Life + Health insurance Test

A retirement plan where contributions are based upon the success of the company is known as a:

Profit Sharing Plan

A renewable term life insurance policy has a(n):

Level death benefit with an increasing premium Although renewable term life insurance has a level face amount, the premiums will increase as the insured gets older. Renewable term may be written for one year, five years, 10 years or even longer. On annual renewable term, the premium will increase each year, but for renewable term written for longer periods of time, the premium is based upon the average age of the insured during the term.

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Law of large numbers

All of the following are true regarding key person life insurance EXCEPT:

The premium is tax deductible for the employer as a business expense Explanation: Key person life insurance is individual life insurance that is used for a business purpose. The business owner would buy life insurance on a key person, naming the business as beneficiary. If the key person died, the proceeds would be paid to the business that would use the funds to hire and train a replacement. The premiums paid are not tax deductible, but neither are the proceeds taxable.

Who bears all of the investment risk in a fixed annuity?

The insurance company. Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

Events in which a person has both the chance of winning or losing are classified as

Speculative risk

is the insurer's legal right to seek damages from third parties, after it has reimbursed the insured for the loss.

Subrogation

All of the following are unfair claims settlement practices EXCEPT

Suggesting negotiations in settling the claim

If a life insurance beneficiary wants all of the proceeds paid out to them in 10 years, they should select which of the following settlement options?

Fixed Period

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured will need a written consent of the insurer.

Under social security, to be fully insured for full retirement, disability, death and survivor's benefits, an individual must have worked and contributed to social security for at least ____ calendar quarters.

40

The person whose life is covered by a life insurance policy is known as the:

Insured

A licensed life agent may transmit an application for insurance to an insurer for which the life agent is not appointed. If the insurer issues the policy, the insurer is considered to have authorized the agent to act on its behalf, and they must forward a notice of appointment to the Commissioner within ____ days after receiving the application.

14 days

What is Apparent authority?

Appearance or the assumption of the authority grants the agent more powers to assist the client

Transacting insurance includes all of the following activities EXCEPT:

Compiling a list of prospects

hazards and may increase the chance of a loss occurring.

Conditions

War and aviation are common types of life insurance:

Exclusions

Which of the following is an example of a non-qualified retirement plan?

Executive bonus plan

An organization that, in addition to other activities, provides a formal insurance plan to its members is classified as a

Fraternal insurer

5 years

Insurer examinations must occur no less frequently than every

What is the term for how frequently a policyowner is required to pay the policy premium?

Mode

Social security provides protection for all of the following EXCEPT:

Poor Investments

The chance of loss without any possibility for gain is known as:

Pure Risk

All of the following are true regarding Traditional IRAs EXCEPT:

Qualified distributions are tax free

is the uncertainty or chance of a loss occurring.

Risk

What is rebating?

Special offers or favors, outside of the contract

involves the opportunity for either loss or gain.

Speculative risk

Unlike the dividend itself, the interest earned on dividends is

Taxable

All of the following are ways in which a Major Medical policy premium is determined EXCEPT

The average age of the group

Which of the following dates must be contained in a policy summary?

The date the summary was prepared. A policy summary must contain the date that the summary was prepared.

Which of the following best describes the entire contract clause as it relates to life insurance?

The policy and the application, if attached at issue

A life settlement broker represents which of the following in a life settlement transaction:

The policy owner

Employee stock ownership plans (ESOP) invest in:

The stock of the employer

What is Conservation effort?

Trying to discourage a policyholder to drop an existing policy

The spouse of a currently insured social security participant who died is eligible to receive monthly life income benefits starting as early as age:

60

Which of the following completes the application for life insurance?

Applicant Explanation: An applicant is a prospective insured who completes and signs a written application form containing the personal information needed by the underwriter to make an informed underwriting decision.

What required provision protects against unintentional lapse of the policy?

Grace period

Underwriters review applications for insurance and the information contained therein so as to NOT

Issue a policy that would insure a pending loss.

Which mode of premium payment would have the highest overall annual cost?

Monthly

A cause of loss is also known as a(n):

Peril

A hazard is defined as:

Something that increases the chance of loss

Peril is most easily defined as

The cause of loss insured against

The department of an insurer that is responsible for classifying risks is:

Underwriting

What level of authority is given to the Office of Insurance Regulation with respect to examination of insurer's activities to determine compliance Unfair Trade Practice laws?

Absolute. Florida statutes provide the Office of Insurance Regulation with an absolute right to examine the affairs of every person (insurers and licensees) involved in the business of insurance to see if they are engaged in any unfair trade practices.

All of the following are components of a life insurance policy premium EXCEPT:

Dividends

Under a long-term care rider, which of the following are considered to be activities of daily living?

Dressing and Eating

The source of dividends paid to the owners of participating life insurance policies issued by mutual insurers is:

Earned surplus Explanation: A mutual insurer's earned surplus or retained earnings are the source of dividends to be paid to their policyholders. Retained earnings are defined as the insurer's net profit before the payment of dividends.

Who is the owner of the policy and who pays the premium in an Executive Bonus Plan?

Executive is the owner and the Executive pays the premium

When using the needs approach to determine how much life insurance a client should buy, producers should consider all of the following EXCEPT:

Future earnings potential

All of the following would be considered to be ordinary life insurance EXCEPT:

Group

Which of the following is NOT included in the types of whole life insurance that is offered?

Increasing term

All of the following are true regarding a mortality table EXCEPT:

It shows which individuals will die each year at a given age

What are the "living benefits" of whole life insurance?

Loan value and retirement income

Which of the following programs expands individual public assistance programs for people with insufficient income and resources?

Medicaid

All of the following are dividend options on a participating life insurance policy EXCEPT:

Monthly income Explanation: Mutual insurers usually offer their policyholders a choice of five dividend options: cash, accumulation at interest, paid-up additions, reduced premium payment and one-year term. Monthly income is an annuity pay out option, not a dividend option.

Which of the following is NOT among the goals of a Medicare Supplement application?

Presuming the applicant is eligible for Medicaid, based on the nature of the policy

What is another name for substandard risk classification?

Rated

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use funds to purchase new insurance?

Replacement rule

In case of a loss, the indemnity provision in insurance policies

Restores an insured person to the same financial state as before the loss

Which type of annuity has no accumulation period?

Single Premium Immediate

What term is used for tricking policyholders by using fraudulent comparisons of policies to persuade the insured to switch or take out another policy with another insurer?

Twisting

How long will a life annuity with an installment refund pay?

Until the balance of the initial premium is paid out in continued payments to the beneficiary after the annuitants dies.

When does the policy begin, if the initial premium is not paid?

When the agent delivers the policy -Collects the initial premium -Applicant completes an acceptable Statement of Good Health

Which of the following is true regarding optional benefits with long-term care policies?

they are available for an additional premium

Licensees must print their license number on all of the following EXCEPT:

Correspondence

Applications to an insurer must include all of the following information, EXCEPT

Credit history report. Licensed agents may not submit applications to an insurer or furnish a copy of an application to a prospective insured unless the name of the insurer is legibly typed or printed on the first page of the application form at the time coverage is bound or the premium is quoted. The application must also disclose the name and license identification number of the agent as shown on the agent's license.

A hazard is defined as something that increases the risk. Which of the following is considered to be a morale hazard?

Driving recklessly Explanation: There are three types of hazards: 1) physical hazards, such as smoking or sky diving; 2) moral hazards, such as engaging in illegal activities; and 3) morale hazards, which are presented by careless persons.

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor. A joint and survivor option pays while either beneficiary is still living.

The uncertainty about loss that exists whenever more than one outcome is possible is called:

Risk Explanation: Risk is defined as the chance, possibility or uncertainty of loss.

If a life insurance policy has an irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary. If a policy has an irrevocable beneficiary designation the beneficiary can only be changed with written permission of the beneficiary.

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT

Upon conversion, the death benefit of the permanent policy will be reduced by 50%. Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.

The requirement that agents not commingle insurance monies with their own funds is known as

Fiduciary responsibility. Money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker.

What is the maximum penalty for violating the Fair Credit Reporting Act?

$2,500

An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds

$50,000. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

How often does the agent's insurance license expire?

2 years

On employer group life, dependent children may be covered from birth until age:

26

On group life insurance, dependent children may be covered up to age:

26 Explanation: Insurance under any group life insurance policy may be extended to insure dependents. A dependent includes a member's spouse and all children from birth until age 26 years of age, or a child 26 years of age or older who is both incapable of self-sustaining employment by reason of mental retardation or physical handicap and chiefly dependent upon the employee for support and maintenance.

If a corporation and a shareholder enter into an agreement that requires the corporation to buy the shareholder's shares upon his or her death, they have entered into:

A buy/sell agreement

All of the following are true regarding convertible term insurance EXCEPT:

A convertible term policy may be converted to any type of life insurance

When can a representation be altered or withdrawn?

Before the insurance is effected, but not afterwards

Generic publication that explains insurance in general terms, to help with decision making

Buyer's Guide

A comprehensive long-term care rider added to a life insurance policy will provide coverage for:

Custodial care in a nursing home and home based care Explanation: There are several levels of long term care. A rider that provides comprehensive long term care will cover both custodial care in a nursing home and home based care.

When a new life insurance policy is classified as a modified endowment contract (MEC), the policyholder may be affected in all of the following ways EXCEPT:

Death benefits are taxable

All of the following are true regarding key person life insurance EXCEPT:

Death benefits are taxable Explanation: Key person life insurance utilizes an individual life insurance policy for a business purpose. On a key person life policy, the employer is both the policyowner and the beneficiary and the key person is the insured. Although the premiums paid by the employer are not tax deductible, the proceeds payable upon the death of the key person are not taxable to the employer, who would use them to hire and train a replacement.

The purchase of insurance does all of the following EXCEPT:

Eliminates risk Explanation: The purchase of insurance does not eliminate risk. Instead, it transfers the risk to the insurance company in consideration of a premium.

Which of the following is NOT a responsibility of the Office of Insurance Regulation?

Enacting new insurance laws. New laws are enacted by the state legislature.

What type of insurance protects producers when they are sued for professional negligence in their duties and are sued by insureds as a result?

Errors and Omissions

When would misrepresentation be considered fraud?

If it is intentional and material

All of the following are true regarding social security disability income benefits EXCEPT:

Individuals must meet the own job definition of total disability Explanation: Social security's definition of total disability is difficult to meet since it requires the worker to have fully insured status and be unable to perform any substantial gainful work. The disability must also be expected to last at least 12 months or be expected to result in death.

Ken 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?

Industrial life

When an insurer can no longer meet its financial obligations when they are due, the insurer is considered to be:

Insolvent

If a whole life policy is being kept in force by use of the waiver of premium rider, what happens to the policyowner's cash value?

It will accumulate in the usual manner

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity.

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain. The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.

Under the California Insurance Code, all of the following are insurable events EXCEPT:

Losing money playing the lottery

hazards refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.

Moral hazard

hazard refers to an increase in the hazard presented by a risk, arising from the insured's indifference to loss because of the existence of insurance.

Morale hazard

If an insured's medical conditions indicate that more information is needed, the underwriter will:

Order an attending physician's statement Explanation: An attending physician's statement is a statement requested by the insurer from any doctor that the insured may have seen within a specified period of time prior to applying for the policy. The statement includes detailed information regarding the purpose of the doctor's visits, results of medical tests, prior treatments and/or hospital stays and medical recommendations.

A tornado that destroys property would be an example of which of the following?

Peril

All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder. Premiums are determined by the age, sex and occupation of the entire group.

Which of the following would not be a violation of Louisiana insurance Regulations?

Producer C uses her license to write uncontrolled business only

A Medicare SELECT policy does all of the following EXCEPT

Prohibit payment for regularly covered services if provided by non-network providers.

When an insurer terminates an agent's appointment, the insurer must do all of the following EXCEPT

Provide a 30-day advance notice to the Commissioner. An appointing entity may terminate an agent's appointment at any time, subject to an appointee's contract rights and with a 60-days advance notice. Once the appointment is terminated, the appointing entity must file a written notice with the department of insurance within 30 days.

direct loss also includes other damage where the insured peril was the

Proximate cause of loss

Which of the following annuity benefit payment options would generate the highest monthly payments to the contract owner upon annuitization?

Pure or straight life Explanation: Remember, the higher the risk the higher the potential reward. Since the pure or straight life annuity pay out option has no beneficiary, it is the most risky and therefore would generate the highest monthly payments to the contract owner upon annuitization.

A situation in which a person can only lose or have no change represents

Pure risk

Which of the following best describes taxation during the accumulation period of an annuity?

Taxes are deferred

Which of the following is NOT covered under a "core" policy, Plan A in Medigap insurance?

The Medicare Part A deductible

The transfer of risk to an insurance company is an effective risk management technique when:

The amount and frequency of future losses are unknown Explanation: If a business wants to retain small predictable losses, it may elect to self-insure. However, if the amount and frequency of future losses is unknown, it would be better to transfer the risk to an insurance company in consideration of a premium.

What is speculative risk?

The chance of gain or loss and is not insurable

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?

The employer is the owner and beneficiary. With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.

All of the following are true regarding the conversion privilege on employer group life EXCEPT:

The employer must pay the entire cost of the converted policy

Which of the following insurance mathematical premises states that the greater the number of similar exposures, the easier it is to predict future losses?

The law of large numbers

In a life settlement contract, whom does the life settlement broker represent?

The owner. Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.

All of the following are true about the guaranteed insurability rider EXCEPT:

The premiums charged for the additional coverage is based upon the insured's original age

An example of a fiduciary duty is:

The trust that your client places in you in regard to handling premiums Explanation: Agents acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.

An example of a fiduciary duty is:

The trust that your client places in you in regard to handling premiums Explanation: An agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.

Any licensee who diverts fiduciary funds to his or her own use is guilty of:

Theft

Benefits of a group life policy must be paid to the employee's beneficiary, which may not be:

Their Employer

All of the following are true regarding participating life insurers EXCEPT:

They are owned by their stock holders

All of the following are true regarding the guaranteed insurability rider EXCEPT

This rider is available to all insured

What is the name of the insured who enters into a viatical settlement?

Viator. Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract.

When would life insurance policy proceeds be included in the insured's taxable estate?

When there are any incidents of ownership at the time of death

losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.

occurrence

If an agent does not notify the insurer of an address change, what is the maximum penalty that can be imposed for a one-time offense?

$250. If the department is not notified within the required time period, a maximum fine of $250 will be imposed for the first offense; for subsequent offenses, either a minimum fine of $500 will be imposed or the agent's license will be suspended or revoked.

How many days must an existing insurer provide policy owners with a policy summary?

10 days

For how many days of skilled nursing facility care will Medicare pay benefits?

100

On a noncontributory employer group life contract, what percentage of the eligible employees must enroll?

100%

When a group health insurance plan is terminated, how long is an extension of benefits provided for an totally disabled employees and dependent

12 months

An agent delivers a life insurance policy to the proposed insured. The insured makes a decision not to accept the policy. The insured may return the policy for a full refund of premium within how many days?

14. The free-look provision in Florida allows the insured to return a life policy or annuity after 14 days if dissatisfied for any reason.

Under social security, being fully insured entitles a worker and family to full benefits. To achieve fully insured status, an individual must attain at least ____ quarters of coverage.

40

A licensee who has applied to renew a license is entitled to continue operating under his or her existing license for ____ days after its specified expiration date, or until notified by the department that the renewal application is deficient, whichever comes first, as long as the applicant has satisfied all the license renewal requirements.

60 days

The maximum amount than can be contributed to an MSA is what percentage of the family deductible for those with family coverage?

75%

Most policies will pay the accident death benefits as long as the death is caused by the accident and occurs within

90 days

An insurer organized under the laws of another state who is legally transacting insurance in this state is known as:

A foreign insurer Explanation: A domestic insurer is organized in this state, a foreign insurer is organized in another state and an alien insurer is organized in another country.

All of the following definitions are correct EXCEPT:

A hazard is a cause of loss

All of the following are true regarding warranties in an insurance contract EXCEPT:

A particular form of words is necessary to create a warranty

a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended.

Accident

Under HIPPAA, which of the following is INCORRECT regarding eligibility requirements for conversion to an individual policy?

An individual who was previously covered by group health insurance for 6 months is eligible

Which of the following is NOT true regarding uniform mandatory provisions concerning claims?

An insured must notify the insurer of a claim on forms prescribed by the insurer.

The death protection component of Universal Life Insurance is always

Annually Renewable Term. 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.

When must the beneficiary of a life insurance policy have an insurable interest in the insured:

At no time

When must an insurance company present an outline of coverage to a person?

At the time of application

Insurable interest must exist:

At the time of application Explanation: On life insurance, an insurable interest must exist at the time of application, but need not continue to exist at the time of loss. Insurable interest is usually based upon either close kinship or economics.

All of the following are ways to reduce risk EXCEPT:

Buying Insurance

What is the term for the fee a policy owner must pay to the insurance company to maintain coverage? A) Commission B) Benefit C) Premium D) Installment

C) Premium

The act of voluntarily giving up insurance by the insured is called

Cancellation

Which of the following would not be used in preventive care?

Chemotherapy

Most insurers issue health insurance policies for delivery in many state. Because each state regulates and mandate the requirement for policy each state, the insurer attaches

Conformity with State Statutes provision

The gatekeeper of an HMO helps to

Control specialist costs.

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.

The net profit of an insurer, less any dividends paid out, is known as their:

Earned Surplus The earned surplus of an insurer, which is also known as retained earnings, consists of the net profit of the insurer, less any dividends paid out to policyholders. Net profit consists of the total income of the insurer, less all expenses and taxes. Dividends, if declared, are paid out of the insurer's net profit and what is left over after that is known as the earned surplus.

Which of the following would most directly affect purchasing power of benefits paid on fixed annuity?

Economic inflation

All of the following are personal uses of life insurance EXCEPT

Estate liquidation. Personal uses of life insurance include survivor protection, estate creation and conservation, cash accumulation, and liquidity.

T/F: A signed waiver of premium is somthing that can be collected/obtained from the applicant

F: Waiver or prem is a rider that can be added to the policy, but not collected from the applicant

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

Fixed amount. When the fixed amount settlement option is chosen, the policyowner sets the amount of each installment. The insurer will determine how long the installments are to be paid.

The Insurance Commissioner may deny an insurance license application without a hearing:

If the applicant has a final conviction of a felony

When must a licensee notify the Insurance Commissioner of a change of address?

Immediately

All of the following are true regarding adverse selection EXCEPT:

Insurers may discriminate against those who may incur losses in order to avoid it Explanation: Although insurers may utilize various strategies designed to prevent adverse selection, they cannot discriminate against those who may incur losses to avoid it.

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Larger

state that the larger the number of people with a similar exposure to loss, the more predictable actual loss will be.

Law of large numbers

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?

Military service or war. There are two different types of exclusions that may be used by life insurers that limit the death benefit if the insured dies as a result of war or while serving in the military. The status clause excludes all causes of death while the insured is on active duty in the military. The results clause only excludes the death benefit if the insured is killed as a result of an act of war.

All are true regarding the reinstatement of a lapsed life insurance policy EXCEPT:

No new contestability clause or suicide exclusion may apply Explanation: Most insurers will allow an insured up to three years to reinstate a lapsed life insurance policy by paying their overdue premium and providing satisfactory proof of insurability. However, since both the suicide clause and the contestability clause start over on reinstatement, the main advantage of reinstating would be that the premium for the reinstated policy is based upon the insured's original age, not the age at reinstatement. Remember though, a policy that has been surrendered for cash cannot be reinstated.

Adding a comprehensive long-term care rider to a life insurance policy will provide the insured with which of the following coverages:

Nursing home and home based care

Which individuals must have insurable interest in the insured?

Policyowner

refers to situations that can only result in a loss or no change.

Pure risk

The risk of loss may be classified as

Pure risk and speculative risk

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of

Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.

If an employer decides to change its life insurance policy to a similar one with a different insurer, which of the following describes the extent that replacement regulations will be exercised?

Replacement regulations will not apply in this situation. If a new life insurance policy is provided under a group life insurance policy covering employees or members of an association, replacement regulations do not apply.

When an insurer voids an insurance contract due to an intentionally fraudulent omission by the insured of a material fact, it is known as:

Rescission

If a firm has between 30 employees that are actively engaged in the business during the preceding calendar year, and 3 employees on the first day

Small Employer

What is material misrepresentation?

Statement by the applicant that would affect the underwriting decision, if discovered.

What is a warranty in insurance?

Statement guaranteed to be true

When recommending to a senior consumer an annuity purchase or the exchange of an annuity that results in another insurance transaction, a producer must have reasonable grounds for believing that the recommendation is:

Suitable

A corporation is the owner and beneficiary od the key person disability policy. If the corporation collects the policy benefit, then

The amount received is tax-free.

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit. If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit.

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?

The cost of coverage is a deductible expense by the employer. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

All of the following must be specified in an insurance policy EXCEPT:

The financial rating of the insurer

What type of insurance would the following acts be: -Solicitation -Preliminary insurance negotiations -Execution of insurance contracts -Transactions of matters arising out of the contracts

Transacting insurance

All are true about transacting insurance EXCEPT:

Transacting without a license is felony

Which department of an insurer is responsible for the selection and classification of risks:

Underwriting

Which of the following is true regarding variable annuities?

Unit values fluctuate depending upon the performance of the separate account

The individual upon whose life an annuity is based on is known as the:

Annuitant

Insurable interest in the property covered in a policy must be proven

At time of loss

Which of the following is true regarding the taxation of accelerated benefits?

Benefits are not taxed

What is the term for replacing insurance policies for the purpose of making commissions?

Churning

Which act require that a company supply an applicant with the name & address of the consumer reporting company?

Fair Credit Reporting Act

If the beneficiary of a life insurance policy wants $1,000 per month for as long as the money lasts, they should choose the ________ settlement option.

Fixed Amount

Life insurance illustrations

Must - Identify non guaranteed values -differentiate guaranteed & projected amount -Only be used as approved

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses?

Subrogation

ll of the following are true regarding representations EXCEPT:

They must be in writing

Which type of term life insurance is usually used as mortgage redemption life insurance?

Decreasing

Your license will be considered to be inactive when you:

No longer have any appointments

J purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000. In joint life policies, the death benefit is paid upon the first death only.

On employer group life, premiums paid by an employer for that portion of an employee's group life coverage in excess of $_________ are taxable as income to the employee.

$50,000

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?

0%. If an insured accepts an accelerated death benefit, the death benefit received by the beneficiary will be reduced by the amount paid by the accelerated death benefit, as well as the amount of earnings lost by the insurance company in interest income. Because it is legal for an insurer to pay 100% of the death benefit before an insured dies, it is possible that the beneficiary of a policy would not receive any benefits after the insured's death.

All life insurance policies and annuities offered for sale to individuals under age 60 in California shall provide a free look period of not less than ____ days nor more than ____ days.

10 / 30 days

All of the following criteria must be satisfied before a participant is eligible to receive social security disability income benefits EXCEPT:

12 month waiting period Explanation: A fully insured social security participant who becomes totally disabled is eligible for disability income benefits if they meet social security's stringent definition of total disability, which requires that an individual must be disabled as a result of a medically defined physical or mental impairment for at least five months and be unable to perform any gainful work. Further, the disability must be expected to last at least 12 months, or be expected to result in death.

Every small employer carrier shall, as a condition of transacting business in this state with small employers, actively offer to small employers at the basic

2

How long should a replacing insurer maintain a replacement register regarding the policy for the next regular examination by the Insurance Department?

3 years

All life insurance policies and annuities offered for sale to a senior citizen in California shall provide a free look period of ____ days after the receipt of the policy, during which time the applicant may return the contract for a refund of all premiums paid.

30 days

Life insurance policies and annuities sold to persons age 65 or older must contain an examination period of ____ days after receipt of the policy for purposes of review, at which time the applicant may return the contract for a full refund of premium.

30 days

A Licensed broker who participates in a national insurance association may get, from the Commissioner, how many continuing education credits?

4

An insurer organized under the laws of another state who is legally transacting insurance in this state is known as:

A foreign insurer Explanation: A domestic insurer is organized in this state, a foreign insurer is organized in another state and an alien insurer is organized in another country.

All are true about representations EXCEPT:

A representation may be altered or withdrawn before or after the insurance is effected

Which of the following would be required to be licensed as an insurance producer?

A salaried employee who advertises and solicits insurance. A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.

What do individuals use to transfer their risk of loss to a larger group? A) Insurance B) Exposure C) Indemnity D) Insurable Interest

A) Insurance

When making a life settlement, a policyowner will permanently transfer all rights of ownership in the policy to another party by making a(n):

Absolute assignment Explanation: In a life settlement transaction, a policyowner sells all of their rights of ownership to another party, which is accomplished by means of an absolute assignment. Although the prior policyowner is still the insured under the policy, the new policyowner will usually name themselves as the beneficiary to receive the proceeds upon the death of the insured.

Group life insurance policies may exclude all of the following EXCEPT:

Accidents Explanation: Group life insurance policies may exclude death due to war, aviation or during military service.

The legal doctrine that states that any ambiguity in an insurance contract will be construed in favor of the insured is known as the Doctrine of:

Adhesion Explanation: Since an insured does not have the opportunity to negotiate the terms and conditions contained in an insurance contract, any vague language in the contract is construed against the insurer, since they wrote it. This is known as the Doctrine of Adhesion.

The incontestability clause in a life insurance policy protects the insured by preventing an insurer from denying a claim:

After the policy has been in effect for a specified period of time Explanation: By law, life insurance policies are contestable for the first two years, and incontestable thereafter, meaning that insurers may not deny life insurance claims for material misrepresentations made on the application after the policy has been in effect for two years, even if fraudulent.

When an applicant reveals conditions that require more information the underwriter will order:

An attending physician's statement

When ordering an attending physician's statement, the underwriter must include:

An authorization form signed by the applicant Explanation: The underwriter's request for an attending physician's statement must be accompanied by an authorization form signed by the applicant.

The person upon whose life an annuity is based is known as the:

Annuitant Explanation: Since annuities do not offer any life insurance protection, the person whose life the contract is based upon is called the annuitant, not the insured. Remember, although the policyowner and the annuitant are often the same person, they do not have to be.

Which of the following hospice expenses would NOT be covered in a cost-containment setting?

Antibiotics

What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided?

Application

When can a representation be altered or withdrawn?

Before the insurance is effected, but not afterwards Explanation: A representation may be altered or withdrawn before the insurance is effected, but not afterwards.

Life insurance applications must be signed by all of the following EXCEPT the:

Beneficiary Explanation: Although an agent is not a party to a life insurance contract, they are a party to the application, so they must sign it along with the insured and the policyowner, if different than the insured. Beneficiaries are not considered to be a party to the application, so they need not sign it.

An insurance contract must contain all of the following to be considered legally binding EXCEPT

Beneficiary's consent. The four essential elements of all legal contracts are offer and acceptance; consideration; competent parties; and legal purpose.

A person shall not solicit, negotiate, or effect contracts of insurance unless the person holds a valid license from the Commissioner authorizing them to act in that capacity. Any person who transacts insurance without a valid license to do so is guilty of a misdemeanor punishable by:

Both a fine not exceeding $50,000 and up to 1 year in a county jail

Which of the following accurately compares business and personal life insurance?

Both create an immediate payment upon the death of the insured.

If a corporation enters into an agreement with a shareholder to purchase their shares if they die, they have entered into a:

Buy/sell agreement

How are state Insurance Guaranty Associations funded?

By their members - authorized insurers. Guaranty Associations are funded by their members: all authorized insurers are required to contribute to a fund to provide for the payment of claims for insolvent insurers.

What is the purpose of a disclosure statement in life insurance policies? A) To help consumers compare policy prices. B) To protect agents and insurers against against lawsuits. C) To explain features & benefits of a proposed policy to the consumer. D) To obtain important underwriting information from the applicant.

C) To explain features & benefits of a proposed policy to the consumer

If an employee is accepted into a group insurance plan, which status will the employee have?

Certificate holder. In group insurance, plan participants (insureds) do not receive a policy. Instead, they receive certificates of insurance, indicating that they are covered by the policy.

The owner of a life insurance policy may do all of the following EXCEPT:

Change the dividend scale Explanation: Although owners of life insurance policies may assign their ownership in the policy to another person, change their mode of payment, change their beneficiary or change their dividend option, they cannot change the dividend scale, which is an illustration of dividends paid historically, currently and projected. The dividend scale (or illustration) is set by the insurer and although it is not a guarantee of future payments, it can be a strong indicator.

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?

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.

Which of the following is a term for a person who seeks insurance from an insurer? A) Agent B) Insured C) Beneficiary D) Applicant

D) Applicant

All of the following are requirements for life insurance illustrations except.. A) They may only be used as approved. B) They must identify non guaranteed values. C) They must differentiate between guaranteed and projected amounts. D) They must be part of the contract.

D) They must be part of the contract.

An individual who obtains a 30 year mortgage and would like insurance coverage which would pay off the mortgage in the event of his or her death and no more and no less, would purchase:

Decreasing term Explanation: Decreasing term insurance can be set up so the amount of life insurance coverage decreases at exactly the same rate as a client's mortgage amortizes, which is also known as mortgage protection or mortgage redemption insurance.

The process by which a mutual insurer becomes a stock insurance company is known as:

Demutualization Explanation: A domestic incorporated mutual life insurer issuing non-assessable policies on a reserve basis may be converted into an incorporated stock life insurance company, issuing on a reserve basis, non-assessable policies of life insurance. Such a process is known as demutualization.

Which of the following would be an example of an unfair claims settlement practice?

Failing to acknowledge a claim within 30 days. Insurers must either affirm or deny a claim within a reasonable amount of time, but no later than 30 days

Both Universal Life and Variable Universal Life have a

Flexible premium. Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.

Which of the following activities would be sufficient violation to warrant rejection, revocation, or suspension of an insurance agent's license?

Forgery. Upon conviction of a felony, an agent's license will be revoked by the Commissioner.

are conditions or situations that increase the probability of an insured loss occurring.

Hazards

Every licensee must notify the Commissioner of a change in their email, residence, principal business or mailing address:

Immediately

the insured would incur a financial loss if the insured property was damaged.

Insurable interest

Which of the following must be printed on every licensee's business cards, written price quotations and printed advertisements?

Insurance License Number

Every licensee shall file with the Commissioner his or her true name and also all fictitious names under which he or she conducts business. The Commissioner may disapprove the use of any true or fictitious name for all of the following reasons EXCEPT:

It is the bona fide natural name of an individual Explanation: Every licensee shall file with the Commissioner his or her true name and also all fictitious names under which he or she conducts business. The Commissioner may disapprove the use of any true or fictitious name (other than the bona fide natural name of an individual) if such name is too similar to a name already on file, may mislead the public, or implies that the licensee is an insurer.

Which of the following must be printed on every licensee's business cards, written price quotations and printed advertisements:

License Number

Which of the following is an example of a limited-pay life policy?

Life Paid-up at Age 65. Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

What is the other term for the cash payment settlement option?

Lump sum. Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump sum.

All of the following statements describe a MEWA EXCEPT

MEWAs are groups of at least 3 employers.

An insurer incorporated in which of the following locations would be considered a foreign insurer in Washington, D.C.?

Maryland. A foreign insurer is an insurance company that is incorporated in another state or territorial possession. Mexico and Canada are foreign countries, so their insurers will be considered alien. An insurer that is incorporated and that operates in Washington, D.C. would be considered domestic.

A 30 year old applicant wants to buy a $100,000 ordinary life insurance policy with the lowest possible initial premium outlay. Which of the following should the agent recommend?

Modified whole life Explanation: On modified whole life, it is the premium that is modified (or discounted) in the early years of the policy, not the face amount. Of the responses listed, the modified whole life policy would have the lowest initial premium outlay at policy inception, followed by traditional whole life, limited-pay whole life and single premium whole life, which would be the most expensive.

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable. Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans.

Which risk classification will have the highest premium?

Non-standard Explanation: Life insurance rates are based upon the Commissioner's Standard Ordinary mortality table, which measures the chance of death for the standard (or average) person. If a person is above average, the rate may be lower than standard, which is known as a preferred risk. If the person is below average, often due to health problems or a dangerous hobby or occupation, he or she may pay a higher (or non-standard) rate. Remember, a rate is defined as the cost per unit. The premium is the rate multiplied by the number of units purchased. One unit of life insurance is $1,000 of coverage.

An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive?

Nothing

What is the major difference between a Stock Company and a Mutual Company?

Ownership. Mutual companies are owned by policyholders, while stock companies are owner by stockholders.

All of the following are non-forfeiture options contained in a cash value life insurance policy EXCEPT:

Paid-up additions Explanation: Be sure to know and understand the three non-forfeiture options that are designed to protect a customer's cash value upon policy lapse. Paid-up additions are not a non-forfeiture option, they are a dividend option.

are the causes of loss insured against in an insurance policy.

Perils

those arising from the material, structural, or operational features of the risk, apart from the persons owning or managing it.

Physical hazard

Hazards are classified as

Physical, moral, and morale

Who is allowed to make changes to the application?

Producer, with the applicant's initials

In respect to the consideration clause, which of the following is consideration on the part of the insurer?

Promising to pay in accordance with the contract terms

Which type of term life insurance has a level face amount but a premium that increases each year as the insured gets older?

Renewable Explanation: Although renewable term life insurance has a level face amount or death benefit, the premiums will go up each year as the insured gets older. Most group life insurance is sold as annual renewable term, with the premium based upon the average age of the group.

An appointment as an agent of an insurer becomes effective on the date it is:

Signed by the insurer Explanation: The authority to transact insurance given to a licensee by an insurer by appointment shall be effective as of the date the notice of appointment is signed by the insurer.

Which of the following is a risk classification used by underwriters for life insurance?

Standard. The three ratings classifications that denote the risk level of insureds are standard, substandard, and preferred. This classification system helps insurers to decide if an insured should pay a higher premium.

Acting as an agent for a non-admitted insurer in the transaction of insurance in this state is considered to be a misdemeanor unless acting as a:

Surplus lines broker Explanation: Except when performed by a surplus line broker, acting as an agent for a non-admitted insurer in the transaction of insurance business in this state is a misdemeanor.

The premium that an employer pays for group life insurance coverage for an employee that exceeds $50,000 in coverage is:

Taxable as income to the employee

What are the 2 offices of the Financial Services Commission?

The Office of Financial Regulation and the Office of Insurance Regulation. The following 2 offices are established within the Commission: the Office of Financial Regulation and the Office of Insurance Regulation, which specifically regulates the business of insurance in the state.

Which is NOT true about beneficiary designations?

The beneficiary must have insurable interest in the insured. A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.

All of the following are true regarding annuities EXCEPT:

The contract owner and the annuitant must be the same person Explanation: Although the policyowner and the annuitant are usually the same person, they do not have to be.

A policy shall specify all of the following EXCEPT:

The financial rating of the insurer

Who does the secondary addressee provision protect?

The insured over the age of 64. The secondary notice/addressee provision protects elderly insured. Coverage for persons age 64 and older that has been in force for at least 1 year cannot lapse for nonpayment of premium after expiration of the grace period without the insurer notifying the policyowner and a specified secondary addressee (if designated in writing by the policyowner) of the impending lapse in coverage.

The policyowner of a Universal Life policy may skip paying the premium and the policy will no lapse as long as

The policy contains sufficient cash value to cover the cost of insurance.

Which of the following statements is correct regarding a whole life policy?

The policyowner is entitled to policy loans. Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

The type of investment

Under the CIC, all of the following are true when a person transacts insurance without a valid license EXCEPT:

They are guilty of a felony

All of the following are true regarding mutual insurance companies EXCEPT:

They issue non-participating policies Explanation: Mutual insurers issue participating policies, meaning that their policyowners may participate in company profits in the form of dividends. It is stock insurers that issue non-participating policies that may pay dividends to their shareholders, instead of their policyholders.

All of the following are true regarding dividends paid by a mutual life insurance company EXCEPT:

They must be paid in cash

If an employer offers employees the option of voluntarily increasing their group life coverage to an amount that is more than the group life policy normally covers, who is responsible for paying the premium for the elective coverage?

Those employees who elect to increase coverage Explanation: The cost of elective group life coverage must be paid by the employee.

Making an insured whole again after a loss is known as:

To indemnify Explanation: The principle of indemnity states that the purpose of insurance is to restore a person financially to the position they were in before the claim occurred. To make a person whole again financially is to indemnify that person.

What is the significance of a conditional receipt?

To provide coverage on an earlier date than the policy

In a survivorship life policy, when does the insurer pay the death benefit?

Upon the last death. Survivorship life pays on the last death rather than upon the first death.

If the beneficiary of a life insurance policy wants to take the proceeds over a 5 year period, they should select the ______ settlement option.

Fixed Period

When an insured dies, who has first claim to the death proceeds of the insured life insurance policy?

Primary beneficiary

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?

Any form of life insurance. Any form of Life insurance may be used to fund a buy-sell agreement.

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse?

Blackout Period

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

Discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance is an unfair trade practice of discrimination.

A non-taxable refund of premium that may be returned to a policyowner by an insurance company under a participating life insurance policy is known as a:

Dividend

The 3 elements of insurable risk are:

Financial, blood, and business

The inclusion of the Life and Health Guaranty Association in an advertisement by an insurer is

Forbidden. No insurance company can advertise the existence of the Guaranty Association; nor can an agent bring up the Guaranty Association in a sales presentation.

Using the needs approach to quantifying, how much life insurance a client needs focuses on all of the following except:

Income replacement

transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Insurance

The person upon whose life a life insurance policy is based is known as the:

Insured Explanation: Although the policyowner and the insured are often the same person, they do not have to be. For example, a parent might purchase a life insurance policy on a minor child. The child is the insured, but the parent is the policyowner.

In a long-term care policy, pre-existing condition limitations

Must appear as a separate paragraph and be clearly labeled.

Can a group that is formed for the sole purpose of obtaining group insurance qualify for group coverage?

No, the group must be formed for a purpose other than obtaining group insurance. In order to qualify for group coverage, the group must be formed for a purpose other than obtaining group insurance. In other words, it must be a natural group. There are generally two types of groups eligible for group insurance: employers sponsored, and association sponsored.

All of the following are true regarding concealment EXCEPT:

Only intentional concealment entitles an injured party to rescind the contract

All of the following are true regarding group life conversion EXCEPT:

The employer will pay the entire cost of the new policy

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of one's family corporation

If an agent advises a policyholder to replace an insurance policy but only does so for the purpose of making commissions, the agent has committed an act of

Churning. "Churning" is defined as replacing insurance policies for the sole purpose of making commissions.

Agents must send all of the following to the replacing insurer when replacing life insurance EXCEPT:

Copies of all printed communications used for presentation to the applicant Explanation: Although replacing agents must leave with the applicant the original or a copy of all printed communications used in their presentation, they do not have to send them to the replacing insurer.

Even though "sickness" is a peril covered by a health insurance policy, coverage may be limited or excluded because of all of the following EXCEPT

Exemptions periods.

(reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.

Indemnity

The neglect to communicate that which a party knows, and ought to communicate, is concealment. Concealment entitles the injured party to rescind the insurance if it is:

Intentional or unintentional Explanation: Concealment, whether intentional or unintentional, entitles the injured party to rescind (void) an insurance contract.

Insurance is a contract by which one seeks to protect another from

Loss

Many insurers follow the principle of indemnity. To indemnify means to:

Make whole Explanation: To indemnify other persons is to restore them financially to the position they were in prior to a loss, or to make them whole again financially.

Contributions to a Roth IRA withdrawn prior to age 59 1/2:

May be withdrawn without tax or penalty Explanation: Since the contributions to a Roth IRA are made in after tax dollars, the participant may withdraw the money they contributed at any time, without tax or penalty.

The Commissioner may, without notice or hearing, suspend or revoke the permanent license of a licensee for any of the following reasons EXCEPT:

Placing before the public any advertisement which uses the existence of the California Life and Health Insurance Guarantee Association for the purpose of inducing the sale of insurance

Upon annuitization, which annuity pay out option will generate the highest monthly payments?

Straight life Explanation: Upon annuitization, annuity owners must select a pay out option, which can never be changed. Since the straight life (or life income) pay out option has no beneficiary, it is considered the most risky choice. However, generally the higher the risk, the higher the reward.

The rules regarding replacement apply when replacing which of the following types of life insurance?

Term life Explanation: The rules regarding replacement do not apply when replacing credit life insurance, group life or group annuities. They do apply when replacing other types of insurance, including term life insurance.

If an applicant for life insurance misstated their age on their application and dies 5 years later:

The death benefit will be adjusted to what the premium paid would have purchased if the correct age was known Explanation: Although a life insurance policy is incontestable after it has been in force for two years, the misstatement of age clause goes on indefinitely. Although a claim may never be denied for misstatement of age, the amount payable to the beneficiary may be adjusted to reflect how much coverage the premium paid by the insured would have purchased if the correct age was known.

The entire contract provision on a life insurance policy states:

The entire contract includes the policy and the application, if attached

The insured has violated the contract without the knowledge of the mortgage holder. After a loss

The insured cannot collect but the mortgage holder will still be paid

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to

The insured's estate. Because there is no viable beneficiary at the time of death, proceeds are paid to the insured's estate.

In terms of parties to a contract, which of the following does NOT describe a competent party?

The person must have at least completed secondary education. The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.

A person insured under a group life insurance policy can make an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, to any of the following EXCEPT

The policyholder. Any person insured under a group life insurance policy can make to any person, other than the policyholder, an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, including the right to exercise the conversion privilege and the right to name a beneficiary.

Buying life insurance is a risk management process whereby a person elects to ____ the financial risk of their premature death.

Transfer Explanation: Risk may be managed several different ways, including risk avoidance, risk retention and risk reduction. However, buying insurance is the most common method of risk management, which involves the transfer of risk to an insurer in consideration of a premium.

A client who wants life insurance protection and cash values that fluctuate in value based upon the performance of a separate account should purchase:

Variable Life

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

Survivor protection. Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.

A representation that fails to correspond with its assertions or stipulations is:

False Explanation: A representation is false when the facts fail to correspond with its assertions or stipulations.

Which of the following is true regarding the spendthrift clause in life insurance policies?

It can protect the policy proceeds from creditors of the beneficiary. The spendthrift clause in a life insurance policy prevents the beneficiary's reckless spending of benefits, and protects the policy proceeds from creditors of the beneficiary or policyowner.

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?

Lower. Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

Which of the following will be included in a policy summary?

Premium amounts and surrender values. A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.

Equity indexed annuities

Seek higher returns. Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the

Spendthrift clause. The spendthrift clause protects the policy proceeds from creditors of the policyowner or beneficiary.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty. A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties, but representations. Representations are statements that are true to the best of the applicant's knowledge.

A licensed life agent may transmit an application for insurance to an insurer for which the life agent is not appointed. If the insurer issues the policy, the insurer is considered to have authorized the agent to act on its behalf, and they must forward a notice of appointment to the Commissioner within ____ days after receiving the application.

14 Explanation: A licensed life agent may transmit an application for insurance to an insurer for which the life agent is not appointed. If the insurer issues the policy, the insurer is considered to have authorized the agent to act on its behalf, and the insurer shall forward a notice of appointment to the Commissioner within 14 days.

Every life and disability agent must maintain all records at their principal place of business for a minimum of ____ years, readily available and open to the inspection of the Commissioner at all times.

5 years Explanation: Agents must maintain all records at their principal place of business for a minimum of five years, readily available and open to the inspection of the Commissioner at all times.

US Armed Forces reservists called to active duty after August 21, 1990, who were covered under a disability policy provided by their employers duty if they apply within how many days of discharge?

90 days

At the time of application, life settlement brokers must disclose all of the following EXCEPT:

Affiliations between the broker and the person making an offer on a proposed life settlement contract Explanation: A life settlement transaction occurs when a policyowner sells their life insurance policy to another for more than its cash value, but less than its face amount. A life settlement broker is a person who represents the policyowner in a life settlement transaction. At the time the policyowner applies to make a life settlement transaction, the broker must disclose that accelerated benefits may be a possible alternative, that the transaction may have tax implications and that the owner will be required to disclose medical, financial and personal information. Any affiliations between the broker and the person making an offer to buy the policy must be disclosed by the broker at the time of the offer, not at the time of the application.

Which of the following is true regarding the accelerated benefits rider:

Amounts paid out will reduce the future death benefit payable to a beneficiary Explanation: The accelerated benefits rider serves as a viable alternative to making a viatical settlement. The rider allows a policyowner to accelerate receipt of a portion of the policy's death benefit upon the occurrence of a critical or terminal illness. Depending upon the insurer, accelerated (or living) benefits may be included as a policy provision or added as a rider, generally for no additional premium charge. All insureds are eligible and there are no restrictions on the use of the funds. Accelerated benefits are not taxable, although future death benefits payable to a beneficiary will be reduced by any amounts paid under the terms of this rider.

All of the following are true regarding participating life insurance policies issued by mutual insurers EXCEPT:

Dividends are guaranteed to be paid if the insurer makes a profit Explanation: On participating life insurance policies, the payment of dividends to the policyholders is at the discretion of the board of directors of the insurer. Remember, dividends may never be guaranteed and the insurer does not have to pay them, whether they make a profit or not.

A condition that could result in a loss is known as a:

Exposure Explanation: An exposure is a condition that could result in a loss. A peril is a cause of loss. Risk is the chance of loss and a hazard is something that increases the risk.

Universal Life Option B includes the annual increase in cash value, the death benefit under this option

Gradually increase each year by the amount that the cash value increases.

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. The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.

Under the California Insurance Code (CIC), neither party to a contract of insurance is bound to communicate any of the following EXCEPT:

Information known to be material Explanation: Each party of a contract of insurance shall communicate to the other, in good faith, all facts within their knowledge which are or which they believe to be material to the contract.

The greater the number of similar exposure units insured, the easier it will be to predict future claims based upon the law of:

Large numbers Explanation: The law of large numbers is a mathematical premise that states that the greater the number of exposures the more accurate the prediction. This law forms the basis for the statistical expectation of loss upon which premium rates for life insurance policies are calculated. Out of a large group of policyholders, life insurers can fairly accurately predict not by name, but by number, the number of insureds that will die at a given age.

A person who, for a fee paid by any person other than an insurer, advises any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract must be licensed as a:

Life and disability insurance analyst Explanation: A life and disability insurance analyst sells advice for a fee, which may be paid by any person other than an insurer.

List in order from the lowest annual premium to the highest:

Modified, ordinary, limited pay, single premium Explanation: Let's assume our client is a 30 year old male who wants to buy an ordinary whole life policy with a face amount of $100,000 with an annual premium of $1,000 per year payable to age 100. If this premium is too high, the insurer could modify it, by allowing the client to pay less in the early years and more in later years. If he wants to pay the policy off faster, the client could buy a limited pay life policy, such as a 20 Pay life, or the client could simply pay all the premiums up front, which is known as a single premium policy.

A person who receives a bonus at work and elects to use the money to buy an annuity that will start paying monthly payments right away has purchased a:

Single premium immediate annuity Explanation: Single premium immediate annuities are purchased with a lump sum and annuitized right away, meaning that they do not have any accumulation period. Many states utilize single premium immediate annuities as a pay out option for lottery winners. Single premium deferred annuities are also purchased with a lump sum which remains in the accumulation period until such time that the client annuitizes the contract.

If a client has to multiply the value of an accumulation unit by the number of units he or she owns in the separate account in order to determine the value of his or her annuity, he or she must have a(an):

Variable annuity Explanation: Variable annuity units are similar to shares of a mutual fund, in that they vary in value based upon the performance of the underlying investment portfolio or separate account. For example, if a client owns 100 units in a variable annuity separate account and each unit is worth $100, then the value of the account is $10,000. However, if the value of a unit increases tomorrow to $110, the account value will increase by $1,000.

Which of the following is an example of a producer being involved in an unfair trade practice of rebating?

Telling a client that his first premium will be waived if he purchased the insurance policy today. Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the policy, including money, reductions in commissions, promises, and personal services. Both the offer and acceptance of a rebate are illegal.

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of

Twisting. Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.

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 insured's premiums will be waived until she is 21. If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

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 beneficiaries were alive.

As specified by the California Insurance Code (CIC), every person must have insurable interest in the person insured at the time of application. Every person has an insurable interest in the life or health of all of the following persons EXCEPT:

Their best friend Explanation: You would have an insurable interest in another person if you would benefit if that person continues to live. On life insurance, insurable interest must exist at the time of application and is usually based upon immediate kinship or economics.

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

Your license will be considered to be inactive when you:

No longer have appointments

A participating insurance policy may do which of the following?

Pay dividends to the policyowner. A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.

All of the following are requirements for life insurance illustrations EXCEPT

They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

All are true about transacting insurance EXCEPT:

Transacting without a license is a felony Explanation: Any person who transacts insurance without a valid license is guilty of a misdemeanor punishable by a fine not exceed $50,000 or by imprisonment in a county jail for a period not exceeding one year, or by both that fine and imprisonment.

Which of the following is NOT allowed in credit life insurance?

Creditor requiring that a debtor buys insurance from a certain insurer

How long should insurers keep advertisements on file?

4 years

Which of the following is not a dividend option offered on participating life insurance policies:

Extended term Explanation: On a participating policy issued by a mutual insurer, the policyholders might participate in the insurer's profits in the form of dividends, although they may not be guaranteed. If declared, the policyowner may choose to receive the dividends several different ways, including cash, interest, paid-up additions, applied to the premium when due or as a premium to buy one-year term insurance. However, the extended term option is a non-forfeiture option, not a dividend option.

An applicant who wants to provide permanent life insurance on themselves and term life insurance coverage for their spouse and children all on one policy should purchase a:

Family policy Explanation: A family life policy (also known as a family protection policy) provides coverage for the policyowner's entire family for just one premium charge. The policy actually consists of permanent whole life insurance on the primary insured and level, convertible term insurance added as a rider to cover the spouse and children.

Which of the following would not be considered to be ordinary life insurance?

Group Explanation: Ordinary life insurance includes whole life (including limited pay whole life), term and endowment policies. Insurers issuing these types of policies base their rates and benefits on the Commissioner's Standard Ordinary Life mortality table. However, group life is not considered to be ordinary life insurance and rates are generally based upon the past claims experience of the group.

Which of the following life insurance riders allows the policyowner to increase coverage periodically without providing proof of insurability:

Guaranteed insurability Explanation: The guaranteed insurability rider allows the insured to purchase additional life insurance in the future without furnishing proof of insurability, although all options to do so must be exercised prior to reaching a certain age, often age 35. Option dates generally occur at three year intervals or when the insured gets married or has a child. If the option is not exercised it is lost, and the insured will have to wait for the next option date to occur. Of course, the premium for the additional amounts of insurance added will be based upon the insured's age at the time the option is exercised. Without this rider, the insured may be required to purchase more than one life insurance policy in order to increase coverage, assuming they can still pass a physical exam.

Which of the following life insurance settlement options enables the beneficiary to conserve the proceeds of a life insurance policy?

Interest only Explanation: If a beneficiary wants to conserve the estate that was created for them upon the death of the insured, they would choose the interest only life insurance settlement option. Under this option, the proceeds are left with the insurer to accumulate interest and the principal amount of the death benefit remains intact, although it may be withdrawn at any time. Although life insurance death benefits are not taxable, the interest that accrues on them is.

Which of the following describes the tax implications of investing in a Roth IRA?

Non-deductible contributions / tax free distributions

A life insurance policy supplemental illustration may be furnished in addition to a basic illustration as long as it illustrates:

Non-guaranteed elements that are not guaranteed or not determined at policy issue Explanation: A supplemental illustration may be provided so long as: 1) it is accompanied by or preceded by a basic illustration; 2) the non-guaranteed elements shown are not more favorable to the policyowner than those shown in the basic illustration; 3) it contains the same statement required of a basic illustration that non-guaranteed elements are not guaranteed; and 4) the supplemental illustration includes a notice referring to the basic illustration for guaranteed elements and other important information.

When a policyowner uses the cash value in their policy to buy a lesser amount of permanent life insurance, they have exercised which non-forfeiture option:

Reduced paid-up Explanation: Non-forfeiture options are designed to protect a life insurance policyowner's cash value in the event of policy lapse, whether intentional or not. The three non-forfeiture options are cash, reduced paid-up and the extended term option. Under the reduced paid-up option, the insurer keeps the owner's cash value and buys them a new whole life policy that is paid up until they die, although the face amount of the new policy will be reduced. The extended term option is called the automatic option since it is the default option unless another option is selected. Under the extended term option, the insurer will also keep the owner's cash value but buy them a new term life policy for an extended period of time instead, with the same face amount as the lapsed policy. Of course, none of these options will apply if the lapsed policy was term life insurance, since term does not have any cash value there is nothing to forfeit.

In the case of a variable annuity sold to a senior citizen in this state for which the owner has directed that the premium be invested in the mutual funds underlying the contract during the 30-day cancellation period, cancellation during that period entitles the owner to a refund of:

The account value Explanation: In the case of a variable annuity for which a senior owner has directed that the premium be invested in the mutual funds underlying the contract during the 30 day cancellation period, cancellation shall entitle the owner to a refund of the account value. However, if the owner had not directed that the premium be invested in the mutual funds underlying the contract, all premiums paid would have to be refunded if the owner canceled the contract during the 30 day free look period.

All of the following are true regarding the waiver of premium rider when it is attached to a whole life insurance policy EXCEPT:

The amount of the waived premium due is treated as a policy loan The waiver of premium rider is actually a type of credit disability insurance that is added to a life insurance policy for an additional premium charge. If the insured is disabled for more than six months, the rider will pay the insured's premium until they either recover or die. Since the premium is being paid by the rider, the cash value in the policy will continue to accumulate as if the insured was paying the premium themselves. If the insured does not become disabled, the rider will usually drop off the policy at age 65 and the overall policy premium will be reduced.

Under the Internal Revenue Code section 1035, all of the following life insurance exchanges are tax deferred EXCEPT:

The exchange of an annuity for a life insurance policy

With respect to the business of insurance, a hazard is

any condition or exposure that increases the possibility of loss

Variable Life insurance is based on what kind of premium?

Level fixed. Variable Life insurance is a level fixed premium investment based product.