Life Insurance License Exam Prep
All of the following statements are true regarding the guaranty association, EXCEPT
All life and health insurance policies are covered by the guaranty association
What is a 1035 Exchanges
1035 Exchanges
Who is subject to the provisions of the Fraud and False Statements Act?
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What does non-forfeiture mean?
A nonforfeiture clause is an insurance policy clause that is included in standard life insurance and long-term care insurance. It stipulates that a policy owner will receive partial or full benefits or a refund of premium paid towards a whole life insurance policy if the policy lapses due to non-payment. A nonforfeiture clause may also become available when the policy owner surrenders the policy.
What 2 types of insurance reports do underwriters use?
Consumer Reports and Investigative Consumer Reports.
A written report about a consumer's character, general reputation, personal characteristics, or mode of living but are obtained through personal interviews with neighbors, friends, or associates of the consumer is a(n):
Investigative consumer reports contain information on a consumer's character, general reputation, personal characteristics, or mode of living but are obtained through personal interviews with neighbors, friends, or associates of the consumer. The correct answer is: Investigative consumer report
Which of the following is not a factor in determining the amount of a life insurance policy dividend? Select one: a. Operating expense b. Morbidity c. Mortality d. Assumed interest
Morbidity is a factor used in determining health insurance premiums, not life insurance. The correct answer is: Morbidity morbidity is the condition of suffering from a disease or medical condition
All of the following are characteristics of whole life insurance, EXCEPT:
The cash value in a whole life policy is a nonforfeiture value, meaning that said funds cannot be forfeited, and the policyowner is entitled to such values. The correct answer is: The cash value in a permanent life insurance policy is not a nonforfeiture benefit.
An example of an unfair claim settlement practice would include:
The correct answer is: Advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer
Which of the following is not true regarding the cash value in an ordinary whole life policy? Select one: a. It grows tax-deferred. b. It may be used as a policy loan without affecting the death benefit. c. It is a nonforfeiture value that is fully guaranteed to the policyowner. d. It can be used to pay policy premiums
The correct answer is: It may be used as a policy loan without affecting the death benefit.
Does whole life have a cash value?
Yes and is considered Permanent life insurance
Which of the following is a personal use of annuities?
a. Life income b. IRAs c. Tax-deferred growth/cash accumulation d. All of the above
All of the following are elements of insurable risks EXCEPT:
exposure must not be chosen randomly For insurable risks, the following must be true: 1.) loss must be definite and measurable; 2.) the loss must be predictable; 3.) loss exposures must be chosen randomly; and 4.) loss must not be catastrophic.
What is SPIA?
A single premium immediate annuity, or SPIA, is a contract in which you pay an insurance company a lump sum of money up front, known as a premium, in exchange for guaranteed, periodic payments for life or over a set period of time. A SPIA can begin paying out almost immediately after you purchase it or within the year.
Christopher surrendered his whole life policy, which has a cash value of $50,000. During the life of the policy, he paid $40,000 in premiums. What amount is subject to federal income tax? Select one: a. Nothing b. $10,000 c. $40,000 d. $50,000
Christopher received $50,000. He had paid $40,000 in premiums. $50,000 less the $40,000 he paid in premiums leaves $10,000 of the cash surrender value that will be subject to federal income tax. The correct answer is: $10,000
What is expressed authority in insurance?
Express authority occurs when an agent is working on behalf of his or her company to act on behalf of a principal. For example, a life insurance agent may have express authority under their company.
What are nonforfeiture options?
Guarantees that are required by law to be part of life insurance policies that build cash value. Insurers are required to make nonforfeiture values available when policyowners discontinue premium payments for any reason.
What is "implied authority"?
Implied authority applies to the insurance company agent that is given the authority to solicit applications for life insurance on behalf of the insurer. ... Implied authority also applies in a situation where a person is wearing a uniform or nametag bearing the logo or trademark of a business or organization.
Collin intentionally surrendered a right on his contract is known as waiver. What prevented him from reclaiming the right? Select one: a. Consideration b. Estoppel c. Misrepresentation d. Concealment
Waiver is voluntarily surrendering a right, and estoppel is the legal process preventing the reclaiming of that right. The correct answer is: Estoppel
What is contained on Part III of an application for insurance?
provides additional information about the applicant's financial condition, character, purpose of the sale, how long the agent has known the applicant.
In most cases, who pays premiums for a credit life insurance policy?
the debtor pays all the premiums
What does aleatory mean?
there is not equal exchange of value; premiums are small in relation to what the insurance company will pay in the event of a loss
The annual renewable term (ART): Select one: a. Has a level face amount and level premium amount b. Has an increasing face amount and increasing premium amount c. Has a requirement for proof of insurability at renewal and a maximum age d. Has no requirement for proof of insurability at renewal and a maximum age.
Annual renewable term allows the insured to renew every year without providing proof of insurability. The correct answer is: Has no requirement for proof of insurability at renewal and a maximum age.
What does "apparent" authority mean in insurance?
Apparent authority is the appearance of power on behalf of the insurer through the actions or use of identifying materials by the agent, such as company advertising material. This type of authority occurs when a principal permits an agent to act on its behalf without either expressed or implied authority.
How will premiums be affected if annuity benefits start at 65 years of age rather than 60? Select one: a. They will go up, because it is for a longer period of time. b. They will go up because more company expenses will be loaded into the premium. c. They will remain the same. d. They will go down, because the benefits will be delayed.
If monthly benefits start 5 years later, the premiums will go down because the company will pay benefits for a shorter period of time. The correct answer is: They will go down, because the benefits will be delayed.
Wesley purchases an increasing term life insurance policy. Which of the following elements must increase in Wesley's policy? Select one: a. The premium b. The interest rate c. The death benefit d. The dividend options
In an increasing term life insurance policy, the death benefit increases as time passes. The correct answer is: The death benefit
When should consumer rights report give notice?
Notice must be given at time of Application
All of the following are false regarding the tax consequences of Roth IRAs, EXCEPT: Select one: a. Once the plan participant reaches age 59 1/2, taxes on distributions are no longer imposed. b. Contributions are tax-deductible. c. Contributions are made with taxed dollars; however, interest grows tax-free. d. Contributions and interest are tax-free.
Roth IRAs have qualified tax-free distributions that may be made before the plan participant is 59 1/2, and all distributions made after the age of 59 are tax-free. The correct answer is: Contributions are made with taxed dollars; however, interest grows tax-free.
Which of the follow statements concerning the payment from a non-qualified annuity is correct?
Since this is a non-qualified plan only a portion of the payment will be taxable.
Who regulates any entity selling insurance
State Insurance Departments
All of the following statements regarding renewable term life insurance policies are false, EXCEPT: Select one: a. Renewable term life insurance policies can only be renewed by the insurance company, and the insured must provide evidence of insurability. b. Renewable term life insurance policies are always convertible. c. Renewable term life insurance policies may be renewed by the insured as long as evidence of insurability is provided. d. Renewable term life insurance policies are renewable at the insured's option.
The perk with renewable term life insurance policies is that the insured has the option of renewing the policy without needing to provide evidence of insurability. The correct answer is: Renewable term life insurance policies are renewable at the insured's option.
Which of the following is not a case in which life insurance proceeds would be included in the deceased's estate? Select one: a. The deceased was the policyowner. b. The deceased's wife was the beneficiary. c. The estate was the named beneficiary. d. The policy was transferred to another person within 3 years of the deceased's death.
The proceeds are taxable if the deceased was the policyowner, the deceased's estate was the named beneficiary and / or the deceased transferred the policy to another person within 3 years of his/her death. The correct answer is: The deceased's wife was the beneficiary.
Which of the following is true about immediate annuities? Select one: a. They cannot be purchased with one payment. b. They can begin payouts within two years of the first premium payment. c. They have annuity periods that are sometime (defined in the contract) in the future d. They do not have an accumulation period.
They do not have an accumulation period, and payouts must begin within one year of the first premium payment. The correct answer is: They do not have an accumulation period.
What happens when the cash value of a life insurance policy equals the face value? Select one: a. Taxes must be paid on the interest accumulation. b. Premiums must be increased so the policy does not become a MEC. c. The policy endows. d. The policy is void.
When the cash value in a life insurance policy equals the face amount, the policy endows, or pays out. Life insurance policies may not endow earlier than the insured's 95th birthday. The correct answer is: The policy endows.
In discussing a potentially lucrative group policy with a business owner who had purchased a business and just moved into the community, an established producer jokingly remarked, "Well, would it sweeten the pot if I could assure you membership in the country club?"The producer added, "I'm on the membership committee and while we're not accepting new application right now, I'm sure something could be worked out." These remarks constituted:
While it is possible a little intimidation was intended in the producer's mention of serving on the membership committee of the closed club, it is clearer the producer is engaging in rebating. The producer is offering something that can have significant value to a new member of the business community (club membership) as a bonus for the purchase of a policy. The offer to, sweeten the pot, was clear and the context of the following conversation made it unmistakable rebating. Obviously the producer did not intend to include that service in the insurance contract. Any inducement in the sale of insurance that is not specified in the insurance contract itself is a rebate. The correct answer is: Rebating
A plan that allows a deceased stockholder's heirs to retain ownership while a portion of the deceased stockholder's shares are redeemed by the corporation is a: Select one: a. Split-dollar plan b. Cross-purchase plan c. Section 303 plan d. Key person
With a Section 303 plan, a deceased stockholder's heirs can retain control over the portion of business owned. The correct answer is: Section 303 plan