LIFE INSURANCE STUDY GUIDE
What type of an interest rate is guaranteed in universal life policies?
Contract interest rate
All of the following are true of the Survivorship life policy EXCEPT
The death benefit is not paid until the last death
What is the cost of coverage based on for group life insurance?
The average age and the ratio of men to women
An individual has a $200,000 convertible term life insurance policy. If he chooses, he can
Convert to a whole life policy for the same face amount without proof of insurability
Who must keep the records pertaining to insurance transaction for a mandated period of time?
The agent or broker
Which of the following is NOT a component of an insurance policy premium?
Number of beneficiaries components: insurer expenses, investment return, mortality cost
A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lended may be guilty of
coercion
Which of the following is the primary source of informaton that an insurer uses to evaluate an insured's risk for life insurance?
insurance application
an annuity has accumulated the cash value of $70,000 of which $30,000 is from premium payments. The annuitant dies. Beneficiary will receive:
$70,000
Life insurance can provide which of the following?
Survivor protection
A fraternal benefit society
is operated for the benefit or its members.
If an agent changes his or her residential address, the Commission must be notified of the change within how many days?
30
An IRA contribution can be made from which of the following?
Cash
Which of the following is true regarding pure life annuity settlement option?
It provides the highest monthly benefit
J's retirement plan meets all federal requirements and entitles him to certain tax benefits as the owner of the plan. What term best describes Js retirement plan?
Qualified
In life insurance, which of the following is NOT required to have an insurable interest in the insured?
The beneficiary Required: policyowner, insured, applicant
Which of the following statements is true regarding thrift plan?
The employer contributes a certain amount for each dollar contributed by the employee
Two individuals of the same age, health status, and life expectancy apply for individual insurance coverage. When policies are issued by the same insurer, the premium rates are different based on the insured's race. What practice does this describe?
Unfair discrimination
Which of the following is a permissible reason for an insurance company to contest payment of a claim based on statements in the application?
the application contains material misstatements
Which of the following best depicts the law of large numbers?
the larger the pool of risk under study, the more accurate the predictions will be.
An Agent is hand delivering an insurance policy to a policyowner. What must the agent obtain to complete the transaction?
A signed delivery receipt
If an agent follows the rules and terms of his agent contract, he is exercising his
Express Authority
All of the following are advantages of a qualified retirement plan EXCEPT
The income at retirement is tax free In a qualified retirement plan any amount not previously taxed will be taxed when the funds are received
All of the following are true of credit life EXCEPT
The insured names the beneficiary True: The creditor is the policyholder , the death benefit cannot exceed the amount of the loan , the premium payment is included in the load payment. *With credit life the lending institution is the owner and names the beneficiary *
Which of the following is NOT true regarding variable life insurance and annuities?
They are not regulated by the DOR - What is true : They are regulated by both SEC and FINRA , Agents selling variable products must be registered with the FINRA & They are regulated by state and federl government.
Under which of the following conditions would life insurance proceeds be taxable by the federal government?
if there is a transfer for value
which of the following statements concerning the medical information bureau is correct?
The medical information bureau assists underwritters in evaluating and classifying risks
Who is required to inform applicants about information gathering practices?
The producer
An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium. Ten days later, his policy is still in effect and has not lapsed. Which policy provision allowed for this?
Grace period
According to the benefit payments provision, which of the following is true?
If someone has incurred funeral expenses on behalf of the insured a limited benefit payment may be made
which of the following actions does NOT constitute false advertising?
Stating that dividends are not guaranteed - False advertising would be : Representing an insurance policy as a share of stock , using names that disguise the true nature of a policy, misrepresenting the terms of a policy.
In contrasting stock insurers with mutual insurers, which statement is true?
Stock insurers are owned by the shareholders and issue nonparticipating policies
In a noncontributory group policy
100% of eligible employees must participate
The entire contract includes all of the following EXCEPT
A buyer guide Entire contract includes : the policy , a copy of the application , any riders or amendments
The frequency and the amount of the premium payment are known as what?
Premium mode
Which type of insurance policies provides pure life insurance protection without a savings element?
Term
If an insured dies, and it is discovered that the insured misstated his/her age or gender, the life insurance company will
Adjust the death benefit to what the premium would have purchased at the actual age or gender
Which of the following is NOT an eligibility requirement for applicants for insurance licenses in this state?
Education Need to be - State resident, Good character & 18
Which of the following is NOT a component of an insurance policy premium?
Mortality Cost - components : Insurer expenses, investment return, number of beneficiaries.
The manner and/or frequency that the policyowner pays the policy premium is called
Premium mode
the family term rider incorporates
Spouse term and children's term
Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles?
Standard
Which of the following is NOT required for a producer to receive a nonresident license in Virginia?
Take and pass the Virginia State insurance examination must be licensed in good standing in the home state , pay required fees , reside in a state that reciprocates non resident licenses to virginia residents
All of the following are true about Surviorship life policy
The death benefit is not paid until the last death, the premium would be lower than in a joint life policy, it can insure more than 2 lives
With Adjustable Life, the owner can change all of the following EXCEPT
The insured - Can change the premium , length of the time the coverage will last & the death benefit.
Which of the following is required in order for a plan to be qualified?
The plan must be formally written and communicated to the employers
Which of the following is TRUE of level term insurance?
The policy endows at age 100
What is the purpose of the surrender charge in a deferred annuity?
To compensate the company for loss of investment value
Under what circumstance may an insurer pay a finder's fee to an unlicensed producer?
Under no circumstance
In a defferred annuity the annual growth is
not taxed since it grows tax deferred
The renewable provision allows the policyowner to renew the coverage at the expiration date
without evidence of insurability
All of the following are true regarding the waiver of cost of insurance rider EXCEPT
The rider expires when the insured reaches age 60 Waives the cost of insurance asnd other expenses in the even the insured becomes disabled. Any premiums necessary to the accumulation of cash values cannot be waived.
Which of the following is NOT a standard exclusion in life insurance policies?
disability is : Hazardous occupation -war and military service -aviation
In the case of policy renewal, an insurer must issue to the policyholder a disclosure of information practices
only when such a disclosure has not been issued in the last 24 months.
If the annitant dies before the annuity start date, which of the following is true?
the interest is taxable
When obtaining coverage for a client agents are responsible for all of the following EXCEPT
Establishing general accounts Must: Keep records of funds, Receipt of premiums , Return of premiums
A policyowner who cannot borrow the equity, change beneficiaries, assign a policy or stop paying premiums without the beneficiary's written consent has designated the beneficiary as a(n)
Irrevocable beneficiary
Which of the following is true regarding a joint life annuity?
The payments stop at the first death
An adjustable life policy can assume the form of
either term insurance or permanent insurance
Which of the following best describes the difference between joint life and joint and survivor annuity payment options?
in joint life options the benefits stop after the first death
Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes
waiver of premium rider
The Human Life Value approach to determining Life Insurance needs is based upon which of the following ideas?
-The human life value approach involves estimating a person's net future earnings (after taxes and living expenses) each year to retirement, and then discounting that sum to a present lump-sum value using a reasonable interest rate.-The needs approach examines personal and family income, liabilities, and assets to calculate the right amount of life insurance. It is the most common method used today.-The needs approach to determining the amount of life insurance needed requires that the producer examine the customer's personal situation in detail
An annuitant pays the annuity premium on the 14th of each month. Which of the following best describes this arrangement?
Level
Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is
taxed as ordinary income
Which provision may be added to a permanent life policy, at no cost, the insures that the policy will not lapse so long as there is cash value?
automatic premium loan option
When an insured terminates membership in the insured group, the insured can convert to
Whole life with proof of insurability
What is the difference between a straight life policy and a 20-pay whole life policy?
Premium payment period
All of the following are true of annually renewable term insurance
the death benefit remains level, the policy must be renewed no matter what happens to ones health, the premium increases each year
If a life insurance company uses HIV testing as part of its underwritting, when must an applicant be notified of the procedure?
Prior to performance of the test
All of the following are true of annually renewable term insurance EXCEPT
False : The premium increases each year True: The death benefit remains level. the policy must be renewed no matter what happens to one's health. Proof of insurability must be provided at each renewal.
Which of the following individuals would be a likely candidate to purchase a deferred annuity?
Someone who wants to grow retirement funds tax deferred
During policy solicitation, an insurer exaggerates the financial condition of one of its competitors, and makes it sounds worse than it is. This is an example of an unfair trade practice of
Defamation
Which type of insurance policies provides pure life insurance protection without a savings element?
Term Life
Wagering on a sporting event is known as what type of risk?
Speculative
S set up an individual retirement account that her employer is now contributing to. Her employers contributions are not included in her gross income. what kind of retirement plan does S have?
Simplified employee pensions (SEP)
When an insured terminates membership in the insured group, the insured can convert to
Whole life without proof of insurability
what guarantees that the information explained in the insurance contract is true?
a warranty
The Commission finds that an insurer has been using defamation in its advertisements. What will the Commission will issue to make the insurer stop this practice?
Cease and desist order
Which of the following would NOT be eligible for coverage under key person?
the owner of a shop - Would be covered: The executive officer of a company, the pharmacist in a drug store, the manager of a small store.
Which of the following could reduce the amount of the death benefit?
failure to repay a policy loan
Which of the following is the primary source of information that an insurer uses to evaluate an insureds risk for life insurance?
insurance application
When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?
As a fiduciary
there is a 10% penalty on the taxable portion of a deferred annuity when it is surrendered prior to what age?
59 1/2
Which of the following is true of level term insurance?
It's a temporary protection
Guaranteeing future dividends is considered to be an unfair or deceptive act known as
Misrepresentation
According to the common disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following is assumed?
the primary beneficiary died before the insured
In whole life insurances, when is the policy cash value scheduled to equal the face amount?
At the insured's age 100
Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates?
Occupation
In order to reinstate a life insurance policy the insured must do all of the following EXCEPT
Pay next year's premium in advance - Must: Pay an interest due on back premiums, repay an outstanding loans and interest, pay back premiums.
Who is responsible for making sure that all marketing communication is truthful and misleading in fact of by implications?
The Insurer
Which of the following is NOT an example of the company's location of incorporation?
Authorized - Example would be : Domestic, Foreign, Alien
Which type of authority is found in the agent's contract?
Express
Which of the following would be true of both the fixed period and fixed amount settlement options?
Both guarantee that the principal and interest will be fully paid out
Who bears the investment risk under a variable life insurance policy?
the policyowner
If an annuity has a guaranteed minimum interest rate, this means
The interest rate will never drop below the guaranteed minimum
A whole life policy is surrendered for a reduced paid up policy. The cash value in the new policy will
Continue to increase
What type of an interest rate is guaranteed in universal life policies?
current interest rate
Which of the following is a correct statement about annuities?
Fixed annuities do not provide protection against inflation
Which of the following annuities are subject to regulations on the suitability of recommendations?
Flexible premium deferred annuities
During the accumulation phase of a fixed annuity, the annuitant's interest rate is based on a min rate as specified in the contract, or the current interest rate. which ever is ?
Higher
In contrasting stock insurers with mutual insurers, which statement is true?
Mutual insurers are owned by the shareholders and issue participating policies.
When comparing a joint life policy to two individual life policies of the same amount on the same insureds, which condition is true?
Joint life has a lower premium than the total of the two individual policies.
If an applicant submits the initial premium with an application, which action constitutes acceptance?
the underwritters approve the application
What is the most common name for a single policy that is designed to insure two or more lives with a standard premium and that pays the death benefit upon the first death?
Joint Life
