life insurance
All of the following entities regulate variable life policies EXCEPT a) The Guaranty Association. b) Federal government. c) The SEC. d) The Insurance Department
A
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a) Universal life b) Adjustable life c) Term life d) Limited pay
A
If a policy includes a free-look period of at least 10 days, the Buyer's Guide must be delivered to the applicant a) With the policy. b) Upon issuance of the policy. c) Prior to accepting an initial premium. d) Prior to filling out an application for insurance.
A
If an insured continually uses the automatic premium loan option to pay the policy premium, a) The policy will terminate when the cash value is reduced to nothing. b) The face amount of the policy will be reduced by the automatic premium loan amount. c) The cash value will continue to increase. d) The insurer will increase the premium amount.
A
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are a) Not taxable since the IRS treats them as a return of a portion of the premium paid. b) Paid at a fixed rate every year. c) Taxable as ordinary income. d) Guaranteed.
A
All of the following are Nonforfeiture options EXCEPT a) Reduced paid-up b) Interest only c) Cash surrender d) Extended term
B
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are a) Partially tax deductible depending on the income level. b) Tax deductible. c) Deducted based on the income level. d) Never tax deductible.
B
Which of the following is an example of liquidity in a life insurance contract? a) The money in a savings account b) The cash value available to the policyowner c) The death benefit paid to the beneficiary d) The flexible premium
b
After the Commissioner receives a written demand for a hearing from by a person aggrieved, a hearing must be held within a) 60 days. b) 2 weeks. c) 1 month. d) 45 days.
d
It is considered an unfair claims settlement practice to pay a claim in full within how many days from the claimant's filing of the proof of loss? a) 10 days b) 15 working days c) 30 calendar days d) 90 calendar days
d
Insurance is the transfer of a) Peril. b) Risk. c) Loss. d) Hazard.
b
Any and all charges made by a producer in the taking of an application, the issuance of a policy, and any related services rendered are defined as a) Fees. b) Premiums. c) Dues. d) Considerations.
B
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a) Those who have no history of claims b) Those who have been insured under the plan for at least 5 years c) Those who have worked in the company for at least 3 years d) Those who have dependents
b
Which clause permits an insurer to discharge its obligations after the death of an insured by paying the death benefits to the person stipulated by the clause? a) Discharge of benefits b) Facility-of-payment c) Deferred compensation d) Death benefit
B
Which nonforfeiture option provides coverage for the longest period of time? a) Accumulated at interest b) Reduced paid-up c) Extended term d) Paid-up option
B
Which of the following authorities determines whether a mass-marketed insurance policy costs a reasonable amount, in relation to the benefits offered? a) Guaranty Association b) Commissioner c) State Insurance Board d) Federal Board of Insurers
B
Which of the following information will be stated in the consideration clause of a life insurance policy? a) The conditions for insurability b) The amount of premium payment c) The parties to the contract d) The time period allowed for the payment of premium
B
Which of the following best describes what the annuity period is? a) The period of time from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments
D
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is a) A Modified Endowment Contract. b) An Accelerated policy. c) An endowment. d) A Multiplicative Policy.
a
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a) The death benefit can be increased by providing evidence of insurability. b) The death benefit cannot be increased. c) The death benefit can be increased only when the policy has developed a cash value. d) The death benefit can be increased only by exchanging the existing policy for a new one.
A
The term "fixed" in a fixed annuity refers to all of the following EXCEPT a) Death benefit b) Guaranteed rate of interest c) Equal annuity payments d) Amount and length of payments
A
Which is NOT true about beneficiary designations? a) The beneficiary must have insurable interest in the insured. b) The beneficiary may be a natural person. c) The policy does not have to have a beneficiary named in order to be valid. d) Trusts can be valid beneficiaries.
A
Which of the following describes the tax advantage of a qualified retirement plan? a) The earnings in the plan accumulate tax deferred. b) Distributions prior to age 59½ are tax deductible. c) Employer contributions are deductible as a business expense when the employee receives benefits. d) Employer contributions are not taxed when paid out to the employee.
A
Which of the following is TRUE of a qualified plan? a) It has a tax benefit for both employer and employee. b) It does not need to have a vesting schedule. c) It may discriminate in favor of highly paid employees. d) It may allow unlimited contributions.
A
Which of the following is TRUE regarding the annuity period? a) It may last for the lifetime of the annuitant. b) During this period of time the annuity payments grow interest tax deferred. c) It is also referred to as the accumulation period. d) It is the period of time during which the annuitant makes premium payments into the annuity.
A
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as a) The next month's premium is sufficient to cover both the current premium amount and the skipped amount. b) The policy contains sufficient cash value to cover the cost of insurance. c) The previous premium payments were high enough to create an excess of premium. d) The policyowner cannot skip premiums without the policy lapsing.
B
What is the purpose of a conditional receipt? a) It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue. b) It is intended to provide coverage on a date earlier than the date of the issuance of the policy. c) It guarantees the applicant that a policy will be issued in the amount applied for in the application. d) It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company.
B
When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. b) An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. c) An insured couple purchases a life insurance policy insuring the life of their grandson. d) A company purchases a life insurance policy on their manager, who is an important part of the operation.
B
When is the earliest a policy may go into effect? a) After the underwriter reviews the policy b) When the application is signed and a check is given to the agent c) When the first premium is paid and the policy has been delivered d) When the insurer approves the application
B
Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider
B
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? a) Employer contributions are not included in the employee's gross income. b) SEPs are suitable for large companies. c) SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income. d) SEPs have a higher tax deductible contribution limit than an IRA
B
Which of the following statements concerning buy-sell agreements is true? a) Buy-sell agreements pay in the event of a medical emergency. b) Buy-sell agreements are normally funded with a life insurance policy. c) Premiums paid are deductible as a business expense. d) Benefits received are considered income taxable.
B
Which of the following would help prevent a universal life policy from lapsing? a) Corridor of insurance b) Target premium c) Face amount d) Adjustable premium
B
Who can make a fully deductible contribution to a traditional IRA? a) A person whose contributions are funded by a return on investment b) An individual not covered by an employer-sponsored plan who has earned income c) Anybody: all IRA contributions are fully deductible regardless of income level d) Someone making contributions to an educational IRA
B
Why should the producer personally deliver the policy when the first premium has already been paid? a) To make sure the policy is not stolen or lost b) To help the insured understand all aspects of the contract c) To ensure the producer gets paid commission d) To find out how the family has been doing since the initial presentation
B
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) IRS has no jurisdiction. b) The benefit is received as taxable income. c) The benefit is received tax free. d) The benefit is subject to the exclusionary rule.
C
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy? a) It is taxable only if it exceeds the amounts paid for premiums by 50%. b) It is automatically taxable. c) It is only taxable if the cash value exceeds the amount paid for premiums. d) It is not considered to be taxable.
C
The automatic premium loan provision is activated at the end of the a) Elimination period. b) Policy period. c) Grace period. d) Free-look period
C
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a) $0 b) $50,000 (50% of the policy value) c) $100,000 d) $300,000 (triple the amount of policy value)
C
Which of the following is NOT true regarding Equity Indexed Annuities? a) They have guaranteed minimum interest rates. b) They are less risky than variable annuities. c) They earn lower interest rates than fixed annuities. d) The insurance company keeps a percentage of the returns.
C
Which policy component decreases in decreasing term insurance? a) Dividend b) Premium c) Face amount d) Cash value
C
Who might receive dividends from a mutual insurer? a) Stockholders b) Agents c) Policyholders d) Subscribers
C
An agent selling variable annuities must be registered with a) Department of Insurance. b) The Guaranty Association. c) SEC. d) FINRA.
D
An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies, "Yes," which of the following best describes the agent's next step? a) The agent must collect the existing policies and turn them over to the replacing insurer. b) The agent must get his supervisor involved in the transaction. c) The agent has no further duties. d) The agent must provide a replacement notice to the applicant.
D
An insured receives an annual life insurance dividend check. What term best describes this arrangement? a) Reduction of Premium b) Annual Dividend Provision c) Accumulation at Interest d) Cash option
D
Children's riders attached to whole life policies are usually issued as what type of insurance? a) Variable life b) Adjustable life c) Whole life d) Term
D
How many days following a hearing does the Commissioner have to enter an order based on conclusions reached during the hearing? a) 15 b) 20 c) 30 d) 45
D
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? a) Life with period certain b) Fixed amount c) Interest only d) Fixed period
D
If the insurance provided on an individual ceases because of termination of employment or of membership in the class eligible for coverage, the individual will be entitled to have an individual life policy issued without evidence of insurability, if application is made within how many days of termination?
D
In West Virginia, a producer's license expires based on a) The date he or she was appointed as an agent to an insurer. b) The date he or she first applied for the license. c) Last completion of continuing education requirements. d) The producer's birth month.
D
It is considered an unfair claims settlement practice to pay a claim in full within how many days from the claimant's filing of the proof of loss? a) 10 days b) 15 working days c) 30 calendar days d) 90 calendar days
D
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called a) Fixed period. b) Fixed amount. c) Joint life. d) Joint and survivor.
D
Which of the following is another term for the accumulation period of an annuity? a) Premium period b) Liquidation period c) Annuity period d) Pay-in period
D
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) Premiums are tax deductible by the key employee. b) Premiums are tax deductible as a business expense. c) Premiums are taxable to the employee. d) Premiums are not tax deductible as a business expense.
D
Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? a) They are always taxable to chronically ill insured. b) They are always taxed. c) There is a 10% penalty for early distribution of the death benefit. d) They are tax free to terminally ill insured
D
Which of the following would be considered a nonmedical insurance application? a) An application that does not ask any questions about the applicant's medical history b) An application submitted with the Agent's Report c) Any application for life insurance d) An application on which the medical information is completed by the applicant and the agent only
D
Who makes up the Medical Information Bureau? a) Hospitals b) Former insured c) Physicians and paramedics d) Insurers
D
f a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? a) Life with period certain b) Fixed amount c) Interest only d) Fixed period
D
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a) Survivor protection b) Life planning c) Survivorship insurance d) Juvenile protection provision
a
A producer's license has been nonrenewed. How long does the producer have to request a hearing? a) 10 days b) 15 days c) 30 days d) 45 days
a
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? a) 5 days b) 7 days c) 10 days d) 3 days
a
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? a) Assignment b) Automatic premium loan c) Waiver of premium d) Incontestability period
b
An adjuster knowingly and willfully engaged in an unfair method of competition. In lieu of revoking the adjuster's license, the Commissioner may order the licensee to pay a civil fine of up to a) $1,000 b) $5,000 c) $10,000 d) $25,000
b
What is the purpose of establishing the target premium for a universal life policy? a) To cover all policy expenses b) To keep the policy in force c) To accumulate cash value faster d) To pay up the policy faster
b
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called a) Waiver of cost of insurance. b) Payor benefit. c) Waiver of premium. d) Guaranteed insurability.
c
Which of the following determines the cash value of a variable life policy? a) The policy's guarantees. b) The premium mode c) The performance of the policy portfolio d) The company's general account
c
Which of the following statements is correct regarding a whole life policy? a) The policy premium is based on the attained age. b) The death benefit may increase or decrease during the policy period. c) The policyowner is entitled to policy loans. d) Cash values are not guaranteed.
c
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is a) An executive annuity plan. b) Subject to government standards. c) Illegal. d) A nonqualified annuity plan.
d
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive? a) There are no deductions taken from death benefits. b) Penalty imposed for early withdrawal of the death benefit, plus the amount of earnings lost by the insurance company in interest income c) 10% federal death benefit income tax, plus the amount of the accelerated benefit d) Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit
d
