Insurance Exam 7

#45. If a person is compensated for a testimonial in an advertisement, which of the following statements should be included in the advertisement? a) "Paid endorsement" b) "Commissioned advertisement" c) "Insurer is not responsible for the contents of the testimonial" d) "The author is the employee of the insurer"

"Paid endorsement"

#81. An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $8,000, tax on growth only b) $10,000, tax on growth only c) $10,000, no tax consequence d) $8,000, no tax consequence

$10,000, no tax consequence

#40. What does "level" refer to in level term insurance? a) Cash value b) Interest rate c) Face amount d) Premium

Face amount

#50. When a policy is replaced, replacing insurers must maintain a replacement register regarding that policy for a) 8 years. b) 10 years. c) 3 years. d) 5 years.

3 years.

#53. Agents, subagents, and counselors are required to maintain records of all insurance transactions for what time period? a) 1 year b) 3 years c) 5 years d) 7 years

5 years

#70. Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a) Until the policyowner reaches age 65. b) For at least 20 years. c) Until the policyowner's age 100, when the policy matures. d) For 20 years or until death, whichever occurs first.

For 20 years or until death, whichever occurs first.

#35. The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the a) Reinstatement clause. b) Insuring clause. c) Misstatement of Age clause. d) Incontestability clause.

Incontestability clause.

#62. If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an a) Modified endowment contract. b) Accelerated benefit policy. c) Endowment. d) Nonqualified annuity.

Modified endowment contract.

#87. Which of the following policies would be classified as a traditional level premium contract? a) Universal Life b) Variable Universal Life c) Straight Life d) Adjustable Life

Straight Life

#19. The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a) The contract can be issued without an annuitant. b) The annuitant must be a natural person. c) A corporation can be an annuitant as long as it is also the owner. d) A corporation can be an annuitant as long as the beneficiary is a natural person.

The annuitant must be a natural person.

#71. The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case? a) The beneficiary b) The benefit must be paid in a lump sum c) The insurance company d) The Court

The beneficiary

#82. All of the following statements are true regarding installments for a fixed amount EXCEPT a) Value of the account and future earnings will determine the time period for the benefits. b) This option pays a specific amount until the funds are exhausted. c) The annuitant may select how big the payments will be. d) The payments will stop when the annuitant dies.

The payments will stop when the annuitant dies.

#51. Which of the following statements about the reinstatement provision is true? a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash.

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

#31. A participating insurance policy may do which of the following? a) Pay dividends to the policyowner b) Provide group coverage c) Pay dividends to the stockholder d) Require 80% participation

Pay dividends to the policyowner

#38. Which of the following best describes the tax advantage of a qualified retirement plan? a) Employer contributions are taxed as income to the employee. b) The earnings in a qualified plan accumulate tax deferred. c) Distributions prior to age 59½ are tax deductible. d) Employer contributions are tax deductible, as long as employee earnings are considered taxable income.

The earnings in a qualified plan accumulate tax deferred.

#12. All of the following are true regarding a decreasing term policy EXCEPT a) The payable premium amount steadily declines throughout the duration of the contract. b) The death benefit is $0 at the end of the policy term. c) The contract pays only in the event of death during the term and there is no cash value. d) The face amount steadily declines throughout the duration of the contract.

The payable premium amount steadily declines throughout the duration of the contract.

#23. All of the following are true of key person insurance EXCEPT a) There is no limitation on the number of key employee plans in force at any one time. b) The employer is the owner, payor and beneficiary of the policy. c) The key employee is the insured. d) The plan is funded by permanent insurance only.

The plan is funded by permanent insurance only.

#25. If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? a) The policy will be interpreted as if the insured did not have an answer to the question. b) The policy will be void. c) The insurer may deny coverage later, because of the information missing on the application. d) The policy will be interpreted as if the insurer waived its right to have an answer on the application.

The policy will be interpreted as if the insurer waived its right to have an answer on the application.

#10. Social Security was created to provide all of the following benefits EXCEPT a) Unemployment income. b) Survivor's benefits. c) Disability income. d) Retirement income.

Unemployment income