LIFE EXAM
Joint life
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
Pay dividends to the policyowner
A participating insurance policy may do which of the following?
Automatic premium loan
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?
Revocable beneficiary.
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
Disclose commissions earned from the sale of the policy.
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT
Survivor protection
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Terminally ill insured.
A viatical settlement is arranged between a viatical company and a/an
Guaranteed surrender value
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?
Ordinary life
An insured purchased an individual life insurance policy with a face amount of $15,000. He pays a premium each month. What type of policy is that?
Rated.
Another name for a substandard risk classification is
Not subject to income taxation by the Federal Government.
Death benefits payable to a beneficiary under a life insurance policy are generally
20
How many hours of prelicensing education are required for applicants seeking a resident agent license for a single line of insurance?
Joint life annuity.
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a
the balance of the loan will be taken out of the death benefit
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
Whether an insurable interest exists between the individuals.
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about
It is only taxable if the cash value exceeds the amount paid for premiums.
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?'
The beneficiary.
In a group life insurance policy, the employer may select all of the following EXCEPT
Upon the last death
In a survivorship life policy, when does the insurer pay the death benefit?
Risk.
Insurance is the transfer of
Adjusted to the insured's age at the time of renewal.
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
Representations.
Statements made by an applicant for a life insurance policy which are true to the best of one's knowledge are referred to as
The order can be appealed.
The Superintendent issues a cease and desist order. A hearing is held in order to determine whether the order should be continued. After the hearing, the Superintendent decides to continue the order. The agent wants to appeal this decision. Which of the following is true?
The beneficiary will receive the greater of the money paid into the annuity or the cash value.
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?
Express authority.
The authority granted to an agent through the agent's contract is referred to as
To purchase a smaller amount of the same type of insurance as the original policy.
The paid-up addition option uses the dividend
2 years
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?
Respond to the consumer's complaint.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must
The current interest rate at the time of surrender
What determines the penalty for surrendering a market value adjusted annuity prematurely?
render the life insurance portion null and void. This means your beneficiary will no longer be eligible to receive any death benefit.
What happens when a policy is surrendered for its cash value?
An agreement between a ceding insurer an assuming insurer
What is reinsurance?
It determines if the insurance policy is a MEC.
What is the main purpose of the Seven-pay Test?
Insurer.
All advertisements are the responsibility of the
2. The interest will continue to accumulate tax deferred.
An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?
2. If the primary beneficiary predeceases the insured
An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
2.5%
An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?
common disaster
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?
Industrial life
An insured has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy does the insured have?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The insured may renew the policy for another 10 years, but at a higher premium rate.
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?
Pay the death benefit in the amount that the premium at the correct age would have purchased
An insured states her age as 40 on the application. When she dies, the insurer discovers that she was actually only 37 at the time of application. What will the insurance company do?
The insured will need a written consent of the insurer.
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
Consideration
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?
2. Increases annually.
Annually renewable term policies provide a level death benefit for a premium that
2 years.
Each person licensed as an agent or solicitor is required to complete continuing education instruction every
Hazards.
Events or conditions that increase the chances of an insured loss occurring are referred to as
Settlement option.
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
Exclusions clause.
Items stipulated in the contract that the insurer will not provide coverage for are found in the
3. Annually Renewable Term
The death protection component of Universal Life Insurance is always
Payor Benefit Rider
Which of the following riders would NOT cause the Death Benefit to increase?
Creating an estate
Which of the following will NOT be an appropriate use of a deferred annuity?
2. If the father is disabled for more than 6 months
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?
Copy of the original application
According to the entire contract provision, what document must be made part of the insurance policy?
30
Agents who change their state of residence must notify the Superintendent within how many days of any change in address?
They must be part of the contract.
All of the following are requirements for life insurance illustrations EXCEPT
1. Obtaining an insurance license.
All of the following would be considered an insurance transaction EXCEPT
The coverage period
An Adjustable Life policyowner can change which of the following policy features?
The interest will continue to accumulate tax deferred.
An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?
4. Attained age.
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
Increases annually.
Annually renewable term policies provide a level death benefit for a premium that
4. By their members - authorized insurers
How are state Insurance Guaranty Associations funded?
3
How many hours of continuing education must be completed in ethics?
2. Reasonable expectations
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
Return the application to the applicant for a signature.
If an agent fails to obtain an applicant's signature on the application, the agent must
2. Settlement option.
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
The beneficiary
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
The insured
In a viatical settlement, who is considered the viator?
The type of investment.
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT
The customer's associates, friends, and neighbors provide the report's data.
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
Misrepresentation.
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
Any form of life insurance
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
15
The hearing for a cease and desist order must occur within how many days of the order date?
3. Conditional
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
5 days
To avoid violating the state Insurance Code regarding unfair claims settlement practices, insurers must pay a claim within how many days of the final agreement to the settlement?
Tax deductible.
Traditional IRA contributions are
3. The same face amount as in the whole life policy.
Under an extended term nonforfeiture option, the policy cash value is converted to
Installments for a fixed period
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?
Homogeneous.
Units with the same or similar exposure to loss are referred to as
Insurance and cash account
What are the two components of a universal policy?
Policy summary
What describes the specific information about a policy?
Agent's contract with the principal
What documentation grants express authority to an agent?
4. The owner will receive the surrender value of the annuity.
What happens if a deferred annuity is surrendered before the annuitization period?
The owner will receive the surrender value of the annuity.
What happens if a deferred annuity is surrendered before the annuitization period?
18
What is the minimum age for obtaining an insurance agent license in this state?
Military service or war
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
30 days
What is the waiting period for rate filing before each rate may become effective?
Class designation.
When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called
It is reduced to the amount of what the cash value would buy as a single premium.
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
31 days
When an employee terminates coverage under a group insurance policy, coverage continues in force
Consideration
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
4. When the application is signed and a check is given to the agent
When is the earliest a policy may go into effect?
December 31 of the year that contains the fifth anniversary of the owner's death.
When must an IRA be completely distributed when a beneficiary is not named?
Equal to the original policy for as long as the cash values will purchase.
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Discrimination.
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered
When there are any incidents of ownership at the time of death
When would life insurance policy proceeds be included in the insured's taxable estate?
Extended Term
Which nonforfeiture option has the highest amount of insurance protection?
2. Payor Benefit
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?
4. It allows the owner to surrender the annuity without a charge.
Which of the following best describes a bail-out provision?
Policyowner
Which of the following individuals must have insurable interest in the insured?
Fraternal
Which of the following insurance providers must be nonprofit and sell insurance only to its members?
2. Debtor in creditor
Which of the following is NOT an example of insurable interest?
Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.
Which of the following is NOT true of Section 1035 Policy Exchanges?
1. Death due to plane crash for a fare-paying passenger
Which of the following is NOT typically excluded from life policies?
The chief administrator of the insurer is called an "attorney-in-fact".
Which of the following is a characteristic of a Reciprocal Insurance Exchange?
Buyer's Guide
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?
They are guaranteed to be true.
Which of the following is true about warranties?
It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.
Which of the following is true of a children's rider added to an insured's permanent life insurance policy?
A minor son of the insured
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?
Automatic premium loan
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
The cost of coverage is based on the ratio of men and women in the group.
Which of the following statements about group life is correct?
Viatical settlement provider
Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract?
3. Discriminating in benefits and coverages based on the insured's habits and lifestyle
Which of the following will NOT be considered unfair discrimination by insurers?
Single payment or periodic payments
Which two terms are associated directly with the way an annuity is funded?
4. An individual not covered by an employer-sponsored plan who has earned income
Who can make a fully deductible contribution to a traditional IRA?
Policyholders
Who might receive dividends from a mutual insurer?
To help the insured understand all aspects of the contract
Why should the producer personally deliver the policy when the first premium has already been paid?
Monthly premium waiver and monthly income
After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?
50% tax on the amount not distributed as required
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
Becomes terminally ill.
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
Taxable.
The interest earned on policy dividends is
Lump sum
What is the other term for the cash payment settlement option?
Grace period
What required provision protects against unintentional lapse of the policy?
When the insured reaches age 100
When would a 20-pay whole life policy endow?
Implied
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Making comparisons between different policies
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
It will continue for 180 days even if the owner disposes of the business.
Which of the following is NOT true regarding a temporary license in this state?
Money borrowed from the cash value is taxable.
Which of the following is NOT true regarding policy loans?
Beneficiaries are not identified by name.
Which of the following is TRUE about a class designation?
Life Paid-up at Age 65
Which of the following is an example of a limited-pay life policy?
The expense of a vacation for surviving family members
Which of the following would NOT fall into the category of costs associated with death?
Confirming future dividends in a life insurance proposal
Which of the following would be considered an illegal inducement to purchase insurance?
Reciprocal insurance
Which type of insurance is based on mutual agreements among subscribers?
Limited pay whole life
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Adjustment in the death benefit.
An applicant for insurance misstates her age at the time her life insurance application is taken. This misstatement may result in
50%
What is the penalty for IRA distributions that are below the required minimum for the year?
The insurance company's general account
When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed?
Distributions are taxable.
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?
Payor Benefit
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?
Domestic
Which of the following best describes an insurance company that has been formed under the laws of this state?
It is level term insurance.
Which of the following best describes annually renewable term insurance?
Taxes are deferred.
Which of the following best describes taxation during the accumulation period of an annuity?
Withdrawn amounts are taxed on a last in, first out basis.
Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?
Application
Which of the following is the basic source of information used by the company in the risk selection process?
It remains the same no matter how many children are added to the policy.
Which of the following is true about the premium on the children's rider in a life insurance policy?
Universal Life - Option A
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Bail-out
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?
Buy-sell agreements are normally funded with a life insurance policy.
Which of the following statements concerning buy-sell agreements is true?
Whole life
Which of the following types of insurance policies would perform the function of cash accumulation?
Face amount
Which policy component decreases in decreasing term insurance?