Life Insurance Exam Question (Texas)

The death benefit in a Universal Life policy is always annually renewable term...

True

A spouse receives $5,000 a month until the principal and interest on her husband's life insurance policy have been paid out. Which settlement options did this beneficiary choose?

Fixed amount

Which of the following is NOT a requirement of a qualified plan?

It must be temporary. (a qualified plan is permanent)

The number of credits required to obtain a fully insured status to receives social security benefits is

40

Upon the insured's death, the beneficiary of a whole life policy will receive the face amount and the cash value

False

Which of the following is true regarding a joint life policy ?

Premium is based on the average age of the insureds

Insurable interest must exist at the time of

application

Representations are statements made by the applicant that are

Considered true to the best of the applicant's knowledge

Which of the following includes information regarding a person's credit, character, reputation, and habits?

Consumers report

The proceeds paid to the beneficiary of a life insurance policy are called the

Death benefits

An individual inherited a large sum of money at age 40 and wanted to use it to provide a guaranteed income after his retirement at age 60. Which of the following types of annuities would best meet this need?

Deferred

Which of the following is NOT a standard exclusion in life insurance policies?

Disability

In a group life polices, individual certificates are given to

Each insured person

Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?

Grace period provision

Which of the following statements is true regarding a universal life policy?

It is issued without a guaranteed interest rate

A substandard risk compared to a standard risk would pay

A higher premium

Which of the following is considered a field underwriter?

An agent

All of the following are nonforfeiture options in life insurance policies EXCEPT

Automatic premium loans

The person who is covered by the insurance policy is referred to as the

Insured

What is the requirement for a number of employees in a SIMPLE plan?

No more than 100

Decreasing term graph In the graphic below, what does line B represent? "---"

Premium

Term life insurance is referred to as

Temporary protection

What is the annuity accumulation period?

The pay in period

Which of the following insurance arrangement will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third- party ownership

As a field underwriter, an agent is responsible for helping the insurer prevent adverse selection.

True

If an insurer issues a policy with unanswered questions on the application, the insurer has given up the right to use the missing information in underwriting.

True

Insurance is the transfer of risk

True

Who is considered the field underwriter

agent

The 10 % early withdrawal penalty from an IRA can be waived for

catastrophic medical expenses

With a traditional whole life policy, the death benefit

remains constant overtime

If an agent fails to obtain an applicant's signature on the insurance application, the agent must

Return the application to the applicant for a signature.

What is the main responsibility of a company's underwriting unit?

Risk selection and classification( preferred, standard, substandard)

The advantage of qualified plans to employers is

Tax- deductible contributions

Whole life insurance only endows at age 100.

True

What type of receipt is given to the applicant who submits the application with the premium payment?

conditional

An insurer is required to obtain a signed disclosures authorization form when it intends to

obtain a consumer report (credit report)

An illustration used in the sale of a life insurance policy must include a label stating

"Life insurance illustration"

Anyone who violates the Insurance Code of Texas may be fined up to

$25,000.

How many hours of continuing education can be carried over from one licensing period to the next?

0 (All CE hours must be completed during the reporting period; licensees are not allowed to carry over excess hours to the next reporting period.)

The Commissioner of insurance issues a cease and desist order and immediately receives a request for the charges to be reviewed in a hearing. Within how many days must the hearing be held?

10 days

Which type of whole life policy would have the highest premium for a 25- year old applicant?

10 pay life

The tax penalty for withdrawals from a traditional IRA before age 59 1/2 is

10 percent

The insured is also the policyowners of a whole life policy. What age must the insured attain to receive the policy's face amount?

100

How many days does a viator have to rescind a viatical settlement after receiving the proceeds?

15 days

What is the minimum required number of continuing education credits in ethics every licensing period ?

2 hours

According to the limitations of lawsuit provision, how many years does a claimant have to take legal actions against the insurer?

2 years

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

A debtor has an insurable interest in the life of a lender. (A lender has an insurable interest in the life of a debtor, but only to the extent of the debt. The debtor does not have an insurable interest in the life of the lender.)

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.)

The Medical Information Bureau is

A source of medical information to alert insurers to adverse medical history

In an individual life insurance policy, when must the nonforfeiture benefits begin?

After 3 policy years

When transacting business in this state an insurer formed under the laws of another country is known as a/an

Alien insurer.

The legal transfer of all or part of a policyowner's right, title or interest is called an

Assignment

Premiums in renewable term polices are based on the insured's

Attained age

When the guaranteed insurability rider is exercised, the additional coverage is based on the insured's

Attained age

Who receives the death benefit in a life insurance policy?

Beneficiary

Betty is the only beneficiary named on her husband Bob's policy, which as a common Disaster provision. They are in a car accident, and Bob die instantly. Betty lives for 29 days. Who will receive the death benefits?

Bob's estate

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time.

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of

Coercion. (This is an example of the illegal practice of coercion.)

Information collected from employment records, credit report or other sources that includes written or oral information concerning credit, character, reputation or habits is called an

Consumer report

A key- person insurance policy benefit will pay for which of the following?

Cost of training a replacement

An individual has just been diagnosed with a quickly-spreading, fatal form of cancer; his oncologist predicts that he will live for 5 months. He applies for individual life insurance. What risk classification will he most likely receive?

Declined

The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer's investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following?

Delay an acceptance or rejection decision

The federal law that permits an applicant for insurance to question the validity and source of any credit information is called

Fair Credit Reporting act

If Tom's policy allows him to make periodic additions to the face amount at standard rates, without proving insurability, his policy includes a

Guaranteed insurability option.

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months

Which of the following provisions prevents an insurers from denying a claim due to statements made on a life insurance application after the policy has been in force for a period of time?

Incontestability (2 years)

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased. (Naming a secondary beneficiary (also referred to as contingent beneficiary) ensures that there is a beneficiary to receive policy proceeds if the primary beneficiary dies before the insured. If there is no secondary beneficiary, the policy benefits will go to the insured's estate.)

An individual receives a temporary life insurance agent's license on January 1, 2010. When will the licensee be eligible to receive another temporary license?

July 1, 2010

Which entity protects the policyowners and beneficiaries if an insurer becomes insolvent?

Life and health Guaranty Association

The plan sponsor in a group life insurance receives a

Master Contract

The MIB is a nonprofit trade association that maintains

Medical information on applicants for life and health insurance

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

Mode

The life income settlement options protects the beneficiary against

Outliving the money

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

Ownership

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

The insured died four months after a 100,000 life insurance policy was issued and delivered. At the time of the claim, the company noticed the original application was missing some key information. What will the company do?

Pay the death claim because the insurer waived the right to obtain the missing information

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit (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.)

To reinstate the full death benefit of a life policy that has been kept in force by the automatic premium loan provision, the policyowner must

Repay the loan plus interest, show proof of insurability

A beneficiary that may be changed at any time by the policyowner is known as

Revocable

What should a producer do if information on an application for insurance is missing or needs to be corrected?

Set up an appointment with the applicant to either complete a new application or correct the error and have the applicant initial the change

A woman has a life policy in force for $300,000. She is terminally ill. She wants to get an "advance" from her death benefit to help pay her mounting medical bills. She met some people who said they could advance her $100,000 if she would sign ownership over to them.

She probably met with a Viatical Settlement Company.

What type of annuity does the image below represent ? The premium paid in lump sum in 2014 and then the payment start in 2017.

Single premium deferred annuity

A person of average physical condition and lifestyles would receive which underwriting classification?

Standard

The cash value in an Equity indexed life policy is usually linked to which of the following?

Standard and Poor's 500 (S&P 500)

Which of the following would NOT sign an application for life insurance policy?

The beneficiary

A universal life contract expires when

The cash value account become too small to pay the cost of the insurance.

All of the following apply to the waiver of premium rider except

There is not charge for this provision

A policy owned by someone other than the insured is known as

Third-party ownership

Nonforfeiture means the policyowners never loses the cash value in the policy

True

The entire contact consists of the policy, application and rider

True

The grace period provision protects against the unintentional lapsing of a policy

True

Which policy allows the policyowner to increase, decrease, or skip premium payments?

Universal life

What is the term for an insured who enters into a viatical settlement ?

Viator

When is the earliest a policy may go into effect?

When the application is signed and a check is given to the agent

If a producer accepts a completed application without the first premium, when does coverage become effective for the insured?

When the policy is delivered and the first permium is paid

Which of the following is not a nonforfeiture options of a whole life policy ?

accumulate at interest

What will an insurance company do if an applicant misstates her age on the application for insurance?

adjust the face amount

A life insurance producer may share commissions with

another life producer

What do employees receive under a group contract?

certificate of insurance

The receipt given to a life insurance applicant when the application is completed and the initial premium is received is called a(n)

conditional receipt

Credit life insurance is usually written as what type of policy?

decreasing term

An insurer who deliberately makes a malicious statement about another insurance company is guilty of an illegal trade practice called

defamation

Cash loans are available from level term life insurance policies

false

In life insurance policies, the policyowners and the insured have ownership rights.

false

Lump-sum death benefits are taxable to the beneficiary

false

Variable whole life policies have __premium

fixed

In an insurance transaction, which of the following does a licensed agent represent?

insurer

The medical information bureau (MIB) membership consists of

insurers

A beneficiary who has a vested interest in the proceeds of a life insurance policy is the

irrevocable beneficiary

When the business is the owner, benefits payor, and beneficiary of a life insurance policy, the is an example of an

key person policy

What does an annuity protect the contract owner against?

outliving his or her money

The intent of the replacement regulations in life insurance is to protect the

policyowner

A limited pay whole life policy limits

premium payments

What does the payor benefits rider protect?

premium payments for a juvenile policy

An agent who offers cash reward to a prospect for buying a policy is guilty of

rebating

Premiums for a variable life policy are deposited in the

separate account

The commissioner of insurance is responsible for all of the following actions EXCEPT

setting premium rates

In order for a producer to represent an insurance company, the producer must be appointed.

true

The purpose of purchasing life insurance is to create an immediate estate

true

Which of the following types of policies allows partial surrenders?

universal life

A 20 pay whole life policy means that insured is covered

until death or age 100

Which law protects consumers against the circulation of inaccurate or obsolete information

Fair Credit Reporting Act

A beneficiary must have a insurable interest in the insured

False

Whose life expectancy is taken into consideration in an annuity?

Annuitant

Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?

Assignment

Decreasing term graph, the line A that "\"?

Death benefits

When the insured purchase a new home, he wanted to purchase a life insurance policy that would protect his family against losing it should he die before the mortgage was paid. Which of the following polices is best suitable for that need?

Decreasing term

If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?

Inform the insurance company

Which type of life insurance policy generates immediate cash value?

Single premium

With personal life insurance, the lumps- sum death benefits is received by the beneficiary

Tax Free

The time period during which an annuitant contributes to an annuity is called

The accumulation period

Purchasing a surivorship life policy is less expensive than purchasing two individual policies.

True

What is insurance?

is a contract in which one party (the insurance company) agrees to idemnify (make whole) the insured party against loss, damage or liability arising from an unknown event.

A warranty is an

absolutely true statement

Representation are statements made by the applicant for insurance that are

True to the best of the applicant's knowledge.

Which of the following is true about the free-look period in a life insurance policy?

It commences when the policy is delivered

The renewable provision allows the policyowner to renew the coverage at the expiration date.

Without evidence of insurability

The primary source of underwriting information is the

application

A life insurance policy becomes incontestable after

2 years

Within how many days of requesting an Investigative Consumer Report must an insurer notify the consumer in writing that the report will be obtained?

3 days

How long does an employee have to convert a group policy to an individual policy without evidence of insurability?

31 days

How long is the grace period in group life polices issued in this state?

31 days

The typical time period to convert group coverage to an individual policy is

31 days

Which of the following retirement plans is a special tax favored plan for nonprofit, charitable, educational or religious groups?

403 (b) Tax- sheltered Annuity (TSA)

Agents whose license has been revoked will not be able to receive another license in Texas for at least

5 years

What percentage of continuing education hours must be in a classroom setting?

50 (At least 50 percent of all required continuing education hours must be completed in a classroom setting or a classroom equivalent setting approved by the department.)

At the age can a participant receive distribution from a qualified plan without incurring a 10% penalty?

59 1/2

A temporary license is normally valid for

90 days

Variable Universal life insurance offers a policyowner which of the following features?

A face amount that must stay level

Which of the following is NOT a possible penalty for a violation of the Insurance Code?

A fine up to $100,000 (In addition to the suspension or revocation of a license, the Commissioner may impose any of all of the following penalties: issue a cease and desist order; order the payment of an administrative penalty; and order the licensee to make restitution. The penalty for a violation may not exceed $25,000.)

A permanent and total transfer of policy ownership right is called

Absolute assignment

Which rider allows the terminally ill insured to have access to some of the insurance proceeds while still living?

Accelerated Death Benefit

If a misstatement of age is discovered during the processing of a life insurance claim, what will the insurance company do?

Adjust the death benefits based on the premium that were paid.

An insured in a group policy has misstated his age on the insurance application. As a result, the insurer will most likely

Adjust the premium

Which of the following is the beneficiary in credit life insurance?

Creditor

A producer's obligation to handle the insured's funds in a trust capacity is called an

Fiduciary responsibility

A life settlement options that pays out the death benefits incrementally, in a specified amount until all of the proceeds are exhausted is called.

Fixed amount installment

An insurance company licensed to conduct business in states other than the one in which it is incorporated is a/an

Foreign company

What provisions in a life insurance policy extends coverage beyond the premium due date?

Grace period (30 days)

A life insurance death benefit paid in a lump sum to a beneficiary is

Not subject to any taxes

All of the following would be considered a insurance transaction EXPECT

Obtaining an insurance license.

Whole life insurance is referred to as

Permanent protection

Which of the following documents describes specific information about policy provisions and benefits?

Policy Summary

All of the following are true regarding insurance policy loans except

Policy loans can be made on polices that do not accumulate cash value.

All of the following are true regarding insurance policy loans EXCEPT

Policy loans can be made on policies that do not accumulate cash value.

what increase every year in an annually renewable term insurance policy?

Premium

children's riders attached to whole life policies are issued as what type of insurance?

Term life

All of the following statements about sources of underwriting are true EXCEPT

The contents of an inspection report cannot be disclosed to the applicant.

At the age 25, an individual purchased a decreasing term policy. what does that say about the coverage and the premium?

The coverage decreases but the premium stays the same.

If the insured's death occurs during the grace period, the beneficiary receives

The face amount minus any overdue premiums

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?

The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.

A printer has hired an advertising agency to design and edited advertisement brochures for an insurance company. Once the brochures are printed, who is responsible for the advertisement and their content?

The insurance company

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

The insurance company

Which statement is INCORRECT concerning policy dividends?

The insurance company may guarantee dividends

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

The insured may renew the policy for another 10 years, but at a higher premium rate.

If an applicant for insurance is submitted without premium, coverage begins when

The policy is delivered and the premium is paid

Limited pay Whole life line A stop "----'

The policy is paid up

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history 1 year later. What will probably happen?

The policy will not be affected.

An unfair practice of twisting means misrepresenting a policy to persuade the policyholder to lapse or replace the policy even though it's not in the owner's best interest.

True

Assignment is a permanent or temporary change of policy ownership

True

Failing to complete continuing education in a timely manner may result in the producer's license being terminated.

True

An insured receives a monthly summary of his life insurance policy. The cash value this month is significantly lower than it was last month. What type of policy is it?

Variable

Which is a disability rider in a life insurance policy?

Waiver of premium

Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes

Wavier of premium rider

What type of policies offers a loan options to the policyowner?

Whole life

If a claimant is to bring a recovery action against an insurance company for a loss claimed under a policy, the action must be brought

Within 2 years.

Which of the following person is required to hold a producer license?

a nonresident agent who negotiates insurance contracts

An insurance company that has obtained a certificate of authority to operate in the state is

admitted

Who is considered a nonresident agent?

an agent who resides in another state, but is licensed to write insurance in this state.

Group life insurance contracts are

annually renewable term insurance

The payment of premium and representations the application are called

consideration

An insurer who deliberately make a maliciously critical statement about another insurance company is guilty of an illegal trade practice called

defamation

The primary purpose of the accelerated death benefits rider is

early payment of a part of the death benefits to the insured

The state Department of Insurance is responsible for

enforcing the insurance code

The policy and a copy of the application, along with any riders and amendments, is called the

entire contact

Which provision of a life insurance policy states that the application is part of the contact?

entire contract

If no beneficiary is named in the policy, the death benefits is paid to the insured's

estate

How often must producers renew their licenses?

every 2 years

Which of the following arrangements allow someone living with a life threatening condition to sell an existing life insurance policy and use the proceeds before death?

viatical settlement

In a renewable term policy the additional premium pays for the right to renew the policy

with the same coverage amount regardless of the insured's death

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

Life paid- up at age 65 (higher premium)

The primary purpose of an investigative consumer report is to assess an applicant's

Lifestyle and habits

Which nonprofit organization collects and maintains adverse medical data on insurance applicant ?

Medical Information Bureau

Which of the following is NOT true regarding policy loans?

Money burrowed from the cash value is taxable

If a life insurance policy has an irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary.

A flexible premium policy that may be term or permanent insurance is known as

Adjustable life

Which type of policy allows the insured to change the amount of the death benefits, amount of premium, or the type of coverage as their needs change?

Adjustable life (for their life needs)

Which of the following is NOT an example of a company's location of incorporation?

Authorized

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be

Authorized.

In credit life insurance, who is responsible for paying the policy premium?

Borrower

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a

Buy-sell agreement. (Buy-Sell agreements are used to contractually establish the intent of someone else to purchase the business upon the insured's death, and to set a value (purchase price) on a business. Life insurance is used to fund the buy-sell agreement. Any type of life insurance may be purchased to provide the necessary funds for the agreement. Insurance can be used to either fully or partially fund the buy-sell agreement.)

The beneficiary second in line to receive the death benefits is the

Contingent beneficiary

The most common type of whole life insurance where premiums are payable over the whole life of the insured to age 100 is called

Continuous premium (straight) life

what term policy feature allows the policyowners to change to permanent coverage without evidence of insurability?

Convertible

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called

Credit life (Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period.)

Which of the following is true regarding the insurance amount in a credit life policy?

Creditor can only insure the debtor for the amount owed.

Which life policy is used to pay off a debt, like a home mortgage?

Decreasing term

Which of the following describes commingling of funds?

Depositing premiums into a personal account

Underwriting is the process of

Determining the insurance company' risk regarding a proposed insured

Who is the beneficiary of a key person policy ?

Employer

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount

Equal to the original policy for as long a period of time that the cash values will purchase.

Which annuities have interest rates tied to a fund like the S&P 500?

Equity indexed

An annuity in which investment growth is dependent on the performance of an index such as the standard and poor's 500 is called an

Equity indexed annuity

In a life insurance policy, hazardous occupation would be an example of a/ an ___.

Exclusion

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called

Executive Bonus. (When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called Executive Bonus.)

Which policy component decreases in a decreasing term insurance?

Face amount

A reinstated life insurance policy is issued at the attained age of the insured

False

An accidental death rider may double or triple the face amount if the insured dies as a result of a sickness.

False

An insurance company may advertise that its polices are guaranteed by the Life & Health Guaranty Association.

False

Insurers may discriminate in life insurance policy rates based on the marital status of the insured.

False

Policy dividends are taxed as ordinary income to the policyowner.

False

The free-look period begins when the policy is approved by the insurance company

False

The reduction of premium dividend options reduces the premium payment for the current policy year.

False

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?

False advertising

The use of words or symbols that are similar to which of the following entities is prohibited in life insurance advertisement?

Federal government

A producer delivers a policy to an insured, but nine days later the insured returns the policy and wants a complete refund. What provisions allows the insured to return the policy ?

Free look

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

Which is true about the cash surrender nonforfeiture options?

Funds exceeding the premium paid are taxable as ordinary income.

Which rider would allow additional insurance at specified dates or events, without evidence on insurability?

Guaranteed insurability

Which of the following must be included in all life insurance advertisements?

Identity of the actual insurer

An employee quits his job and converts his group insurance to an individual policy. On which of the following will the premium for the individual policy be based?

Insured 's attained age

Which of the following policy components contains the company's promise to pay?

Insuring clause (The insuring clause contains the company's promise to pay.)

Which of the following would help prevent a universal life policy from lapsing?

Target premium (The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.)

If the cash value exceeds the premiums paid in a whole life policy, what are the tax consequences if the policy is surrendered?

The portion that exceeds the premiums paid is taxable

A single premium whole life policy has cash value immediately available for a policy loan

True

A traditional IRA is a type of a qualified plan

True

An annuity begins paying income a month after it is issued is a single premium immediate annuity

True

An immediate annuity has no accumulation period.

True

A agent's license must be renewed

every 2 years on the anniversary date of issurance

Each of the following is a typical characteristics of group life insurance EXCEPT

evidence of insurability is usually required.

The nonforfeiture options that provides insurance in the same amount as the original policy is

extended term

Which settlement options pays a specified payment until the money is gone?

fixed amount

Universal life policies have ____premiums.

flexible

The premium payment mode can be best described as the

frequently with which the policy premium will be paid

If a retirement plan or annuity is qualified, this mean it

has favorable tax treatment

What is the process by which one life policy is terminated and another is written in its place?

replacement

Statement in the application for insurance that are believed to be true to the best of the applicant's knowledge are called

representations

An annuity that is purchased with a lump-sum payment and begins income payment within one year is a

single premium immediate annuity

Who would normally purchase a deferred annuity?

someone who needs tax-deferred growth for retirement

The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend options has the insured chosen?

Reduction of premium

Which of the following are Social Security benefits?

Retirement, disability, and survivors

A life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the

incontestability clause (2 years)

Which of the following would be considered a disadvantage of term insurance?

If the insured dies after the end of the term, there is no death benefits to the beneficiary

An individual owns a adjustable life policy. Sometimes in the future he wants to increase the death benefit. Which of the following statement is correct regarding the death benefits increases?

It can be increased by providing evidence of insurability.

An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?

On the date of the application

The shorter the premium-paying period of a whole life policy, the ____the total annual cost.

higher

Underwriting is a process of

risk selection and classification

Which of the following classifications would result in a rated policy?

substandard

Which of the following best describes the purpose of the USA PATRIOT Act with regards to the insurance, what must the agent do?

Inform the insurance company

In a life insurance policy, when must insurable interest exist?

A valid insurable interest may exist between the policyowners and the insured when they policy is insuring any of the following 1. policyowner's own life 2. the life of a family member (a spouse or a close blood relative) 3. The life of a business partner, key employees, or someone who has a financial obligation to the policy owner (such as debtor to a creditor)

Under what circumstances will the contingent beneficiary receive the death benefit?

if the primary beneficiary dies before the insured

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

If the policy premium has not been submitted with the application, upon policy delivery the agent must obtain____from the insured.

A statement of GOOD health

Whose life expectancy is taken into consideration in annuity?

Annuitant

A document that provides information for underwriting purposes is the...

Application

Which of the following would be the main source of underwriting information used by the company in the risk selection process?

Application "90% information comes from the application"

When must insurable interest exist in life insurance?

Application or issues date

Generally, the premium paid for personal life insurance is

Not tax deductible

If no receipt is issued at the time application, a statement of good health is usually required at the time of

Policy Delivery

Example: Insured :Jane Smith Agent: Bob Policy : term life policy period: 5 year premium: $300

Policy Summary

What is the term for the fee a policyowner must pay to the insurance company to maintain coverage ?

Premium

The agent's report includes the agent's personal observation concerning the proposed insured.

True

Which of the following is true of the fixed- period and fixed amount settlement options?

both guarantee that the principal and interest will be fully paid out (pay everything out )

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

it is available automatically, for no extra premium

An annually renewable term policy

maintains a level premium each year

When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What actions will the insurer take?

pay a reduced death benefit based on the insured's actual age

A life insurance applicant discloses his or her medical history in the

policy application

Statements made by the insured on the application are considered

representation

A mutual interchange of rights and privileges is known as

reciprocity

Which dividend options may decrease future premium payments?

reduction of premium

The guaranteed insurability rider allows the insured to increase coverage at

specified future events

Life insurance companies and producers are regulated by the

state

A cease and desist order issued by the Department of Insurance means a person must

stop a specified trade practice

What is the risk classification for those who are insurable, but present a higher than average risk?

substandard

What is the main purpose of requiring licenses for persons who transact insurance?

to protect the general public

What is the purpose of the grace period in life insurance policies ?

to protect the policyowner against an unintentional lapse of the policy

A level term life policy has a level face amount and a level premium

true

An advantage of reinstating a lapsed policy is for coverage to be based on the original issue age

true

To prevent individuals from profiting from a loss, insurance companies must be certain that

Insurable interest exist

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance?

Insurance agent

In an insurance transaction, which of the following does a a licensed producer represent?

Insurance company

Soliciting or negotiating with a prospect to purchase insurance is referred to as a/an

Insurance transaction

Who makes up the Medical Information Bureau?

Insurers (The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.)

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?

Interest only option

Which of the following best describes a misrepresentation?

Issuing sales material with false statements about policy benefits (Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.)

Which statement is NOT true regarding a Straight Life policy?

It does not : Its premium steadily decreases over time, in response to its growing cash value.

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate.

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

What is the special significance of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of the issuance of the policy.

Which settlement options guarantees an income for two or more recipients for as long as they live?

Joint and Survivor

A specialized life insurance policy that pays on the death of the first insured is known as

Joint life

A whole life product that covers two lives and provides for payment of the death benefits on the death of the first insured is called

Joint life

What license is required to sell an equity-indexed annuity?

Life only

Which type of life insurance provides protection beyond the premium paying years?

Limited- pay Whole life

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

The annuity period is defined as the time in which the annuitant

receives payment

A current assumption or interest- sensitive whole life policy has

Premiums that the policy owner may change based on certain assumptions

Julie pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. Julie has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Reduction of premium option

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

Required a premium increase each renewal

When the application is submitted without a premium payment, what is required at policy delivery?

Statement of good health

Social Security benefits include retirement, disability, and ___.

Survivors

First insured dies: no death benefits Last insured dies: death benefits paid

Survivorship life

The life insurance policy provision that prohibits an insurance company from denying a death claim after the policy has been in force for a specified period of time is the

incontestability

Which provision protects the insurer if a material misrepresentation is discovered on an application shortly after a policy is issued?

incontestability

What type of permanent insurance allows the policyowner to pay for policy in a specified period of time, and the policy owner does not have to make anymore premium payments for the life of the policy?

limited payment

When an employer pays all the premiums in a group policy, the plan is referred to as

noncontributory

Cash surrender, extended term, and reduced paid up- insurance are all

nonforfeiture options

If a producer licensed in a resident states wants to transact insurance in another state, the producer must obtain a

nonresident license

What is the main purpose of requiring license for persons involved in transacting insurance?

protect the public

An annuity is considered fixed when it does all the following EXCEPT

provides the annuitant with either the guaranteed or current interest rate, whichever is less.

In underwriting, ___ cannot be used as a factor to determine an applicant's insurability.

race

An agent who offers a cash reward to prospect for buying an insurance policy is guilty of

rebating

Which of the following is an unfair trade practice?

rebating

All the following may have an insurable interest in the insured EXCEPT

Insured's best friend

All of the following persons who do not have an employer-sponsored retirement plan would be eligible to set up contribution to a traditional IRA EXCEPT

Arelene, age 70, a nurse (70 1/2)

If a life policy does not pass the 7-pay test, that policy

Becomes a modified Endowment Contract

A conditional receipt guarantees that coverage will begin on the date of application

False (after the first payment)