Life Insurance Exam Missed
An agent must notify the Commissioner of Insurance within __ business days of an address change.
10
All of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawals before age 59 1/2
Approved premium rates for group health insurance shall be guaranteed by the insurer for an initial period of not LESS than how many months?
12
An insurer must provide an insured with claim forms within __ days after receiving notice of a loss.
15
Minors in North Carolina age __ and up can enter into life insurance contracts and have all the rights that come with ownership.
15
What year was the McCarran-Ferguson Act enacted?
1945
In North Carolina, life insurance policies have a contestability period of
2 years
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay Life
Under a Group Health Insurance Policy, continuation shall be available only to an employee who has been insured immediately prior to the date of termination for a period of AT LEAST
3 months
AT LEAST how many days before the effective date of a rate increase must an insurer provide written notice to individual accident and health policyowners?
30 days
In North Carolina, a health policy that is paid on a quarterly basis requires a grace period of
31 days
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?
5
Every insurance agent/broker MUST maintain all records, books, and documents for insurance transactions for a period of not less than
5 years
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%
A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?
6
How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 days
If a health insurance claim is not promptly paid, legal action may be taken against the insurer after
60 days
A life policy loan in North Carolina cannot charge a fixed rate of interest higher than
8%
Eligible employees must be added to group health coverage NO LATER than how many days after their first day of employment?
90
Which of these is an element of a Variable Life policy?
A fixed, level premium
Joint Life
A joint life policy covers two or more people. Using some type of permanent insurance (as opposed to term), it pays the death benefit at the first insured's death
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
payor provision
A payor provision provides that in the event of death or disability of the adult premium payor, the premiums on a juvenile policy will be waived until the insured child reaches a specified age or the maturity date of the contract.
Policy Loan provision
A policy loan will pay the policyowner an amount that, with interest, does NOT exceed the guaranteed cash value.
What do Dread Disease policies cover?
A specific disease or illness
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called:
An installment Refund annuity
Which type of contract liquidates an estate through recurrent payments?
Annuity
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
An applicant for a nonresident agent license MUST meet which of the following requirements?
Be licensed as an agent in the agent's state of domicile
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
All of the following statements about Major Medical benefits are true, EXCEPT:
Benefits have no maximum limit
Which type of policy would pay an employee's salary if the employer was injured in a bicycle accident and out of work for six weeks?
Business Overhead Expense
A policy loan is made possible by which of these life insurance policy features?
Cash value provision
What is issued to each employee of an employer health plan?
Certificate
Which rider provides coverage for a child under a parent's life insurance policy?
Child term rider
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement
Insurance policies are offered on a "take it or leave it" basis, which make them
Contracts of Adhesion
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Which of the following types of insurance is exempt from the Rules Governing Life Insurance and Annuity Replacements?
Credit Life
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer:
Does not have to make any further payments
M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which of the following statements BEST describes what is owed to her estate?
Earned, but unpaid benefits
K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies?
Endowment at Age 65
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
"Exclusion
Exclusions are specified hazards listed in a policy for which benefits will not be paid
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary responsibility
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
File written proof of loss
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
Flexible Installment Deferred
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
Which of the following types of organizations are prepaid group health plans, where members pay in advance for the services of participating physicians and hospitals that have agreements?
HMO
A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary?
Her group health plan
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child
Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT?
If the employee paid for qualified medical expenses, the reimbursements may be tax-free
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Inspection report
Which of the following BEST describes Credit Life insurance?
Insurance issued on a debtor to cover outstanding balances on installment loans
An insurance broker in North Carolina is a representative of the
Insured
In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT:
Insured
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:
Interest Only
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance (IOLI) or (STOLI)
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
Which plan is intended to be used by a sole proprietor and the employees of that business?
Keogh Plan
Which of these are NOT an example of a Nonforfeiture option?
Life Income
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
Level term
Life insurance written to cover a need for a specified period of time at the lowest premium is called level term insurance.
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
Life settlement contract
Which of these is an element of a Single Premium annuity?
Lump-sum payment
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole Life
Modified Premium Life
Modified whole life policies are distinguished by premiums that are lower than typical whole life premiums during the first few years (usually five) and then higher than typical thereafter
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
When an existing life insurance policy is being reissued with a reduction in cash value, the agent must sign the
Notice Regarding Replacement of Life Insurance or Annuity
S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning:
November 1. The insured must wait 60 days after written proof of loss before legal action can be brought against the company.
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
What does Medicare Parts A and B cover?
Part A covers hospitalization; Part B covers doctor's services
Which of these is considered a mandatory provision?
Payment of Claims
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor Benefit rider
When does a Probationary Period provision become effective in a health insurance contract?
Policy's inception
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of these describe a participating life insurance policy?
Policyowners are entitled to receive dividends
A policyowner is able to choose the frequency of premium payments through what policy feature?
Premium Mode
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
Which of these is NOT a type of agent authority?
Principal
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?
Reimbursement
K failed to pay a renewal premium within the time granted by the insurer. K then sends in a payment which the insurer subsequently accepts. Which policy provision specifies that coverage may be restored in this situation?
Reinstatement
R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity?
Residual Disability
What does a 401(k) plan generally provide its participants?
Salary-deferral contributions
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
Split-dollar plan
What type of life insurance are credit policies issued as?
Term
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
Time Limit on Certain Defenses
The Time Limit on Certain Defenses (Incontestability) provision limits the time during which the insurance company may challenge the validity of an insurance claim on the basis of a misstatement made on the insured's application.
What does a Guaranteed Insurability rider provide a Disability Income policyowner?
The ability to periodically increase the amount of coverage without evidence of insurability
On delivery of a policy, a signed statement of good health is typically requested if:
The application was submitted without the initial premium
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
The correct answer is "$50,000". The suicide occurred outside the Suicide clause period (normally 1-2 years), thus the face amount will be paid.
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
Quarterly premium payments increase the annual cost of insurance because
The higher the frequency of payments, the higher the premiums.
T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take?
The insurer will rescind the policy, deny the claim, and recover all payments made
Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges?
The maximum amount considered eligible for reimbursement by an insurance company under a health plan
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:
The premiums can be lowered or raised, based on investment performance
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
There is a flexible premium payment
The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is:
Time Limit on Certain Defenses
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
Life and health insurance policies are:
Unilateral contracts
A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
Universal Life
Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
Universal Life
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
Which of the following BEST describes how pre-admission certifications are used?
Used to prevent nonessential medical costs
What type of rider would be added to an Accident and Health policy if the policyowner wants to ensure the policy will continue if he/she ever becomes totally disabled?
Waiver of Premium rider
Which of these is considered a statement that is assured to be true in every respect?
Warranty
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional Whole Life coverage at specified times
How long does the coverage normally remain on a limited-pay life policy?
age 100
aleatory
amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss
Group life insurance policies are generally written as:
annually renewable term
To be eligible for Social Security disability benefits, an employee must be unable to perform:
any occupation
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the:
applicant's physician
The automatic premium loan provision is designed to:
avoid a policy lapse
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
beneficiary's age
Additional coverage can be added to a Whole Life policy by adding a(n):
decreasing term rider
The purpose of the Insurance Guaranty Fund is to
ensure that claims filed against insolvent insurance companies will be paid
Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?
entire contract
The three types of agent authority include
express, implied, and apparent authority
All of these are characteristics of an Adjustable Life policy, EXCEPT:
face amount can be adjusted using policy dividends
false representations will
false representations will void a policy if they are material to the risk.
The Life and Health Insurance Guaranty Association is
funded by admitted insurance companies through assessments
The type of annuity that can be purchased with one monetary deposit is called a(n):
immediate annuity
An insurer receives proof of loss for an acceptable medical expense claim under an Individual Health Insurance Policy. Under the Time of Payment of Claims provision, the insurer MUST pay the benefits:
immediately
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
An insurance broker in North Carolina is a representative of the
insured
An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the:
insurer dates the policy
The phrase "This policy will only pay for a semi-private room" is an example of a(n):
internal limit
In North Carolina, a domestic insurance company is defined as a company that
is incorporated and formed in North Carolina
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
joint life
Pre-hospitalization authorization is considered an example of:
managed care
The funds used by the Life and Health Insurance Guaranty Association to carry out its purpose are obtained from the
member companies
Every Group Health Policy providing benefits for chemical dependency treatments must include, for the life of the contract, a
minimum benefit of $16,000
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
modified whole life
If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best desribes this policy is called:
noncancellable
Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT
partial withdrawal features beyond a surrender charge period
Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT:
partial withdrawal features beyond a surrender charge period
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
Who elects the governing body of a mutual insurance company?
policyholders
A Limited-Pay Life policy has
premium payments limited to a specified number of years
A Limited-Pay Life policy has:
premium payments limited to a specified number of years
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:
probability of making timely premium payments
The purpose of the Rules Governing Life Insurance and Annuity Replacements is to
reduce the opportunity for misrepresentation and incomplete disclosure
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called:
representations
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a:
risk retention group
The investment gains from a Universal Life Policy usually go toward:
the cash value
A level premium indicates:
the premium is fixed for the entire duration of the contract
The Consideration clause of an insurance contract includes:
the schedule and amount of premium payments
Essential Benefits without annual and lifetime limits are required on any health policy purchased
through the Federal Marketplace
A disability elimination period is best described as a:
time deductible
A Business Disability Buyout plan policy is designed
to pay benefits to the Corporation or other shareholders
A Business Disability Buyout plan policy is designed:
to pay benefits to the Corporation or other shareholders
Inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance is
twisting
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
A term life insurance policy matures:
upon the insured's death during the term of the policy
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has:
waived one of its legal rights
A policy that becomes a Modified Endowment Contract (MEC):
will lose many of its tax advantages