Life Insurance Exam Practice Questions
T Would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should teach purchase.
10 year endowment
A 15 year mortgage is best protected by what kind of life policy
15-year decreasing term
What year was the McCarran-Ferguson act enacted
1945
Which of the following requires ensures to disclose win an applicant consumer credit history is being investigated
1970-Fair Credit Reporting Act
Jay 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
What type of policy would offer a 40 year old the quickest accumulation of cash value
20-pay life
N is a 40 year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy would level premiums, permanent protection, and be paid up at retirement. Which of these should N purchase
30 Pay Life
Which of these is an element of a variable life policy
A fixed, level premium
Which statement is true regarding a variable whole life policy
A minimum guaranteed Death benefit is provided
Which of the following best describes a warranty
A statement guaranteed to be true
What kind of life insurance product covers children under their parents policy
A term rider
Which of the following types of policies pays a benefit if the insured goes blind
AD&D
A contract or one party Either except or reject the terms of the contract written by another party is called a contract of
Adhesion
How long does the coverage normally remain on a limited pay life policy
Age 100
Q purchase a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q died suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features
Aleatory
Insurance contracts are known as _____ because certain future conditions or ask must occur before any claims can be paid
Conditional
Which of the following consists of an offer, acceptance, and consideration
Contract
Insurance policies are offered on a "take it or leave it" basis which make them
Contracts of adhesion
When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply
Conversion provision
Dividends payable to a policy owner are
Declared by the insurance company
a ______ Term life policy is normally used when covering and insured's mortgage balance
Decreasing
Which of these types of policies may not have the automatic premium loan provision attached to it
Decreasing term
S is close to retiring and would like to purchase a policy that will yield greater games and bonds, but will still protect the principal with a minimum level of risk. Which product would S be advised to purchase
Equity index insurance
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
E & F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business and four months later E dies. although he was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists where will the proceeds from his life insurance policy be directed to?
F
And insurance applicant must be informed of an investigation regarding his/her reputation and character according to the
Fair credit reporting act
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained
Fair credit reporting act
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
In regards to representations or warranties, which of these statements is true
If material to the risk, false representations will void a policy
When most insurable interest exist for a life insurance contract to be valid
Inception of the contract
A life insurance policy would be considered wagering contract without
Insurable interest
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
A policy of adhesion can only be modified by whom
Insurance company
Who makes the legally enforceable promises in a unilateral insurance policy
Insurance company
If a contract of adhesion contains complicated language to him with the interpretation be in favor of
Insured
Which of these arrangements allows one to bypass insurable interest laws
Investor-Originated Life Insurance
A life insurance arrangement which circumvents insurable interest statutes is called
Investor-Originated Life Insurance. (or IOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.
K, age 45, And his wife, age 43 have three children. They purchase a family policy that covers K's wife to age 65. All of these situations will pay a death benefit except
K's Wife dies at age 66
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest)
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed
Level term
Which of these would be considered a limited pay life policy
Life Paid-Up at Age 70
When a life insurance policy exceeds certain IRS table values, the result would create which of the following
Modified Endowment Contract (MEC)
Which type of policy is considered to be over funded, as stated by IRS guidelines
Modified endowment contract
K buys a policy where the premium stays fixed for the first five years. The premium then increases in year six and stays level there after, all while the death benefit remains the same. What kind of policy is this
Modified whole life
When a policy pays dividends to it's policyholders it is said to be
Participating
Who benefits in investor originated life insurance when the insured dies
Policy owner
Which of these describe a participating Insurance policy?
Policy owners are entitled to receive dividends
Which of the following is not required to be included in a whole life policy
Policy's guaranteed dividend table
Who likes the governing body of a mutual insurance company
Policyholders
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 statement is correct regarding the premium payment schedule for whole life policies
Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured
Which of these is not a type of agent authority
Principal
What is the consideration given by an insurer in the consideration clause of a life policy
Promise to pay a death benefit to a named beneficiary
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to it's policyholders is called
Reserves
A group owned insurance company that is formed to assume and spread the liability risk of its members is known as
Risk retention group
Which of the following types of permanent life insurance policies offers the highest initial cash value
Single premium
What type of life insurance gives the greatest amount of coverage for a limited period of time
Term life
What advantage does the renewability feature give to a term policy
The insured may extend the coverage period
Under a graded premium whole life policy
The premium increases each year during the early years of the contract and remains the same after that time
The consideration clause of an insurance contract includes
The schedule and amount of premium payments
How does a typical variable life policy investment account grow
Through mutual funds, stocks, bonds
What type of reinsurance contract involves two companies automatically sharing their risk exposure
Treaty
Which of the following is considered an element of a variable life policy
Underlying equity investment
In an insurance contract the insurer is the only party who makes illegally enforceable promise. What kind of contract is this
Unilateral
Life and health insurance policies are
Unilateral contracts, because one party makes a promise and the other party can only except by performance
K purchased a life insurance policy in 1986 which paid 10% interest in the early years of the policy. 20 years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much higher premium is paid because of falling interest rates. This type of policy is known as a ____ life policy
Universal
What type of insurance incorporates flexible premiums and an adjustable death benefit
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 these types of life insurance allows the policy owner to have level premiums and also choose from a selection of investment options
Variable life
A ____ _____ Life policy combines investment choices with a form of term coverage
Variable universal
Term life policies that have the ability to be converted to permanent coverage may do so during a specific time period. this conversion period
Varies according to the contract
Which of these is considered a statement that is assured to be true in every respect
Warranty
At what point does an informal agreement become a binding contract
When consideration is provided by one of the parties to the contract
When most insurable interest to be present in order for a life insurance policy to be valid
When the application is made
The part of a life insurance policy guaranteed to be true is called
a warranty
All of the following are considered to be typical characteristics describing the nature of an insurance contract except
bilateral
Variable whole life insurance can be described as
both an insurance and securities product
Which provision allows the policy owner to change a term life policy to a permanent one without providing proof of good health
conversion
The combination of whole life and ___ term insurance is referred to as a family income policy
decreasing
Additional coverage can be added to a whole life policy by adding a
decreasing term rider
A nonprofit Incorporated society that does not have capital stock and operates for the sole benefit of its members is known as
fraternal benefit society
A policy of adhesion can only be modified by whom
insurance company
Credit life insurance is
issued in an amount not to exceed the amount of the loan
Which of these is not considered to be an element of an insurance contract
negotiating
A father who dies within three years after purchasing a life insurance policy on his infant daughter can have the policy premiums waved under which provision
payor provision
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
A limited pay life policy has
premium payments limited to a specified number of years
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this
renewable
Statements made on an insurance application that are believed to be true to the best of the applicants knowledge are called
representations
The investment gains from a universal life policy usually go toward
the cash value In a Universal Life Policy, income is usually directed toward the cash value.
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
Under a renewable term policy
the renewal premium is calculated on the basis of the insured's attained age
The cash value in a ___ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors
universal
When is the face amount paid under a joint life and survivor policy
upon death of the last insured
a _____ Life policy offers the owner investment in products such as money market funds, long term bonds and equities
variable
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a
variable universal life policy
A life insurance policy that provides a policy owner with cash value along with a level face amount is called
whole life
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100
whole life
What type of insurance offers permanent life coverage with premiums that are payable for life
whole life