Insurance Test
Which of the following statements would be producer's CORRECT response to a client who is purchasing a Guaranteed renewable Accident and Health policy and wishes to have the provision explained?
"The company cannot refuse to renew the policy if premiums are paid, but it may change the premiums by class."
Q and H are co-primary beneficiaries on the 100,000 Accidental Death and Dismemberment policy insuring their mother. Their father is the contingent beneficiary. If Q dies of cancer and the mother is killed in an auto accident two months later, the father will receive a MAXIMUM of
$0
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:
$10,000
In 1990, Q purchase a $100,000 whole life policy. When asked if Q has any aviation activities other than fare paying passenger, Q responds "no". Therefore, the policy contains no aviation exclusion. In 1994, Q takes up flying lessons and the 1997 is killed in a crash while piloting a plane. What death will Q's beneficiary receive?
$100,000, less any outstanding loans and interest
If an insured has a Major medical policy with a $500 deductible and an 80/20 Coinsurance clause, how much would the insured pay for a $5000 hospital bill?
$1400
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
$2,500
K pays on a $20,000 20-year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?
$25,000
B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for common carrier death. If B is killed from a accident on a commercial flight, what will the policy pay B's beneficiary?
$300,000
M has an Accidental Death and Dismemberment policy with a principal sum of $10,000. While mowing M's grass, M cuts off one of M's toes. M will receive a Maximum of how much from M's policy?
$5,000
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insuerer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
M and J are married and their children are K and L. On May 1st they bought a family Health and Accident policy with a $250 deductible per person with a limit of three deductibles. On June 20th M and J each went to the doctors and the cost was over $250 for each of them. Then on August 1st, K went to the doctor with a $1,000 bill, then L went to the doctor on Nov. 20th and his bill was $750. What is the total amount the family will have to pay in deductibles?
$750
____ of personal life insurance premiums is usually deductible for federal income tax purposes.
0%
Application Parts
1. General Information 2. Medical Information 3. Agent's Report - Agent's personal observations of the applicant.
Reinstatement
10 day period. If the insurer takes no action within 45 days...
Right to examine (free look)
10 days
Premature IRA distributions are assessed a penalty tax of:
10%
The maximum fixed policy loan interest rate that an insurer can change in Florida is
10%
What is the MAXIMUM fixed policy loan interest that an insurance company can charge in Florida
10%
All of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawals before age 59 1/2
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
In a noncontributory group health plan, what percentage of eligible employees must participate before the plan be put in force?
100%
XYZ Company pays the entire premium for its group health plan. The MINUMUM percentage of eligible employees that must be covered is:
100%
In a Noncontributory group, the policy must cover
100% of eligible persons
Long Term Care
12 months
Free Look provision allows an insured a period of
14 days from the delivery date of the policy to look over the new policy and return it for a full premium refund if dissatisfied for any reason
What is the youngest age you can legally engage in a life insurance contract?
15
Claim forms
15 days
An employer has
15 days to report a felony on the agent to the DFS
Minimum age at which an individual can sign a life insurance application is
15 years
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
Florida insurance law requires that coverage be provided for newborn baby from a covered family member for a period of
18 months
An agent's license will terminate if the agent allows
18 months to elapse without being appointed for the class or classes of insurance listed on the license
What is the time limit an insurer can contest a life insurance contract due to application fraud?
2 years
A provision that the policy terms shall be incontestable after it has been in force for a period of
2 years from tis date of issue
In florida, if an insured commits suicide (suicide clause) within
2 years of policy issue, the beneficiary will only receive a refund of premiums paid
Florida's health insurance coverage continuation act (mini COBRA) applies to employers who employ less than how many employees?
20
How many employees must a business have before the employees can be eligible to participate in COBRA?
20
Which of the following life insurance polciies provide a 25-year-old with the most rapid growth of cash value?
20 Pay life
Notice of claim
20 days
Within how long after the onset of disability must a client file a notice of claim with the insurance carrier?
20 days
Florida's health insurance coverage continuation act (Mini COBRA) applies to employers who employ less than
20 employees
Consolidated Omnibus Budget Reconciliation (COBRA)
20 or more employees
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay life
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-pay life accumulates cash value faster than Straight Life
The primary recipients of coverage provided by the Florida Healthy Kids Corporation are school-age children in families with incomes within what percentage of the federal poverty level?
200%
In what year was the patriot act founded
2001 (9/11)
The USA Patriot Act was enacted in:
2001 (9/11)
In Florida, anyone over the age of 64 will receive an additional
21 days beyond the normal policy grace period
How many hours of continuing education must agent who have been licensed less than six years complete every two years?
24
How many hours of continuing education must agents who have been license less than six years complete every two years?
24
How many hours of continuing education on the subject of suitability in annuity and life insurance transaction must an agent have in order to sell annuities?
3
Employees who have been covered under a group health plan or at least _____ before their termination to be eligible to continue their coverage under COBRA. They must request continuation within ______ following termination
3 months, 31 days
The insured has sustained an injury and is no longer able to perform the essential activities of daily living. The insured has been receiving coverage for skilled nursing care through Medicare but also a long-term care (LTC) rider. In order for the insured to maintain 100% coverage, the insured should have selected a LTC rider with an elimination period of how many days?
30
Within how many days must a license notify the department of Financial Services (DFS) of an address change?
30
Change in Address
30 Days
Free Look
30 Days
Grace Period
30 Days
A free look period is offered by all the qualified Long-term care insurance policies for how many days?
30 days
Free Look
30 days
If an agent changes his/her residence address, the department of Financial Services must be notified within
30 days
If an agent is found guilty of a felony, he/she is required to notify the Department of Insurance within
30 days
The grace period for a life insurance policy is never less than
30 days
The grace period for a life insurance policy is never less than:
30 days
Life insurance policies must provide a grace period of
30 days after the due date
An agent's change of business, residence, or email address must be reported to the Department of Financial Services within
30 days.
N is a 40-year old applicant who would life to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 pay Life
S is employed by a large corporation that provides group health coverage for its employees and their dependents. If S dies, the company must allow his surviving spouse and dependents to continue their group health coverage for a maximum of how many months under COBRA regulations?
36
Which of the following retirement plan involves a "matching element"?
401K
An insurance company that requires an application for reinstatement has how many days to reject the application before reinstatement is automatic?
45
Time payment of claims
45 days
An insurance company that requires an application for reinstatement has
45 days to reject the application
How many continuing education hours in a law and ethics update course are required for agents every two years?
5
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to file for Social Security disability benefits?
5
A person may first become eligible for benefits under social security after having been disabled for
5 Months
Any continuing education must include a minimum of
5 hours in ethics and laws
One becomes eligible for Social Security disability benefits after having been disabled for:
5 months
The purpose of the Florida Employee Health Care access act is to make group health insurance available to employers with
50 or fewer employees
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%
Normally, no more than
50% of an agent's insurance sales are allowed to come from controlled business
An insurer may normally delay the payment of a cash value loan or surrender value for up to
6 months
Group health insurance
6 months, 12 months or 63 days
20 hours of continuing education for every two years for agents licensed more than
6 years
24 hours of continuing education every two years for agents licensed less than
6 years
No legal action can be initiated within
60 days then 5 years
Grace period
7 days for weekly, 10 days for monthly and 31 days for everything else
Proof of loss
90 days
Partial Withdrawal
A 10% tax penalty is applied if a distribution is received before the annuitant reaches age 59 1/2
According to Florida statutes, all the following provisions must be contained in a Medicare Supplement policy EXCEPT:
A 12-month limitation on pre-existing conditions
A variable Whole Life Policy offers which the following features?
A Fixed, Level Premium
Which of the following items may be used to include coverage for children under their parent's insurance policy?
A Term Rider
Which of the following ways is a Life Insurance policy guaranteed to be correct?
A Warranty
All students attending a large university could be covered by
A blanket policy
All students attending a large university could be covered by:
A blanket policy
Agents can help perspective insureds understand and purchase the most appropriate product by delivering:
A buyer's guide
A method of providing life insurance on the children of a person who is covered by a life insurance policy is by:
A child term rider.
Hazard
A conditions or situation that creates or increases a chance of loss (Icy roads, driving while intoxicated, improperly stored toxic waste)
Renewable term
A feature of term insurance that allows the policyowner to renew the coverage after the designated term expires without having to prove insurability
Which of following statements is correct when the owner of an ordinary life policy chooses a premium payment mode that is more frequent than an annual payment?
A higher gross premium will be paid than if paid on an annual basis
Which of the following situations is an example of insurable interest?
A husband purchases a life insurance policy on his wife top pay off debts in the event of her death
When must insurable interest exist
A life insurance policy is issued
Life insurance premiums: Mortality factor
A measure of the number of deaths in a given population. Insurance companies use mortality tables to help predict the life expectancy and probability of death for a given group.
Needs Based Value Approach
A method of determining a person's financial value based on the amount of money needed for current and future expenses. For Example:final expenses, spouse's income, mortgage, college education, and retirement.
Human Life Value Approach
A method of determining the financial value of a person's life. It is based on computing the current value of a person's future earnings for a certain period of time.
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
All of the following statements are true about noncontributory employee group life insurance EXCEPT
A minimum number of participants is required
Annuitant
A person who's lifespan will affect the annuity and is also the person receiving the benefits
Joint life policy
A policy that covers two or more people. The age of the insureds are "averaged" and a single premium is charged. It uses permanent insurance (as opposed to term) and pays a death benefit when one of the insureds dies. The survivors then have the option of purchasing an individual policy without evidence of insurability. The premium for a joint life policy is less than the premium for separate, multiple policies.
Consideration Clause
A policyowner must pay a premium in exchange for the insurer's promise to pay benefits. The amount and frequency of premium payments are contained in the consideration clause.
Which of the following elements of a contract is necessary before a life policy will be used?
A prospect's signature on an application
Which of the following elements of a contract is necessary before a life policy will be issued?
A prospect's signature on an application.
Dread Disease policies cover
A single disease or illness only
Which of the following persons would MOST likely purchase a Medicare supplement policy?
A sixty-seven year old who is covered by medicare
Convertible term
A term life policy that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability
Which of the following parts of life policy is guaranteed to be correct?
A warranty
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
Which of the following is NOT included in an annuity contract?
AD&D rider
All are true statements regarding the underwriting process, EXCEPT:
AIDS and HIV virus exams can be conducted in a discriminatory fashion
A Guaranteed Insurability rider allows an insured to purchase additional insurance
AT SPECIFIED FUTURE DATES WITHOUT SUBMITTING PROOF OF INSURABILITY
Which provision is NOT a requirement in a group life policy?
Accidental
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):
Accidental Death and Dismemberment (AD&D) rider
In what type of insurance situation is a medical examination virtually never required as part of the application process?
Accidental Death and Dismemberment Insurance (AD&D)
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental Death and Dismemberment clause (AD&D)
Which of the following provisions of a life insurance policy will pay a stated amount to an insured if the insured is blinded in an accident?
Accidental death and dismemberment clause
N takes out a loan against a life insurance policy which is equal to one-half of the cash value. Ig N decides not to pay the interest when it is due, the insurance company will automatically:
Add to the loan balance the amount of the interest due
A Cost of Living rider gives the insured
Additional Death Benefits
Additional coverage can be added to a Whole Life policy by adding a(n):
Additional coverage can be added to a Whole Life policy by adding a(n):
A term Life rider offers the insured
Additional life coverage
Elements of insurable risk - Loss must be randomly selected
Adverse selection
Under joint life and survivor policy, benefits are paid
After the death of the last insured
A joint life policy pays
After the first insured dies.
How long does the coverage normally remain on a limited-pay life policy?
Age 100
Life insurance premiums: Other factors
Age, Sex, Health, Occupation, Hobbies, Habits
All of the following information must be shown on every insurance application in Florida EXCEPT the:
Agents office address and telephone number
An insurance company that is domiciled in Europe is known as what time of company?
Alien
An insurance company that is organized or chartered in a country other than the United States is defined as
Alien
An insurance company incorporated in another country is considered a(n)
Alien company
Under which of the following circumstances will the benefits under COBRA continuation coverage end?
All group health plans are terminated by the employer
Common exclusions to continuation of group coverage include:
All of the above
Elements of the contract: Competent Parties
All parties must be of legal competence, meaning they must be of legal age, mentally capable of understanding the terms, and not influenced by drugs or alcohol.
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received
Dividend options - Accumulate interest Option
Allows dividends to accumulate interest
Living Benefit Options: Accelerated Benefit
Allows someone that a physician certifies as terminally ill to access the death benefit. The amount of benefit received will be tax free.
Living Benefit Options: Viatical Settlement
Allows someone with a terminal illness to sell their existing life insurance policy to a third party for a percentage of the face value. The new owner continues to make the premium payments and will eventually collect the entire death benefit. Note: The original policy owner is called the Viator and the new third party owner is called the Viatical or sometimes called the Viatee.
Automatic premium loan rider
Allows the insurance company to deduct overdue premium from an insured's cash value if a payment is missed on a life policy.
Single Premium Life
Allows the insured to pay the entire premium in one lump-sum and have coverage for the insured's entire life.
Accelerated Benefit Rider
Allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and expected to die within 1-2 years
Misstatement of Age or Sex
Allows the insurer to adjust the policy benefits if the insured's age or sex is misstated on the policy application
Automatic premium loans
Allows the insurer to automatically use the policy cash value to pay an overdue premium. There is no cost for this provision.
Waiver of premium rider
Allows the policyowner to waive premium payments during a disability and keeps the policy in force. The disability must be total and permanent and have sustained through the waiting period (90 days or 6 months). After a certain age (usually 60-65), the waiver of premium rider is void
Death Benefit Settlement Options: Fixed Period
Also called period certain. The fixed period option is when the insurer pays proceeds (including interest and principal) in minimum guaranteed dollar payments over a specified number of years.
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
Amount of benefits available from other sources
The consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
An insurance company formed under the laws of Canada would be known in Florida as
An Alien Company
All of the following provisions are required in a group life policy EXCEPT
An accidental death and dismemberment provision
Credit report
An applicant's credit history is sometimes used for underwriting. The Fair Credit Reporting Act requires the applicant be notified in writing if a credit report will be used. The applicant must also be notified if the premium is increased because of a credit rating.
Which of the following would be certificate holder under a trustee group life policy?
An employee
The feature of a life insurance policy stating that the policy will not cover certain risks is called
An exclusion
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity
In a Disability Income policy, a statement that excludes coverage for back injuries is known as
An impairment rider.
Conversation Period
An individual must apply for individual coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversation period.
All of the following statements regarding group health insurance is true, EXCEPT:
An individual policy is given to each member
A provision that requires the insured to pay the first portion of covered expenses before major medical coverage applies is called
An initial deductible
Elements of the contract: 2 Legal Purpose
An insurance contract must be legal and not in opposition of public policy. If an insurance contract has insurable interest and the insured has provided written consent, it has legal purpose. Without legal effect, the contract would be null and void.
What does the insuring agreement in a life insurance contract establish?
An insurer's basic promise
Changing a beneficiary: Irrevocable Beneficiary
An irrevocable designation may not be changed without the written consent of the beneficiary. The irrevocable designation may not be changed without the written consent of the beneficiary. The Irrevocable beneficiary has vested interest in the policy, therefore the policyowner may not exercise certain rights (such as taking out a policy loan) without the consent of the beneficiary.
Elements of the contract: 3 Offer and Acceptance
An offer is made when the applicant submits an application and money for insurance to the insurance company. The offer is accepted after it has been approved by the insurance company's underwriter and issues a policy. If no money is given, the applicant is making an invitation.
Which premium schedule results in the lowest cost to the policyowner?
Annual
The Total cost of a life policy is lowest when the premiums are paid on which fo the following schedules?
Annually
Group life insurance policies are generally written as:
Annually renewable term
Which type of contract liquidates an estate through recurrent payments?
Annuity
Income tax treatment of annuity benefits
Annuity benefit payments consist of principal and interest. The portion of annuity benefits that are a return of principal (premiums paid into the annuity during the accumulation period) are not taxed. The portion of the annuity benefits that is considered interest is taxable as ordinary income
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):
Anti-Money Laundering violation
A customer surrenders a recently issued whole life policy and requests proceeds to be made payable to an unrelated third party. This would be a red flag potential violation of the:
Anti-money laundering rules
When a insurance application is taken by a producer, which of these statements is true?
Any changes made on the application require the applicant's initials
When an insurance application is taken by a producer, which of these statements is true?
Any changes made on the application require the applicant's initials
An insured who has a disability income policy that pays $1500 monthly benefit becomes disabled for a period of one year. The insure later dies as a result of the complications from the disability. In this situation, which of the following describes the right of the insured's estate?
Any earned but unpaid benefits will be paid
Disability, as defined for social security purposes, describes as an employee who is unable to engage in
Any occupation
When can a policyowner change a revocable beneficiary?
Anytime
Any changes made on an insurance application requires the initials of whom?
Applicant
In a third party contract, woh is considered a party?
Applicant
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the:
Applicant's physician
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
The authority given by an insurer or employer to a licensee to transact insurance or adjust claims on their behalf is called
Appointment
Which of the following terms defines the authority given to an agent to transact business on behalf of the insurer?
Appointment
Before a licensed agent is eligible to transact insurance sales, they must be
Appointment by an insurance company
Traditional individual retirement annuity (IRA) distributions must start by:
April 1st of the year following the year the participant attains age 70 1/2
Rollovers
Are a transfer of funds from one IRA or qualified plan to another. Rollover are taxable at 20% unless the funds are deposited into a new IRA or qualified plan within 60 days of distribution.
Independent Rating Services
Are credit rating agencies that rate or "grade" the financial strength and stability of insurers based on claims, reserves, and company profits. The nationally recognized statistical rating organizations that rate insurers are A.M Best, Mooty's, Standard and Poor's, and Fitch Ratings. Each rating service has its own rating system, but most use an A to F letter grading scheme.
Adjustable life policies
Are distinguished by their flexibility that comes from combining term and whole life insurance into a single plan. the policyowner determines how much face amount protection is needed and how much premium the policyowner wants to pay. Adjustable life insurance allows you to vary your coverage as your needs change. Consequently, no new policy needs to be issued when changes are desired.
How Insurance is sold: Distribution Systems
Are the ways insurance products are marketed and sold to the public. Insurance can be purchased through licensed insurance producers, who are either agents or brokers, or through a number of other ways. Agents are either captive/career agents or independent agents. Captive agents work for only one insurer. Independent agents work for themselves or for several insurers non-exclusively
Which of the following medical expenses does Cancer insurance NOT cover?
Arthritis
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
If a life policy owner wants to take out a bank loan and the bank insist on collateral, the insured may
Assign the policy to the bank
A policy owner may change a revocable beneficiary at which of the following times?
At any time
A Probationary Period provision in a group disability insurance contract becomes effective:
At the inception of the coverage.
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid
At the time of application
Annuity Units
At the time of the variable annuity is to be paid out to the annuitant, the accumulations are converted into annuity units. These payouts can vary from month to month depending on the investment results. The number of units doesn't change, but the value does. The value of an annuity unit is based on the return on the equity portfolio supporting the annuity
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
S has a whole life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
Which of the following provisions would keep a Whole Life policy in force if a required premium payment is not made and sufficient cash value exists from which the premium can be paid?
Automatic Policy Loan
A pilot applies for Life insurance. The insurer approves the application with a $10 additional monthly premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will then likely issue the coverage with a(n)
Aviation Exclusion
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation Exclusion
The Automatic Premium Loan provision is designed to:
Avoid a policy lapse
Which of the following kinds of policies typically contains a limited daily room and board benefit and provides coverage on an in-hospital basis only?
Basic Hospital.
A comprehensive major medical policy combines which of the following types of coverage?
Basic hospital/surgical and major medical
To be eligible for an association group life policy, a group MUST meet which of the following requirements?
Be formed for a purpose other than obtaining insurance
Contract of adhesion
Because an insurance contract has been prepared by an insurance company with no negotiation, it is considered a contract of adhesion. In a contract of adhesion there is only one author - the insurance company. If there is an ambiguity in the contract, the courts always favor the insured over the insurer.
Fiduciary responsibility
Because the agent handles money of the insured and insurer, he/she has fiduciary responsibility. A fiduciary is someone in a position of trust. With insurance, for example, it is illegal for agents to mix premiums collected from applicants with their own personal funds. This is called commingling.
T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the
Beneficiary
Who is NOT required to sign a life insurance application?
Beneficiary
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
All of the following conditions are included in group credit life programs EXCEPT
Benefits are paid to the borrower's beneficiary
All of the following statements about Major Medical benefits are true, EXCEPT:
Benefits have no maximum limit
Which of the following policies provides Accidental Death benefits to airplane passengers?
Blanket Accident
A vacation cruise line that wants group death coverage for its passengers would purchase what kind of insurance?
Blanket Health Insurance
Joe wants to buy Life Insurance on his 18 year old son. Who must sign the contract?
Both
Dental insurance contains which of the following features?
Both A and B
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is:
Business Overhead Expense
Which type of policy would pay an employee's salary if the employer was injured in a bicycle accident and out of work for six weeks?
Business Overhead Expense
A Business Overhead Expense policy:
Business Overhead Expense insurance covers eligible expenses for utilities, rent, and staff
What business overhead expense insurance designed to pay?
Business expense incurred when a business owner is disabled
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
W, an architect who has five employees, is concerned about how the business would survive financially if W became ill and was disable. Which of the following policies would BEST meet W's needs?
Business overhead expense
Which of these circumstances is a Business Disability Buy-Sell policy designed to help in the sale of a business?
Business owner becoming disabled
Treatment of Risk - How people deal with risk - Transfer
Buying insurance is the best way to transfer risk
All of the following rights are extended to a policy owner EXCEPT
CHANGE A CONTRACT PROVISION
The concept of level premiums
CHARGES MORE THAN NEEDED IN EARLY YEARS
Which of the following policy sections enables policy-owner to exchange one insurance policy for a policy of different kind?
CONVERSION PRIVILEAGE
Types of Hazard - Morale
Careless attitude, reckless driving, jumping off a cliff, stealing, racing motorcycles, carefree, careless lifestyle. This attitude causes an indifference to loss.
Which statement about a whole life policy is true?
Cash value may be borrowed against
Which statment about a whole life policy is true?
Cash value may be borrowed against
All individuals covered under a group contract will receive a(n)
Certificate
What is issued to each employee of an employer health plan?
Certificate
Employees are called
Certificate holders
Company XYZ offers a group term life insurance plan to its employees. What does each employee covered under this plan receive
Certificate of insurance
A Whole Life insurance policyowner does NOT have the right to
Change the grace period
A company that owns a life insurance policy on one of its key employees may do all of the following EXPECT
Change the policy's interest rate
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to do which of the following?
Charge an extra premium
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
if the contract values of an existing policy are used to purchase a new policy with the same insurer, this is known as:
Churning.
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
Which of the following is considered an unfair trade practice under Florida Law?
Coercion
When Sal borrowed money from the bank, he also gave the bank the legal right to a part of the death benefit of his life insurance policy. This transfer is called
Collateral assignment
Which of these actions is taken when a policyowner uses a Life insurance policy as collateral for a bank loan?
Collateral assignment
Coverage will begin on the day an insured signs a nonmedical application only if the producer takes which of the following actions on the same day?
Collects the initial premium
A key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?
Company X
Disability income insurance on a key employee would typically insure a(n):
Company executive.
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then, send the application off to the insurance company
W applies for life insurance on W's five year old child and submits the initial annual premium. The producer issues W a receipt and says that coverage will be effective immediately if the application is approved, because no medical examination is required. Which of the following types of receipts did the producer issue?
Conditional
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
Conditional receipt
A prospect's statements made in the application for insurance constitute a part of which of the following?
Consideration clause
Before an informal agreement becomes a binding contract, which of the following requirements MUST be met?
Consideration must be provided by one of the parties to the contract.
Employers are called
Contract holders
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
Which of the following types of group Term Life insurance plans does Z Corporation offer if its employees share the premium cost?
Contributory
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion
Which of the following features group Term Life Policy enables an individual to leave group and continue his or her insurance without providing evidence of insurability?
Conversion Privilege
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion Privilege
Which statement about conversion privileges in Group Life policies sold is CORRECT?
Conversion at a regular rate on attained-age basis without a medical exam is a standard provision
Which of the following individual policy conversions is usually permitted without any evidence of insurability?
Conversion from a Term policy to a whole life policy
An insured woh exchange a Term policy for a whole life policy without providing evidence of insurability probably exercised which of the following policy provisions?
Conversion privilege
Which of the following features of a group term life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
Which of the following features of group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
Which of the following polices provide temporary coverage that may be changed to permanent coverage without regard to the insured's health?
Convertible Term
Which of the following factors are MOST important when insured owner is trying decide whether to convert term insurance at insured's original age or the insured's attained age?
Cost of Insurance
The provisions of the Florida Employee Health Care Access Act require that
Coverage be renewed by insurers with the only exception being for nonpayment of the premium
A prospective insured applies for life insurance and pays an initial premium. The producer gives the prospect an appropriate receipt. Which of the following statements, is CORRECT about the situation?
Coverage is conditional, depending on the insurance company's underwriting requirements.
Under Florida Law, which of the following statements is CORRECT about coverage under a health policy for a disabled child when the child reaches the limiting age specified in the policy?
Coverage may be extended if the child is incapable of employment and chiefly dependent on the policyowner.
Annual renewable term
Coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
A business Overhead expense Disability Plan is BEST described as having a benefit paid to a Business partner is known as
Covering the fixed business costs
Blanket Life Insurance
Covers groups of people exposed to the same hazard, such as passengers on an airplane. No one is named on this policy and there is not a certificate of coverage given out. Individuals are only covered for the common hazard.
Death Benefit Settlement Options: Lump Sum
Death Benefit is paid in a single payment
For cash value accumulation to receive favorite tax treatment, a specific percentage of universal life policy premiums must be used to purchase
Death benefits
The combination of Whole Life and ____ Term insurance is referred to as a family Income Policy
Decreasing
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
What type of life policy has a death benefit that adjust periodically and is written for a specific period of time?
Decreasing Term rider
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred
Which of the following expenses are NOT covered by medicare Part A and Part B?
Dental services
Which of the following expenses are NOT covered by Medicare Part A and Part B?
Dental services.
K has An Individual Comprehensive Major Medical policy, and the premiums are payable on the first day of each month. K forgets to make the May payment and on June 20, is hospitalized and files a claim. In this situation, the insurance company probably will:
Deny the claim.
The agency responsible for rehabilitating or liquidating insurers when necessary is
Department of Financial Services (DFS)
Which Florida agency has the authority to investigate violations or potential violations of the Florida financial institutions code
Department of Financial Services (DFS)
continue group health benefits
Disability Buy-Sell
A type of health contract that allows the remaining partner to buy out the interest of the disabled business partner is known as
Disability Buy-sell
Which of the following policies pays monthly benefits to a lawyer's secretary who fell off a ladder at a secretary's home and was unable to work for three months?
Disability income
Which of the following policies will pay monthly benefits to a surgeon who is unable to work as a result of injuries sustained in a car accident?
Disability income
Social security disability benefits
Disability income benefits are paid to the covered worker in the amount of the PIA after a 5-month waiting period.
Types of Hazard - Moral
Dishonesty, Drugs, Alcohol abuse
Social Security provides all of the following types of benefits EXCEPT
Dismemberment
Which of the following does Social Security NOT provide benefits for?
Dismemberment
An employee requested that the balance of her 401 (k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into a IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
How are Roth IRA distributions normally taxed?
Distributions are received tax-free
Variable Annuity
Does not provide a guaranteed rate of return, because of the investment risk. A statement must be provided to the owner of the annuity at a minimum of once per year. Variable annuities can be classified as either immediate or deferred. Insurers that deal with variable annuities are subject to dual regulation by the SEC and the state's Office of Insurance Regulation
Treatment of Risk - How people deal with risk - Avoidance
Don't do anything
During the licensing application process, the Department will NOT request which of the following?
Drug test.
Which of the following sections of a life insurance contract states that the application is part contract
ENTIRE CONTRACT PROVISION
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-sell agreement, which of the following is TRUE?
Each parter owns a $500,000 policy on their partner's life
Treatment of Risk - How people deal with risk - Sharing
Each party assumes a portion of the risk
Under a trustee group life policy, who would be eligible for a certificate of coverage?
Employee
The federal income tax treatment of employer-provided group Medical Expense insurance can be accurately described as:
Employee's premiums paid by the employer is tax-deductible to the employer as a business expenditure
The eligibility requirements under group term life plans may allow all of the following employees to be excluded EXCEPT:
Employees who work more than 40 hours a week
Which of the health policy provisions states that the producer does NOT have the authority to change the policy or waive any of its provisions?
Entire Contract.
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire contract Provision
Elements of insurable risk - Loss must be predictable
Estimate the average frequency and severity
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusion
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
Exclusion
Which of the following features would be used in a life insurance policy to limit benefits for loss occurring while the insured is flying as a student pilot?
Exclusion
Term insurance has which of the following characteristics?
Expires at the end of the policy period
Express Authority
Express authority is the explicit authority granted to the agent by the insurer as written in the agency contract
An insurance company may lawfully take all of the following actions to provide disability income coverage to a substandard applicant EXCEPT:
Extend the contestability period.
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
Extended term
The authority behind the requirements that an applicant for Accident and Health policy MUST be notified of an investigation concerning the applicant's character, general reputation and mode of living is known as the
FAIR CREDIT REPORTING ACT
All of the following are systems that support sale insurance through agents and brokers EXCEPT
FRATERNAL BENEFIT SOCIETYSYSTEM
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
Fair Credit Reporting Act
The authority behind the requirement that an applicant for an accident and health policy must be notified of an investigation concerning the applicants character, general reputation and made a living is known as the
Fair Credit Reporting Act
Which of the following laws requires an insurer to advise an applicant in writing that an investigative consumer report may be conducted?
Fair Credit Reporting Act
When authority behind the requirements that an applicant for an accident and health policy MUST be notified of an investigation concerning the applicant's character, general reputation and mode of living is known as the
Fair credit reporting act
In insurance, which of the following statements about warranties or representations is CORRECT?
False representations will void a policy if they are material to the risk
What kind of life insurance policy pays a specificed monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
A policy that provides an income for a specific period starting at the death of the insured is a
Family maintenance policy
Agents marketing variable life insurance MUST be licensed and appointed as a life and variable contract agent, and a
Financial Industry Regulatory Authority (FINRA) registered representative
Agents marketing variable life insurance MUST be licensed and appointed as a life and variable contract agent, and a:
Financial Industry Regulatory Authority (FINRA) registered.
Types of beneficiaries: Primary
First in line to receive death benefit proceeds
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
The reason for a business having a Business Overhead Expense Disability Plan is to cover:
Fixed business expenses
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?
Flexible Installment Deferred
When may the Financial Services Commission hold hearings?
For any purpose within the scope for the insurance code deemed necessary
Modified Endowment Contracts (MEC)
For those policies that do not meet the 7-pay test, they are considered MEC's and will lose favorable tax treatment. The 7-pay test is a limitation on the total amount you can pay into your policy in the first seven years of its existence. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven-year period. For example, if yearly premium is $500, in a seven year period a total amount paid would equal $3,500. If you paid $3,501, it has now exceeded the 7-pay test and is no longer a life insurance contract. It will now be taxed as an investment. If withdrawn prior to age 59 1/2, there is a 10% penalty. Taxation only occurs when cash is distributed. The gain is taxable first on a Last in First Out (LIFO) basis.
ADC life insurance company's home office is located in Massachusetts and is incorporates in Massachusetts. In Florida, they are considered to be
Foreign
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium
Which of the following is a nonprofit provider of life insurance that is covered by a special section of the Florida insurance code
Fraternal life insurance organizations
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
Industry Oversight and regulation: The Armstrong Investigation Act
Gave the authority to the states to regulate insurance
The purpose of the ____ Period clause is to avoid an unintentional lapse of a life insurance policy.
Grace
If an insured fails to pay the premium when due, the insured's health policy will remain in force for a specified period of time under which of the following provisions
Grace Period
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
Group plans where employees pay a portion of the premiums are called contributory plans
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance
A Disability Income policy providing coverage to age 65 allows the insurance company to change the premium rate for the overall risk class assigned. Which of the following types of renewability BEST describes this situation?
Guaranteed Renewable
Under federal law tax exempt Health Savings account can only be opened for an individual who is enrolled in which type of plan?
High deductible health plan
Home Service Insurers
Home service insurance is industrial Insurance sold by home service or debit life insurance companies. Face amounts are small; usually $1,000 to $2,000 and premiums are paid weekly.
In life insurance, the needs approach is used mostly to establish:
How much life insurance a client should apply for
Which of the following statements about Equity Indexed Life Insurance is INCORRECT?
IF THE ACTUAL INVESTMENTS DIFFERS FROM WHAT WAS EXPECTED, PREMIUMS WILLBE EITHER LOWERED OR RAISED
Which life insurance arrangement is used to circumvent state insurable interest statutes Key Person Insurance?
INVESTOR-ORIGINATED LIFE INSURANCE
Which of the following statements is CORRECT about Variable insurance contract?
IT DOES NOT GUARANTEE A RETURN ON THE INVESTMENT ACCOUNTS
Which of the following statements if CORRECT about conversion of group term life insurance on termination of employment?
If death occurs during the conversion period, the death benefit must be paid
Payor Rider
If the individual paying the premiums on a juvenile life policy becomes disabled or dies before that child reaches a certain age, such as 18,21 or 25. The policy premiums will be waived until the child reaches a specified age in that contract
Simultaneous Death
If the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the uniform simultaneous death act law will assume that that the primary died first, this allows the death benefit proceeds to be paid to the contingent beneficiaries.
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
The type of annuity that can be purchased with one monetary deposit is called a(n):
Immadiate annuity
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n):
Immediate annuity
Utmost Good faith
Implies that there will be no attempt by either party to misrepresent, conceal or commit fraud as it pertains to insurance policies
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
Survivors benefits
Include a $255 lump-sum death benefit, surviving spouse benefits, child's benefit, and parent's benefit
All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT
Income derived from the TSA is received income tax-free
At the age of 45, age individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in:
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income tax and a 10% penalty tax on $30,000
T, age 70, withdraws cash from a profit-sharing plan and purchases a straight life annuity. What will this transaction provide?
Income that cannot be outlived by the owner
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners may receive credited interest tied
A retirement plan that may be established but an employee, regardless of any other retirement plan is called a(n)
Individual retirement account (IRA)
Which of these actions should a producers take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)
Installment Refund annuity
Adverse selection
Insueers must minimize adverse selection, which is defined as the tendency for poorer than average risks to seek out insurance. For example, a person who takes 12 prescriptions is a poor risk. If a insurer cannot compensate ppor risks with better than average risks, then its loss experience will increase and its ability to pay claims may be compromised
Life insurance premiums: Expense factor
Insurance companies are just like any other business. They have operating expenses which need to be factored into the premiums. The expense factor is also known as the loading charge.
Life insurance premiums: Interest factor
Insurance companies invest the premiums they receive in an effort to earn interest. This interest is one of the ways an insurance company can lower the premium rates.
A policy of adhesion is best described as one which the
Insurance company can modify
Death Benefit Settlement Options: Interest only
Insurance company holds death benefit for a period of time and pays only the interest earned to beneficiaries
Elements of insurable risk - Loss exposure to be insured must be large
Insurance company must be able to predict loss (based on law of large numbers)
Noncontributory
Insurance company requires that 100% of all employees are eligible
Contributory
Insurance company requires that at least 75% of all employees participate
Policy delivery refers to the delivery of the
Insurance contract to the applicant
Aleatory Contract
Insurance contracts are aleatory, which means there is an unequal exchange. The premiums paid by the applicant is small in relation to the amount that will be paid by the insurance company in the event of a loss.
Conditional Contract
Insurance contracts are conditional because certain conditions must be met by all parties in the contract. This is needed when a loss occurs in order for the contract to be legally enforceable
Industrial life
Insurance issues very small face amounts, such as $1,000 or $2,000. Premiums are paid weekly and collected by debit agents. They were designed for burial coverage.
After the insured dies, the insurance company discovers that the insured's age had been understated on the life insurance policy. The Misstatement of the Age provision in the policy specifies that the
Insurance proceeds will be adjusted to a reduced amount
Whole life
Insurance provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100.
Term Life
Insurance provides pure death protection since it only pays a death benefit if the insured dies during the policy term. Term life insurance does not accrue cash value
Group Life
Insurance written for members of a group, such as a place of employment, association, or a union. Coverage is provided to the members of that group under one master contract. The group is underwritten as a whole, not on each individual member. One of the benefits of group life coverage is usually there is no evidence of insurability required.
Who has the option to renew a Renewable Term policy?
Insured
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simulaneous Death Act?
Insured's contigent beneficiary
Variable annuities may invest premiums in each of the following, EXCEPT:
Insurer's corporate business account
In an accidental & health policy, which of the following clauses states the amount of benefits to be paid?
Insuring
Which of the following clauses of an insurance contract states that a specified amount of money will be paid to a designated person on the death of an insured?
Insuring Agreement
Which part of the insurance contract describes the obligation assumed by the insurance company in exchange for the premiums paid
Insuring Clause
A health insurance policy's provision that identifies the specific type of health care service that are covered by that policy is called
Insuring clause
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the:
Insuring clause
Which of the following claims are typically excluded from Medical expense policies?
Intentionally self-inflicted injuries
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:
Interest Only
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
Which of these types of coverage is best described as a short term medical policy?
Interim Coverage
A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need?
Irrevocable
A policyowner's rights are limited under which beneficiary designation?
Irrevocable
B is the owner and insured of a Single Premium Universal Life insurance contract. B wants to name a charitable entity as beneficiary and make the change permanent. Which is the best type of designation to assure B's wishes?
Irrevocable
What kind of Accidental Death and Dismemberment (AD&D) insurance beneficiary requires his/her consent when a change of beneficiary is made?
Irrevocable beneficiary
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?
Irrevocable beneficiary
Elements of Insurable Risk: Speculative Risk
Is a risk that presents both the chance for loss or gain. Gambling is an example. Speculative risks are not insurable.
Variable Universal Life (VUL)
Is a type of life insurance that builds cash value. It combines all the characteristics of a universal life and variable life. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which the avaliable separate accounts to use is entirely up to the contract owner. The 'variable' component in the name refers to the ability to invest in separate accounts whose values vary-they vary because they are invested in stock and.or bonds markets. The 'universal' component in the name refers to the flexibility the owner has in making premium payments. This provides the policyowner with flexible premiums, adjustable death benefits, a guaranteed minimum death benefit and gives the insured growth potential for higher returns, but also potential for loss.
Universal life
Is a variation of whole life insurance, characterized by considerable flexibility. Unlike whole life (with its fixed premiums, fixed amounts, and fixed face amounts, and fixed cash value accumulations) universal life allows its policyowners to determine the amount and frequency of premium payments which will adjust the policy face amount. Basic characteristics of a universal life policy are flexible premiums, flexible benefits, no minimum death benefit, and cash value withdrawals.
Credit life insurance
Is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid. A creasing term policy is most often used.
Life with period certain payout option (life income with term certain)
Is designed to pay the annuitant guaranteed payments for the life of the annuitant or for a specific period of time for the beneficiary. For example, if an annuitant has a 20 year period certain and dies after 10 years, the beneficiary will receive payments for another 10 years.
Waive
Is either intentionally or voluntarily surrendering of a known right.
Ordinary Life
Is made up of several types of individual life insurance, such as temporary (term), permanent (Whole)
Lloyd's of London
Is not an Insurance company. Members of the association from syndicates to underwrite and issue insurance - like coverage. This is a group of investors who share in unusual risk.
Implied Authority
Is not specifically expressed by the principal to agent in the agency contract, but is implicit in the agent's duties (otherwise unwritten in the contract)
Elements of Insurable Risk: Pure Risk
Is the only insurable risk and present a potential for loss only, such as injury, illness, and death.
The renewability feature of a term policy offers what advantage to the insured?
It allows the insured to extend the coverage period.
Which of the following conditions is typical of a major medical policy
It contains a deductible and coinsurance
What is the purpose of a Policy Summary?
It highlights the critical parts of the policy issued
What is the purpose of the Policy Summary?
It highlights the critical parts of the policy issued
Which of the following statements is correct about medicare
It is a hospital and medical expense insurance program
Which of the following statements is Correct about the life and insurance guaranty Association?
It is funded by insurance companies through assessments
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
Which of the following statements is CORRECT about third-party ownership of a life insurance policy?
It is widely used in business insurance and estate-planning situations.
Which of the following statements is correct about the action an insurer may take regarding misrepresentation on a application for a life insurance policy
It may void the policy only if it is discovered during the contestable period and only if it is proven to be material
J and K are married and have several children. J is primary beneficiary on K's Accidental Death and Dismemberment (AD&D) policy and K's sibling L is the contingent beneficiary. J, K and L are involved in a train accident and K and L are killed instantly. The Accident Death benefits will be paid to
J only
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage became effective?
January 26
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Joint Life
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
A life insurance policy that promises to pay the face amount on the death of first of 2 lives covered by the policy is called a
Joint life policy
X owns a Disability Income policy with a 30 day Elimination. That provides total disability benefits only. X becomes ill on May 1 and returns to work on May 15. X then becomes disabled from an accident on June 1 and the disability lasts until December 1 of the same year. Under these circumstances, X is eligible to receive benefits beginning on:
July 1
An insured files a written proof of loss for a disability income claim on May 20. If the insurer does not respond to the claim, what is the earliest date on which the insured can take legal action against the company?
July 20
A sole proprietor may use this plan ONLY if the employees of this business are included
Keogh Pension Plan
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?
Key Person Life Policy
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should be the firm purchase on its project manager?
Key person insurance
Which of the following BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition?
Less restrictive
T has a annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for balance of the 20 years. What type of annuity is this?
Life Annuity with Period certain
Valued vs Indemity
Life insurance contracts are valued contracts, which means it will pay a stated amount. Health insurance contracts are indemnity contracts are indemnity contracts and will only reimburse the actual cost of the loss (pay medical bills, etc.) You cannot profit from an indemnity contract.
Group Term Life
Life insurance is normally offered as a guaranteed annual renewable term policy. The policy is issued for one year and may be renewed annually without evidence of insurability at the discretion of the policyowner.
Juvenile insurance
Life insurance which is written on the lives of children is called juvenile insurance. The adult applicant is usually the premium payor as well, until the child comes of age and is able to take over the payments. A payor provision is typically attached to juvenile policies. It provides that, in the event of death or disability of the adult premium payor, the premiums will be waived until the child reaches a specified age (such as 18, 21 or 25)
An underwriter would use consumer reports to determine an applicant's
Likelihood of making premium payments
The purpose of a STOP loss provision in Major medical expense policies is to
Limit the amount of an insured's out of pocket medical expenses
Which of the following polices would best suit a prospective insured who desires permanent insurance
Limited pay life policy
The accelerated death benefit provision in a life insurance policy is also known as a(n):
Living Benefit
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rates
For which of the following loses would an insurance company MUST likely pay benefit under an Accidental Death and Dismemberment policy
Loss of Eyesight due to an accidental injury
An insurance company would MOST likely pay benefits under an Accidental Death and Dismemberment policy for which of the following losses?
Loss of eyesight due to an accidental injury
Modified whole life
Low premiums in the early years and jumps to a higher premium in the later years and remains fixed thereafter. Premiums increase just once.
Which of these is an element of a single premium annuity?
Lump-sum payment
Reinsurers
Make arrangements with other insurance companies to transfer a portion of their risk to the reinsurer. The company transferring the risk is called the Ceding Company and the company assuming the risk is the Reinsurer.
A pre-hospitalization authorization program (pre-certification) is a good example of
Managed care
Accidental Death and Dismemberment
May be added to a life insurance policy. Pays benefits for dismemberment and accidental death. Pays a principal sum for loss of both hands, both arms, both legs, or loss of vision in both eyes
Distribution by descent: Per stripes
Meaning by bloodline. In the event that a beneficiary dies before the insured, benefits from that policy will be paid to that beneficiary's heirs.
Distribution by descent: Per capita
Meaning by the head. Evenly distributes benefits among all named living beneficiaries
Long-term care partnership policies provide asset protection if the policyholder needs to apply for assistance from:
Medicaid
An agent who intentionally makes an untrue or incomplete statement in the course of an insurance transaction may be guilty of
Misrepresentation
Which of the following terms refers to how frequently an insured pays the premium?
Mode
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of premium
Which of the following policy features permits an insured to pay premiums more than once every year?
Mode of premium provision
A policy that is overfunded, according to IRS tables is classified as which type of policy?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract (MEC)
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance polciy is this?
Modified Premium Life
K Buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract
Newborn child
Moment of birth for 18 months
Reserves
Money that together with future premiums, interest, and survivorship benefits will fulfill an insurance company's obligations to pay future claims
In florida, what is the minimum schedule of time in which claims must be made to an insurer under an individual Disability policy?
Monthly
The time payment of claims provision requires that an insurance company pay Disability income benefits no less frequently than
Monthly
All of the following statements regarding MORBIDITY are true, EXCEPT
Morbidity figures reveal when and how long an individual will be disabled
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of plan assets are in key employee accounts
Life insurance premium rates, in large part, are based upon the anticipated number of individuals within a given group who will die within a specific period of time, as indicated on a ____ table.
Mortality
Requirements for a license
Must be 18, US citizen, Florida resident, not an employee of Vet affairs, funeral director or direct disposer, completed a 60 hour licensing course, pass the insurance state licensing examination
Elements of insurable risk - Loss cannot be catastrophic
Must be reasonable, 1 trillion dollar policy is not reasonable
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
A hardware store owner has a Group Life policy covering 50 employees. If the owner decides not to renew the policy and stops paying premiums, which statement is CORRECT?
Neither the insurer nor the owner is obligated to do anything.
Which of the following characteristics is associated with a large group disability income policy?
No medical underwriting
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
None
Which of the following benefits, if any, may be taxed like wages and salary by the internal revenue service?
None of the above
A typical short-term medical expense policy is best described as
Nonrenewable
A fraudulent statement was made in the original application for a health insurance policy. Under Florida law, if the policy is NOT guaranteed renewable, what will the company pay in the event of a claim?
Nothing
A corporation offers a $10,000 group life policy to its employees and pays a $5 monthly premium for each employee who accepts the coverage. The corporation is required to report how much additional taxable income for each employee?
Nothing.
An insurance company receives a prepaid application for an Individual Disability Income policy. One week later, it receives the Medical Information Bureau (MIB) report indicating that the applicant had a heart attack two years ago, although this was not disclosed on the application. In this situation, the company would most likely take all of the following actions EXCEPT:
Notify the MIB that coverage is denied.
Invesntors-Originated Life Iansurnance (IOLI) is arrangement which the death of insured benefits the
OWNER
Which entity oversees complaints against the life insurance agents and agencies selling universal life insurance products?
Office of Financial Regulation
Insurance policy forms used in Florida are approved by...
Office of Insurance Regulation (OIR)
Unilateral contract
On sided agreement, where only the insurer is legally bound. In an insurance contract only the insurance company is legally bound to do anything.
Families with children covered by the Florida Healthy Kids Corporation program pay:
Only a portion of the premium
Which of the following statements describe the income tax treatment of policy owner dividends?
Only interest on accumulation is taxed
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
Ordinary income tax and a 10% tax penalty for early withdrawal
The National Association of Insurance Commissioners (NAIC)
Organization composed of insurance commissioners from all 50 states, the distract of Columbia and the 4 US territories. They are responsible for recommending appropriate laws and regulations. They are responsible for the creation of the Advertising Code and the Unfair Trade Practices Act
The office of Insurance Regulation is NOT responsible for which of the following?
Organizing and licensing of companies
Elements of insurable risk - Loss must be due to chance
Outside the insured's control
To comply with ERISA Minimum participation standards, qualified retirement plans must allow the enrollment of all employees
Over age 21 with one year service
To comply with ERISA minimum participation standards, qualified retirement plans must allow the enrollment of all employees
Over age 21 with one year service
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD$D) policy and Q's sister R is the ocntingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:
P only
Dividends from a stock company are paid to stockholders, whereas in a mutual company dividends are
PAID TO THE POLICYOWNERS
An agent who sells a juvenile Life policy should recommend which of the following provisions to ensure that premiums will be waived if the policy owner becomes disabled?
PAYOR CLAUSE
Who is considered the owner of a mutual insurance company
POLICYHOLDERS
Under what system does a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured?
PPO
Which of the following statements is CORRECT about a Limited-Pay Life Policy?
PREMIUM PAYMENTS ARE LIMITED TO SPECIFIED NUMBER OF YEARS
Which of the following is CORRECT about premium payment schedule for a Whole Life Policy?
PREMIUMS ARE PAYABLE THROUGHOUT THE INSURED'S LIFETIME, AND COVERAGE CONTINUES UNTIL THE INSURED'S DEATH
Dividends from a stock company are paid stockholders, whereas in mutual dividends are
PREMIUMS FOR PARTICIPATING POLICIES ARE USUALLY HIGHER THAN NONPARTICIPATING POLICES
The primary purpose of including a suicide provision in a life insurance policy is to
PROTECT THE INSUERER AGAINST THE PURCHASE OF A POLICY IN CONTEMPLATION OF SUICIDE
K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?
Paid-Up Additional Insurance
All of the following statements are true regarding a policy's Grace period, EXCEPT:
Past due premiums are waived
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
If an insured's age is understated by 10 years on a life insurance policy and dies after the contestable period, the insurance company will:
Pay the amount that the premium would have purchased at the correct age.
W has suffered from chronic back problems for many years. Four years ago, W took out a disability income policy but did not tell the insurance company about the history of the back submits a claim, the insurance company will MOST likely
Pay the claim and allow the policy or remain in force
The annual premium on an insured's life policy due September 4. If he died on September 21 without paying the premium, the insurance company would take which of the following actions?
Pay the death benefit less the past-due premium
An insured who is covered by an individual Comprehensive Major Medical policy forgets to pay the annual premium, which is due on March 1. If the insured is hospitalized on March 10, and submits a claim, the insurance company will take which of the following actions?
Pay the full claim minus premium due
The benefits under a Disability Buy-Out policy are:
Payable to the company or another shareholder
In a life insurance policy, the Consideration clause states that the policy owner's consideration consist of completing the application and
Paying the initial premium
In a health policy, which of the following policy features states that the insured and the insurance company will share the cost of covered losses?
Payment of Claims provision
Which of these statement concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor Clause
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Joint and Full survivor payout option
Pays out the annuity to two people until the last annuitant dies. If one of them dies, the other will continue to receive the same income payments. There are two additional options made available with joint and survivor payout
Guaranteed Insurability Rider (future increase option)
Permits the policyowner to buy additional permanent life insurance coverage at specific points of time in the future, normally starting at age 25 and ending at age 40. It also includes specific events like marriage and births, without requiring the proof of insurability. Usually the benefit is allowed every 3 years, up to the original face amount of the policy.
Reinstatement
Permits the policyowner to reinstate a policy that has lapsed- as long as the policyowner can provide proof of insurability and pays all back premiums, outstanding loans, and interest. Most states allow reinstatement up to 3 years. However, some states are 5-7 years.
Extended term option
Permits the policyowner to use the policy's cash value to buy extended term insurance. No premium payments are made.
Which of the following best describes a contingent beneficiary?
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
In Florida, insurers are required to issue an additional lapse notice after the applicable statutory grace period has expired for policyholders at what age?
Persons who are 64 years of age or older
In Florida, insurers are required to issue an additional lapse notice after the applicable statutory grace period has expired for policyholders of what age?
Persons who are 64 years of age or older
Policy Loan Provisions
Policies that have cash value also have policy loan and withdrawal provisions. These policies must begin to build cash value after a certain number of years. In most states, this is 3 years. The policyowner has the right to the policy's cash value. Policy loans are not taxable
The underwriting process involves all of these, EXCEPT for:
Policy Loan
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:
Policy Loan provision
1035 Exchange Policy
Policy exchanges that qualify as a 1035 exchange are not taxable
The purpose of the Grace Period in an Accidental Death and Dismemberment policy is to give the
Policy owner additional time to pay overdue premiums
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Policy was returned within the free-look period, premium will be fully refunded
A Medicare Supplement policy's Outline of Coverage MUST include the
Policy's exceptions and limitations
On an Accidental Death and Dismemberment (AD&D) insurance policy, who is qualified to change the beneficiary designation?
Policyowner
The ____ has the right to change a life insurance policy's beneficiary
Policyowner
The ____ is authorized to assign a Life Insurance policy as collateral for a loan
Policyowner
Who benefits in Investor-Orinated Life Insurance (IOLI) when the insured dies?
Policyowner
Types of Hazard - Physical
Poor Health, Overweight, Blind
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?
Portion of the premiums paid for by the employer may be a tax deduction
A policyowner is able to choose the frequency of premium payments through what policy feature?
Premium Mode
The policy feature that permits the policy owner to select the timing of payment is
Premium Mode
How does group insurance differ from individual insurance?
Premiums are lower
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for a long as there is insurance coverage in force
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if the payor becomes disabled
Exceptions to the roles on taxing premiums
Premiums used for charity - life insurance paid by an ex-spouse - employer-paid premiums used to fund group life insurance for the benefit of employees
The MIB's main purpose is:
Prevent misrepresentation and fraud
Incontestable clause
Prevents the insurer from denying a claim or voiding a life insurance policy, except for nonpayment of premiums, after the policy has been in force for 2 years.
T is covered by two health insurance plans: a group plan through his employer and his spouse's plan as a dependent. Under the Modal Group Coordination of Benefits provision, when T files a claim, his employer's plan is considered the:
Primary carrier
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary insurance Amount (PIA)
Under Social Security, which of the following determines the full amount of retirement benefits for an eligible person?
Primary insurance amount (PIA)
A medical information report (MIB) report may disclose which of the following:
Prior use of marjuana
Cosumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:
Probability of making timely premium payments
K is the insured and P is the sole beneficiary on a Accidental Death and Dismemberment (AD&D) insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be paid to P's estate
K is the insured and P is the sole beneficiary on an Accidental Death and Dismemberment (AD&D) insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be paid to P's estate
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K's estate if P dies within a specified time
The insured and sole beneficiary are involved in an accident in which the insured dies before the beneficiary. Under the Common Disaster provision of life insurance contract, which of the following statements must be correct
Proceeds will be payable to the estate of the deceased beneficiary
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary
The statement that an insured MUST give an insurance company to show that a loss actually occurred is a:
Proof of Loss
The statement that an insured MUST give an insurance company to show that a loss actually occurred is a:
Proof of loss
Fixed Annuity
Provide a guaranteed rate of return
Buyer's Guide
Provides specific information about the policy purchased, such as the premium and benefits.
Dividend options - One-year term option
Purchase one-year term protection
Dividend options - Paid-Up additions option
Purchase single payment whole life coverage
Immediate Annuities
Purchased with a single lump sum payment, and will start providing income payments within the first year, but usually starting 30 days, from the purchase date. It's purpose is to provide for liquidation of a principle sum.
All of these are considered sources of underwriting information about an applicant, EXCEPT:
Rating Services
Dividend options - Reduced premiums option
Reduces premium payments
Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?
Reimbursement
An insured must present evidence of insurability within a reasonable time after policy has lapsed to exercise which of the following provisions
Reinstatement
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called:
Reinstatement
Which of the following policy provisions specifies that, if an insured fails to pay a renewal premium within the time granted but the insurer subsequently accepts the premium, coverage may be restored?
Reinstatement
Which of the following provisions can an insured use to put a policy in force that has lapsed as a result of nonpayment of premium?
Reinstatement
An insured lapsed a life insurance policy one year ago and now wants to reestablish this coverage. The policy can be placed in force under the
Reinstatement Provision
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
When an applicant's statements in an insurance application are accepted as true and accurate to the best of the applicant's belief, the statements are considered
Representations
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
Insurable Interest
Requires that an individual have a valid concern for the continuation of the life or well-being of the person insured. Without insurable interest, an insurance contract is not legally enforceable and would be considered a wagering contract. Note: Insurable interest only needs to exit at the time of the application or when policy is issued.
Amounts of money that together with future premiums, interest, and survivorship benefits will fulfill an insurance company's obligations to pay future claims known as
Reserves
An ophthalmologist has reopened his office after being totally disabled for one year. However, he will be able to handle only one-half of his patient schedule until he regains his full strength. If his individual Disability Income policy has been paying benefits and will continue to pay reduced benefits, the policy contains which of the following types of benefits provisions?
Residual Disability
When a person returns to work after a period of total disability but cannot earn as much as he or she did before the disability-this situation is called which of the following?
Residual disability
Qualified plans
Retirement plans that meet federal requirements and receive favorable tax treatment. Qualified plans provide tax benefits and must be approved by the IRS. The plans must be permanent, in writing communicated to the employees, defined contributions or benefits, and cannot favor highly paid employees, executives, or stockholders. The primary type of qualified plans includes defined benefit and defined contribution plans. To comply with ERISA minimum participation standards, qualified, retirement plans must allow the enrollment of all employees over age 21 with one year experience
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider
An insurance company will take which of the following actions if a producer submits an incomplete application for life insurance?
Return the application to the producer.
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
A(n) ____ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.
Revocable
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the benficiary designation at anytime. What type of beneficiary is his son?
Revocable
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Risk classification
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
Events or conditions that increase the likelihood of a loss occurring are referred to as
Risks
Post-tax dollar contributions are found in:
Roth IRA investments
Parol Evidence Rule
Rule that prevents parties in a contract from changing the meaning of a written contract by introducing oral or written evidence made prior to the formation of the contract but are not part of the contract.
Which of the following are Equity Indexed annuities typically invested in?
S&P 500
What does a 401(k) plan generally provide its participants?
Salary-deferral contributions
Which of the following information is included in the consideration clause of a life or health policy?
Schedule and amount of premium payments
A producer who discovers that answers to a series of questions on a life insurance application were omitted should take which of the following actions?
Schedule another appointment with the applicant to complete the unanswered questions
Types of beneficiaries: Secondary (contingent)
Second in line to receive death benefit proceeds
Which federal regulation requires insurance companies offering permanent, individual life insurance and individual annuity products to establish and maintain an anti-money laundering compliance program?
Security and Exchange Act
Treatment of Risk - How people deal with risk - Retention
Self Insure - Accepting a risk and confronting it if it occurs
Which of these factors does NOT influence an applicant's need for life insurance?
Self-maintenance expenses
All of the following activities could result in the suspension of an agent's license EXCEPT
Selling any replacement policy that causes an insured to lapse an existing policy
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions
P is a new employee and will be obtaining non-contributory group Major Medical insurance from her employer. Which of the following actions must she take during the open enrollment period?
Sign an enrollment card
Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT:
Signed HIPAA disclosure
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium
An insured purchases an Annuity with a large sum of money on January 2, and will begin receiving monthly payments February 1, which will continue for as long as he and his spouse lives. The type of Annuity purchased is a:
Single Premium Immediate Joint with Survivor Annuity.
Which mode of payment is NOT used by health insurance policies?
Single premium
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security
Which of the following programs pays benefits that are based on a percentage of an individual's Primary Insurance Amount (PIA)?
Social Security Disability Income
The purpose of the insuring clause in a health and accidental policy is to
Specify the scope and limits of the coverage provided
Graded whole life
Starts out with a low premium then has slight increases yearly for a set period of time. Premiums then level off for the remainder of the policy. For example, a policy can start out low in a graded whole life and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy.
Guaranty Associations
State life and health guaranty associations provide a safety net for all member life, health and annuities insurers in a particular state. Guaranty associations protect insureds in the event of insurer insolvency, or inability to pay claims up to a certain limit.
NAIC has four broad objectives: To preserve...
State regulation of the insurance business
Representations
Statements made by the applicant believed to be true (height, weight)
Warranties
Statements made by the applicant guaranteed to be true (name, DOB)
Law of Large Numbers
States that the larger the amount of exposures that are combined into a group, the more certainty there is to the amount of loss incurred in any given period
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n):
Straight Life annuity
Replacement of one insurance policy with another is
Strictly regulated and requires full disclosure
Under the claim forms provision of a health policy, if the insurance company fails to send out the claim forms within the time period required by the provision, the insured should
Submit the claim in any form, which must be accepted by the company as adequate proof of loss
Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries cause by a third party?
Subrogation
What must a agent soliciting a medical supplement policy provide?
Suitability Form
Basic cancer plans pay for which of the following conditions?
Surgery for malignant tumors
Which type of coverage when selected will allow an applicant to have excess life insurance coverage?
TERM RIDER
Credit policies MUST be issued in which of the following forms?
TERM.
Which of the following types insurance policies would provide greatest amount protection for a temporary period?
TERM.
A policy owner decides to use dividends from a life insurance policy to purchase paid-up addition. The policy owner asks an agent to explain how the amount of the paid-up that is purchased each year will be determined. The agent's explanation includes all of the
THE AGE OF THE BENEFICIARY
Under a group Credit Life Policy, the amount of insurance on life of a detbtor is limited to
THE TOTAL AMOUNT OF THE INSURED's LOAN
Treatment of Risk - How people deal with risk - Reduction
Take precautions - some alarms, stop smoking
Dividend options - Cash option
Take the cash
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income
During the payout period of an annuity, the interest portion of the payment is
Taxed ordinary income
A(n) ____ rider may be used to include coverage for children under their parent's life insurance policy.
Term
Credit policies must be issued in which of the following forms?
Term
What type of life insurance are credit policies issued as?
Term
Which of the following best describes a policy containing no cash value and premium increase over a period of time?
Term
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term Life
Decreasing term
Term life insurance that provides a decreasing face amount over time with fixed premiums. These policies are usually used for mortgage protection.
Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period?
Term.
What would the Medical Information Bureau (MIB) identify?
Testing positive for marijuana use from a previous screening
A license may not transact insurance business in Florida until which of the following occurs?
The Licensee is appointed by an insurer
A licensee may not transact business in Florida until...
The Licensee is appointed by an insurer
Death Benefit Settlement Options: Life Income
The Life income option provides the beneficiary with an income that they cannot outlive. Installment payments are guaranteed for as long as the recipient lives, the amount of each installment is based on the recipient's life expectancy and the amount of principal. This gives the potential for a greater return, or the potential for greater loss, based on how long the insured lives.
Medical Information Bureau (MIB)
The MIB is a nonprofit trade organization which maintains medical information about individuals. Information from the MIB is used by life and health insurers. This helps insurance companies from adverse selection by applicants, as it detects misrepresentations, helps identify fraudulent information, and controls the cost of insurance.
The definition of usual, customary, and reasonable (UCR) charges is
The Maximum amount the insurer will consider eligible for reimbursement under a health insurance plan
Accumulation Period
The Pay-in period, where the contract owner pays premiums
Who is the ultimate decision maker?
The Policyowner (unless it is in the underwriting process. At that point, the underwriter may consider the issue of the insurable interest.
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
Signatures
The agent and the applicant are required to sign the application. If the applicant is someone other than the proposed insured, except for a minor child, the proposed insured must also sign the application. This is considered third party ownership.
When may a licensed agent represent an unauthorized entity
The agent may never represent an unauthorized entity
Which of following statements is CORRECT about an agent who is taking an insurance application?
The agent should have the applicant initial any changes made on the application
Changes made on a insurance application should be signed or initiated by which of the following parties
The applicant
An applicant has been denied insurance coverage because of information contained in a consumer report. According to the Fair Credit Reporting Act, all of the following statements are true about this situation, EXCEPT
The applicant has the right to obtain a copy of the consumer report directly from an insurance company that used the report
Application
The application is the starting point and basic source of information used by the insurance company in the risk selection.
An applicant for an Accident & Health insurance policy must answer all questions on the application & it for which of the following reasons?
The application statements and representations are part of the consideration for issuing a policy.
The provision in a life insurance policy that provides protection against unintentional policy lapse is known as
The automatic premium loan provision
Which statement regarding a Key Employee Life policy is NOT true?
The beneficiary is named by the key employee
Beneficiary
The beneficiary is the person who receives survivor benefits upon the annuitant's death
Binding Receipt
The binding receipt or the temporary insurance agreement provides coverage from the date of the application regardless of whether the applicant is insurable. Coverage usually lasts for 30 to 60 days, or until the insurer accepts or declines the coverage. Binding receipts are rarely used in life insurance, and are primarily used in auto and homeowners insurance.
The Investment gains from a Universal Life Policy usually go toward:
The cash value
All of the following are true about modifications to an existing life insurance policy EXCEPT
The change must be countersigned by an agent
In florida, coverage for a child who is dependent on the parents for support due to phyiscal handicap may be continued beyond the contractual limiting age when of the following is correct?
The child is incapable of self-sustaining employment
L purchased a life insurance contract on July 16, 2004. L became severely depressed and on November 1, 2004 took his own life. Which of the following statements best describe how the insurance company settled the claim with L's beneficiaries?
The claim was denied under the suicide clause of the policy
If the primary beneficiary dies before the insured and a contingent beneficiary is also named in the policy, which of the following will occur when the insured dies?
The contingent beneficiary will receive the proceeds.
A contract owner terminates an annuity before the income payment period begins. The owner will then receive
The current contract surrender value
An agent takes an application for individual Accident and Health insurance and accepts a check from the client. The agent mails the check and application to the insurance company. A member of the company's underwriting department notices that the application is signed but the check is not. In this situation, if the applicant is approved by the insurance company, coverage will be effective as of which the following dates?
The date the agent delivered the policy collected the initial premium and obtained a statement indicating that there is no change in the insured's health
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate when using this phrase?
The duration of premium payments
What is the underlying concept regarding level premiums?
The early year are charged more than what is needed
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
A company wants to purchase a Key Employee Life policy. Which of the following statements is INCORRECT?
The employee names the beneficiary.
Under an employer/employee group health plan
The employer receives a master policy and the employee receives certificates
Which of the following statements is correct regarding an employer/employee group health plan?
The employer receives a master policy and the employees receive certificates
Which statement is TRUE regarding a group accident & health policy issued to an employer?
The employer receives the policy and each employee is issued a certificate
If an insurance company obtains an inspection report on a perspective insured, it must inform the prospect that it permitted to do so under which of the following federal laws?
The fair credit report act
Death Benefit Settlement Options: Fixed Amount
The fixed amount installment option pays a fixed death benefit in specified installment amounts until the proceeds are gone. The larger the installment payment the shorter the payout period.
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?
The gross premium is higher on a monthly payment mode as compared to being paid annually
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
The initial premium was NOT submitted with the application
Health Insurance
The insurance company agrees to pay a percentage of the insured's medical bills in exchange for consideration (premiums)
Which of the statements about Guaranteed Renewable health insurance policies is CORRECT?
The insurance company may cancel the policy for nonpayment of premium only.
Which of the following statements about the reinstatement of an Accident and Health policy is CORRECT?
The insurance company must act on an application for reinstatement within forty-five days after receiving it.
Entire Contract
The insurance policy itself, any riders and endorsements/amendments, and the application comprise the entire contract between all parties. Insurance producers cannot make changes to a policy. The entire contract provision is found at the beginning of every life insurance policy issued. Only an authorized officer of the insurer is permitted to make changes to the contract.
When an insured reinstates a policy, which of the following statements is INCORRECT?
The insured forfeits the right to use the automatic premium loan provision in the future.
An insured named his wife beneficiary and his son as contingent beneficiary. If the insured and his wife and killed in the same accident, the common disaster clause provides for payment to whom?
The insured's son
The amount of coverage on a group credit life policy is limited to:
The insured's total loan value
Insuring Clause
The insurer's basic promise to pay benefits in the event of a covered loss.
If an individual annually receives both dividends and interest on dividends from a participating life policy, the individual should include which of the following items in gross income for federal income tax purposes?
The interest only.
Estoppel
The legal process of preventing one party from reclaiming a right that was waived
Which party has the authority to name the beneficiary of a life insurance contract?
The owner.
Collateral assignment
The partial and temporary transfer of rights to another person or entity. Collateral assignments are usually intended for securing a loan.
Grace period
The period of time policyowners are allowed to pay an overdue premium during which the policy remains in force, usually 30 days
Which of the following features is typical of the Term Insurance?
The policy expires at the end of the policy period
Changing a beneficiary: Revocable beneficiary
The policy owner may change the beneficiary at any time without notifying or getting permission from the beneficiary
Suicide clause
The policy will be voided and no death will be paid if the insured commits suicide within 2 years from policy issuance. Some states mandate 1 year, but most are at 2 years. However, the company will return premiums paid.
Which statement regarding the Change of Beneficiary provision is true?
The policyowner can change the beneficiary
Free look
The policyowner is permitted 14 days in Florida once the policy is delivered to look over the policy and return it for a refund of all premiums paid.
Reduced Paid-up option
The policyowner pays no more premiums but the face amount is decreased
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:
The premiums can be lowered or raised, based on investment performance
Premiums and Receipts: Conditional Receipts
The producer issues a conditional receipt to the applicant when the application and premium are collected. The conditional receipt denotes that coverage will be effective once certain conditions are met. If the insurer accepts the coverage as applied for, the coverage will take effect from the date of the application or medical exam, whichever is later.
Assignment Clause
The right to transfer policy rights to another person or entity
Not all risks are insurable. Certain characteristics must be present for a particular risk to be considered an "insurable risk." Which of the following characteristics might make a risk uninsurable?
The risk of loss exists because of a catastrophic exposure
An application for an individual disability income policy may require all of the following information about the proposes insured EXCEPT for
The spouse's occupation
Group life insurance
There is no minimum number of members required for group life insurance
Group credit life
These are set-up by banks, finance companies, etc. In case the insured dies before a loan is repaid. Policy benefits are paid to the creditor and used to settle the loan balance. The premiums are usually paid by the insured. A decreasing term policy is commonly used.
Which of the following statements is true about most Blue Cross/Blue Shield organizations?
They are nonprofit organizations
Types of beneficiaries: Tetiary
Third in line to receive death benefit proceeds. If no one named, death benefit will go to insured's estate
For an individual disability policy that is paid for on an annual premium basis, the Grace Period provision is a minimum of how many days?
Thirty-one
Straight Life
This basic whole life insurance with a level face amount and fixed premiums payable over the insured's entire life. Premium payments made until death of insured or age 100.
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
This clause provides the payment of proceeds to the insured's estate
Annuity Period
This is also called the liquidation period, annutization period, or pay-out period. This is the time when the money that has accured during the accumulation period is paid-out in the form of payments to the annuitant.
Limited Pay Life
This is whole life insurance where the insured is covered for his entire life, but premiums are paid for a limited time. As the premium payment period shortens, cash values increase faster. For example, under a life paid-up at 65 policy, premiums are only paid until the insured is 65 years old. With a 20-pay life policy, the insured only pays for 20 years. The policies are in effect until the insured's death or they reach age 100.
Black-out period
This refers to benefits paid to the surviving spouse of a deceased person who was receiving social security. The "black-out period" begins when Social Security survivorship benefits cease. This is when the youngest child turns 16 years old, or if no children-immediately. The "black-out period" ends when the surviving spouse turns at least 60 years old.
Inspection Reports
This report provides information about the applicant's character, lifestyle, and financial stability. Inspection reports are usually only requested for larger coverages because they add expense to underwriting process.
Proceeds from which of the following policies are subject to federal income tax?
Those payable in installments
Preexisting Conditions are referred to in which of the following required Accident and Health policy provisions?
Time limit on certain defenses
Which of the following policy provisions gives an insurance company the right to set requirements that an insured must meet while a claim is pending?
Time limit on certain defenses
Elements of insurable risk - Loss must be definite and measurable
Time, place, amount, and when payable
Under a Limited- Pay Life policy, the death benefit coverage usually continues
To Age 100
Why is an applicant's signature required on a life insurance application?
To attest that the statements on the application are accurate to the best of the applicant's knowledge
Which is the fundamental purpose of medicare supplement insurance?
To cover medical cost not covered by the government
Which is the purpose of the Florida Employee Health Care Access Act
To make group health insurance available to employers with 50 or fewer employees
Fully insured and currently insured
To obtain fully insured status, a covered worker must accrue a total 40 quarters of credit, which is about 10 years of work. To be considered currently insured, and thus eligible for limited survivor benefits, a worker must have earned 6 credits during the last 13-quarter period.
The Florida Life and Health Insurance Guaranty Association was Established to provide funds
To protect an insured in the event of an insurer's insolvency
The applicant's signature is required on a life insurance application for which of the following reasons?
To represent that the statements on the application are true to the best of the applicant's knowledge
Under a health policy, an insured must give Notice of Claim to the insurance company within a MAXIMUM of how many days after the occurrence or commencement of a loss?
Twenty
Of the following terms, which best describes the act of replacing existing life insurance with new life insurance policy based upon incomplete or incorrect representations?
Twisting
Which of the following statements about unfair trade practices is true?
Twisting is a misrepresentation made by an agent in order to induce a policyholder to lapse a policy and switch insurance companies.
A variable annuity has which of the following characteristics?
Underlying equity investments
NAIC has four broad objectives: To encourage...
Uniformity in state insurance laws and regulations
A health insurance policy is an example of which of the following types?
Unilateral.
The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
Universal
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. That policy best suited for S would be
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
Which of the following Life insurance combine term insurance with an investment element?
Universal Life
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
What type of permanent plan has a "corridor"?
Universal Life Option
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of the last insured
Non-forfeiture options provide policy owners with all of the following options EXCEPT
Using the cash value to fund an automatic premium loan
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Utilities and office rent
A variable life policy has
Values based on mutual funds or stocks
A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n) ____ rate loan.
Variable
A(n) ____ life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
Variable
In order to sell a(n) _____ life policy, a producer is required to register with the Financial Industry Regulartory Authority (FINRA)
Variable
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
Variable
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
A producer is required to register with the Financial Industry Regulatory Authority (FINRA) in order to sell which of the following policies?
Variable Life.
An agent is required to register with the National Association of Securities Dealer (NASD) in order to sell which of the following policies?
Variable Life.
A(n) ____ ____ life policy combines investment choices with a form of Term coverage
Variable Universal
A policy with cash values that fluctuate in accordance with the investment performance of common stocks is known as:
Variable Whole Life
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable universal life
An applicant for life insurance must be informed of their rights under FairCredit Report Act at which of the following times?
WHEN THE PRODUCER COMPLETES INSURED'S APPLICATION
Which of the following policies guarantees to pay the face value either to the beneficiary when the insured dies or to the insured when age 100 is attained?
WHOLE LIFE
An insured who wants to guarantee that an Accident and Health policy will remain in force even in the event of being disabled should purchase which of the following riders?
Waiver of Premium.
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of premium
A statement that must be literally true in every respect is called
Warranty
Which parts of a life insurance policy are guaranteed to be true?
Warranty
Variable Life Insurance
Was created to help offset the effects of inflation on death benefits. It's permanent life insurance with many of the same characteristics of traditional whole life insurance. The main difference is the manner in which the policy's values are invested. With traditional whole life, these values are kept in the insurer's general accounts and invested in conservative investments selected by the insurer to match its contractual guarantees and liabiltities. With variable life insurance policies, the policy values are invested in the insurer's separate accounts which house common stock, bond, money market, and other securities investment options. Values held in these separate accounts are invested in riskier, but potentially higher yielding assets than those held in the general account. The basic characteristics of a variable life policy are: fixed premiums, a guaranteed minimum death benefit which fluctuates over the minimum, and cash values which fluctuate and are not guaranteed.
Risk Pooling (loss sharing)
When a large of people spread a risk for a small certain cost. It transfers risk from an individual to a group
Policy Surrender
When a policy is surrendered for the cash value, some of the cash value, some of the cash value received may be taxable, if the value was more than the amount of the premiums paid for the policy.
Nonforfeiture Options
When a policyowner decides he does not want his life insurance policy anymore, he has the option to surrender his policy. If there is cash value remaining he must use one of the following nonforfeiture options
Accelerated Death Benefit
When benefits are paid under a life insurance policy to a terminally ill person, the benfits are received tax-free. To be considered terminally ill, a physician must certify that the person has a condition or illness that will result in death in two years.
Under an Accidental Death and Dismemberment policy, in which of the following will an autopsy NOT be performed?
When it is prohibited by law
When does a life insurance contract become effective if the initial premium is not collected during the application process?
When producer delivers policy and collects initial premium
A $20,000 life insurance policy application is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?
When the applicant receives the policy and pays the initial premium
An insurance policy on the life of another person is valid if the policy owner has an insurable interest in the insured at which of the following times?
When the application is made
In life insurance, insurable interest must exist at which of the following times?
When the appreciation is taken
At what point does a Whole Life Insurance policy endow?
When the cash value equals the death benefit
An agent gives a conditional receipt to a client for a insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
In a policy with rear end loaded provision, surrender charges are deducted
When the policy is discontinued
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
Whole
A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
Whole Life
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole Life policy with an Other Insured Rider
Family income policies
Whole life and decreasing term insurance (begins date of purchase)
Family maintenance policy
Whole life and level term (begins date of death)
Deferred Annuities
Will start providing income payments after the first year. Deferred annuities are usually purchased with either a single lump sum payment known as a single premium deferred annuity (SPDA) or from monthly payments known as Flexible Premium Deferred Annuity (FPDA)
Common Disaster Provision
With a common disaster provision, a policyowner can be sure that if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary.
Concealment
Withholding of information or facts by the applicant (smoker, diabetes)
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew
Without evidence of insurability
Which activity may result in suspension or revocation of an agent's license?
Writing primarily controlled business
Can an agent in charge have more than one location
Yes, as long as the agent in charge is present when insurance activity occurs
B has owned a life insurance policy for one year. The insurer has discovered that b falsely answered questions on the application. Can the insurer void the policy?
Yes, because the application is part of the insurance contract
Can an agent in charge oversee multiple locations?
Yes, but the agent in charge must be onsite during the transaction of insurance sales
The Z Company takes out a Key employee policy on its director of operations. Several years later, the employee leaves Z company, joins a company and is killed in an automobile accident while the Key Employee policy is still in force. In this situation, the insurance company will pay the proceeds to which of the following entities?
Z company
A fifty-five-year-old widow recently sold a home and earned $100,000 profit. If the widow wants to purchase an annuity that will pay $1000 a month beginning at age sixty-four, the widow's producer should recommend:
a Deferred Fixed annuity.
Agents can help prospective insureds understand and purchase the most appropriate product by delivering
a buyer's guide.
A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as:
a representation
Dividend income received by a participating life insurance policyholder is:
a return of premium and not taxable
The Payor clause of an insurance policy on a juvenile provides which of the following benefits?
a waiver of premiums if the payor becomes disabled.
N takes out a loan against a life insurance policy which is equal to one-half of the cash value. Ig N decides not to pay the interest when it is due, the insurance company will automatically:
add to the loan balance the amount of interest due
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional Whole Life coverage at specified times
I has understated his age on disability insurance application. If J files a claim for benefits and the insurance company discovers the misstatement of age, it will MOST likely
adjust the benefits to the amount that the premiums paid would have purchased at J's correct age
An important underwriting principal of group life insurance is that
all or a large percentage of persons in the group must be covered by the insurance
A qualified profit-sharing plan is designed to:
allow employees to participate in the profits of the company
Cash surrender
allows the policyowner to receive the policy's cash value. Policyowner no longer has coverage at this point.
Level term
also called level premium level term, has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal.
Stock Companies
anAre incorporated companies owned by their stockholders. Dividends from a stock company are paid to stockholders. Traditionally, stock insurers are called nonparticipating insurers because policyholders do not receive dividends. Transformation of a stock insurer into a mutual insurer is termed mutualization, and the reverse is termed demutualization. Although stock companies CAN GIVE DIVIDENTS AND NOT GIVE DIVIDENDS, when they do, they are operating ON A MIXED PLAN. In this case, dividends are taxable
Systematic liquidation of accumulated funds is the basic function of a(n):
annuity
Cash value
applies to the savings element of whole life insurance policies that are payable before death. However, during the early years of a whole life insurance policy, the savings portion brings very little return compared to the premiums paid.
Under a Graded Premium Whole Life policy, the premiums
are lower during the policy's early years
In a qualified retirement plan, the yearly contributions to an employee's account:
are restricted to maximum levels set by the IRS
Fraternal benefit societies
are special types of mutual companies/nonprofit religios, ethnic or charitable organizations that provide insurance solely to their members. For example, Knights of Columbus.
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required
The purpose of the coordination of benefits (COB) provision, found only in group health plans, is to
avoid the duplication of benefit payments and overinsurance
The purpose of the coordination of benefits (COB) provision, found only in group health plans, is to:
avoid the duplication of benefit payments and overinsurance.
An agent or producer will always
be deemed to represent the insurance company and not the applicant
When replacing or exchanging an annuity contract, the agent must provide on a Form all of the following information EXCEPT
beneficiary designation
Variable Whole Life insurance can be described as:
both an insurance and securities product
The rules of disclosure review what needs to be provided to each prospective purchaser of a life insurance policy. This includes a
buyer's guide, policy summary, and 14 day free look period.
Under an interest sensitive Whole Life policy
cash values are determined by interest rates
All of the following situations must exist for a risk to be insurable EXCEPT a
certain gain or loss
Each person insured under a Group Life insurance policy is
certificate holder
If an insured leaves the primary area of medical coverage and seeks medical care, the insured first needs to:
contact the insurer to obtain prior approval for the medical service.
The consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers (and their families) whose employment has been terminated the right to:
continue group health benefits
What type of group insurance plan involves employees sharing the cost?
contributory plan
In the event of a termination of a group life plan or termination of a covered employee, a person covered by a group policy has the right to convert such coverage to an individual policy within the
conversion period (31 days)
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be:
converted to an individual permanent policy at an individual rate
All of the following are possible consequences for placing business with an unauthorized insurer EXCEPT
conviction of a third degree felony.
If an agent realizes that an applicant has made an error on an insurance application, the agent MUST
correct the information and the applicant initial the changes.
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the
cost of insurance
A business overage expense policy:
covers business expenses such as rent and utilities
Apparent authority
deals with the relationship between the insurer, the agent, and the customer. It is the appearance of authority based on the agent-insurer gives the customer reasonable belief that an agent has the power and authority to bind the principal
A(n) _____ term life policy is normally used when covering an insured's mortgage balance
decreasing
A long-term care rider may lapse for nonpayment of premium only if he insured and the:
designee fail to pay the premium more than 30 days after the lapse date.
What is the purpose of the U.S.A. Patriot Act?
detect and deter terriorism
T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company
does NOT have to make any further payments
During the licensing application process. The Department will NOT request which of the following?
drug test
Which of the following clauses in a health policy states that a copy of the application will be attached to the policy and made part of the contract?
entire contract
A(n) ____ contained in a life insurance policy states that the policy will NOT cover certain risks
exclusion
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the
expense charges
An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with a(n):
extra premium
All of these are characteristics of an Adjustable Life policy, EXCEPT:
face amount can be adjusted using policy dividends
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect, EXCEPT:
free-look period has expired
A Nonforfeiture clause gives the policyowner
guaranteed values even if the policy has lapsed
A Long-Term Care policy will pay
home care
A long-term care policy will pay for
home care
NAIC has four broad objectives: to assist...
in the administration of those laws and regulations by promoting efficiency
medicare part B does not cover
in-patient hospital services
Medical Expense policies usually EXCLUDE coverage for claims resulting from treatment of
intentionally self-inflicted injuries.
Medical Expense policies usually EXCLUDE coverage for claims resulting from treatment of:
intentionally self-inflicted injuries.
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the adminsitrative costs are increased
Participating company
is a life insurance company that shares its surplus earnings with its Insured. Nonparticipating companies do not
Peril
is an immediate, specific event which causes loss, such as an earthquake or tornado
Fraud
is an intentional misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value
Elements of the contract: 1. Consideration
is something of value that each interested party gives to each other. The insured provides consideration with payment of premium. The insurer consideration by promising to pay the insurance benefit.
Risk
is the uncertainty of loss
Dividends paid from a life insurance policy are
issused by the insurer
Which of the following statements about medicare is correct
it is financed by both federal and state goverment
Which of the following statements about Medicaid is CORRECT
it is financed by both the federal and state governments
A variation of the joint life policy is...
joint and survivor policy, also known as "second to die" policy. This plan also covers two lives, but the benefit is paid upon the death of the last surviving insured.
The advantage of an automatic premium loan provision or rider on a life insurance policy is that it
keeps a policy in force when premiums are due
Additional coverage can be added to a Whole Life policy by adding a(n):
level
An employer that offers a qualified retirement plan to its employees is eligible to:
make tax-deductible contributions to the plan
Florida law requires an agent who is recommending to a person the purchase of an annuity to obtain information regarding all of the following EXCEPT the persons:
marital status
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
marital status
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the:
martial deduction
Under Florida insurance law, deceptive advertising is considered a form of:
misrepresentation
Stock insurance companies that issues both participating and non-participating policies are referred to as a company doing business on a
mixed plan
in life insurance, "Reduced Paid-Up" as an example of a:
non-forfeiture option
The coverage provided by a Disability income policy that does NOT provide benefits for losses occurring as the result of the insurance employment is called:
nonoccupational coverage.
In an individual retirement account (IRA), rollover contributions are:
not limited by dollar amount
Small employer
not more than 50 employees
NAIC has four broad objectives: To protect the interests...
of policyowners and consumers
An accident policy will most likely pay a benefit for a(n):
off-the-job-accident
Which definition of disability requires the insured be unable to perform the insured's current occupation as a result of sickness or accident?
own occupation
Accidental Death Benefit Rider (multiple indemnity)
pays an additional sum to the beneficiary if the issured dies due to an accident. The amount paid is a multiple of the policy face amount such as double or triple the original benefit.
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the:
policy proceeds
Who has the right to change a revocable beneficiary?
policyowner
Spendthrift Clause
prevents a beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over a certain period of time.
The Coordination of Benefits provision:
prevents an insured covered by two health plans from making a profit on a covered loss
When does a life insurance contract become effective if the initial premium is not collected during the application process?
probability of making timely premium payments
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:
profit-sharing plan
The primary purpose of reluation of the insurance industry is to
promote the public welfare by maintaining the solvency of insurance companies
Industry Oversight and regulation: Fair Credit Reporting Act
provides individuals privacy protection and fair and accurate credit reporting. Insurance companies are required to notify applicants if a credit applicants if a credit check will be made on them.
When delivering the policy, the producer needs to explain that the free look provision begins upon
receipt of the policy by the policy owner
An insured suffers a disability which was due to the same cause as a previous disability. Both disabilities occurred within a six-month period. The insurer may provide the same benefits without a new elimination period, covering the second disability under the
recurrent disability benefit
Premium payment: Mode
refers to the premium payment schedule. Insurance policy rates are based on the assumption that the premium will be paid annually at the beginning of the policy year and that the company will have the premium to invest (interest factor) for a full year. If the policyowner chooses to pay the premium more than once per year (example monthly, quarterly, semi-annually) there normally will be an additional charge because the company will have additional charges in billing and collecting the premium payments.
Self Insurers
retain risks and must have a large number of similar risks and enough capital to pay claims. However, they may save money if the loss experience is lower than the expected costs.
The purpose of the Medical Information Bureau (MIB) is to
share medical data among member companies.
The purpose of the Medical Information Bureau (MIB) is to:
share medical data among member companies.
An immediate annuity consists of a:
single premium
Industry Oversight and regulation: The McCarran Ferguson Act of 1945
states that while the federal government has authority to regulate the insurance industry, it would not exercise it right if the insurance industry was regulate the insurance industry, it would not exercise its right if the insurance industry was regulated effectively and adequately on the state level
Replacement of one insurance policy with another is
strictly regulated and requires full disclosure
Replacement of one insurance policy with another is:
strictly regulated and requires full disclosure
The premiums paid by an employer for his employee's group life insurance are usually considered to be:
tax-deductible to the employer
An agent must disclose when replacing or exchanging an annuity contract
that there may be tax consequences as a result of the purchase
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:
the cost
If a life insurance policy loan is made and the insured person dies before it is repaid, the beneficiary will receive:
the death benefit minus the outstanding loan amount
A noncontributory group term life plan is characterized by:
the entire cost of the plan is paid for by the employer
Life Insurance
the insurance company agrees to pay a predetermined amount - the face amount, in exchange for consideration (premium)
An adjustable life insurance policy provides the flexibility to allow:
the insured to change the face amount or the premium payments
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
the intial premium
If a death claim is made while there is a loan against a life insurance policy:
the loan amount plus interest will be deducted from their death benefit
Under a Graded Premium Whole Life policy,
the premium increases each year during the early years of the contract and remains the same after that time
A level premium indicates:
the premium is fixed for the entire duration of the contract
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
An individual who purchases a life annuity is given protection against:
the risk of living longer than expected
When soliciting insurance for insurance companies, agents represent
their insurance companies.
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):
third-party with no insurable interest
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
A policy becomes a Modified Endowment Contract (MEC) when
too much premium is paid in the initial policy's years
An agent needs to abide by the following guidelines every...
two years to maintain their license
All of these are considered sources of underwriting information about an applicant, EXCEPT:
unemployment
An insurance company that charges different premiums for persons of the same risk class may be found guilty of
unfair discrimination
Term Life policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversation period
varies according to the contract
To receive a percentage of the policy face value, an owner of a life policy may sell the policy to a(n)
viatical settlement provider
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has:
waived one of its legal rights
If Medicare supplement policy is sold, the agent must deliver an Outline of Coverage to the applicant no later than
when the application is taken
Absolute assignment
when the assignee receives full control of the policy and rights to the policy benefits from the current policyowner.
If an insurer wishes to cancel a health insurance policy, it can do so
with a 45 day notice to the policyholder.
A Medicare Supplement insurer may NOT deny any application for a Medicare Supplement policy submitted
within six months after the applicant reaches the age of 65