Missed Exam questions
Life insurance policies that have cash value must provide for a maximum policy loan interest rate of no more than
8% per annum
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
Which of the following will NOT be an appropriate use of a deferred annuity?
Creating an estate
Which of the following is NOT a term for the period of time during which the annuitant of the beneficiary receives income?
Depreciation period
Which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable.
Which policy component decreases in decreasing term insurance?
Face amount
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term rider
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income.
In life insurance policies, cash value increases
Grow tax deferred.
Annually renewable term policies provide a level death benefit for a premium that
Increases annually.
All advertisements are the responsibility of the
Insurer
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 true regarding a single life settlement option?
It provides income the beneficiary cannot outlive.
A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.25 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?
Joint and survivor
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payment. What type of annuity did the couple buy?
Joint life
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a
Joint life annuity.
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?
Medical background
Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
Using a class designation for beneficiaries means
Naming beneficiaries as a group.
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Option B
An insured purchased an individual life insurance policy with a face amount of $15,000. The insured pays a premium each month directly to the insurance company. What type of policy is that?
Ordinary life
The risk of loss may be classified as
Pure risk and speculative risk.
If a court ordered payment for a loss that was not covered int he policy even if it was clearly worded, it would be an example of which legal concept?
Reasonable expectations
Which of the following insurance options would be considered a risk-sharing agreement?
Reciprocal
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends tot he next year's premium, thus reducing it to $900. What option does this describe?
Reduction of Premium
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would ratheruse the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium
An application for a life insurance policy was rejected because of information disclosed in an inspection report. The applicant reviewed the consumer reporting agency's file and found they collected incorrect information concerning his personal life. He can legally require the reporting agency to
Reinvestigate
The Ownership provision entitles the policyowner to do all of the following EXCEPT
Set premium rates
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association
Which of the following would provide an underwriter with information concerning an applicant's health history?
The Medical Information Bureau
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner.
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?
The annuitant must be a natural person
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit.
In a group life insurance policy, the employer may select all of the following EXCEPT
The beneficiary.
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
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
The interest is not taxable since it remains inside the insurance policy.
Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic.
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
The policy is owned by the company.
An absolute assignment is a
Transfer of all ownership rights in a policy.
What kind of policy allows withdrawals or partial surrenders?
Universal life
Which of the following Life Insurance policies would be considered interest sensitive?
Universal life
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
Variable
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
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
Which of the following is TRUE about a class designation?
Beneficiaries are not identified by name.
Stranger-originated life insurance policies are in direct opposition to the principle of
Insurable interest
Which of the following is NOT true about a joint and survivor annuity benefit option?
Payments stop after the first death among the annuitants.
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
Which of the following is TRUE regarding variable annuities?
The annuitant assumes the risks on investment.
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?
The annuitant must be a natural person.
What happens if a deferred annuity is surrendered before the annuitization period?
The owner will receive the surrender value of the annuity.
J transferred his life insurance policy to his son two years before his death. Which of the following is true?
The entire face value of the policy will be included in J's taxable estate.
An individual was insured under a group contract. He was just fired from his job, and , subsequently, his coverage was terminated. How long does his insurer have to notify him of his right to convert that group policy into an individual policy?
60 days beyond the policy's next expiration date
Which of the following type(s) of licenses is/are required to sell variable insurance in this state?
A life insurance license and a registered representative license
All of the following would be considered rebating EXCEPT
An agent misrepresents policy benefits to convince a policyowner to replace policies.
When an annuity is written, whose life expectancy is taken into account?
Annuitant
All of the following are examples of risk retention EXEPT
Premiums
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
$50,000
An insurer has just asked an applicant to take an HIV test. How long does the applicant have to decide whether or not to sign a consent form?
10 days
Insurers are required to maintain copies of their policy summaries for at least
3 years
Contracts that are prepared by one party and submitted to the other party on a take-it-or leave-it basis are classified as
Contracts of adhesion.
A producer must do all of the following when delivering a new policy to the insured EXCEPT
Disclose commissions earned from the sale of the policy.
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
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
Guaranteed insurability rider.
Which of the following best describes annually renewable term insurance?
It is a level term insurance
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One-year term option.
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT?
Other insurance coverages.
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 statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy.
Under which nonforfeiture option does the company pay the surrender value and have no further obligations tot he policyowner?
Cash surrender
What limits the amount that a policyowner may borrow from a whole life insurance policy?
Cash value
An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information?
Present the insured with a Disclosure Authorization Notice
Which of the following statements is an accurate comparison between private and government insurers?
Private insurers may be authorized to transact insurance by state insurance departments.
An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario?
Re-entry
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waiver of premium.
Which type of life insurance policy generates immediate cash value?
Single Premium
Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called
Suitability.
The interest earned on policy dividends is
Taxable
The initial amount of credit life insurance may NOT exceed
The amount to be repaid under the contract.
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments.
Which of the following is an example of a producer's diduciary duty?
The trust that a client places in the producer in regard to handling premiums.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life - Option A
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
Variable universal life