Life insurance FINAL EXAM
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase:
A Whole Life Policy with an Other Insured Rider
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
Which of the following is NOT included in an annuity contract?
AD&D rider
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment rider (AD&D)
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
An applicant for an agent's license must meet which of the following requirements?
Be honest, trustworthy, and reliable
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing term
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
Which of the following actions by an insurance company is considered an unfair claims settlement practice?
Denying an insured's claim without indicating the basis of denial under the policy
All of the following may charge fees for insurance advice EXCEPT
Legal reserve agents
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
Limited-Pay Life
Which of these is an element of a Single Premium annuity?
Lump-sum payment
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
Which statement is true regarding a minor beneficiary?
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
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 certificate of authority does which of the following?
Permits an insurance company to transact business in Texas
Which of the following best describes a contingent beneficiary?
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
Which of these do NOT constitute policy delivery?
Policy issued with a rating
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be paid to K's estate if P dies within a specified time
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
Group life policies does not include the following provisions
Right to Loan Proceeds
An insurance company must do which of the following to terminate an agent's appointment?
Send notice of the termination to the Texas Department of Insurance
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions
Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT
Signed HIPAA disclosure
Under the Texas insurance code, which of the following statements about the Suicide clause is CORRECT?
Suicide may not be a defense against payment after the second year
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term life
What kind of life insurance product covers children under their parent's policy?
Term rider
If an insured sustains a loss on a policy sold by an agent through an insurance company that is not authorized to do business in Texas, which of the following would be liable?
The agent and the company
Insurance company agent appointments remain in force for which of the following maximum periods of time, if any?
Until terminated or withdrawn
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
At what point does an informal contract become binding?
When one party makes an offer and the other party accepts that offer
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
The Misstatement of Age provision requires that if the age of the insured is misstated, then any amount payable is
an amount that the premiums paid would have purchased at the current age or ages
An insurance company must provide information on fraudulent claims at the request of all of the following entities EXCEPT
an insured
An agent may legally share commissions only with
another agent who is licensed in the same line of insurance
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
What is not considered to be typical characteristics describing the nature of an insurance contract
bilateral
A person who is insured within a group contract will be given a
certificate
A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of
coercion
An agent who tells claimants that their rights may be impaired if they fail to complete a release form within a given period of time could be guilty of
coercion
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
collateral assignment
Under Texas insurance law, the term "transacting business" includes
collecting premiums
A life insurance illustration is NOT required to include the
company's mortality table
Under the Texas code, the MAXIMUM for which a spouse may be insured in a company group life program with a $50,000 death benefit is
$25,000
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a
$25,000 individual whole life policy
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
Under an individual life insurance policy, an insured may assign a MAXIMUM of what percentage of policy ownership?
100%
Under the Texas insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of
2 years
insurance agent licenses normally must be renewed every
2 years
Before holding a hearing regarding an agent's unfair or deceptive practice, the Insurance Commissioner MUST give how many days notice?
30
An individual life insurance policy issued in Texas MUST have a grace period for premium payment of how many days?
31
What percentage of continuing education instruction MUST be completed in the classroom or classroom equivalent?
50%
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?
50,000
Under the Nonforfeiture Law, a cash surrender value payment may be deferred by the insurance company for NO LONGER than how many months?
6
The Commissioner of Insurance may issue a temporary agent's license for a maximum of how many days?
90
An engineering firm that would suffer financially from the death of a project manager should purchase a
Key Person Life Policy
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusion
Term insurance has which of the following characteristics?
Expires at the end of the policy period
What provisions must not be included in life insurance policies
Extended Term
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n)
Immediate annuity
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
An agent MUST do which of the following during a sales presentation for a participating life insurance policy?
Include a statement that dividends are not guaranteed
Which of the following BEST describes Credit Life insurance?
Insurance issued on a debtor to cover outstanding balances on installment loans
All of these statements about the Waiver of Premium provision are correct, EXCEPT
Insured must be eligible for Social Security disability for claim to be accepted
A life insurance arrangement which circumvents insurable interest statutes is called
Investor-Originated Life Insurance
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?
Irrevocable beneficiary
What MUST an insurance company use in its advertising?
Its true corporate name
An insurance company may be judged guilty of false advertising if it
exaggerates its dividends in a newspaper advertisement
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
exclusion
What are not a characteristics of an Adjustable Life policy?
face amount can be adjusted using policy dividends
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums
An organization that solicits insurance only among its members is known as a
fraternal benefit society
An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors?
gender
In life insurance, the needs approach is used mostly to establish
how much life insurance a client should apply for
A Renewable Term Policy is renewable at the option of the
insured
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased
The Commissioner of insurance may suspend, revoke, or refuse to renew the license of an agent who
is found guilty of misrepresentation or fraud in obtaining the license
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the
marital deduction
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
marital status
An agent who tells a client that dividends are guaranteed may be guilty of
misrepresentation
An insurance agent does NOT have fiduciary responsibilities to
other agents
If, at the time of an insured's death, the insurance company discovers that the insured's age was misstated on the application for life insurance, the company will most likely
pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age
A group life insurance policy may NOT insure groups consisting exclusively of persons who are
related by marriage, blood or legal adoption
Which of the following is an example of rebating?
returning a portion of a premium as inducement to purchase insurance
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
social security
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
A foreign insurance company is one that is incorporated
under the laws of another state
Life and health insurance policies are
unilateral contracts
A term life insurance policy matures
upon the insured's death during the term of the policy
An agent whose license has been revoked is required to
wait at least five years before applying for a new license
