life insurance missed questions
Which of the following is TRUE about credit life insurance? a)Debtor is the annuitant. b)Creditor is the insured. c)Debtor is the policy beneficiary. d)Creditor is the policyowner.
Creditor is the policyowner.
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? a)Variable period b)Variable amount c)Fixed period d)Fixed amount
Fixed amount
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a)$0 b)$50,000 (50% of the policy value) c)$100,000 d)$300,000 (triple the amount of policy value)
$100,000
A life insurance producer would be qualified to act as a life settlement broker if the producer has had a valid life license for at least a)6 months. b)1 year. c)3 years. d)5 years.
1 year.
Which of the following features of the Indexed Whole Life policy is NOT fixed? a)Policy period b)Cash value growth c)Premium d)Death benefit
Cash value growth
Which policy component decreases in decreasing term insurance? a)Face amount b)Cash value c)Dividend d)Premium
Face amount
The continuing education requirement for licensees, during the initial licensing period, is a a)Minimum of 45 hours of instruction. b)Minimum of 45 hours of instruction to include 6 hours of ethics training. c)Minimum of 30 hours of instruction to include 4 hours of ethics training. d)Minimum of 60 hours of instruction.
Minimum of 60 hours of instruction.
The Commissioner may issue a temporary insurance producer license without requiring an examination for a period a)Not less than 30 days or more than 90 days. b)Not to exceed 180 days. c)Not to exceed 90 days. d)Not less than 60 days or more than 120 days.
Not to exceed 180 days.
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a)Rollover. b)Settlement option. c)Nontaxable exchange. d)Nonforfeiture option.
Settlement option.
An absolute assignment is a a)Transfer of some ownership rights in a policy. b)Change of beneficiary. c)Change of insurer. d)Transfer of all ownership rights in a policy.
Transfer of all ownership rights in a policy.
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? a)Fixed amount option b)Interest only option c)Life income with period certain d)Joint and survivor
Interest only option
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable? a)Annuitant b)Spouse c)Charitable organization d)Dependents
Spouse
The most the Insurance Guaranty Association will pay for net cash surrender values is a)$500,000. b)$1,000,000. c)$100,000. d)$250,000.
$100,000.
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a)Additional insured rider b)Family term rider c)Spouse rider d)Children's rider
Family term rider
Children's riders attached to whole life policies are usually issued as what type of insurance? a)Term b)Variable life c)Adjustable life d)Whole life
Term
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a)Equal to the original policy for as long as the cash values will purchase. b)In lesser amounts for the remaining policy term of age 100. c)Equal to the cash value surrendered from the policy d)The same as the original policy minus the cash value
Equal to the original policy for as long as the cash values will purchase.
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a)$20,000 b)$25,000 c)$50,000 d)The face amount will be determined by the insurer.
$50,000
What is the minimum age requirement for an insurance producer in this state? a)16 years old b)18 years old c)19 years old d)21 years old
18 years old
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? a)1 year b)2 years c)5 years d)7 years
2 years
What is the waiting period on a Waiver of Premium rider in life insurance policies? a)30 days b)3 months c)5 months d)6 months
6 months
Employer contributions made to a qualified plan a)Are subject to vesting requirements. b)May discriminate in favor of highly paid employees. c)Are after-tax contributions. d)Are taxed annually as salary.
Are subject to vesting requirements.
Which of the following terms is used to name the nontaxed return of unused premiums? a)Dividend b)Premium return c)Interest d)Surrender
Dividend
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true? a)He will have to pay a penalty regardless of his age. b)He will not have to pay a penalty, regardless of his age. c)He cannot withdraw money from his MEC before age 59½. d)He will have to pay a penalty if he is younger than 59½.
He will have to pay a penalty if he is younger than 59½.
Which statement regarding insurable risks is NOT correct? a)An insurable risk must involve a loss that is definite as to cause, time, place and amount. b)Insureds cannot be randomly selected. c)Insurance cannot be mandatory. d)The insurable risk needs to be statistically predictable.
Insureds cannot be randomly selected.
A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? a)Straight life b)Joint and survivor c)Joint annuity d)Cash refund annuity
Joint and survivor
A participating insurance policy may do which of the following?a)Require 80% participation b)Pay dividends to the policyowner c)Provide group coverage d)Pay dividends to the stockholder
Pay dividends to the policyowner
Another name for a substandard risk classification is a)Elevated. b)Rated. c)Controlled. d)Declined.
Rated.
Which type of retirement account does not require the owner to start taking distributions at age 72?a)Standard IRA b)Traditional IRA c)Roth IRA d)Nonqualified IRA
Roth IRA
Whenever the Commissioner has reason to believe that any person has engaged in any unfair method of competition or any unfair or deceptive act or practice, the Commissioner will serve a notice of a hearing, the time and place of which CANNOT be a)Sooner than 21 days after the date such notice was served. b)Later than 21 days after the date such notice was served. c)Later than 30 days after the date such notice was served. d)Sooner than 30 days after the date such notice was served.
Sooner than 21 days after the date such notice was served.
In a life settlement contract, whom does the life settlement broker represent? a)The owner b)The insurer c)The beneficiary d)The life settlement intermediary
The owner
All of the following statements are true regarding installments for a fixed amount EXCEPT a)The payments will stop when the annuitant dies. b)Value of the account and future earnings will determine the time period for the benefits. c)This option pays a specific amount until the funds are exhausted. d)The annuitant may select how big the payments will be.
The payments will stop when the annuitant dies.
In a survivorship life policy, when does the insurer pay the death benefit? a)Half at the first death, and half at the second death b)If the insured survives to age 100 c)Upon the last death d)Upon the first death
Upon the last death
Before a variable contract may be issued, for how long must a copy of this form be on file with the Commissioner? a)30 days b)3 months c)6 months d)1 year
30 days
Which of the following best describes fixed-period settlement option? a)The death benefit must be paid out in a lump sum within a certain time period. b)Income is guaranteed for the life of the beneficiary. c)Both the principal and interest will be liquidated over a selected period of time. d)Only the principal amount will be paid out within a specified period of time.
Both the principal and interest will be liquidated over a selected period of time.
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? a)Cash surrender b)Reduced paid-up c)Paid-up options d)Extended term
Cash surrender
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? a)A legal advertising strategy b)Unfair Discrimination c)Defamation d)Illegal
Illegal
Which Universal Life option has a gradually increasing cash value and a level death benefit? a)Option A b)Juvenile life c)Term insurance d)Option B
Option A
Which of the following applicants would NOT qualify for a Keogh Plan? a)Someone who has been employed for more than 12 months b)Someone who is over 25 years of age c)Someone who works for a self-employed individual d)Someone who works 400 hours per year
Someone who works 400 hours per year
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? a)The date of policy delivery b)The date of issue c)The date of application d)The date of medical exam
The date of medical exam
All of the following are true of key person insurance EXCEPT a)There is no limitation on the number of key employee plans in force at any one time. b)The employer is the owner, payor and beneficiary of the policy. c)The key employee is the insured. d)The plan is funded by permanent insurance only.
The plan is funded by permanent insurance only.
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? a)Variable life b)Adjustable life c)Universal life d)Flexible life
Universal life
The two types of assignments are a)Complete and partial. b)Complete and proportionate. c)Absolute and collateral. d)Absolute and partial.
Absolute and collateral.
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? a)Insurance Index b)Policy Summary c)Illustrations d)Buyer's Guide
Buyer's Guide
Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced? a)Consumer price indices b)Policy cost indices c)Cost comparison methods d)Policy cost guides
Cost comparison methods
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? a)Underwriter's Report b)Inspection Report c)Medical Information Bureau's report d)Agent's Report
Inspection Report
Which of the following is another term for the accumulation period of an annuity? a)Annuity period b)Pay-in period c)Premium period d)Liquidation period
Pay-in period
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a)Decreasing term b)Variable life c)Universal life d)Whole life
Decreasing term
If a producer has administrative action taken against his license, he must report such action a)Within 30 days of the final disposition on such action. b)Within 10 days of the pretrial hearing on such action. c)Within 10 days of the final disposition on such action. d)Within 30 days of the pretrial hearing on such action.
Within 30 days of the final disposition on such action.
Why should the producer personally deliver the policy when the first premium has already been paid? a)To find out how the family has been doing since the initial presentation b)To make sure the policy is not stolen or lost c)To help the insured understand all aspects of the contract d)To ensure the producer gets paid commission
To help the insured understand all aspects of the contract
All advertisements are the responsibility of the a)Soliciting agent. b)Advertising agency. c)Department of Insurance. d)Insurer.
Insurer.
Under an extended term nonforfeiture option, the policy cash value is converted to a)A higher face amount than the whole life policy. b)The same face amount as in the whole life policy. c)The face amount equal to the cash value. d)A lower face amount than the whole life policy.
The same face amount as in the whole life policy.
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? a)Employer's matching contribution can be 50% of employee's salary. b)75% of employee's contributions are taxed. c)They are tax deferred until withdrawn. d)Taxes must be paid in full.
They are tax deferred until withdrawn.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a)Limited pay whole life b)Interest-sensitive whole life c)Life annuity with period certain d)Increasing term
Limited pay whole life
Any licensed person who violates a cease and desist order must forfeit and pay a maximum sum of a)$5,000 for each violation. b)$5,000 for all aggregate violations. c)$10,000 for each violation. d)$10,000 for all aggregate violations.
$10,000 for each violation.
Any person or organization willfully violating any provision of rate-making provisions of the law will be punished by a fine of a)A maximum of $500 for each such violation. b)A maximum of $1,000 for each such violation. c)$500 for each such violation, not to exceed a $2000 gross fine. d)A maximum of $1,000 for each such violation, not to exceed a $5000 gross fine.
A maximum of $500 for each such violation.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a)A misrepresentation. b)A required statement. c)A legal representation of the Association. d)An unfair trade practice.
An unfair trade practice.
A tax-sheltered annuity is a special tax-favored retirement plan available to a)Anyone. b)Certain age groups only. c)Certain groups depending on factors such as race, gender, and age. d)Certain groups of employees only.
Certain groups of employees only.
All of the following are duties and responsibilities of producers at the time of application EXCEPT a)Change any incorrect statement on the application by personally initialing next to the corrected statement. b)Explain the nature and type of any receipt the producer is giving to the applicant. c)Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. d)Check to make sure that there are no unanswered questions on the application.
Change any incorrect statement on the application by personally initialing next to the corrected statement.
A producer who fails to separate premium monies from his own personal funds is guilty of a)Theft. b)Commingling. c)Larceny. d)Embezzlement.
Commingling.
What happens when a policy is surrendered for its cash value?a)Coverage ends but the policy can be reinstated at any time. b)The policy can be reinstated by paying back all policy loans and premiums. c)The policy can be converted to term coverage. d)Coverage ends and the policy cannot be reinstated.
Coverage ends and the policy cannot be reinstated.
Which of the following is NOT an example of insurable interest? a)Business partners in each other b)Employer in employee c)Child in parent d)Debtor in creditor
Debtor in creditor
Which of the following types of insurance policies is most commonly used in credit life insurance? a)Whole life b)Equity indexed life c)Decreasing term d)Increasing term
Decreasing term
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? a)Assumed b)Express c)Implied d)Apparent
Implied
An insured has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy does the insured have? a)Credit life b)Ordinary life c)Franchise life d)Industrial life
Industrial life
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be? a)Installments for a fixed amount b)Installment refund c)Cash refund d)Installments for a fixed period
Installments for a fixed period
Which of the following statements is TRUE concerning the Accidental Death Rider? a)It is also known as a triple indemnity rider. b)This rider is only available to insureds over the age of 65. c)It is only available in group insurance. d)It will pay double or triple the face amount.
It will pay double or triple the face amount.
Which statement is NOT true regarding a Straight Life policy? a)It has the lowest annual premium of the three types of Whole Life policies. b)Its premium steadily decreases over time, in response to its growing cash value. c)The face value of the policy is paid to the insured at age 100. d)It usually develops cash value by the end of the third policy year.
Its premium steadily decreases over time, in response to its growing cash value.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a)Whole Life b)Ordinary Life c)Joint Life d)Decreasing Term
Joint Life
Which of the following best describes gross annual premium? a)Basic insurance rate plus commissions b)Expense premium c)Net premium plus expenses d)Annual loading
Net premium plus expenses
When is an approval by the Commissioner NOT required for the use of policy forms? a)Only if the forms have been on file for at least 30 days b)Only if the forms have been on file for at least 1 year c)Only if the domestic insurer is not being examined every 3 years d)Never
Only if the forms have been on file for at least 30 days
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a)Insured's annual expenses. b)Effect of inflation on income over time. c)Predicted needs of the family after the insured's death. d)Insured's current and future income.
Predicted needs of the family after the insured's death.
All of the following are examples of risk retention EXCEPT a)Self insurance. b)Premiums. c)Deductibles. d)Copayments.
Premiums.
Willie, a private investigator, was hired by an insurer to obtain a character report on Joan, an applicant. Willie pretends to be a reporter working on a story about working women in Joan's town. During the conversation, Joan is asked a variety of questions for which the answers will be used to determine the final underwriting decision. This is an example of a)Covert underwriting. b)Insurance fraud. c)Investigative news reporting. d)Pretext interviewing.
Pretext interviewing
Which of the following statements is an accurate comparison between private and government insurers? a)Private insurers may be authorized to transact insurance by state insurance departments. b)Insurance provided by the government is called federal insurance. c)Private insurers offer fewer lines of insurance than government insurers. d)Private insurers provide insurance in areas where the government will not.
Private insurers may be authorized to transact insurance by state insurance departments.
Pertaining to insurance, what is the definition of a fiduciary responsibility? a)Helping insureds to file claims b)Performing reviews of insured's coverage c)Offering additional coverage to clients d)Promptly forwarding premiums to the insurance company
Promptly forwarding premiums to the insurance company
Which nonforfeiture option provides coverage for the longest period of time? a)Accumulated at interest b)Reduced paid-up c)Extended term d)Paid-up option
Reduced paid-up
All of the following are general requirements of a qualified plan EXCEPT a)The plan must be permanent, written and legally binding. b)The plan must provide an offset for social security benefits. c)The plan must be communicated to all employees. d)The plan must be for the exclusive benefits of the employees and their beneficiaries.
The plan must provide an offset for social security benefits.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a)The policy is owned by the company. b)Any type of insurance policy may be used. c)The employer pays a bonus to a selected employee to fund the policy. d)It is considered a nonqualified employee benefit.
The policy is owned by the company.
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called a)Waiver of premium. b)Guaranteed insurability. c)Waiver of cost of insurance. d)Payor benefit.
Waiver of premium.
An insurer used fraudulent representations to procure the payment of premiums. What sort of punishment does she face? a)A fine of between $100 and $1,000 or imprisonment for up to 6 months b)A fine of up to $1,000 and imprisonment for up to 2 years c)A fine of up to $1,000 and imprisonment for up to 6 months d)A fine of between $100 and $1,000 or imprisonment for up to 1 year
A fine of between $100 and $1,000 or imprisonment for up to 1 year
An insurer used fraudulent representations to procure the payment of premiums. What sort of punishment does she face? a)A fine of up to $1,000 and imprisonment for up to 6 months b)A fine of between $100 and $1,000 or imprisonment for up to 1 year c)A fine of between $100 and $1,000 or imprisonment for up to 6 months d)A fine of up to $1,000 and imprisonment for up to 2 years
A fine of between $100 and $1,000 or imprisonment for up to 1 year
SIMPLE Plans require all of the following EXCEPT a)No more than 100 employees. b)Employees must receive a minimum of $5,000 in annual compensation. c)At least 1,000 employees. d)No other qualified plan can be used.
At least 1,000 employees.
Connor, a licensed producer, paid Brandon, a fellow producer, a commission on a life sale that results from a referral from Brandon. Brandon, however, is only licensed as a health producer. Which of the following statements is true? a)Connor knowingly paid Brandon a fee for which he was not licensed; he will be punished by a fine of not less than $100 nor more than $1,000. b)Connor knowingly paid Brandon a fee for which he was not licensed; he will be punished by a fine of not less than $50 nor more than $1,000. c)Since Brandon was licensed, such a payment of commission is allowed. d)Brandon was not licensed in the line of insurance that resulted from the commission; therefore, Brandon will not be paid.
Brandon was not licensed in the line of insurance that resulted from the commission; therefore, Brandon will not be paid.
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident? a)Nonforfeiture Clause b)Common Disaster Clause c)Spendthrift Clause d)Settlement Clause
Common Disaster Clause
When an employee terminates coverage under a group insurance policy, coverage continues in force a)Until the employee notifies the group insurance provider that coverage conversion policy is issued. b)For 31 days. c)For 60 days. d)Until the employee can obtain coverage under a new group plan.
For 31 days.
What are the two components of a universal policy? a)Mortality cost and interest b)Separate account and policy loans c)Insurance and cash account d)Insurance and investments
Insurance and cash account
In Modified Life policies, what happens to the premium? a)It varies at the beginning, but levels out by the end of the third year. b)It is level at the beginning and increases after the first few years. c)It always remains level. d)It is higher during the first policy years.
It is level at the beginning and increases after the first few years.
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? a)It decreases over the term of the policy. b)It remains the same as the original policy, regardless of any differences in value. c)It is reduced to the amount of what the cash value would buy as a single premium. d)It is increased when extra premiums are paid.
It is reduced to the amount of what the cash value would buy as a single premium.
Which of the following is TRUE regarding the annuity period? a)During this period of time the annuity payments grow interest tax deferred. b)It is also referred to as the accumulation period. c)It is the period of time during which the annuitant makes premium payments into the annuity. d)It may last for the lifetime of the annuitant.
It may last for the lifetime of the annuitant.
Freddy receives a premium from his client. He fails to pay the premiums collected to the company after the insurer makes a written demand upon him. Upon conviction he will be guilty of a)Misdemeanor. b)Larceny. c)Commingling. d)Fraud.
Larceny.
B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for B? a)Limited Pay b)Interest-sensitive Whole Life c)Modified Life d)Limited Term
Modified Life
After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a)Payments for life b)Yearly premium waiver and income c)Monthly premium waiver and monthly income d)Percentage of medical costs paid by the insurer
Monthly premium waiver and monthly income
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Corridor option b)Variable option c)Option A d)Option B
Option B
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? a)Dividend Accumulation option b)Paid-up option c)Accumulation at Interest d)Paid-up additions
Paid-up option
No insurer, representative or support organization may request an investigative consumer report in connection with an insurance application, policy renewal, reinstatement or a change in benefits - unless the affected individual is informed a)That a consumer report interview will be completed as part of the underwriting process and that the cost will be added to the planned premiums. b)That consumer report interview will be conducted and that the results of the interview may be purchased from the reporting agency for an additional fee. c)That each individual may request to be interviewed in connection with the report. d)That he may be directed to be interviewed in connection with the preparation of a consumer report.
That each individual may request to be interviewed in connection with the report.
Which of the following is NOT the consideration in a policy? a)The promise to pay covered losses b)The application given to a prospective insured c)Something of value exchanged between parties d)The premium amount paid at the time of application
The application given to a prospective insured
Which of the following statements about group life is correct? a)The group sponsor receives a Certificate of Insurance. b)The policy can be converted to an individual term insurance policy. c)The cost of coverage is based on the ratio of men and women in the group. d)The premiums are higher than in an individual policy because there is no medical exam.
The cost of coverage is based on the ratio of men and women in the group.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a)The insured may choose to convert to term or permanent individual coverage. b)The insured would not need to prove insurability for a conversion policy. c)The insured may convert coverage to an individual policy within 31 days. d)The premium for individual coverage will be based upon the insured's attained age.
The insured may choose to convert to term or permanent individual coverage.
How are contributions to a tax-sheltered annuity treated with regards to taxation? a)They are never taxed. b)They are taxed as income for the employee. c)They are taxed as income for the employee, but are tax free upon withdrawal. d)They are not included as income for the employee, but are taxable upon distribution.
They are not included as income for the employee, but are taxable upon distribution.
Which of the following statements is TRUE concerning irrevocable beneficiaries? a)They may be changed at any time. b)They can never be changed. c)They may be changed only on the anniversary date of the policy. d)They can be changed only with the written consent of that beneficiary.
They can be changed only with the written consent of that beneficiary.
The paid-up addition option uses the dividend a)To accumulate additional savings for retirement. b)To purchase a smaller amount of the same type of insurance as the original policy. c)To purchase a one-year term insurance in the amount of the cash value. d)To reduce the next year's premium.
To purchase a smaller amount of the same type of insurance as the original policy.
When is the earliest a policy may go into effect? a)After the underwriter reviews the policy b)When the application is signed and a check is given to the agent c)When the first premium is paid and the policy has been delivered d)When the insurer approves the application
When the application is signed and a check is given to the agent
In a life settlement transaction, how many days does the owner have to terminate the contract after the date it is executed? a)10 days b)15 days c)21 days d)30 days
15 days
Which of the following is NOT an allowable 1035 exchange? a)A life insurance policy is exchanged for an annuity. b)A whole life insurance policy is exchanged for a term insurance policy. c)A whole life insurance policy is exchanged for a Universal life insurance policy. d)An annuity is exchanged for another annuity.
A whole life insurance policy is exchanged for a term insurance policy.
What documentation grants express authority to an agent?a)Agent's contract with the principal b)Agent's insurance license c)Fiduciary contract d)State provisions
Agent's contract with the principal
Who can make a fully deductible contribution to a traditional IRA? a)A person whose contributions are funded by a return on investment b)An individual not covered by an employer-sponsored plan who has earned income c)Anybody; all IRA contributions are fully deductible regardless of income level d)Someone making contributions to an educational IRA
An individual not covered by an employer-sponsored plan who has earned income
Which of the following is NOT true of Section 1035 Policy Exchanges? a)It requires an absolute assignment of the existing policy to the replacing company who surrenders the contract and issues a replacement policy. b)It is an IRS Code which permits like kind exchanges of property. c)It is typically used when exchanging or replacing a less competitive life policy with a more competitive life policy. d)Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.
Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an a)Credit Life. b)Annual Renewable Term. c)Adjustable Life. d)Interest-sensitive Whole Life.
Interest-sensitive Whole Life
What is the purpose of a free-look period in insurance policies? a)It allows the insured 10 days to pay the initial premium. b)It allows the insurer to temporarily suspend coverage after an insured's disability. c)It allows the insurer to cancel coverage if a misrepresentation is discovered. d)It allows the insured to reject the policy with a full refund.
It allows the insured to reject the policy with a full refund.
Which of the following is correct regarding credit life insurance? a)It has a maximum term of 20 years. b)It insures the life of a debtor. c)It is purchased on an installment basis. d)It insures the life of a creditor.
It insures the life of a debtor.
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? a)Jumping Juvenile b)Juvenile Premium Provision c)Waiver of Premium d)Payor Benefit
Payor Benefit
Which of the following riders would NOT cause the Death Benefit to increase? a)Accidental Death Rider b)Payor Benefit Rider c)Guaranteed Insurability Rider d)Cost of Living Rider
Payor Benefit Rider
An applicant wants to buy a policy that has a cash value element. Which type should she buy? a)Investment b)Term c)Permanent d)Stock
Permanent
When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? a)Spendthrift provision b)Settlement option c)Accelerated benefit provision d)Loan provision
Spendthrift provision
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 one year later. What will probably happen? a)Because the insured is currently not a drug user, his policy will not be affected. b)The policy will not be affected. c)The policy will be voided. d)The insurer will sue the insured for committing fraud.
The policy will not be affected.
Which of the following is NOT a goal of risk retention? a)To increase control of claim reserving and claims settlements b)To fund losses that cannot be insured c)To minimize the insured's level of liability in the event of loss d)To reduce expenses and improve cash flow
To minimize the insured's level of liability in the event of loss
How long are the free-look periods provided during policy replacement? a)10 days b)60 days c)20 days d)30 days
20 days
Which of the following types of agent authority is also called "perceived authority"? a)Fiduciary b)Apparent c)Express d)Implied
Apparent
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? a)Medical records b)Application c)Interviews d)State records
Application
Which nonforfeiture option has the highest amount of insurance protection? a)Decreasing Term b)Reduced Paid-up c)Extended Term d)Conversion
Extended Term
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a)Automatically pay the policy proceeds. b)Pay the policy proceeds only if it would have issued the policy. c)Pay the policy proceeds up to an established limit. d)Not pay the policy proceeds under any circumstances.
Pay the policy proceeds only if it would have issued the policy.
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? a)Disclosure rule b)Replacement rule c)Reinstatement rule d)Conversion rule
Replacement rule
Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called a)Approval. b)Underwriting. c)Suitability. d)Client protection.
Suitability.
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by a)A physician of the applicant's choice and at his expense. b)A home office underwriter. c)A paramedic or examining physician at the insurer's expense. d)The agent.
A paramedic or examining physician at the insurer's expense.
In insurance, an offer is usually made when a)An applicant submits an application to the insurer. b)The insurer approves the application and receives the initial premium. c)The agent hands the policy to the policyholder. d)An agent explains a policy to a potential applicant.
An applicant submits an application to the insurer.
The LEAST expensive first-year premium is found in which of the following policies? a)Increasing Term b)Decreasing Term c)Level Term d)Annually Renewable Term
Annually Renewable Term
The LEAST expensive first-year premium is found in which of the following policies? a)Level Term b)Annually Renewable Term c)Increasing Term d)Decreasing Term
Annually Renewable Term
The authority granted to an agent through the agent's contract is referred to as a)Absolute authority. b)Express authority. c)Apparent authority. d)Implied authority.
Express authority.
Which of the following is TRUE of a qualified plan? a)It has a tax benefit for both employer and employee. b)It does not need to have a vesting schedule. c)It may discriminate in favor of highly paid employees. d)It may allow unlimited contributions.
It has a tax benefit for both employer and employee.
Where would the underwriter find relevant information not presented by the applicant on the insurance application but communicated by the producer? a)Inspection report b)Producer's report c)Statement of Continued Good Health d)Conditional receipt
Producer's report
All of the following are requirements from the written application for a license to act as an insurance adviser EXCEPT a)The application must state his professional credentials and all political affiliations for which he has received compensation or served as a member. b)The application must state the name, age, residence, and occupation of the applicant at the time of making the application. c)The application must also contain a statement as to the trustworthiness and competency of the applicant, signed by at least three reputable citizens of this commonwealth. d)The application must state his residence, occupation, and all business affiliations for the ten years next preceding the date of the application.
The application must state his professional credentials and all political affiliations for which he has received compensation or served as a member.
Which of the following is true regarding a market value adjusted annuity? a)It provides a level benefit payment. b)The owner is guaranteed a fixed interest rate for a specific period of time. c)The insurer bears all the market risk of changing interest rates. d)There are no penalties for a premature surrender of the annuity.
The owner is guaranteed a fixed interest rate for a specific period of time.
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? a)The proceeds will be split evenly between the two beneficiaries. b)The policyowner can specify the way proceeds are split in the policy. c)The way proceeds are split between beneficiaries is decided by which type of policy is chosen. d)Life insurance policies may have only one beneficiary.
The policyowner can specify the way proceeds are split in the policy.
All of the following would be eligible to establish a Keogh retirement plan EXCEPT a)The president and employee of a family corporation. b)A sole proprietor of a service station who employs four employees. c)A sole proprietor of film development store with no employees. d)A hair dresser who operates her business at her house.
The president and employee of a family corporation.
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a)Policy loans are taxable distributions. b)Accumulations are tax deferred. c)Withdrawals are not taxable. d)Distributions before age 59 1/2 incur a 10% penalty on policy gains.
Withdrawals are not taxable
A business entity acting as an insurance producer is required to obtain a)A $10,000 bond prior to transacting insurance business. b)Prior approval from the Department of Commerce. c)60 hours of Continuing Education every 24 month licensing period. d)An insurance producer license.
An insurance producer license.
Which is TRUE about the cash surrender nonforfeiture option? a)Funds exceeding the premium paid are taxable as ordinary income. b)After the cash surrender, the insured is covered for a grace period of one month. c)The policy remains active for some time after the policyholder opts for cash surrender. d)The policyholder receives the original cash value of the policy.
Funds exceeding the premium paid are taxable as ordinary income.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a)Nonforfeiture options b)Guaranteed insurability option c)Dividend options d)Guaranteed renewable option
Guaranteed insurability option
What type of insurance would be used for a Return of Premium rider? a)Annually Renewable Term b)Increasing Term c)Level Term d)Decreasing Term
Increasing Term
Which of the following best describes the MIB? a)It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. b)It is a government agency that collects medical information on the insured from the insurance companies. c)It is a member organization that protects insured against insolvent insurers. d)It is a rating organization for health insurance.
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.
What is the purpose of a conditional receipt? a)It is given only to applicants who fully prepay the premium. b)It is intended to provide coverage on a date prior to the policy issue. c)It guarantees that a policy will be issued in the amount applied for. d)It serves as proof that the applicant has been determined insurable.
It is intended to provide coverage on a date prior to the policy issue.
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance? a)Gender b)Occupation c)Marital status d)Medical background
Medical background
Any person who violates a cease and desist order of the Commissioner after it has become final must a)Pay a fine to the state not to exceed ten thousand dollars total, which sum may be recovered in a civil action. b)Pay a fine to the state not to exceed ten thousand dollars for each violation, which may be recovered in a civil action. c)Pay a fine to the state of one thousand dollars for each violation not to exceed ten thousand dollars in total, which may be recovered in a civil action. d)Be considered in contempt of court and shall be guilty of a Class A misdemeanor.
Pay a fine to the state not to exceed ten thousand dollars for each violation, which may be recovered in a civil action.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a)Pay a reduced death benefit b)Pay the full death benefit c)Pay nothing; there was a misrepresentation on the application d)Pay the full death benefit and refund excess premium
Pay a reduced death benefit
All of the following are characteristics of group life insurance EXCEPT a)Certificate holders may convert coverage to an individual policy without evidence of insurability. b)Premiums are determined by the age, sex and occupation of each individual certificate holder. c)Group life insurance is written as a master policy. d)Individuals covered under the policy receive a certificate of insurance.
Premiums are determined by the age, sex and occupation of each individual certificate holder.
An IRA purchased by a small employer to cover employees is known as a a)Defined contribution plan. b)403(b) plan. c)Simplified Employee Pension plan. d)401(k) plan.
Simplified Employee Pension plan.
All of the following would be different between qualified and nonqualified retirement plans EXCEPT a)Taxation on accumulation b)Taxation of withdrawals c)Taxation of contributions d)IRS approval requirements
Taxation on accumulation
All of the following are true regarding a decreasing term policy EXCEPT a)The payable premium amount steadily declines throughout the duration of the contract. b)The death benefit is $0 at the end of the policy term. c)The contract pays only in the event of death during the term and there is no cash value. d)The face amount steadily declines throughout the duration of the contract.
The payable premium amount steadily declines throughout the duration of the contract.
The Waiver of Cost of Insurance rider is found in what type of insurance? a)Whole Life b)Joint and Survivor c)Juvenile Life d)Universal Life
Universal Life
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose? a)Straight life b)Joint and Survivor c)Joint life d)Life with period certain
Joint and Survivor
All of the following statements are correct regarding credit life insurance EXCEPT a)Benefits are paid to the borrower's beneficiary. b)The amount of insurance permissible is limited per borrower. c)Premiums are usually paid by the borrower. d)Benefits are paid to the creditor.
Benefits are paid to the borrower's beneficiary.
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a)Payment of premium. b)Delivery receipt. c)Signed waiver of premium. d)Statement of good health.
Signed waiver of premium.
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a)Survivorship insurance. b)Juvenile protection provision. c)Survivor protection. d)Life planning.
Survivor protection.
Which is true about a spouse term rider? a)The rider is usually level term insurance. b)Coverage is allowed for an unlimited time. c)The rider is decreasing term insurance. d)Coverage is allowed up to age 75.
The rider is usually level term insurance.
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? a)Joint and survivor b)Life with period certain c)Joint limited annuity d)Joint life
Joint life
What is the penalty for IRA distributions that are below the required minimum for the year?a)10% b)25% c)50% d)60%
50%
Which of the following produces evaluations of insurers' financial status often used by state departments of insurance? a)AM Best b)NAIC c)Consumer's guide d)SEC
AM Best
Who makes up the Medical Information Bureau? a)Former insured b)Physicians and paramedics c)Insurers d)Hospitals
Insurers
Which of the following is true about the premium on the children's rider in a life insurance policy? a)It decreases when an adopted child is added to the policy. b)It remains the same no matter how many children are added to the policy. c)It decreases when the oldest child reaches the age of 21. d)It increases when a newborn baby is added to the policy.
It remains the same no matter how many children are added to the policy.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a)Juvenile rider. b)Payor rider. c)Other-insured rider. d)Change of insured rider.
Other-insured rider.
Traditional IRA contributions are tax deductible based on which of the following? a)How long the plan has been in force b)Owner's age c)IRA limit d)Owner's income
Owner's income
If the annuitant dies during the accumulation period, who will receive the annuity benefits?a)The insurance company b)The annuitant's estate c)The beneficiary d)The annuity owner
The beneficiary
Which of the following is an example of liquidity in a life insurance contract? a)The death benefit paid to the beneficiary b)The flexible premium c)The money in a savings account d)The cash value available to the policyowner
The cash value available to the policyowner
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a)The death benefit can be increased only when the policy has developed a cash value. b)The death benefit can be increased only by exchanging the existing policy for a new one. c)The death benefit can be increased by providing evidence of insurability. d)The death benefit cannot be increased.
The death benefit can be increased by providing evidence of insurability.
Which of the following are generally NOT considered when underwriting group insurance? a)The size of the group b)The insureds' medical history c)The nature of the group d)The group's past claim experience
The insureds' medical history
An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur? a)The premiums will decrease. b)The interest will continue to accumulate tax deferred. c)The interest will become immediately taxable. d)The premiums will increase.
The interest will continue to accumulate tax deferred.
Which of the following is NOT true regarding Equity Indexed Annuities? a)They earn lower interest rates than fixed annuities. b)The insurance company keeps a percentage of the returns. c)They have guaranteed minimum interest rates. d)They are less risky than variable annuities.
They earn lower interest rates than fixed annuities
When would life insurance policy proceeds be included in the insured's taxable estate? a)When there are any incidents of ownership at the time of death b)If the insured's spouse is the policyowner c)If the insured transfers ownership of the policy or makes a gift of the policy 5 years prior to his or her death d)When the beneficiary is named in the policy
When there are any incidents of ownership at the time of death
What is the purpose of a fixed-period settlement option? a)To provide a guaranteed income for a certain amount of time b)To settle the insurance company's liability c)To provide a guaranteed income for life d)To provide a guaranteed amount of money each month
To provide a guaranteed income for a certain amount of time
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? a)15% for early withdrawal b)50% tax on the amount not distributed as required c)No penalties, since the owner is older than 59 ½ d)10% for early withdrawal
50% tax on the amount not distributed as required
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? a)A debtor has an insurable interest in the life of a lender. b)Business partners have an insurable interest in each other. c)A husband or wife has an insurable interest in their spouse. d)An individual has an insurable interest in his or her own life.
A debtor has an insurable interest in the life of a lender.
An insurer was just caught misrepresenting the terms of a policy. What fine does he face? a)A fine of up to $1,000 or imprisonment for up to 6 months b)A fine of between $100 and $1,000 and imprisonment for up to 1 year c)A fine of between $100 and $1,000 and imprisonment for up to 6 months d)A fine of up to $1,000 or imprisonment for up to 2 years
A fine of up to $1,000 or imprisonment for up to 6 months
What describes the specific information about a policy? a)Illustrations b)Buyer's guide c)Producer's report d)Policy summary
Policy summary
Which of the following is true regarding the spendthrift clause in life insurance policies? a)It allows the beneficiary to select a different settlement option. b)It is only used when the beneficiary is a minor. c)It is the same as irrevocable settlement clause. d)It can protect the policy proceeds from creditors of the beneficiary.
It can protect the policy proceeds from creditors of the beneficiary.
Which of the following is true about the mandatory free look in a Life Insurance policy? a)It applies only to term life insurance policies. b)It is optional on all life insurance policies. c)It commences when the policy is delivered. d)It commences when the application is signed.
It commences when the policy is delivered.
