Life Insurance - Exam Simulation - Wrong Answers to Study 1
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
Aleatory
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?
Amount paid with the accelerated benefit, plus the earning lost by the insurance company in interest income from the accelerated benefit.
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 fro the bank in the amount of the loan. This is an example of?
Coercion
Which of the following is true about the premium on the children's rider in a life insurance policy?
It remains the same no matter how many children are added to the policy.
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
Joint Life Policy
A policy will pay the death benefit if the insured dies during the 20-year premium paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
Level Term
During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes?
Misrepresentation
Is Interest Only a Nonforfeiture Option?
NO
Can a temporary license may be issued with out examination, if the spouse is married to a retired producer?
No
Does Large group life insurance underwriting, take the health of each individual in the group into considerations?
No
Is Renewable coverage available, based on how the face amount changes during the policy term?
No
To become a non-resident producer in this state, do they need to pass the Licensing examination?
No
Will the Payor Benefit Rider cause the Death Benefit to increase?
No (it only pays the premium in case of being disabled or death)
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement Provision
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
Revocable beneficiary.
Methods used to pay the death benefits to a beneficiary upon the insured's death are called?
Settlement options.
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?
Stock
The responsibility of making certain that an application for insurance is filled out completely, correctly and to the best of his or her knowledge is the responsibility of whom?
The Producer
What is NOT the consideration in a policy?
The application given to a prospective insured
Who bears all of the investment risk in a fixed annuity?
The insurance company
Under an extended term nonforfeiture option, the policy cash value is converted to?
The same face value amount as in the whole life policy
The paid-up addition option uses the dividend?
To purchase a smaller amount of the same type of insurance as the original policy.
A Policy Assignment transfers rights of ownership from the owner to another person?
True
Is it TRUE that a Spouse Term rider is usually Level Term Insurance?
True
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
When an insured terminates membership in the insured group, the insured can convert to
Whole life without proof of insurability.
A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person untitled elects another available option within __ days after the due date of the premium in default.
60 days
What is the maximum fine for the Insurance Code violation?
$1,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
$10,000, no tax consequence
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2,500
An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employees in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?
$8,000 - 60 days (20% held back)
How long is the licensing period in Arkansas?
2 years
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. What is true regarding taxation of the accelerated benefits?
A portion of the benefit up to a limit is tax free; the rest is taxable income.
L's insurer has made all of the decisions regarding the provisions included in her policy. L finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?
Adhesion
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
Adjusted to the insured's age at the time of renewal.
When must insurable interest exist in a life insurance policy?
At the time of application
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his?
Attained Age
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
Which of the following is paid solely to advise clients?
Consultant
Which of the following is NOT an essential element of an insurance contract?
Counteroffer
Which of the following must an agent receive in order to sell variable life insurance policies?
FINRA registration
Which policy component decreases in decreasing term insurance?
Face amount
In a Universal Life Policy...The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner?
False
Is it TRUE that an employer can receive a current tax deduction for any contribution made to a Employer Sponsored nonqualified retirement plan?
False
True or False, that Money borrowed from the cash value from Policy Loans is taxable?
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
When doing business in this state an insurance company that is formed under the laws of another state is known as which type of insurer?
Foreign
A Return of Premium term life policy is written as what type of term coverage?
Increasing
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable interest and consent
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Insuring clause
