Insurance

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in A. Adjustment in the amount of death benefit B. No change whatsoever C. Automatic lapse D. Recession of the policy

A. Adjustment in the amount of death benefit If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased

If a life insurance policy contains a minimum 10-day unconditional refund provision (free look), when is the latest that the buyer's guide and policy summary must be delivered? A. At the time of policy delivery B. Within 10 days of policy delivery C. Before accepting the initial premium D. Within 30 days of policy delivery

A. At the time of policy delivery If the policy contains an unconditional refund provision of at least 10 days, or if the policy summary includes an unconditional refund offer, the buyer's guide and policy summary may be delivered either before or at the same time as the delivery of the policy.

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A. Conditional B. Contigent C. Aleatory D. Unilateral

A. Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? A. Fixed amount B. Variable period C. Variable amount D. Fixed Period

A. Fixed Amount Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contigencies.

All of the following are dividend options EXCEPT A. Fixed period installments B. Accumulated at interest C. Reduction of premium D. Paid-up additions

A. Fixed-period installments Fixed-period installments is a settlement option, and not one of the divident options

A Universal Life insurance policy has two types of interest rates that are called: A. Guaranteed and Current B. Option A and Option B C. Fixed and Variable D. Minimum and Target

A. Guaranteed and Current The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contact (lower guaranteed) rate of interest

Which of the following is an eligibility requirement for all Social Security Disability Income benefits? A. Have attained fully insured status B. Be disabled for at least 1 year C. Have permanent kidney failure D. Be at least 50

A. Have attained fully insured status Although Social Security offers many benefits, suc as retirement, survivors and Medicare, only those who have attained fully insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status.

The divident option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the A. One-year term option B. Paid up option C. Acclerated endowment D. Paid-up additions

A. One-year term option The dividend is utilized to purchase one-year term insurance

Which Universal Life option has a gradually increasing cash value and a level death benefit? A. Option A B. Juvenile life C. Term insurance D. Option B

A. Option A. Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date inorder to maintain a gap between the cash value and teh death benefit before the policy matures.

In North Carolina, suicide is covered after the life insurance policy has been in force for a minimum of how many years? A. 1 year B. 2 years C. 3 years D. Suicide is never covered

B. 2 years In North Carolina, life insurance policy benefits may not be limited after 2 years from the date of issue on the basis of the insured's suicide. If the suicide occurs prior to the 2 years, the insurere will return the premiums to the beneficiary

Which of the following is NOT a mandatory provision in a life insurance contract? A. 2-year incontestability period B. 5% minimum interest paid on cash value C. Misstatement of age or sex D. 31-day grace period

B. 5% minimum interest paind on cash value North Carolina's life insurance mandatory provisions include a grace period of 31 days, incontestability after 2 years, except for nonpayment of premium, and misstatement of age and sex. A minimum interest of 5% on cash value is not a mandatory provision.

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercises the extended term option for the policy's cash value, which is $20,000. What would be the face amount of the new term policy? A. $20,000 B. $25,000 C. $50,000 D. The face amount will be determined by the insurer

C. $50,000 The face of the term policy would be the same as the face amount provided under the whole life policy.

Under an extended term nonforfeiture option, the policy cash value is converted to A. A lower face amount than the whole life policy B. A higher face amount than the whole life policy C. The same face amount as in the whole life policy D. The face amount equal to the cash value

C. The same face amount as in the whole life policy Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy

Which of the following acts would be grounds for a person's license suspension, revocation, or refusal to renew? A. An agent unknowingly misrepresents the terms of an insurance contract B. An agen refuses to offer an explanation to a policyholder concerning the coverage provided by another insurer C. The broker does not return a client's calls on timely basis D. An agent fails to pay state income tax

D. An agen fails to pay state income tax. Failure to pay state income tax is a violation subject to license suspension or revocation, all the other examples are not.

Variable Whole Life Insurance is based on what type of premium? A. Increasing B. Flexible C. Graded D. Level Fixed

D. Level fixed Variable Whole Life Insurance is a level fixed premium investment based product

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? A. Adhesion B. Consideration C. Good faith D. Represenation

B. Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premium and the health represenations made in teh application. Consideration on the part of the insurer is the promise to pay in the event of loss

The minimum number of credits required for partially insured status for Social Security disability benefits is A. 4 credits B. 6 credits C. 10 credits D. 40 credits

B. 6 credits To be considered partially insured, an individual must have earned 6 credits during the last 13-quarter period.

A Return of Premium term life policy is written as what type of term coverage? A. Renewable B. Level C. Increasing D. Decreasing

C. Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

In which of the following instances would the premium be tax deductible? A. Premiums paid by an employer on a $30,000 group term life insurance plan for employees B. Premiums paid by an individual on his/her own life insurance C. Premiums paid by a mother on her son's policy D. Premiums paid by an employer on the life of a key person

A. Premiums paid by an employer on a $30,000 group term life insurance plan for employees As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.

Which type of life insurance policy gnerates immediate cash value? A. Single Premium B. Level Term C. Decreasing Term D. Continuous Premium

A. Single Premium Like other types of whole life policies, Single remium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum paments made to the insurer.

During partial withdrawal from a universal life policy, which portion will be taxed? A. Principal B. Loan C. Interest D. Cash value

C. Interest During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation.

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? A. Variable whole life B. Decreasing term C. Straight whole life D. Universal life

D. Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then A. The benefit is received tax free B. The benefit is subject to the exclusionary rule C. IRS has no jurisdiction D. The benefit is received as taxable income

A. The benefit is received tax free Should a key person die, the benefit is treated as a reimbursement to the business for loss of service from that key person

Which of the following best describes what the annuity period is? A. The period of time during which accumulated money is converted into income payments B. The period of time from the accumulation period to the annuitization period C. The period of time during which money is accumulated in an annuity D. The period of time from the effective date of the contract to the date of its termination

A. The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated oney is converted into an income stream.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A. Universal Life - Option A B. Universal Life - Option B C. Equity Indexed Universal Life D. Variable Universal Life

A. Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated wih life insurance

Which of the following products requires a securities license? A. Variable annuity B. Fixed annuity C. Equity Indexed annuity D. Deferred annuity

A. Variable annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commision (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuitites

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters ? A. 4 credits B. 6 credits C. 10 credits D. 40 credits

B. 6 credits To be considered currently (or partially) insured, an individual must have earned 6 credits during the last 13 quarter period.

If an insurer accepts premium payments by credit card, who is responsible for paying the fees charged by a credit card company? A. Credit card company B. Insurer accepting payment C. Policyowners, as part of their premium D. Insured making payment

B. Insurer accepting payment Credit card payment fees are the responsibility of the insurer. In fact, it is one of the conditions for permitting the insurer to accept payments by credit card.

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT A. Obtain appropriate signatures on the application for insurance B. Issue the policy that is requested C. Help prevent adverse selection D. Solicit business that will fall within the insurer's underwriting guidelines

B. Issue the policy that is requested The producer does not issue the policy, but delivers the policy. The producer has a duty to solicit business that will fall within the underwriting guidelines and represent profitable business to the insurer (help prevent adverse selection)

If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? A. Single premium policy B. Jumping juvenile policy C. Limited pay whole life policy D. Modified life insurance policy

B. Jumping juvenile policy While many policies provide a level death benefit, Jumping Juvenile policies provide a low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21)

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend A. Joint and survivor B. Straight life C. Life income with period certain D. Installment refund

B. Straight life With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant

All of the following entities regulate variable life policies EXCEPT A. The Insurance Department B. The Guaranty Association C. Federal government D. The SEC

B. The Guaranty Association Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.

The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? A. The money wiill continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary B. The beneficiary will receive the greater of the money paid into the annuity or the cash value C. The owner's estate will receive the money paid into the annuity D. The insurance company will retain the cash value and pay back the premiums to the owner's estate

B. The beneficiary will receive the greater of the money paid into the annuity or the cash value If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity, either the amount paid into the plan or the cash value, whichever is greater

A licensee who ceases to maintain residency in North Carolina is required to deliver any insurance licenses to the Commisioner by mail or in person within how many days after terminating residency? A. 10 days B. 21 days C. 30 days D. 90 days

C. 30 days

A Straight Life policy has what type of premium? A. A decreasing annual premium for the life of the insured B. A variable annual premium for the life of the insured C. A level annual premium for the life of the insured D. An increasing annual premium for the life of the insured

C. A level annual premium for the life of the insured

In cases when an applicant for insurance is blind or deaf, the insurer underwriting the policy may do which of the following? A. Refuse to insure the applicant because of adverse risk B. Limit the amount or type of coverage available to the applicant C. Apply the same standards as are used for applicants whose sight and hearing are not impaired D. Charge a different rate for the same coverage based on increased risk

C. Apply the same standards as are used for applicants whose sight and hearing are not impaired Insurers cannot refuse to insure or refust to continue to insure an individual, limit the amount, extent, or kind of coverage available to an individual, or charge an individual a different rate for the same coverage, solely because of blindness or partial blindness, or deafness or partial deafness

In which of the following methods of changing a beneficiary does the policyowner send the contract to the home office of the insurer for approval and change? A. Recording method B. Succession method C. Endorsement method D. Filing method

C. Endorsement method In the endorsement method, the policyowner is required to send the request for change with the contract to the home office of the insurer . The home office will have to aporive and make the change

Which of the following best describes annually renewable term insurace? A. Neither the premium nor the death benefit is affected by the insured's age B. It provides an anually increasing death benefit C. It is level term insurance D. It requires proof of insurability at each renewal

C. It is level term insurance Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost

Which of the following settlement options in life insurance is known as straight life? A. Life with period certain B. Fixed amount C. Life income D. Single life

C. Life income The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.

An insured purchased a life policy in 2010 and died in 2020. The insurance comapny discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? A. Pay a decreased death benefit B. Sue for the right to not pay the death benefit C. Pay the death benefit D. Refuse to pay the death benefit because of the missstatement on the application

C. Pay the death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Which type of misrepresentation persuades an insured, to their detriment, to cancel, lapse, or switch policies from one to another? A. False advertising B. Rebating C. Twisting D. Switching

C. Twisting "Twisting" is a misrepresentaton that persuades an insured/owner, to their detriment, to cancel, lapse, or switch policies from one to another

Which of the following is a key distinction between variable whole life and variable universal life products? A. Variable whole life allows policy loans from the cash value B. Variable universal life has a fixed premium C. Variable whole life has a guaranteed death benefit D. Variable universal life is regulated solely through FINRA

C. Variable whole life has a guaranteed death benefit Variable universal life insurance may or may not have a minimum death benefit, unlike variable whole life insurance which guarantees a minimum death benefit.

Any agent, broker or limited representative who acts for a person other than himself negotiating a contract of insurance, for the purpose of receiving the premium, is deemed to be A. A designated representative of the agent B. A managing partner of the insured. C. In violation of the free credit act. D. An agent of the company.

D. An agent of the company Any agent, broker, or limited representative who acts for a person other than himself negotiating a contract of insurance, for the purpose of receiving the premium, is deemed to be the company's agent. Any agent, broker, or limited representative knowingly procuring by fraudulent representations payment, or the obligation for the payment, of a premium of insurance, may be found guilty of a Class 1 misdemeanor

A Universal Life Insurance policy is best described as a/an: A. Variable Life with a cash value account B. Whole Life policy with two premiums: target and minimum C. Flexible Premium Variable Life Policy D. Annually Renewable Term policy with a cash value account

D. Annually Renewable Term policy with a cash value account A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance

Which of the following must an insurer obtain in order to transact insurance within a given state? A. Producer's certificate B. Business entity license C. Insurer's license D. Certificate of authority

D. Certificate of authority All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state

When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? A. Defamation B. Twisting C. Rebating D. False financial statment

D. False financial statement False financial statements are made when insurance companies attempt to hide their financial troubles from public and government officials

W owns a policy in which she is covered as the bread-winner with permanent insurance and with decreasing term insurance in the form of a rider. What type of policy is this? A. Family Policy B. Family Maintenance Policy C. Family Protection Policy D. Family Income Policy

D. Family Income Policy If the insured dies during the income period of a family income policy, monthly benefits are paid to the survivors for the balance of the income phase. The death benefit is then paid to the beneficiary. During the income phase, the insurer retains the cash value and death benefit to invest and generate insurance

What is the benefit of choosing extended term as a nonforfeiture option? A. It matures at age 100 B. It allows for coverage to continue beyond maturity date C. It can be converted to a fixed annuity D. It has the highest amount of insurance protection

D. It has the highest amount of insurnace protection Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase

An individual who sells insurance solely as a foreign military sales agent works with a A. Military license B. Temporary license C. Alien license D. Restricted license

D. Restricted license An individual may transact insurance as a foreign military sales agent in foreign countries or territories on U.S. military installations or with U.S. military personnel under a restricted license

An insured has chosen joint and 2/3 survivors as the settlement option. What does this mean to the beneficiaries? A. The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time B. The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies C. One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies D. The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

D. The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When the reduced option is written as "joint and 2/3 survivor", the surviving beneficiary receives 2/3 of what was received when both beneficiarise were alive

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT A. The length of coverage B. The premium C. The amount of insurance D. The type of investment

D. The type of investment Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.

When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy? A. They can convert their coverage to permanent life insurance with evidence of insurability. B. Family members are not provided any rights C. They can surrender the coverage for its cash value D. They can convert their coverage to permanent life insurance without evidence of insurability

D. They can convert their coverage to permanent life insurance without evidence of insurability. Family members may convert their term coverage to permanent insurance if requested within the time stated in the policy.

In insurance policies, the insured is not legally bound to any particular action in the insurace contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?? A. Unidirectional B. Aleatory C. Conditional D. Unilateral

D. Unilateral In a unilateral contact, the insured is not legally bound to do anything. The insurer, however, mus pay losses covered by the policy.

All of the following benefits are available under Social Security EXCEPT: A. Old age and retirement benefits B. Disability benefits C. Death benefits D. Welfare benefits

D. Welfare benefits Social security is an entitlement program, not a welfare program