Insurance exam
Which of the following is the basic source of information used by the company in the risk selection process ? A. Consumer report B. Application C. Agent's report D. Warranty
B. Application
Items stipulated in the contract that the insurer will not provide coverage for are found in the ? A. Benefit Payment clause B. Consideration clause C. Exclusions clause D. Insuring clause
C. Exclusions clause
The waiver of Cost of insurance rider is found in what type of insurance
Universal Life
Which of the following is NOT the consideration in a policy ? A. The application given to a prospective insured B. Something of value exchanged between parties C. The premium paid at the time of application D. The promise to pay covered losses
A. The application given to a prospective insured
Which of the following best describe annually renewable term insurance ? A. It requires proof of insurability at each renewal B. Neither the premium nor the death benefits is affected by the insured's age C. It provides an annually increasing death benefit D. It is level term insurance
D. It is level term insurance
Which of the following best describes annually renewable term insurance? A. It requires proof of insurability at each renewal B. Neither the premium nor the death benefit is affected by the insured's age C. It provides an annually increasing death benefit D. It is level term insurance
D. It is level term insurance
Which of the following would NOT cause the Death Benefits to increase ? A. Accidental Death Rider B. Payor Benefit Rider C. Guaranteed Insurability Rider D. Cost of Living Rider
B. Payor Benefit Rider
An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car again. Which method of risk management does this describe ? A. Avoidance B. Reduction C. Sharing D. Retention
A. Avoidance
For what reason may a life insurance producer backdate a life insurance policy ? A. To avoid an increase in premium rate for the insured B. To meet sales quotas established by the insurer C. To make a policy effective during a period when the agent's appointment was in force D. To shorten the period of contestability
A. To avoid an increase in premium rate for the insured
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it ? A. Unilateral B. Adhesion C. Conditional D. A legal (but unethical) contract
A. Unilateral
When would a 20-pay whole life policy endow? A. After 20 payments B. In 20 years C. When the insured reaches age 100 D. At the insured's age 65
C. When the insured reaches age 100
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death ? A. The former wife of the deceased insured B. A minor son of the insured C. A business partner of the insured D. The wife of the deceased insured
B. A minor son of the insured
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company ? A. Warranty B. Aleatory C. Adhesion D. Subrogation
B. Aleatory
Which of the following statements regarding HIV testing for life insurance purposes in NOT true ? A. HIV testing is regulated at the state level B. Insurers are barred from requesting HIV testing C. Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant D. The testing practices must meet the criteria of the U.S. Department of Health and Human Services
B. Insurers are barred from requesting HIV testing
Which of the following best describes what the annuity period is ? A. The period of time from the effective sate of the contract to the date of its termination B. The period of time during which accumulated money is converted into income payments C. The period of time from the accumulation period to the annuitization period D. The period of time during which money is accumulated in an annuity
B. The period of time during which accumulated money is converted into income payments
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy ? A. $0 B. $200 C. $9,800 D. $10,000
C. $9,800
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered ? A. A required disclosure B. A legal representation of the Association C. An unfair trade practice D. A misrepresentation
C. An unfair trade practice
Which concept is associated with "exclusion ratio"? A. How exclusion riders affect an insurance premium B. Policy provisions C. Annuity payments D. Dividend distribution
C. Annuity payments
A temporary producer license could be issued without examination to all of the following EXCEPT ? A. The designee of a licensed insurance producer who enters active duty in the U.S. Armed Forces B. The designee of a disabled licensed producer C. The spouse of a retired insurance producer D. The spouse of a deceased insurance producer
C. The spouse of a retired insurance producer
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement ? A. Term insurance only B. Permanent insurance only C. Universal life insurance only D. Any form of life insurance
D. Any form of life insurance
An Adjustable Life policy owner can change which of the following policy features ? A. The mortality expense B. The investment account C. The insured D. The coverage period
D. The coverage period
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called? A. Single premium whole life B. Modified Endowment Contract (MEC) C. Level term life D. Graded premium whole life
A. Single premium whole life
Which is true about a spouse term rider ? A. Coverage is allowed for an unlimited time B. The rider is decreasing term insurance C. Coverage is allowed up to age 75 D. The rider is usually level term insurance
D. The rider is usually level term insurance
Graded-Premium Whole Life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. After the period of increase the premium will ? A. Be level thereafter B. Continue to increase C. Return to the initial premium amount D. Decrease again
A. Be level thereafter
Which non-forfeiture option has the highest amount of insurance protection ? A. Extended Term B. Conversion C. Decreasing Term D. Reduced Paid-up
A. Extended Term
Which statement is NOT true regarding a Straight Life policy? A. Its premium steadily decreases over time, in response to its growing cash value B. The face value of the policy is paid to the insured at age 100 C. It usually develops cash value by the end of the third policy year D. It has the lowest annual premium of the three types of Whole Life policies
A. Its premium steadily decreases over time, in response to its growing cash value
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client ? A. Limited pay whole life B. Interest-sensitive whole life C. Life annuity period certain D. Increasing term
A. Limited pay whole life
Which of the following documents must be provided to the policy owner or applicant during policy replacement ? A. Notice Regarding Replacement B. Disclosure Authorization Form C. Buyer's Guide and Policy Summary D. Policy illustrations
A. Notice Regarding Replacement
The dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as the ? A. One-year term option B. Paid-up option C. Accelerated endowment D. Paid-up additions
A. One-year term option
Which of the following policies is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy ? A. Minimum deposit whole life B. Graded premium whole life C. Indeterminate premium whole life D. Enhanced whole life
B. Graded premium whole life
If a settlement option is not chosen by the policy owner or the beneficiary, which option will be used ? A. Fixed amount B. Lump sum C. Life income D. Fixed period
B. Lump sum
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles ? A. Standard risk is also known as high exposure risk B. Standard risk is representative of the majority of people C. Standard risk pays a higher premium than a substandard risk D. Standard risk requires extra rating
B. Standard risk is representative of the majority of people
The interest earned on a policy dividend is ? A. 40% taxable, similar to a capitol gains B. Taxable C. Nontaxable D. Tax deductible
B. Taxable
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements in correct regarding this change? A. The death benefits can be increased only by exchanging the existing policy for a new one. B. The death benefits can be increased by providing evidence of insurability C. The death benefits cannot be increased D. The death benefits can be increased only when the policy has developed a cash value
B. The death benefits can be increased by providing evidence of insurability
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policy from one to another ? A. Rebating B. Twisting C. Switching D. False advertising
B. Twisting
Which is TRUE about the cash surrender non-forfeiture option ? A. The policy remains active for some time after the policyholder opts for cash surrender B. The policyholder received the original cash value of the policy C. Funds exceeding the premium paid are taxable as ordinary income D. After the cash surrender, the insured is covered for a grace period of one month
C. Funds exceeding the premium paid are taxable as ordinary income
The death benefits under the Universal Life Option B A. Increases for the first few years of the policy, and then levels off B. Remains levels C. Gradually increases each year by the amount that the cash value increases D. Decreases by the amount that the cash value increases
C. Gradually increases each year by the amount that the cash value increases
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. Insuring clause B. Misstatement of Age clause C. Incontestability clause D. Reinstatement clause
C. Incontestability clause
Which Universal Life option has a gradually increasing cash value and a level death benefit ? A. Term insurance B. Option B C. Option A D. Juvenile life
C. Option A
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the ? A. Juvenile rider B. Payor rider C. Other-insured rider D. Change of insured rider
C. Other-insured rider
Traditional IRA contributions are tax deductible based on which of the following ? A. Owner's age B. IRA limits C. Owner's income D. How long the plan has been in forced
C. Owner's income
The risk of loss may be classified as ? A. Named risk and un-named risk B. High risk and low risk C. Pure risk and speculative risk D. Certain risk and uncertain risk
C. Pure risk and speculative risk
To sell variable life insurance policies, an agent must receive all of the following EXCEPT? A. A securities licenses B. A life insurance license C. SEC registration D. FINRA registration
C. SEC registration
The accelerated benefits provision will provide for an early payment of death benefits when the insured ? A. Needs to borrow money B. Has earned enough credits C. Becomes disabled D. Becomes terminally ill
D. Becomes terminally ill
Under a 20-pay whole life policy, in order for the policy to pay the death benefits to a beneficiary, the premium 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
D. For 20 years or until death, whichever occurs first
Which of the following statement is TRUE concerning the Accidental Death Rider ? A. It is also known as a triple indemnity rider B. This rider is only available to insureds over the age of 65 C. It is only available in group insurance D. It will pay double or triple the face amount
D. It will pay double or triple the face amount
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called ? A. Fixed period B. Fixed amount C. Joint life D. Joint and Survivor
D. Joint and Survivor
Which Universal Life option has a gradually increasing cash value and a level death benefits A. Juvenile life B. Term insurance C. Option B D. Options A
D. Options A
Part 2 of the application for life insurance provides question regarding all of the following EXCEPT ? A. Family health history B. Alcohol and tobacco consumption C. Recent surgeries D. Other insurance coverage
D. Other insurance coverage
An insurer that does not pay a death benefit in a timely manner as required by state law, will be required to ? A. Cease and desist from writing new business for 30 days B. Pay double benefits C. Forfeit their certificate of authority D. Pay to the beneficiary an interest penalty from the date of the insured's death
D. Pay to the beneficiary an interest penalty from the date of the insured's death
The ownership provision entitles the policy owner to do all of the following EXCEPT ? A. Receive a policy loan B. Assign the policy C. Designate a beneficiary D. Set premium rates
D. Set premium rates
If a life insurance policy has an irrevocable beneficiary designation ? A. The beneficiary cannot be changed for at least 2 years B. The owner can always change the beneficiary at will C. The beneficiary cannot be changed D. The beneficiary can only be changed with written permission of the beneficiary
D. The beneficiary can only be changed with written permission of the beneficiary
Which of the following employees insured under group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated ? A. Those who have worked in the company for at least 3 years B. Those who have dependents C. Those who have no history of claims D. Those who have been insured under the plan for at least 5 years
D. Those who have been insured under the plan for at least 5 years
The authority granted to an agent through the agent's contract is referred to as ? A. Express authority B. Apparent authority C. Implied authority D. Absolute authority
A. Express authority
What is the maximum fine for submitting a false or fraudulent claim to the insurer ? A. $500 B. $1,000 C. $1,500 D. $2,000
B. $1,000
The validity of coverage under a life insurance policy may be contested, except for nonpayment of premium, after the policy has been in force for at least how many years ? A. 1 year B. 2 years C. 5 years D. 7 years
B. 2 years
What is a material misrepresentation ? A. Concealment B. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company C. Any misstatement made by an applicant for insurance D. Any misstatement by the producer
B. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
Which of the following is TRUE about a class designation ? A. It is not allowed B. It determined the succession of beneficiaries C. Beneficiaries are not identified by name D. Beneficiaries must be part of the insured's immediate family
C. Beneficiaries are not identified by name
A producer is helping a married couple determine the financial needs of the children in the event one or both should die prematurely. This is a personal use of life insurance known as ? A. Survivorship insurance B. Juvenile protection provision C. Survivor protection D. Life planning
C. Survivor protection
In an Adjustable Life policy all of the following can be changed by the policy owner Except A. The Premium B. The amount of insurance C. The type of investment D. The length of coverage
C. The type of investment
An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds ? A. $10,000 B. $15,000 C. $25,000 D. $50,000
D. $50,000
The LEAST expensive first-year premium is found in which policies ? A. Increasing Term B. Decreasing Term C. level Term D. Annually Renewable Term
D. Annually Renewable Term
A man decides to purchase a $100,000 Annually Renewable Term Life policy to provide additional protect until his children finish college. He discovers that his policy ? A. Built cash value B. Required proof of insurability every year C. Decreasing death benefit at each renewal D. Requires a premium increase each renewal
D. Requires a premium increase each renewal
All of the following are true regarding rebates EXCEPT ? A. Rebates are allowed if it's in the best interest of the client B. Rebates are only allowed if specifically stated in the policy C. Rebates can be anything of economic value, given as an inducement to buy. D. Dividends are not considered to be rebates
A. Rebates are allowed if it's in the best interest of the client
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called ? A. Adverse selection B. Discrimination C. Law of large numbers D. Misrepresentation
B. Discrimination
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distribution ? A. There are no distributions B. Distributions are taxable C. Distributions are nontaxable D. Distributions cannot begin prior to age 72
B. Distributions are taxable
What insurance concept is associated with the names Weiss and Fitch? A. Index used by stock companies B. Guides describing company financial integrity C. Policy dividends D. Types of mutual companies
B. Guides describing company financial integrity
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about ? A. Which individual will pay the premium B. Whether an insurable interest exists between the individuals C. The gender of the application D. The type of policy requested
B. Whether an insurable interest exists between the individuals
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE ? A. The insurance company will retain the cash value and pay back the premium to the owner's estate B. The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary C. The beneficiary will receive the greater of the money paid into the annuity or the cash value D. The owner's estate will receive the money paid into the annuity
C. The beneficiary will receive the greater of the money paid into the annuity or the cash value
If an insurer terminates a producer, the Commissioner will receive a notification. Within how many days of this notification must the producer be sent a copy ? A. 30 B. 7 C. 10 D. 15
D. 15
A temporary license is this state is valid for a maximum of ? A. 30 days B. 60 days C. 90 days D. 180 days
D. 180 days
What required provision protects against unintentional lapse of the policy ? A. Assignment B. Payment of premium C. Reinstatement D. Grace period
D. Grace period
All of the following entities regulate variable life policies EXCEPT ? A. The Guaranty Association B. Federal Government C. The SEC D. The Insurance Department
A. The Guaranty Association
All of the following are characteristics of a group life insurance plan EXCEPT A. There is a requirement to provide insurability on the part of the participants B. The participants receive a Certificate of Insurance as their proof of insurance C. A minimum number of participants is required in order to underwrite the plan D. The cost of the plan is determined by the average age of the group
A. There is a requirement to provide insurability on the part of the participants
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe ? A. Unilateral B. Unidirectional C. Aleatory D. Conditional
A. Unilateral
Are insurance company underwriters allowed to discriminate ? A. Yes, but not unfairly B. No, higher risks pay higher premium C. No, discrimination is an unfair practice D. Yes, but only for gender
A. Yes, but not unfairly
Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death ? A. Estate conservation B. Life insurance proceeds C. State Education Waiver D. Viatical settlement
B. Life insurance proceeds
Which of the following can surrender a deferred annuity contract ? A. A deferred annuity cannot be surrendered B. Only the annuity owner C. Only the insurance company for nonpayment of premium D. The beneficiary after the owner's death
B. Only the annuity owner
Another name for a substandard risk classification is ? A. Elevated B. Rated C. Controlled D. Declined
B. Rated
Which services are associated with Standard & Poor's and AM Best ? A. Storing medical information collected by insurance companies B. Rating the financial strength of insurance companies C. Investigating violations of The Fair Credit Reporting Act D. Providing employment history for investigative consumer reports
B. Rating the financial strength of insurance companies
Which of the following is NOT true regarding the annuitant ? A. The annuitant must be a natural person B. The annuitant cannot be the same person as the annuity owner C. The annuitant's life expectancy is taken into consideration for the annuity D. The annuitant receives the annuity benfits
B. The annuitant cannot be the same person as the annuity owner
Which of the following would NOT fall into the category of costs associated with death ? A. Day to day expenses of maintaining the family B. The expense of a vacation for surviving family members C. Funeral expenses D. Final medical expenses of the insured
B. The expense of a vacation for surviving family members
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what happen ? A. The insurer will pay nothing because the employee has terminated his group insurance and hasn't started he individual one B. The insurer will pay the full death benefit from the group policy to the beneficiary C. The insurer will pay a reduced death benefit to the beneficiary D. The insurer will pay the death benefit minus one month's premium
B. The insurer will pay the full death benefit from the group policy to the beneficiary
To legally transact insurance in this state, and insurer must obtain which of the following ? A. Business entity license B. Certificate of Insurance C. Certificate of Authority D. Power of Attorney
C. Certificate of Authority
Which of the following best describes the MIB ? A. It is a member organization that protects insured against insolvent insurers B. It is a rating organization for health insurance C. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance D. It is a government agency that collects medical information on the insured from the insurance companies
C. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
Which of the following individuals could qualify for a temporary insurance license ? A. A retired producer B. An employee of a deceased producer C. The designee of a producer that is called to active service with the Navy D. A deceased producer's brother who is employed by the Department of Insurance
C. The designee of a producer that is called to active service with the Navy
How must a replacing producer respond to an applicant wishing to replace existing life insurance ? A. The producer must request the permission of the existing insurer B. The producer has no specific duties C. The producer must provide the applicant with a Notice Regarding Replacement D. The producer must collect the existing policies and turn them over to the replacing insurer
C. The producer must provide the applicant with a Notice Regarding Replacement
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of ? A. Misrepresentation B. Rebating C. Twisting D. Defamation
C. Twisting
Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination ? A. An applicant who was born in another country B. An applicant who is legally blind C. An applicant who has been a victim of domestic abuse D. An applicant who is a smoker
D. An applicant who is a smoker
In an annuity, the accumulated money is converted into a stream of income during which time period ? A. Payment period B. Amortization period C. Conversion period D. Annuitization period
D. Annuitization period
Which is the primary source of information used for insurance underwriting ? A. Applicant interview B. Medical records C. Private investigations D. Application
D. Application
When would a 20-pay whole life policy endow? A. At the insured's age 65 B. After 20 payments C. In 20 years D. When the insured reaches age 100
D. When the insured reaches age 100
The Gramm-Leach-Bliley Act
Enacted to protect the privacy of consumer personal information.
Which of the following statements about group life is correct ? A. The cost of coverage is based on the ratio of men and women in the group. B. The premiums are higher than in an individual policy because there is no medical exam. C. The group sponsor receives a Certificate of Insurance. D. The policy can be converted to an individual term insurance policy.
A. The cost of coverage is based on the ratio of men and women in the group.
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as ? A. Binding contracts B. Contracts of adhesion C. Unilateral contracts D. Aleatory contracts
B. Contracts of adhesion
When would a misrepresentation on the insurance application be considered fraud ? A. Any misrepresentation is considered fruad B. If it is intentional and material C. Never: statements by the applicant are only representations D. When the application is complete
B. If it is intentional and material
An insurer receives a report regarding a potential insured that includes the insured's status, hobbies and habits. What type of a report is this ? A. Underwriter's Report B. Inspection Report C. Medical Information Bureau's report D. Agent;s Report
B. Inspection Report
An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy ? A. She can only convert her coverage without proof of insurability if she has the master policy B. She must apply for a new policy, which requires her to provide proof of insurability C. She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan D. She will still be covered under the group plan, but will have to pay an individual policy premium
C. She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan
What type of annuity activity will cause immediate taxation of the interest earned ? A. Changing a settlement option B. Failing to make a planned contribution C. Surrendering the annuity for cash D. Using the contract as collateral for a loan
C. Surrendering the annuity for cash
Which of the following will NOT be an appropriate use of a deferred annuity ? A. Accumulation retirement funds B. Accumulating funds in an IRA C. Funding a child's college education D. Creating an estate
D. Creating an estate
What kind of policy does NOT typically require proof of insurability ? A. Variable universal life B. Term insurance C. Individual insurance D. Group insurance
D. Group insurance
The Commissioner may waive prelicensing requirements or examinations for someone who has been a licensed insurance producer ? A. In the preceding 2 years B. In the last 5 years C. Any time in the past D. In the preceding 12 months
D. In the preceding 12 months
What type of insurance would be used for a Return of Premium rider? A. Level term B. Decreasing term C. Annually renewable term D. Increasing term
D. Increasing term
What is the purpose of a fixed-period settlement option ? A. To provide a guaranteed income for life B. To provide a guaranteed amount of money each month C. To provide a guaranteed income for a certain amount of time D. To settle the insurance company's liability
C. To provide a guaranteed income for a certain amount of time
Which of the following would describe a legal document which dictate who can buy a deceased partner's share of a business and for what amount ? A. Profit and loss agreement B. Key person agreement C. Split dollar agreement D. Buy-sell agreement
D. Buy-sell agreement
An insured receives an annual insurance dividend check. What term best describes this arrangement ? A. Reduction of Premium B. Annual Dividend Provision C. Accumulation at Interest D. Cash option
D. Cash option
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to ? A. Require a yearly medical examination B. Lower its insurability standards C. Refuse to issue the policy D. Charge a higher premium
D. Charge a higher premium
A bank is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an ? A. Loading B. Defamation C. Twisting D. Coercion
D. Coercion
When applying for an individual life insurance policy, an applicant states that he went to the doctors for nausea, but fails to mention the he was also having severe chest pains. This is an example of ? A. Misrepresentation B. Fraud C. Warranty D. Concealment
D. Concealment
All of the following are characteristics of group life insurance EXCEPT? A. Amount of coverage is determined according to nondiscriminatory rules. B. Individuals covered under the policy receive a certification of insurance. C. Certificate holders may convert coverage to an individual policy without evidence of insurability. D. Premiums are determined by age, sex and occupation of each individual certificate holder
D. Premiums are determined by age, sex and occupation of each individual certificate holder
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT ? A. Disclose commissions earned from the sale of the policy B. Explain the policy provisions, riders, and exclusions C. Collect any premium due D. Explain the rating procedure if the policy is rated differently than applied for
A. Disclose commissions earned from the sale of the policy
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy ? A. Non-forfeiture option B. Guaranteed insurability option C. Dividend option D. Guaranteed renewable option
B. Guaranteed insurability option
Which statement regarding insurable risks is NOT correct ? A. An insurable risk must involve a loss that is definite as to cause, time, place and amount B. Insured cannot be randomly selected C. Insurance cannot be mandatory D. The insurable risk needs to be statistically predictable
B. Insured cannot be randomly selected
In Modified Life policies, what happens to the premium ? A. It varies at the beginning, but levels out by the end of the third year B. It is level at the beginning and increases after the first few years C. It always remains level D. It is higher during the first policy years
B. It is level at the beginning and increases after the first few years
Which of the following applies to the 10 day free-look privilege ? A. It is granted only to the option of the agent B. It permits the insured to return the policy for a full refund of premium paid C. It allows the insured 10 days to pay the initial premium D. It can be waived only by the insurance company
B. It permits the insured to return the policy for a full refund of premium paid
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated ? A. Law of group evaluation B. Law of large numbers C. Law of masses D. Law of averages
B. Law of large numbers
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a ? A. Rollover B. Settlement option C. Nontaxable exchange D. Non-forfeiture option
B. Settlement option
All of the following are considered unfair trade practices in the business of insurance EXCEPT ? A. Defamation B. Sharing commission C. Boycott D. Rebating
B. Sharing commission
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy ? A. $20,000 B. $25,000 C. $50,000 D. The face amount will be determined by the insurer
C. $50,000
Within what time period after completing pre-licensing education must an applicant file a certificate of education completion with the Commissioner ? A. 30 days B. 90 days C. 12 months D. 2 years
C. 12 months
Which of the following statements concerning buy-sell agreements is true ? A. Benefits received are considered income taxable B. Buy-sell agreements pay in the event of a medical emergency C. Buy-sell agreements are normally funded with a life insurance policy D. Premiums paid are deductible as a business expenses
C. Buy-sell agreements are normally funded with a life insurance policy
The automatic premium loan provision is activated at the end of the ? A. Elimination period B. Policy period C. Grace period D. Free-look period
C. Grace period
What kind of policy issues certification of insurance to insureds ? A. Non-qualified annuity B. Any insurance C. Group insurance D. Individual insurance
C. Group insurance
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium ? A. The applicant's habits and health do not affect the premiums B. It will likely be lower because the applicant is a preferred risk C. It will likely be higher because the applicant is a substandard risk D. It will likely be the average premium issued to standard risks
C. It will likely be higher because the applicant is a substandard risk
The policy owner of an adjustable life policy wants to increase the death benefits. Which of the following statements is correct regarding this change ? A. The death benefit can be increased only when the policy has devolved a cash value B. The death benefit can be increased only by exchanging the existing policy for a new one C. The death benefit can be increased by providing evidence of insurability D. The death benefit cannot be increased
C. The death benefit can be increased by providing evidence of insurability
Which of the following is NOT a characteristic of an insurable risk ? A. The loss must be measurable B. The loss exposure must be large C. The loss must be catastrophic D. The loss must be due to chance
C. The loss must be catastrophic
Which is NOT required of an applicant for an insurance license in Michigan ? A. Applicant must be 18 years old B. A Certificate of Completion from the required pre-licensing study course C. Two letters of recommendation attesting to trustworthiness, reliability, and good reputation D. The passing of a written examination
C. Two letters of recommendation attesting to trustworthiness, reliability, and good reputation
An applicant for a Counselor's license in Michigan must possess al of the following EXCEPT ? A. A good business reputation and good moral character B. A reasonable understanding of the Michigan insurance code C. A reasonable understanding of the provisions, terms, and conditions of the type of insurance he/she wishes to counsel D. A license to practice law
D. A license to practice law
Which of the following provisions would not be allowed as apart of a life insurance policy issued in Michigan ? A. A provision that allows for a settlement option that is equal to the face amount of the policy B. A provision that allows the insurer to cancel the policy for nonpayment if the amount of a policy loan, plus interest, exceeds the existing cash value of the policy C. A provision that allows the policy owner to initiate a legal action against the insurer within 6 years after the cause of action D. A provision that allows the effective date of the policy to be backdated up to 8 months in order to effect a lower premium rate for the insured
D. A provision that allows the effective date of the policy to be backdated up to 8 months in order to effect a lower premium rate for the insured
Which of the following best describes fixed-period settlement option? A. Only the principal amount will be paid within a specified period of time B. The death benefit must be paid out in a lump sum within a certain time period C. Income is guaranteed for the life of the beneficiary D. Both the principle and interest will be liquidated over a selected period of time
D. Both the principle and interest will be liquidated over a selected period of time
If an insured surrenders his insurance policy, which statement is true regarding the cash value of the policy ? A. It is not considered to be taxable B. It is taxable only if it exceeds the amount paid for the premium by 50% C. It is automatically taxable D. It is only taxable if the cash value exceeds the amount paid for premium
D. It is only taxable if the cash value exceeds the amount paid for premium
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance ? A. Gender B. Occupation C. Marital status D. Medical background
D. Medical background
Most agents try to collect the premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a ? A. Statement of good health B. Backdated receipt C. Warranty D. Premium receipt
D. Premium receipt
Adverse selection is a concept best described as ? A. Underwriters slanting the odds in favor of the company B. Poor choices of applicants to be covered C. Only offering coverage to good risks D. Risks with higher probability of loss seeking insurance more often than other risks
D. Risks with higher probability of loss seeking insurance more often than other risks
Children's riders attached to whole life policies are usually issued as what type of insurance ? A. Variable life B. Adjustable life C. Whole life D. Term
D. Term
Which of the following statements about group life is correct ? A. The premium are higher than in an individual policy because there is no medical exam B. The group sponsor receives a Certificate of Insurance C. The policy can be converted to an individual term insurance policy D. The cost of coverage is based on the ratio of men and women in the group
D. The cost of coverage is based on the ratio of men and women in the group
In an Adjustable Life policy all the following can be changed by the policy owner EXCEPT ? A. The length of coverage B. The premium C. The amount of insurance D. The type of investment
D. The type of investment
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have ? A. Adjustable life B. Term life C. Limited pay D. Universal life
D. Universal life
All of the following are personal uses of life insurance EXCEPT A. Estate creation B. Cash accumulation C. Buy-sell agreement D. Survivor protection
C. Buy-sell agreement
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) ? A. Flexible Annuity B. Immediate Annuity C. Equity Indexed Annuity D. Variable Annuity
C. Equity Indexed Annuity
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium ? A. If the daughter is disabled for more that 3 months B. If the daughter is disabled for any length of time C. If the father is disabled for more than 6 months D. If the father is disabled for at least a year
C. If the father is disabled for more than 6 months
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT ? A. The insured would not need to prove insurability for a conversion policy B. The insured may convert coverage to an individual policy within 31 days C. The premium for individual coverage will be based upon the insured's attained age D. The insured may choose to convert to term or permanent individual coverage
D. The insured may choose to convert to term or permanent individual coverage
Which of the following are generally NOT considered when underwriting group insurance ? A. The nature of the group B. The group's past claim experience C. The size of the group D. The insured's medical history
D. The insured's medical history
When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is the money placed ? A. Forwarded to an investor B. Each contract's separate account C. The annuity owner's account D. The insurance company's general account
D. The insurance company's general account
