Life Insurance

A group of four entrepreneurs decide to open an insurance company. How many must be licensed insurance producers?

1

Who can make a fully deductible contribution to a traditional IRA

An individual not covered by an employer-sponsored plan who has earned income Individuals who are not covered by an employer sponsored plan may deduct the amount of their IRA contributions regardless of their income level

Which of the following types of insurance policies is most commonly used in credit life insurance?

Decreasing term

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue.

Which of the following is not true regarding a certificate of authority?

It is issued to group insurance participants

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death

A married couple owns a permanent policy which covers both their lives and pays the death benefit only upon death of the first insured. Which policy is that?

Join Life Policy

When would a 20-pay whole life policy endow?

When the insured reaches age 100

The maximum the Insurance Guaranty Association will pay to an individual for life insurance death benefits is

$500,000

Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What king of policy would you recommend?

An endowment policy premium is considerably higher with an endowment policy, and cash value in endowments build up faster as funds are intended to be used while insured is alive

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has raised 7% as a result. What policy rider caused this change?

Cost of living rider

Which of the following is not fundable by annuities?

Death Benefits Annuities are most commonly used to fund someone's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance

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?

Decreasing Term Decreasing term policy's face amount decreases as amount of debt is reduced.

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

Guaranteed Insurability Option Allows the insured to purchase specific amounts of additional insurance at specific times without proof of insurability

What type of insurance would be used for a Return of Premium rider?

Increasing Term Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy it provides that at death prior to a given age, not only is the original face amount payable, but also all premiums previously paid are payable to the beneficiary

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?

Inspection Report

Which of the following settlement options is known as straight life?

Life Income The life income option, also known as straight life, provides the recipient with an income that he or she can not outlive. It pays the benefit while the beneficiary is still alive, however payments stop at death

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a beneficiary for the remainder of this period

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?

Misrepresentation

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual

During replacement of life insurance, a replacing insurer must do which of the following?

Obtain a list of all life insurance policies that will be replace

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When reduced option is written as "joint and 2/3 survivor" the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive

Solicitation rules would apply to which forms of coverage?

Whole life