Life Insurance Practice Test

Adjustable Life Insurance

-combines term and whole life into a single plan -the policy can be converted from term to whole life or whole life to term -premiums and face amounts can be increased or decreased at the policyholder's request -Face amount increases may also be subject to proof of insurability -cash value; fixed rate of return; ***General account*** -can borrow from cash value

Variable Life Insurance

-permanent insurance; returns are earned on a tax-deferred basis -allows for either a fixed (if Whole Life) or flexible (if Universal) premium -flexible death benefit (can increase or decrease to stated minimum) -cash value not guaranteed; ***Separate account*** -can borrow cash value

Universal Life Insurance

-permanent protection -flexible premium payments -flexible death benefits -cash-value fluctuates depending on the amount paid into the policy; ***General account*** -can borrow cash value

A producer's license has been nonrenewed. How long does the producer have to request a hearing?

10 Days

The Commissioner may revoke a person's license if the person does not stop a violation following a cease and desist order within how many days?

20 Days

According to the disclosure rules in life insurance solicitation, insurer must maintain in their home office copies of all documents used in insurance transactions for a minimum of how many years?

3 Years

Unilateral Contract

A one-sided promise

An employee of an insurance company that effectuates an insurance contract would need...

A valid insurance producer license.

Premium payment requirements for a trustee group

If paid by trustees only, 100% of eligible persons must be insured. It may be paid by trustees in full. It may be paid by the insured persons in full if at least 75% of eligible persons are insured. No trustee group policy may be issued in which the entire premium is derived from funds contributed by the insured persons specifically for their insurance.

Fixed-period installments

Is a settlement option, and not one of the dividend options.

The cash value of a variable life policy

Is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

Survivorship Life Policy

Joint life policy in which the policy proceeds are paid out upon the death of the second insured.

What is the other term for the cash payment settlement option?

Lump Sum

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

Lump sum

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A

What explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's Rights

Joint Life Premiums

Rates are determined by averaging the age of both insureds. Death benefit is paid on the first death.

Life Income Option

Also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.

Nonforfeiture values include

Cash surrender, extended term and reduced paid-up. Interest only is a settlement option.

Insurance Application

Signed statement of facts requested by an insurance company on the basis of which it decides whether or not to issue an insurance policy; it becomes part of the health insurance contract if a policy is issued ***The key source underwriters use for information about the applicant. ***

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments

Pure Death Protection

Term/temporary protection If the insured dies during this term, the beneficiary receives the pay out; If policy is cancelled/expires prior to insured death, there is nothing payable at the end; NO cash value; Maximum age that coverage is not offered is 80

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

The benefit is received tax free. Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

Aleatory Contract

The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss.

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Unilateral

Replacement regulations would apply to what kind of policy?

Whole life policy

All of the following are dividend options EXCEPT

a)Paid-up additions b)Fixed-period installments c)Accumulated at interest d)Reduction of premium. Answer (B)

When group coverage is converted to an individual policy,

the insurer will determine the type of coverage, usually permanent insurance.