Life Insurance Test

How many policies are necessary to cover a cross purchase (buy/sell agreement) between 3 people?

6, Since each person would have a policy on each of the other people, among the 3 owners, the total number of policies would be six.

All other factors being equal, the least expensive first year premium payment is found in

Annual Renewable Term

A policyowner of a universal life insurance policy must receive a policy status report from the insurer at least

annually

If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed

15 days

Abigail's father dies leaving her the designated beneficiary on his life insurance policy. She is surprised to see that in addition to the face amount of the policy, she will also receive a refund of all the of the premiums he had paid. Which rider is attached to the policy?

Return of premium

State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT

Inviting prospective clients to the grand opening of the company's new office.

Which of the following is the best reason to purchase life insurance rather than annuities?

To create and estate

person who receives benefits or payments from the annuity, and for whom the annuity is written and whose life expectancy is taken into consideration

Annuitant

Which concept is associated with "exclusion ratio"?

Annuities payments

Who may complete a paramedical report

Paramedic or registered nurse

the commissioner may waive pre licensing requirements for examinations for someone who has been licensed insurance producer

In preceding 12 months

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Option A

Which of the following rider would not cause the death benefit to increase

Payor Benefit Rider

What company produces evaluations of insurer financial status often used by the Insurance Department?

AM Best & Company

And inv. applied for policy and paid premium and insurer issued conditional receipt. Five days later applicant submitted to medical exam. If policy is issued what would the policy's effective date be?

Date of medical exam

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until the insureds death

a man decides to purchase a $100,000 annually renewable term insurance life policy to provide additional protection until his children finished college, he discovered that this policy

required a premium increase at each renewal

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

Which option for Universal life allows the beneficiary to collect both death benefit and cash value when he dies

Option B

Which of the following is true regarding a modified guaranteed annuity?

The owner is guaranteed a fixed interest rate over a specified period of time

All of the following statements about Credit Life insurance are true EXCEPT:

Benefits are paid to the borrowers beneficiary (The creditor IS the beneficiary)

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

Entire contract

The death benefit under the Universal Life Option B

Gradually increases each year by the amount that the cash value increases

An applicant wants to buy a life insurance policy that has a cash value element. Which type should she buy

Permanent

What qualifications must an agent hold in order to sell variable life insurance policies?

both state and federal licensing-agents selling variable life products must be registered with the Financial Industry Regulatory Authority (FINRA) and must be licensed within the state to sell life insurance and variable products

Which of the following best describes annually renewable term insurance?

It is level term insurance

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?

Limited-pay Life

All of the following are examples of risk retention EXCEPT

Premiums

Which of the following is NOT consideration on the part of an insured?

Promise to submit timely claims

Which non-forfeiture option provides coverage for the longest period of time

Reduced paid-up

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

Require evidence of insurability

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

Unfair trade practice

What limits the amount that a policyowner may borrow from a whole life insurance policy?

Cash value plus loan interest

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid up option

Which of the following individuals could qualify for a temporary insurance license?

The designee of a producer that is called to active service with the Navy

How many days does a licensee have to inform commissioner of change of address

30 days

Rebating is an unfair trade practice and is regulated by law. ALl of the following would be considered to be rebating EXCEPT

An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him

All of the following are true of the federal tax advantages of a qualified plan, EXCEPT

At distribution, all amounts received by the employee are free of taxes.

Which of the following is not a government insurance program?

Federal Deposit Insurance Corporation ( FDIC )

Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?

Twisting

Amy's insurance premium has decreased slightly, despite the fact that her level of health has remained the same. Which of the following most likely caused the premium decrease?

her insurer used interest earned on premiums to lower premium amounts

If an applicant for a lief insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

whether an insurable interest exists between the individuals

Out-of-state producer wants to start selling insurance in this state. What type of license should he obtain?

Nonresident

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

The insurer will pay the full Death Benefit to the beneficiary.

Cameron is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he feels he can afford at this time, he wants to be sure that additional coverage will be available in the future. He should include in this policy a

Guaranteed insurability option

An insured pays a small $100 premium every month, yet the insurer promises to pay a high percentage of all medical costs. What element of an insurance contract does this describe?

Aleatory

The ________ option guarantees an income for two or more recipients for as long as they live.

Life Income Joint and Survivor

When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file bankruptcy. Which of the following terms best describes the advertisement?

False financial statment

A projection of insurance needs that is based upon the capitalization of a applicant's future earnings is:

Human life value approach- is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.

A rider attached to a life insurance policy that provides coverage on the insured's family memebers is called the

Other-insured rider

An insured purchases a policy in 2000 and dies and 2005. The insurance company discovers at the time that the insured concealed information during the application process. What can they do?

Pay the death benefit- the incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Randy transfers his life insurance policy to his son Andy two years before Randy's death. Which of the following is true?

The entire face value of the policy will be included in Randy's taxable estate.

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium

What will happen to my license if I do not complete all 24 credit hours by my CE review date?

Your license will be suspended for a period of 90 days or until your 24-hour requirement is met.

When would a 20-pay whole life policy endow?

When insured reaches age 100

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?

b) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

$3,000

How much is an agents appointment fee?

$5

Which of the following would be considered an illegal inducement to purchase insurance?

Confirming future dividends in a life insurance proposal

Bill 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 Bill?

Modified life

Taking a defensive driving course or installing deadbolt locks on the doors of a home are examples of which of the following?

Risk Reduction

M, who is not licensed as an insurance agent works part-time in her father's insurance agency. M may perform all of the following duties EXCEPT

Collect premium for in-force policies and explain coverages to clients that have existing policies written by her father

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

Military service or war

Example of apparent authority

Accepting late premiums after grace period

Which of the following best describes fixed period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

Which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer?

Business entity

The President of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

Corporations are never legal annuitants

Which of following about Group Life is correct

Cost of coverage is based on ratio of men and women

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Material misrepresentation

Adverse selection is a concept best described as:

risks with higher probability of loss seeking insurance more often than other risks