Life Exam
What is the maximum allowed value of a gift that an agent can give to an insured without violating the regulation on rebating? $10 $15 $25 $100
$25
After its issuance, the temporary work authority expires after how many days? 10 days 30 days 45 days 60 days The temporary work authority expires no more than 60 days after it is issued and becomes ineffective when the actual license is issued.
60 days
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is A Multiplicative Policy. A Modified Endowment Contract. An Accelerated policy. An endowment.
A Modified Endowment Contract.
What are the two components of a universal policy? Insurance and investments Mortality cost and interest Separate account and policy loans Insurance and cash account
Insurance and cash account
In a survivorship life policy, when does the insurer pay the death benefit? Upon the last death Upon the first death Half at the first death, and half at the second death If the insured survives to age 100
Upon the last death
Producer licenses are valid for 1 year. 2 years. 5 years. Unlimited amount of time.
2 years.
Which type of life insurance policy generates immediate cash value? a) Single Premium b) Level Term c) Decreasing Term d) Continuous Premium
Single Premium
#65. If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death? a) 10% b) 0% c) 50% d) 25%
0%
#76. An insurance producer refused to comply with a subpoena. What would be the producer's penalty for this violation? a) A fine and an imprisonment b) A fine up to $10,000 c) Imprisonment up to 6 months d) A fine up to $5,000
A fine up to 5000
#59. Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) The wife of the deceased insured b) The former wife of the deceased insured c) A minor son of the insured d) A business partner of the insured
A minor son of the insured
Which of the following is the closest term to an authorized insurer? Licensed Legal Admitted Certified
Admitted
#75. In an annuity, the accumulated money is converted into a stream of income during which time period? a) Payment period b) Amortization period c) Conversion period d) Annuitization period
Annuitization period
Which of the following statements concerning buy-sell agreements is true? Buy-sell agreements pay in the event of a medical emergency. Buy-sell agreements are normally funded with a life insurance policy. Premiums paid are deductible as a business expense. Benefits received are considered income taxable.
Buy-sell agreements are normally funded with a life insurance policy.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? Reduction of Premium Annual Dividend Provision Accumulation at Interest Cash option
Cash option
Which of the following information about the applicant is NOT included on Part 1 of the application for insurance? Occupation Marital status Medical background Gender
Medical background
The Department can run a report on a specific producer that lists his or her license information, current license status, and the types of insurance that he or she can transact. What is the name of this report? Certification of license status report MIB report Producer's report Investigative consumer report
Certification of license status report
Which authority has the power to deny someone an insurance producer's license? Federal Insurance Licensing Regulation Board Commissioner Insurance company Guaranty Association
Commissioner
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report Are entitled to obtain a copy of the report from the party who ordered it. Must be advised that a copy of the report is available to anyone who requests it. May sue the reporting agency in order to get inaccurate data corrected. Must be informed of the source of the report.
Must be informed of the source of the report.
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? The premiums will become tax deductible until the insured's 18th birthday. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. The insured's premiums will be waived until she is 21.
The insured's premiums will be waived until she is 21.
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a) $0 b) $200 c) $9,800 d) $10,000
c) $9,800
#24. Which policy component decreases in decreasing term insurance? a) Cash value b) Dividend c) Premium d) Face amount
d) Face amount
Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend? A whole life policy An endowment policy A term policy An annuity
An endowment policy
Which of the following is TRUE about credit life insurance? Debtor is the annuitant. Creditor is the insured. Debtor is the policy beneficiary. Creditor is the policyowner.
Federal trade commission
What significance did Paul vs. Virginia have on the insurance industry? It was decided that insurance licenses should not be issued by the federal government and should instead be issued by individual states. It was decided that insurance was not interstate commerce and could not be regulated by the federal government. It was decided that insurance was interstate commerce and should therefore be regulated by the federal government. It was decided that insurance required a separate federal regulatory agency from Securities products.
It was decided that insurance was not interstate commerce and could not be regulated by the federal government.
An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the application process. What can they do? Pay a decreased death benefit Sue for the right to not pay the death benefit Pay the death benefit Refuse to pay the death benefit because of the fraud
Pay the death benefit
#31. If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a) Settlement option. b) Nontaxable exchange. c) Nonforfeiture option. d) Rollover.
Settlement option
Applicants for an individual producer license must submit proof of completing 24 hours of continuing education credits during the previous 5 years. 2 years. 3 years. 4 years.
2 years.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT A life insurance license. A SEC registration. A FINRA registration. A securities license.
A SEC registration.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? Guaranteed insurability option Dividend options Guaranteed renewable option Nonforfeiture options
Guaranteed insurability option
#7. Which of the following is NOT true regarding a Certificate of Authority? a) It is equivalent to an insurance license. b) It is issued by the state department of insurance. c) It is issued to group insurance participants. d) It may be necessary for transacting business in a specific state.
It is issued to group insurance participants.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of Rebating. Misrepresentation. Concealment. Unfair claim practice.
Misrepresentation
Which of the following best details the underwriting process for life insurance? Selection, classification, and rating of risks Solicitation, negotiation and sale of policies Issuance of policies Reporting and rejection of risks
Selection, classification, and rating of risks
#43. The interest earned on policy dividends is a) Nontaxable. b) Tax deductible. c) 40% taxable, similar to a capital gain. d) Taxable.
Taxable
The paid-up addition option uses the dividend To accumulate additional savings for retirement. To purchase a smaller amount of the same type of insurance as the original policy. To purchase a one-year term insurance in the amount of the cash value. To reduce the next year's premium.
To purchase a smaller amount of the same type of insurance as the original policy.
What is the purpose of a disclosure statement in life insurance policies? To protect agents and insurers against lawsuits To explain features and benefits of a proposed policy to the consumer To obtain important underwriting information from the applicant To help consumers compare policy prices
b) To explain features and benefits of a proposed policy to the consumer
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT The interest is credited at a rate specified by the policy. The policyholder has the right to withdraw the accumulations at any time. The interest is not taxable since it remains inside the insurance policy. The annual dividend is retained by the company.
c) The interest is not taxable since it remains inside the insurance policy.
What is the number of credits required for fully insured status for Social Security disability benefits? 4 10 30 40
40
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? Underwriter's Report Inspection Report Medical Information Bureau's report Agent's Report
Inspection Report
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another? False advertising Rebating Twisting Switching
Twisting
#73. An insured replaces his current policy with one offered by another insurer. If he finds that he is unsatisfied with the new policy, within what period of time can he return it and receive a full refund? a) This is not possible with replacement policies unless a mistake was made by either of the insurers. b) 30 days c) 60 days d) 90 days
b) 30 days
#69. A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? a) Flexible payment annuity b) Deferred interest annuity c) Immediate annuity d) Variable annuity
c) Immediate annuity
All of the following are Nonforfeiture options EXCEPT a) Extended term b) Reduced paid-up c) Interest only d) Cash surrender
c) Interest only
Which of the following information will be stated in the consideration clause of a life insurance policy? a) The time period allowed for the payment of premium b) The conditions for insurability c) The amount of premium payment d) The parties to the contract
c) The amount of premium payment
#64. All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT a) Most term policies contain a convertibility option. b) Upon conversion, the premium for the permanent policy will be based upon attained age. c) Upon conversion, the death benefit of the permanent policy will be reduced by 50%. d) Evidence of insurability is not required.
c) Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
If an applicant's license has lapsed within the past year, the applicant may apply for late renewal of the license within the maximum of how many months of expiration? a) 3 months b) 6 months c) 9 months d) 12 months
d) 12 months
#81. An insurance company and insured are settling a lawsuit involving a life insurance policy. The insurer believes that the application would help to establish material facts in the case. Which of the following is true? a) Once the policy is issued, it is permissible to use the application in litigation, provided that the insured is notified. b) If less than 2 years have passed since the policy issue date, it is acceptable for the application to be considered as evidence. c) State law prohibits applications from being used in litigation. d) Applications can only be used in court cases if they are attached to or endorsed upon the issued policy.
d) Applications can only be used in court cases if they are attached to or endorsed upon the issued policy.
#78. A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a) Pay the policy proceeds up to an established limit. b) Not pay the policy proceeds under any circumstances. c) Automatically pay the policy proceeds. d) Pay the policy proceeds only if it would have issued the policy.
d) Pay the policy proceeds only if it would have issued the policy.
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are Partially tax deductible depending on the income level. Tax deductible. Deducted based on the income level. Never tax deductible.
tax deductible.
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? Common Disaster Accidental Death Survivor Life Second-to-Die
Common Disaster
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called Payor rider. Cost of living rider. Accelerated benefit rider. Living need rider.
Cost of living rider.
What is the purpose of a conditional receipt? It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue. It is intended to provide coverage on a date earlier than the date of the issuance of the policy. It guarantees the applicant that a policy will be issued in the amount applied for in the application. It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company.
It is intended to provide coverage on a date earlier than the date of the issuance of the policy.
#26. If the issuance of a license is denied and a hearing is requested, which entity will be making determination whether or not the license should be issued? a) The state courts b) The Office of Administrative Law c) The Department of Insurance d) The NAIC
The Department of Insurance
A group of 4 entrepreneurs decides to open an insurance company. Which of the following is true? At least 2 members must be licensed insurance producers. All 4 members must be licensed insurance producers, regardless of whether they are involved in insurance transactions. At least 1 member must be a licensed insurance producer. None of the members have to be licensed as insurance producers, except for those who want to transact insurance business.
At least 1 member must be a licensed insurance producer.
Life income joint and survivor settlement option guarantees Payment of interest on death proceeds. Payout of the entire death benefit. Equal payments to all recipients. Income for 2 or more recipients until they die.
Income for 2 or more recipients until they die.
All of the following are requirements for life insurance illustrations EXCEPT They must differentiate between guaranteed and projected amounts. They must be part of the contract. They may only be used as approved. They must identify nonguaranteed values.
They must be part of the contract.
#23. Which of the following is NOT an example of insurable interest? a) Child in parent b) Debtor in creditor c) Business partners in each other d) Employer in employee
b) Debtor in creditor
#71. All of the following are characteristics of group life insurance EXCEPT a) Certificate holders may convert coverage to an individual policy without evidence of insurability. b) Premiums are determined by the age, sex and occupation of each individual certificate holder. c) Amount of coverage is determined according to nondiscriminatory rules. d) Individuals covered under the policy receive a certificate of insurance.
b) Premiums are determined by the age, sex and occupation of each individual certificate holder
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? a) Premiums are determined by age, occupation, and individual underwriting. b) 100% participation of members is required in noncontributory plans. c) Each member covered receives a policy. d) Coverage cannot be converted when an individual leaves the group.
c) 100% participation of members is required in noncontributory plans
#28. An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this? a) Incontestable clause b) Grace period c) Reinstatement provision d) Waiver of premium provision
c) Reinstatement provision
Nonforfeiture values guarantee which of the following for the policyowner? a. That the death benefit will be paid in a lump sum b. That the policy premiums will never increase c. That the cash value will not be lost d. That the dividends will be paid annually
c. That the cash value will not be lost
#76. Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a) Ordinary Life b) Joint Life c) Decreasing Term d) Whole Life
Joint Life
Which is TRUE about the cash surrender nonforfeiture option? After the cash surrender, the insured is covered for a grace period of 1 month. The policy remains active for some time after the policyholder opts for cash surrender. The policyholder receives the original cash value of the policy. Funds exceeding the premium paid are taxable as ordinary income.
Funds exceeding the premium paid are taxable as ordinary income.
If an applicant's license has lapsed within the past year, the applicant may apply for late renewal of the license within the maximum of how many months of expiration? a) 3 months b) 6 months c) 9 months d) 12 months
d) 12 months
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? $0 $50,000 (50% of the policy value) $100,000 $300,000 (triple the amount of policy value)
100,000
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium? If the daughter is disabled for any length of time If the father is disabled for more than 6 months If the father is disabled for at least a year If the daughter is disabled for more than 3 months
If the father is disabled for more than 6 months
The Supreme Court stated that insurance is interstate commerce and is therefore subject to regulation by the federal government in the decision of what case? Rosche-Wall vs. Alabama Paul vs. Virginia The U.S. vs. the South-Eastern Underwriters Association McCarran-Ferguson vs. New York
The U.S. vs. the South-Eastern Underwriters Association
#33. A small employer owns a group health insurance policy. The employer neglects to pay the premium by the payment due date. The employer fails to pay the premium yet again by the end of the grace period. Which of the following will happen? a) The policy will continue for the certificate holders only. b) The certificate holders will be transferred to another policy. c) The certificate holders will have to pay for all claims that were incurred after the premium due date. d) The policy will terminate.
The policy will terminate
A producer's license was revoked as a result of the Insurance Code violation. Which of the following is true? The producer can apply for a new license. The producer's license can be returned after 1 year. The producer cannot apply for a license reinstatement once the license has been revoked. The producer will have to wait 5 years before applying for license reinstatement.
The producer will have to wait 5 years before applying for license reinstatement.
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a) Decreasing term b) Variable life c) Universal life d) Whole life
a) Decreasing term
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a) Interest only option b) Life income with period certain c) Joint and survivor d) Fixed amount option
a) Interest only option
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive? 10% federal death benefit income tax, plus the amount of the accelerated benefit Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit There are no deductions taken from death benefits. Penalty imposed for early withdrawal of the death benefit, plus the amount of earnings lost by the insurance company in interest income
b) Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit
#14. Which of the following would NOT be considered an exception to the National Do Not Call List? a) Calls by or on behalf of tax-exempt nonprofit organizations b) Calls based from outside of the United States c) Calls for which the consumer has given prior written permission d) Calls which are not commercial or do not include unsolicited advertisements
b) Calls based from outside of the United States
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? An irrevocable beneficiary A buy-sell agreement Family term rider Third-party ownership
d) Third-party ownership
#66. What is the waiting period on a Waiver of Premium rider in life insurance policies? a) 30 days b) 3 months c) 5 months d) 6 months
d. 6
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT The amount of insurance. The type of investment. The length of coverage. The premium.
type of investment.
Which is NOT true about beneficiary designations? The beneficiary must have insurable interest in the insured. The beneficiary may be a natural person. The policy does not have to have a beneficiary named in order to be valid. Trusts can be valid beneficiaries.
a) The beneficiary must have insurable interest in the insured.
#74. Which of the following is true regarding license cancellation and reinstatement? a) The license needs to be returned to the Insurance Department. It can be reinstated by filling out an application and paying a fee. b) The producer must allow it to lapse. After that point, it can be reinstated any time within the next 2 years, provided that the continuing education requirements have been met. c) The license needs to be returned to the Insurance Department. Once this occurs, it cannot be reinstated. d) The producer must complete a brief interview with the Commissioner's Office. The license may then be reinstated within 1 year.
a) The license needs to be returned to the Insurance Department. It can be reinstated by filling out an application and paying a fee.
#12. All of the following are true of key person insurance EXCEPT a) The plan is funded by permanent insurance only. b) There is no limitation on the number of key employee plans in force at any one time. c) The employer is the owner, payor and beneficiary of the policy. d) The key employee is the insured.
a) The plan is funded by permanent insurance only.
#32. When an insurance producer sustains a spinal cord injury in a car wreck, he is rendered permanently disabled. In order to continue his business, his wife establishes an agreement with another producer to continue his business. This authorization will last for a maximum of a) 90 days. b) 180 days. c) 365 days. d) 30 days.
180 days
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? Assignment Automatic premium loan Waiver of premium Incontestability period
Automatic premium loan
Under which of the following circumstances would a nonresident producer NOT required to complete CE hours in New Jersey? Any time nonresident producers satisfy CE requirements in their home state Under no circumstances: all producers must meet CE requirements in this state If a waiver is received from the Commissioner If the producer's home state has the same CE requirements and the producer satisfies them
If the producer's home state has the same CE requirements and the producer satisfies them
During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes Coercion. Misrepresentation. Defamation. Twisting.
Misrepresentation.
#27. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a) Purchase a term rider to attach to the policy. b) Pay back all premiums owed plus interest. c) Receive payments for a fixed amount. d) Purchase a single premium policy for a reduced face amount.
d) Purchase a single premium policy for a reduced face amount.
Which of the following entities established the Do-Not-Call Registry? The Federal Trade Commission The Better Business Bureau The NAIC The Consumer Protection Agency
The Consumer Protection Agency
#21. An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a) The insured would not need to prove insurability for a conversion policy. b) The insured may convert coverage to an individual policy within 31 days. c) The premium for individual coverage will be based upon the insured's attained age. d) The insured may choose to convert to term or permanent individual coverage.
The insured may choose to convert to term or permanent individual coverage.
All of the following are requirements for life insurance illustrations EXCEPT They must differentiate between guaranteed and projected amounts. They must be part of the contract. They may only be used as approved. They must identify nonguaranteed values.
They must be part of the contract.
Which of the following included in the term "insurance-related conduct"? Transmitting funds between producers and the insurance company Insurer's acting with the scope of the Insurance Code Producer's ethical behavior Producer licensing
Transmitting funds between producers and the insurance company
#82. A Certification of License Status must include all of the following information EXCEPT a) Number of years a licensee has been in the business b) Licensee's date of birth c) Types of insurance for which the licensee is authorized d) License reference number
a) Number of years a licensee has been in the business
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? Payor Benefit Jumping Juvenile Juvenile Premium Provision Waiver of Premium
a) Payor Benefit
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $8,000, no tax consequence b) $8,000, tax on growth only c) $10,000, tax on growth only d) $10,000, no tax consequence
$10,000, no tax consequence
What are the penalties for the first, second, and any subsequent violation of the New Jersey Fraud Prevention Act, respectively? $10,000; $15,000; $20,000 $25,000; $50,000; $100,000 $5,000; $10,000; $15,000 $1,000; $5,000; $10,000
$5,000; $10,000; $15,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover? $10,000, 60 days $10,000, 30 days $8,000, 60 days $8,000, 30 days
$8,000, 60 days
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount In lesser amounts for the remaining policy term of age 100. Equal to the cash value surrendered from the policy. The same as the original policy minus the cash value. Equal to the original policy for as long a period of time that the cash values will purchase.
Equal to the original policy for as long a period of time that the cash values will purchase.
