Life Insurance Exam questions IDAHO

Which of the following best describes life annuity with period certain option?

3. It guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary.

If a retirement plan or annuity is qualified, this means

3. It satisfies IRS requirements for favorable tax treatment.

Which of the following is NOT a personal use of life insurance?

4. An individual buys insurance to fund a buy-sell agreement.

An individual has a $200,000 convertible term life insurance policy. If he chooses, he can

4. Convert to a whole life policy for the same face amount without proof of insurability.

Which of the following individuals would be a likely candidate to purchase a deferred annuity?

4. Someone who wants to grow retirement funds tax deferred

Which of the following statements concerning the Medical Information Bureau is correct?

4. The Medical Information Bureau assists underwriters in evaluating and classifying risks.

When an insured terminates membership in the insured group, the insured can convert to

4. Whole life without proof of insurability.

Domestic insurers must be examined at least once every

5 yrs

In order for someone to qualify to be the Director of Insurance, how many years of related business or insurance experience must the person have?

5 yrs

A public employee group which is eligible for a group life insurance policy must have at least how many employees?

5. Public employee groups eligible for group life insurance policies must have at least 5 employees at the date of issue.

During the grace period, what is the annual interest rate that the insurer may charge for the number of days before the premium is paid?

6%

An annuity has accumulated the cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive

70,000

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

The payments stop at the first death.

What is the purpose of the surrender charge in a deferred annuity?

To compensate the company for loss of investment value

Insurance provides a means to

Transfer a loss

An insured's flexible premium is invested into a separate account. What type of insurance product did he purchase?

Variable Universal Life

The purpose of the Fair Credit Reporting Act is to

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount?

childrem term riders

A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lender may be guilty of

coercion

Which statement below is INCORRECT regarding the type of term insurance that fits best with the applicant's needs?

Applicants who may require a larger death benefit in the future should buy convertible term insurance. Convertible term converts to a cash value policy with the same death benefit but at a higher premium.

If an applicant's health is poorer than that of an average applicant, the policy may be issued

substandar

Which of the following entities is considered the Principal?

the insurer

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

without evidence of insurability

Answers to questions in an insurance application are called representations and, as such, they are

believe to be true, best knowlegde

Which of the following statements is true regarding SIMPLE plans?

1. Contributions and earnings are tax-deferred until funds are withdrawn.

An insured receives his life insurance policy and is not satisfied with the provisions. He decides to return the policy after 25 days. What percentage of his premium will he be refunded?

0%

How long is the grace period for an individual life insurance policy?

1 month

Which of the following best describes a rebate?

1. A producer returning part of her commission to her client, as an inducement to buy

According to the life insurance replacement regulations, which of the following would be an example of policy replacement?

2. A policy is reissued with a reduction in cash value.

Which of the following would be an example of an insurer participating in the unfair trade practice of discrimination?

2. Charging the insured higher premiums based on her race

Which of the following statements describes one of the reasons individuals purchase life insurance?

2. It creates an immediate estate.

All of the following are true regarding a producer's fiduciary responsibilities EXCEPT

2. Producers may commingle personal funds with company funds.

What of the following is a correct statement concerning assignment?

Assignment refers to the person who will receive the benefits of a policy should an insured die.

Which of the following is true of the taxation of cash values in a business life insurance policy?

Cash values grow tax deferred. The cash value of a business owned life insurance policy or an employer provided policy accumulates on a tax-deferred basis and is taxed in the same manner as an individually owned policy.

What type of an interest rate is guaranteed in universal life policies?

Contract interest rate

In this state the owner gets a "free look" of a specified number of days from

Delivery of the policy

Which type of authority is found in the agent's contract?

Express

An individual receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy?

Single premium immediate annuity

Which of the following would be likely to establish a SEP?

Smalls employers

Who does the spendthrift clause in a life insurance policy protect?

The beneficiary

For an insurance contract, the principle of utmost good faith means

3. Each party relies upon the truthfulness of the other.

All of the following statements are true regarding an Ordinary (Straight) Life policy EXCEPT

3. It does not have a guaranteed death benefit.

When is the company responsible for actions of its agents?

1. Whenever the agent is acting within the conditions of the contract

How long must the free look period be on all annuity and pure endowment contracts issued in Idaho?

20 days

Replacing insurance companies must keep evidence of the notice regarding replacement, the policy summary, contract, and any ledger statements used for the replacement policy for how long?

3 yrs

If an insured dies, and it is discovered that the insured misstated his/her age or gender, the life insurance company will

3. Adjust the death benefit to what the premium would have purchased at the actual age or gender.

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insured's death was caused by an accident as defined in the policy?

ACCIDENTAL DEATH RIDER. The Accidental Death Rider pays some multiple of the face amount if death is the result of an accident as defined in the policy.

Which of the following statements is INCORRECT concerning Modified Endowment Contracts (MECs)?

An MEC must always pass the 7-pay test. Life insurance contracts must pass the 7-pay test; otherwise, they become classified as Modified Endowment Contracts (MECs), and policy loans or withdrawals will be subject to taxation as provided by the regulation. If investment funds are withdrawn or borrowed prior to age 59½, they will also be subject to a 10% penalty.

All of the following are true of a nonqualified deferred compensation plan EXCEPT

Contributions are tax deductible. Nonqualified deferred compensation plans may be discretionary and therefore do not require IRS approval. These plans are contractual agreements between employees and employers for the deferral of constructive receipt of a portion of their earnings are not tax deductible.

An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered

DELIVERED. When the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered legally delivered.

If an insurer suspects that insurance fraud is being committed, to whom should it be reported?

Director of Insurance

Which of the following could reduce the amount of the death benefit?

Failure to repay a policy loan

Which of the following would be considered a peril?

Fire

Which provision allows premiums to be paid after their due date?

Grace period

The mechanism used to pay covered claims and prevent financial losses to claimants and policyowners when an insurance company becomes insolvent is a

Guarantee association

According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT

If an applicant is declined for an insurance policy, he/she had no right to know what is in the report

In which of the following scenarios would a producer be allowed to obtain insurance through an unauthorized insurer?

If there are no authorized insurers for a specific type of coverage in this state

Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance?

Insurance application

Which of the following best describes pure life annuity?

It provides the highest monthly benefits. The pure life annuity, also known as Life Only or Straight Life, pays the most since it only guarantees to pay for the rest of one's life without a minimum guarantee.

J purchased an annuity, but M receives the annuity benefits. R is the beneficiary, and X is the insurer. Who is the annuity owner?

J

What is the most common name for a single policy that is designed to insure two or more lives with a standard premium, and that pays the death benefit upon the first death?

Joint life

Cash Value guarantees in a whole life policy are called

NONFORFEITURE VALUES. Because permanent life insurance policies have cash values, there are certain guarantees that are built into the policy that cannot be forfeited by the policyowner. These guarantees (known as nonforfeiture values) are required by state law to be included in the policy. A table showing the nonforfeiture values must be included in the policy for a minimum period of 20 years. The policyowner has options as to how to exercise nonforfeiture values.

The reduction of premium option uses the dividend to reduce

Next's year premium

Partners in a business want to make sure that if one of them were to pass away, their surviving family will receive a fair value for their portion in the business. What life insurance arrangement would be most suited for transitioning the business?

buy and sell agreement

J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose?

fixed amount

An insurer incorporated under the laws of another state but doing business in this state is considered

foreing

If a creditor has claims against an insured, what may the insurer do with the proceedings of a life insurance policy?

hold

A Jumping Juvenile policy is unique in that the death benefit automatically

increase at certain age

If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do?

inform the insurance company

To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss. What is this concept called?

insurable interest

An insurance company that is owned by the policyholders is called a

mutual insurer

Which of the following is true regarding pure life annuity settlement option?

provides a high income

Which of the following will be eligible for a tax-sheltered annuity?

public school teachers

The family term rider incorporates

spouse term and children term

Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles?

standard

state

state