Illinois Life Insurance Exam
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments? -6 months -1 month -24 months -12 months
1 month When an immediate annuity is funded with a single premium, the annuitant may begin receiving payments after 1 month.
A new life insurance policyowner may review a policy and return it for a full refund within ___ days after policy delivery -15 -20 -5 -10
10
A lapsed producer's license may be reinstated without having to pass a written exam if the license lapses within _____ months after the renewal fee due date -8 -10 -12 -6
12
Once a producer's license has been revoked, the producer must wait a MINIMUM of __ year(s) to reapply for any insurance license. -2 -4 -1 -3
3 A person's whose license is revoked or whose application is denied is ineligible to apply for any license for 3 years.
A policyowner decides to cancel an insurance policy within 90 days of the issue date. As a result of this cancellation, the producer is REQUIRED to refund a prorated portion of any fee charged within __ days of receiving the cancellation notice. 30 60 45 90
30
Producers must report felony convictions to the Director within ___ days after the entry date of the judgement. -15 -30 -10 -45
30 A licensee must report a felony conviction to the Director within 30 days of the judgement.
According to Illinois insurance law, life insurance claim payments made _____ days from receipt of satisfactory proof of loss must receive the insurer's current interest rate. -10 -15 -20 -31
31
Within how many days must a Traditional IRA be rolled over to another IRA in order to avoid tax consequences -30 -60 -45 -90
60
A temporary insurance license is valid for up to ___ days -45 -180 -90 -30
90
Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application? -an exclusion -a waiver of premium -a replacement form -a good health statement
A good health statement
Which of the following is an example of the insured's consideration? -Intent -Insurer's promise to pay benefits -A paid premium -Legal purpose
A paid premium
Which of the following is considered to be an alternative to a life settlement? -decreasing term insurance -accelerated death benefit rider -waiver of premium rider -extended term option
Accelerated death benefit rider
All of these are valid policy dividend options for a life insurance policyowner EXCEPT -reduction in policy premium -accumulate without interest -buy additional insurance coverage -cash outlay to the policyowner
Accumulate without interest. Policyowner dividends normally accumulate WITH interest.
Which of these is NOT considered to be a purpose of an annuity? -annuities are intended to liquidate an estate -annuities are intended to distribute accumulated principal -annuities are intended for the tax-free growth of principal -annuities are intended to create an estate
Annuities are intended to create an estate
Maria would like an annuity that provides a guaranteed accumulation or payout. The type of annuity she is seeking is called -fixed accumulation -annuity certain -variable payout -interest guaranteed
Annuity certain A type of annuity that provides a guaranteed accumulation or payout is called annuity certain.
The Life and Health Insurance Guaranty Association -sets rates for the insurer -is regulated by the National Association of Insurance and Financial Advisors -assumes the financial obligations of insolvent insurance companies -assists in underwriting large policies
Assumes the financial obligations of insolvent insurance companies
Which of these premium payment frequencies is not typically available to a policyowner? -Semi-annual -Bi-weekly -Quarterly -Monthly
Bi-weekly
In order for a contract to be valid, it must -be in writing -contain an offer and acceptance -be signed and witnessed by an attorney -be filed with the state
Contain an offer and acceptance
An employee under a group insurance policy has the right to name a beneficiary and the right to
Convert to an individual policy in the event of employment termination
Which of these is affected by the frequency of an insurance policy's premium payments? -death benefit -cost -cash value -settlement options
Cost
_____ is NOT an element of a valid contract. -countersignature -legal -consideration -competent parties
Countersignature
In what part of an insurance policy are policy benefits found? -conditions -entire contract -waivers -declarations
Declarations
Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period? -decreasing term insurance -increasing term insurance -modified life insurance -adjustable life insurance
Decreasing term insurance Decreasing term insurance is normally used to pay off a mortgage balance in the event of death of the insured.
Matt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt -dies of a stroke -is killed while committing a felony -is injured in a skiing accident and dies 18 months later -dies instantly from a car accident
Dies instantly from a car accident
Which of the following is an annuity that is linked to a market-related index? -Equity-indexed annuity -Deferred-risk annuity -Market-related annuity -Fixed-amount annuity
Equity-indexed annuity
Which of these would limit a company's liability to provide insurance coverage? -waiver -exclusion -rider -provision
Exclusion
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n) -cost of living rider -guaranteed term rider -guaranteed insurability rider -accelerated benefit rider
Guaranteed insurability rider
Index whole life insurance contains a securities component that acts as a(n) -means to lowering taxes on earnings -premium stabilizer -hedge against inflation -incentive to purchase more coverage
Hedge against inflation The securities component of index whole life insurance is considered an effective hedge against inflation.
Which of these are considered a major tax advantage of life insurance? -premiums are tax deductible by an employee if paid for by an employer -tax credits are available for life insurance premiums paid -annual earnings are tax free -income tax is typically not owed on proceeds paid directly to a beneficiary
Income tax is typically not owed on proceeds paid directly to a beneficiary
Which of the following types of insurance may a limited lines producer sell? endowment disability industrial life whole life
Industrial Life
Which of these accounts are producer license fees deposited into? -general fund -director administrative fund -insurance producer administrative fund -insurance guaranty fund
Insurance producer administrative fund All licensing fees collected by the Director are paid into a special fund in the State Treasury known as the Insurance producer administrative fund.
Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary? -interest only -dividends only -extended interest -fixed period
Interest only
Sharon is the policyowner of a $50,000 life insurance policy. Her son, Mike, is the beneficiary. If Sharon MUST obtain Mike's signature in order to change the beneficiary, what kind of beneficiary designation is this? -irrevocable -revocable -contingent -tertiary
Irrevocable
Which type of life insurance is normally associated with a Payor Benefit rider? -term rider -family income insurance -juvenile insurance -spouse insurance
Juvenile insurance
Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
Life annuity certain
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? -interest only -installment refund -fixed period -life income
Life income
The premium for a Modified whole life policy is -higher than the typical whole life policy during the first few years and then lower than typical for the remainder -normally graded over a period of 20 years -lower than the typical whole life policy during the first few years and then higher than typical for the remainder -level for the first 5 years then decreases for the remainder of the policy
Lower than the typical whole life policy during the first few years and then higher than typical for the remainder
The Director of Insurance is authorized to -set insurance rates for foreign insurers -pass state laws relating to insurance -establish sales quotas -make reasonable insurance rules and regulations
Make reasonable insurance rules and regulations
Stating that dividends are guaranteed is considered to be -rebating -discrimination -misrepresentation -defamation
Misrepresentation
Lloyd's of London
NOT an insurer but rather a syndicate of individuals and companies that underwrite insurance.
When a producer submits an insurance application, the application is REQUIRED to contain the producer's: home address social security number sales commission rate name and signature
Name and signature
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE? -term life policies are the only type of insurance that allows policy loans -no interest will be charged on loan balance -a loan can be taken out for up to the face amount of the policy -net death benefit will be reduced if the loan is not repaid
Net death benefit will be reduced if the loan is not repaid
What must be signed by both the producer and applicant when an existing life insurance policy is being reissued with a reduction in cash value? -policy guide -replacement receipt -notice regarding replacement -buyer's summary
Notice regarding replacement When a policy has been reissued with any reduction in cash value, that is considered a replacement. A Notice Regarding Replacement must be signed by both the producer and applicant.
An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called - partial surrender - accelerated death benefit - subrogation - automatic premium loan
Partial surrender
Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?
Payor Benefit
Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance? -policyowner may increase or decrease the face amount -policyowner can contribute large sums of money -policyowner may increase or decrease the premium payments -policyowner has the right to select the investment which will provide the greatest return
Policyowner has the right to select the investment which will provide the greatest return. The right to select the investment which will provide the greatest return pertains only to variable universal life insurance.
Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? -withdrawals will be prohibited -the premium payments will be tax deductible -pre-death distributions are typically taxable -policy loans are disallowed
Pre-death distributions are typically taxable Modified Endowment Contract (MEC): is the term given to a life insurance policy whose funding has exceeded federal tax law limits Seven-pay test helps the IRS determine whether your life insurance policy will be converted into an MEC. It compares the total premiums you paid in the first seven years of the policy with what you'd need to pay it in full.
Dana is an employee who deposits a percentage of her income into her individual annuity. Her company also contributes a percentage into a separate company pension plan. What kind of annuity is this considered? -executive compensation plan -qualified retirement annuity -key employee retirement annuity -keogh annuity plan
Qualified retirement annuity
A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due? -cash dividend option -extended term option -paid-up option -reduction of premium dividend option
Reduction of premium dividend option
1970 Fair Credit Reporting Act
Requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application.
Which of these retirement plans do NOT qualify for a federal income tax deduction? -Keogh Plan -Roth IRA -SIMPLE Plan -Traditional IRA
Roth IRA
Which market index is normally associated with an indexed annuity's rate of return? -NAIC -SEC -S & P 500 -A & P 300
S & P 500
What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured? -specified amount of money -policy dividend -funeral expense fund -policy's cash value
Specified amount of money Life insurance guarantees to the beneficiary a specified sum of money in the event of the insured's death.
Which of these is NOT a characteristic of the Accelerated Death Benefit option? -there may be a dollar limit on the maximum benefit -the benefit can be offered as a rider at a specific extra cost or may be at no cost -before payment of the benefit is made, specific conditions must exist, such as suffering from a terminal illness -the face amount and policy premium are not affected by the payment
The benefit can be offered as a rider at a specific extra cost or may be at no cost. Accelerated Death Benefit options are offered with NO increase in premium.
When calculating the amount of life insurance needed for an income earner, what has to be determined when using the Needs Approach? - The family's financial objectives if the income earner were to die or become disabled - The income earner's credit score - The insurance company's financial rating - The income earner's future projected income
The family's financial objectives if the income earner were to die or become disabled
1945 McCarran and Ferguson Act
This law made it clear that the states' continued regulation of insurance was in the public's best interest. However, it also made possible the application of federal antitrust laws to the extent that [the insurance business] is not regulated by state law.
Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds? -Tom -Tom's spouse -Bob's estate -Bob's spouse
Tom Insurable interest only has to exist at the time of the application, not at the time of the claim. Being there was no change in beneficiary prior to Bob's death, Tom will still receive the policy proceeds.
In an insurance contract, the insurer is the only party legally obligated to perform. Because of this, an insurance contract is considered -aleatory -unilateral -conditional -voidable
Unilateral
Joe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy's cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this? -universal life policy -nonparticipating life policy -modified whole life policy -increasing term life policy
Universal Life policy *review Universal Life policy
Which type of policy combines the flexibility of a universal life policy with investment choices? -variable universal life policy -adjustable universal life policy -flexible universal life policy -modified universal life policy
Variable universal life policy
Who negotiates viatical settlements between a policyowner and a viatical settlement provider? -viatical settlement broker -registered viator -vitatical settlement negotiator -investment advisor (IA)
Viatical settlement broker A licensed agent who acts on behalf of a viator and for a fee, commission or other valuable consideration offers or attempts to negotiate viatical settlements between a viator and one or more viatical settlement providers.
When does a life insurance policy typically become effective? -when the policy is issued -when the application is completed and signed -when the initial premium is collected and policy is issued -when the completed application is signed and initial premium is collected
When the initial premium is collected and policy is issued
Which of the following BEST describes a conditional insurance contract? -a contract that has the potential for the unequal exchange of consideration for both parties -a contract that requires certain conditions or acts by the insured individual -a contract where only one party makes any kind of enforceable contract -a contract where one party "adheres" to the terms of the contract
a contract that requires certain conditions or acts by the insured individual
All of the following are examples of insurance advertisement EXCEPT -a memo from an employer announcing the availability of coverage for employees -a mass mailing announcing a new insurance product -a celebrity endorsement for an insurance company -a full page announcement of an insurer conducting business in a new territory
a memo from an employer announcing the availability of coverage for employees
All of these are valid options for an Adjustable Life Policy EXCEPT -the policy's premium can be increased or decreased -the policy's death benefit can be increased or decreased -the policy's protection period can be modified -a nonforfeiture option can be used to increase the death benefit
a nonforfeiture option can be used to increase the death benefit
What is Illinois' definition of Life insurance replacement? -a transaction in which a policyowner reinstates a lapsed policy -a transaction in which a new policy is bought and an old policy is terminated -a transaction in which coverage on an existing policy is increased -a transaction in which group life coverage is converted to an individual policy
a transaction in which a new policy is bought and an old policy is terminated
All of these MUST be included on an insurance producer's license EXCEPT -appointing insurance company -name of producer -date of issue -producer ID number
appointing insurance company
Life insurance illustrations must include all of these EXCEPT -date it was prepared -nonguaranteed elements must be clearly marked as such -guaranteed death benefits and values available upon surrender -beneficiary's name
beneficiary's name
Under a group life policy, the insurer will issue an individual _____ to the policyowner for delivery to each person insured. -policy -certificate -application -rider
certificate
Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this? -child term rider -family income rider -family maintenance rider -payor rider
child term rider a child term rider is level term insurance that can be added to an existing policy.
Ownership of a life insurance policy may be temporarily transferred with a(n) -transferable assignment -absolute assignment -beneficiary assignment -collateral assignment
collateral assignment An owner of a life insurance policy may transfer ownership temporarily with a collateral assignment.
Which of the following would be considered an underwriting duty of an agent? -accepting or declining an application -completing all applications and collecting initial premiums -assigning a risk classification -requesting medical information from the Medical Information Bureau (MIB)
completing all applications and collecting initial premiums
Which of these actions does NOT constitute life insurance policy replacement? -discontinue premiums on an existing policy and applying the payments to a new policy -cash surrender an existing policy and purchase a new policy -take reduced paid-up insurance and purchase a new policy with another insurer -convert term coverage to a whole life policy
convert term coverage to a whole life policy
The least expensive option to pay off a 30-year mortgage balance would be -increasing term life -convertible term life -decreasing term life -adjustable term life
decreasing term life
A business entity wishes to become approved as a producer for soliciting insurance business. Before doing so, the business entity is require to submit to the Director a(n) -affidavit stating that no controlled business will be written -proof of solvency -surety bond of $1,000,000 -designated producer assigned for compliance with Illinois insurance laws
designated producer assigned for compliance with Illinois insurance laws
An example of an unfair claims practice would be -paying a claim promptly after receiving proof of loss -failing to effectuate prompt, faire, and equitable claim settlements -denying a fraudulent claim -requiring the insured to give a statement under oath
failing to effectuate prompt, faire, and equitable claim settlements
Which of these riders will pay a death benefit if the insured's spouse dies? -family term insurance rider -guaranteed insurability rider -family whole insurance rider -payor benefit rider
family term insurance rider A family term insurance rider provides a death benefit if the spouse of the insured dies.
How are annuities given favorable tax treatment? -gains are tax deductible -gains are converted to tax credits -gains are taxed at distribution -gains are tax exempt at distribution
gains are taxed at distribution Annuities defer paying taxes on the money you put toward qualified annuities so you don't have to pay taxes on the income until you take distributions so your wealth can grow over the years tax free.
Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n) -endowment rider -payor rider -guaranteed insurability rider -family income rider
guaranteed insurability rider
During a sales presentation for a participating life insurance policy, a producer MUST -make a prospect understand that dividends ARE guaranteed -include a statement of the insurer's AM Best rating -offer to the prospect a portion of the commissions -include a statement that dividends are not guaranteed
include a statement that dividends are not guaranteed
How does one qualify as a fully-insured individual under Social Security disability coverage? -individual has been credited with the appropriate number of quarters of coverage -Individual is currently covered under Medicaid -Individual is currently employed -Individual is expected to be disabled for 5 months
individual has been credited with the appropriate number of quarters of coverage
The conversion privilege under a group life plan allows an employee to convert to a(n)
individual plan upon employment termination
All of the following are characteristics of a Group Life Insurance Plan EXCEPT -individual underwriting -master contract -probationary period -group underwriting
individual underwriting
All of these are required to be included in a life insurance illustration EXCEPT -rating classification -insurer's mortality table -insurer's name -initial death benefit
insurer's mortality table
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy? -interest only -reduced paid-up insurance -cash surrender -extended term insurance
interest only
What kind of life insurance policy covers two or more people with the death benefit payable upon the last person's death? -joint life insurance -shared life insurance -dual life insurance -last survivor life insurance
last survivor life insurance
A provision in a whole life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n) -nonforfeiture provision -reinstatement provision -insuring clause -payor provision
nonforfeiture provision A nonforfeiture provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.
The ____ must be signed by both the producer and applicant when an existing life insurance policy is being reissued with a reduction in cash value. -policy guide -buyer's summary -notice regarding replacement -replacement receipt
notice regarding replacement
Which situation accurately describes a reduced paid-up nonforfeiture option? - face amount of the new policy equals that of the original policy - cash value is surrendered to policyowner - premiums must continue to be paid - policy has a decreased face amount
policy has a decreased face amount
The two major actions required for a policyholder to comply with the Reinstatement Clause are -pay past due premiums, agree to a reduction in coverage -provide evidence of insurability, agree to a new incontestable period -pay past due premiums, agree to a new incontestable period -provide evidence of insurability, pay past due premiums
provide evidence of insurability, pay past due premiums Two important actions usually required for the policyowner to satisfy the conditions of the Reinstatement Clause would be to provide evidence of insurability and pay past due premiums.
An insurance producer is often responsible for field underwriting during the application process. All of these are possible field underwriting roles EXCEPT -collecting initial premium -providing commission information to the applicant -providing disclosure information to the applicant -policy delivery
providing commission information to the applicant
What is the automatic continuance of insurance coverage referred to as? -resumption -renovation -reinstatement -renewal
renewal
Which of these is NOT an unfair method of competition? -monopolize the business of insurance -replace coverage written by another producer -misrepresent any fact about an insurance policy -publish misleading information about insurance coverage
replace coverage written by another producer
A producer has influenced an existing policyowner to convert an existing whole life policy to Reduced Paid-up insurance. The producer then sells the policyowner a new universal life policy. This transaction is called a(n): -asset rollover -conversion -misrepresentation -replacement
replacement
An annuity is primarily used to provide -disability income -retirement income -long-term care benefits -death benefits
retirement income
Which of the following are the premium payments for a Universal life policy NOT used for? -loading costs -death benefits -separate account investments -cash value
separate account investments Premium payments for a Universal life policy are NOT used for separate account investments.
James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount? -the death benefit paid will be what the premium would have purchased at the correct age -the amount of premiums paid will be returned with interest -the policy will be voided with no death benefits paid -the original face amount will be paid to the beneficiary
the death benefit paid will be what the premium would have purchased at the correct age. Under the Misstatement of Age provision, the amount paid will be what the premium would have purchased at the correct age.
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if -the insured and beneficiary died at the same time -the beneficiary outlived the insured -the insured outlived the beneficiary -no beneficiary was ever named
the insured outlived the beneficiary A common disaster provision states that if the beneficiary dies from the same accident as the insured individual, the insurer will proceed as if the insured outlived the beneficiary. This allows the proceeds to go to the contingent beneficiary.
If an insured dies during the grace period with no premiums paid -the policy would be payable, minus the premium amount -all past premiums would be refunded with interest -the policy would be payable only after the beneficiary makes past due premium payment -the claim would be denied
the policy would be payable, minus the premium amount
Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds -will go to Mike's estate -will no longer provide insurance protection -will be divided by probate -will not be paid until the last brother dies
will no longer provide insurance protection
