Life Insurance practice exam
The amount of the distribution is reduced by the amount of a 20% withholding tax.
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The benefit is received tax free.
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then...
The insured's premiums will be waived until she is 21.
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the opti Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance
Joint and survivor
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?
Automatic premium loan
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
Revocable beneficiary.
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
Cost of living rider
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called
Pure risk
A situation in which a person can only lose or have no change represents
Risks with higher probability of loss seeking insurance more often than other risks.
Adverse selection is a concept best described as
Twisting
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of
Buy-sell agreement.
All of the following are personal uses of life insurance EXCEPT
The plan is funded by permanent insurance only.
All of the following are true of Key Person insurance EXCEPT
The payable premium amount steadily declines throughout the duration of the contract.
All of the following are true regarding a decreasing term policy EXCEPT
Beneficiary's age. MUST BE USED: •Annual Income •tax status •Financial experience
All of the following information about a customer must be used in determining annuity suitability EXCEPT
The coverage period
An Adjustable Life policyowner can change which of the following policy features?
50% tax on the amount not distributed as required
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?
The interest will continue to accumulate tax deferred
An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?
permanent
An applicant wants to buy a policy that has a cash value element. Which type should she buy?
Attained age
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
5 years
An individual insurance agent may operate as a viatical settlement broker without obtaining a separate license if the viatical settlement broker activities are incidental to the agent's business transactions, and if the agent has been licensed for life insurance for at least what time period?
2.5%
An insurance company forwards fixed annuity prentiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?
Retirement plans
Annuities can be used to fund which of the following?
Apparent
Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?
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?
Buyer's Guide
Hazards
Events or conditions that increase the chances of an insured loss occurring are referred to as
180 calendar days
For how long is the certificate of prelicensing course completion valid?
10 calendar days
How many days does the viator have to rescind a contract after receiving the vatical settlement proceeds?
$3,000
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
Insolvent
If an insurer has fewer assets than liabilities and is unable to pay its financial obligations for at least 3 years, the insurer is considered
Unilateral
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
Reduction
Installing deadbolt locks on the doors of a home is an example of which method?
Promptly forwarding premiums to the insurance company
Pertaining to insurance, which of the following is arfexample of a producer's fiduciary responsibility?
Must allow the policyowner to return the policy for a full refund.
Regarding the free-look provision, the insurance company
Universal Life
The Waiver of Cost of Insurance rider is found in what type of insurance?
Express authority.
The authority granted to an agent through the agents contract is referred to as
180 days
The maximum duration of a temporary license in this state is
To purchase a smaller amount of the same type of insurance as the original policy.
The paid-up addition option uses the dividend
lower
The premium of a survivorship life policy compared with that of a joint life policy would be
The man's payments will be larger.
Twins brother and sister each purchased a retirement annuity. When they retired at the same time, each selected the life income option. Both have similar life styles and are in good health. Which of the following is true with respect to their monthly annuity payments?
The same face amount as in the whole life policy.
Under an extended term nonforfeiture option, the policy cash value is converted to
When the agent receiving the commission is licensed for that same line of business
Under what circumstances may an agent appointed with the issuing insurance company pay a commission to another agent?
The beneficiary will only receive payments of the interest earned on the death benefit.
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
Application
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?
foreign
When doing business in this state, an insurance company that is formed under the law another state is known as which type of insurer?
Exchange of unequal values
Which of the following best describes the aleatory nature of an insurance contract?
director
Which of the following has the authority to issue a cease and desist order?
It is a period during which the payments into the annuity grow tax deferred.
Which of the following is TRUE regarding the accumulation period of an annuity?
The cash value available to the policyowner
Which of the following is an example of liquidity in a life insurance contract?
Bail out
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?
Payor Benefit Rider
Which of the following riders would NOT cause the Death Benefit to increase?
The cost of coverage is based on the ratio of men and women in the group.
Which of the following statements about group life is correct?
Insurers
Who makes up the Medical Information Bureau?
The director
Who must approve viatical settlements?
An applicant for a resident license who was previously licensed in another state and whose license lapsed 2 years ago.
any of the following individuals may be exempt from the prelicensing education requirement for agents EXCEPT
The death benefit is $0 at the end of the policy term. TRUE- •The contract pays only in the event of death during the term and there is no cash value. •The face amount steadily declines throughout the duration of the contract. •The payable premium amount steadily declines throughout the duration of the contract.
All of the following are true regarding a decreasing term policy EXCEPT
The payments will stop when the annuitant dies. TRUE: •The annuitant may select how big the payments will be •This option pays a specific amount until the funds are exhausted. •Value of the account and future earnings will determine the time period for the benefits.
All of the following statements are true regarding installments for a fixed amount EXCEPT
It is a life contingency option. TRUE- •it will pay the benefit only for a designated period of time. •The payments are not guaranteed for life. •The insurer determines the amount for each payment.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
Common Disaster
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
Limited-pay Life
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
$50,000
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined, and the cash value fell to $10,000. If the insured dies, how much will be paid out?
Ordinary life
An insured purchased an individual life insurance policy with a face amount of $15,000. The insured pays a premium each month directly to the insurance company. What type of policy is that?
The policy will terminate when the loan amount with interest equals or exceeds the cash value.
An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?
Rebating
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as
Juvenile Life is classified as any life insurance purchased by a minor.
Concerning Juvenile Life insurance, which of the following statements is INCORRECT?
Accumulated cash value
If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate?
Whether an insurable interest exists between the individuals
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about
Decreases
If an insured changes the premium payment mode from monthly to annually, what happens to the total premium?
The policy will terminate when the cash value is reduced to nothing.
If an insured continually uses the automatic premium loan option to pay the policy premium,
Name, age and sex of the insurance producer. NEEDED: •Generic policy name, company product name, and form number. • Initial death benefits. •Name of the insurer.
In Ohio, all life insurance policy illustrations must include all of the following EXCEPT
The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
The owner will receive the surrender value of the annuity.
What happens if a deferred annuity is surrendered before the annuitization period?
Guided describing company financial integrity
What insurance concept is associated with the names Weiss and Fitch?
Ownership
What is the major difference between a stock company and a mutual company?
$10,000
What is the maximum civil penalty for violating the Director's cease and desist order?
to provide a guaranteed income for a certain amount of time
What is the purpose of a fixed-period settlement option?
It allows the insured to reject the policy with a full refund
What is the purpose of a free-look period in insurance policies?
Income tax on distributions and no penalty.
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
When the insured reaches age 100
When would a 20-pay whole life policy endow?
Reduced Paid-Up
Which nonforfeiture option provides coverage for the longest period of time?
The recommended amount to keep the policy in force throughout its lifetime
Which of the following best defines target premium in a universal life policy?
Taxes are deferred
Which of the following best describes taxation during the accumulation period of an annuity?
Payments stop after the first death among the annuitants.
Which of the following is NOT true about a joint and survivor annuity benefit option?
They earn lower interest rates than fixed annuities. TRUE- •They have guaranteed minimum interest rates. •They are less risky than variable annuities. •The insurance company keeps a percentage of the returns.
Which of the following is NOT true regarding Equity Indexed Annuities?
It is term coverage that is convertible to permanent insurance at or prior to the child
Which of the following is true of a children's rider added to an insured's permanent life insurance policy?
The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.
Which of the following is true regarding a waiver of a surrender charge on an annuity contract?
Dividends are not taxable.
Which of the following is true regarding taxation of dividends in participating policies?
Cost comparison methods
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?
It pays dividends to policyowners.
Which of the following is usually true of a participating life insurance policy?
A minor son of the insured
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?
Straight Life
Which of the following policies would be classified as a traditional level premium contract?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following statements about the reinstatement provision is true?
dividend
Which of the following terms is used to name the nontaxed return of unused premiums?
Substandard risk
Which of the following types of risk will result in the highest premium?
The expense of a vacation for surviving family members
Which of the following would NOT fall into the category of costs associated with death?
A denied license in another state
Which of the following would be sufficient violation to warrant rejection, revocation, or suspension of an insurance agent's license?
Paid-up option
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?
Insureds cannot be randomly selected.
Which statement regarding insurable risks is NOT correct?
Disclose commissions earned from the sale of the policy. DO- •Collect any premium due. •Explain the rating procedures if the policy is rated differently than applied for. •Explain the policy provisions, riders, and exclusions.
a producer must do all of the following when delivering a new policy to the insured EXCEPT
The beneficiary
if the annuitant dies during the accumulation period, who will receive the annuity benefits?
Re-entry
insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario?
