Practice Exam 6
An insured bought a $150,000 non-participating whole life policy many years ago. He is 100 years old today. He has borrowed from the policy's cash value and has faithfully made all payments when due. The policy's cash value is:
A) $150,000
Renewable term insurance can best be described as:
A) A level death benefit with a raising premium
Renewable term insurance can be best described as:
A) A level death benefit with an increase in premium
The policy provision which comes into effect when the insured and primary beneficiary die in a simultaneous (common) accident with no evidence as to who died first is a:
A) Common disaster provision.
Common life insurance policy riders include all of the following, except:
A) Extended term
If an insurer is not able to meet financial obligations when due, the insurer would be considered:
A) Insolvent
Usually, in order to join a group insurance plan without proving insurability, an employee must:
A) Join the plan during the enrollment period.
When may a representation be withdrawn?
A) Only before the insurance is in effect
Which type of life insurance policy gives the policy owner the right to share in the insurer's surplus?
A) Participating
The Employee Retirement Income Security Act of 1974 (ERISA) mandates requiring plan sponsor to provide participants with:
A) Plan descriptions and benefit statements
Unless it is merely a statement of an expectation or a belief, a representation as to the future is considered which of the following?
A) Promise
The payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified on the policy:
A) The insurer will make the payments until the insured juvenile reaches the specified age.
Regarding life insurance coverage for a company, the one responsible for obtaining the coverage, maintaining the policy, and paying the premium is:
A) The master policy holder
What makes up the entire contract in a life insurance policy?
A) The policy, when attached, in the application
Loss retention is an effective risk management technique when all of the following conditions exist, except:
A) The probability of loss is unknown
Which of the following is a true statement regarding the social security (OASDHI) program?
A) The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs.
The probationary period in a group policy is intended for people:
A) Who joined the group after the policy effective date.
Which of the following is true regarding participation in a group plan?
B) A non-contributory group health plan must involve all members
Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness?
B) Accelerated death benefit
In insurance terms a representation can be considered:
B) An implied warranty
How do rights of an irrevocable beneficiary differ from those of a revocable beneficiary?
B) An irrevocable beneficiary has a vested right that neither the policy owner nor his creditors can impair without the beneficiary's consent.
Which of the following requires a reporting company to respond to a consumer's complaint that his file contains inaccurate information about them?
B) Fair credit reporting act.
Under the 10-day right -to - return, the policy will pay proceeds:
B) If the policy is not returned but premium is paid.
Which of the following describes an insurer who has enough financial resources only to provide for its liabilities and for reinsurance of outstanding risks?
B) Insolvent
In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase:
B) Key person insurance
In the state of California:
B) Providing free insurance coverage in connection with the sale of services as an inducement for completing the transaction is illegal.
RW and associates is an agency which represents BLG Insurance Corporation. RW and Associates may leave the name BLG Insurance Corporation in its advertisements by clearly stating the relationship between the two businesses in any of the following ways, except:
B) RW and Associates underwriting for BLG Insurance Corporation
What does the Insurance Commissioner have the right to do if an agent lacks authority from an insurer named on a binder for coverage?
B) Suspend or revoke the license of the agent
When a licensed agent submits a renewal application with an applicable fee on or before the expiration date:
B) The agent will be able to operate for up to 60 days after the specified expiration date.
All of the following statements about contingent beneficiaries are true, except:
B) The contingent beneficiary shares death proceeds equally with the primary beneficiary
According to the CA Insurance Code, an insured's policy must specify all of the following, except:
B) The financial rating of the insurer.
In group insurance the Certificates of Insurance are issued to:
B) The group members
Which of the following is a correct statement about life insurance policy types?
B) The initial premium for term insurance is lower than the initial premium for whole life insurance
Which of the following statements about policy dividends is true?
B) The insured usually selects the dividend option at the time of the policy purchase
All of the following statements about survivorship life insurance are true, except:
B) The policy face amount is paid out only upon the death of the first insured to die
The department responsible for evaluation, selection and distribution of risks is:
B) The underwriting department
All of the following statements about the election of a life insurance policy's settlement options are true, except:
B) When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate.
How much continuing education is a new agent who is both life and fire & casualty licensed required to complete?
C) 25 hours per year for either license
Which of the following is a hazard?
C) A condition that might increase the likelihood of a loss occurring
All of the following are true statements concerning the treatment of federal income tax on life insurance, except:
C) Annuity death benefit proceeds are exempt from all taxation.
Insurers make an adjustment to the cash value of an account of a universal life policy each time a payment is made. They add the premium paid and:
C) Current interest; adjusted for mortality and a general expense charge.
In the event of an accidental death, the principal sum in a disability policy will be paid:
C) In one lump sum.
Identify the penalty for each violation for a person engaging in any unfair method of competition:
C) No more than $5,000 for each act, or no more than $10,000 for each act if the act is judged to be willful.
People commonly purchase an annuity to protect against the risk of:
C) Outliving their financial resources.
In life insurance, the loss of a key family member is considered a:
C) Personal loss
According to the CA Insurance Code, all insurers must maintain a department to investigate:
C) Possible fraudulent claims from insureds
What recourse does an insurer have if a violation of a material warranty on the part of the insured is discovered?
C) Rescission of the policy.
The adjustments that an insurer makes in a cash value account in a universal life policy each time a payment is made includes all of the following, except:
C) Subtract the policy surrender charges
The Common Disaster provision is designed to protect the interests of which of the following?
C) The contingent or secondary beneficiary
A significant benefit to the insured in group underwriting verses individual is:
C) The cost of coverage is lower
After a life insurance policy has been in effect for two years, what keeps it from being rescinded by the insurer?
C) The incontestability clause
Which of the following is a correct statement about life insurance policy types?
C) The initial premium for term insurance is lower than the initial premium for whole life insurance
An insured bought a $150,000 non-participating whole life policy many years ago. She is 100 years old today. She has never borrowed from the policy, and has made all premium payments when due. The policy cash value is:
D) $150,000
How long must a life-only agent maintain records regarding policies sold in this state?
D) 5 years.
Joe receives a large bonus at work and decides to purchase an annuity with it. His monthly income payments from the annuity will begin the following month. Which of the following has Joe purchased?
D) A single premium immediate annuity
The insured, aged 65, owns a $100,000 non-participating whole life policy. The policy is paid up as of today. When would the cash value reach $100,000?
D) Age 100
What would be the Insurance Commissioner's most likely course of action if an applicant for an insurance license had a previous application for a professional license denied for cause by any licensing authority within five years of the date of the filing?
D) Deny the application without a hearing
The purchase of an insurance policy may not provide one of the following for the insured. Select the most complete answer:
D) Elimination of the risk
Which of the following requires a reporting company to respond to a consumer's complaint that his file contains inaccurate information?
D) Fair Credit Reporting Act
What would we call a representation which fails to correspond with its stipulations or assertions?
D) False
Which of the following is true about life insurance beneficiary designations?
D) If there is no surviving beneficiary, the death benefit is paid to the insured's estate.
Term insurance is typically characterized by:
D) Low premiums and no cash value
What would a person be guilty of who refuses to submit books and records to the Commissioner?
D) Misdemeanor
When are parties to a contract required to communicate information solely based on personal judgment for a matter in question?
D) Never
The guaranteed insurability option provides the ability to:
D) Purchase additional insurance regardless of insurability
Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium?
D) Renewable term
An intentional concealment entitles the injured party to which course of action?
D) Rescission of the contract
Unintentional concealment entitles the injured party to which course of action?
D) Rescission of the contract
An individual with a low income and high insurance needs should buy:
D) Term insurance
A $50,000 whole life policy with a cash value of $10,000 has been in force for 11 years. The policy owner is unable to continue the premium payments. Which of the following describes the reduced paid-up non-forfeiture option?
D) The cash value is used to purchase a $20,000 paid-up policy.
Why is having a large number of similar exposure units important to insurers?
D) The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums
While an insurer is paying the premium for a life insurance policy under the waiver of premium rider:
D) The policy remains in full force in every respect
What is the purpose of "key person" insurance?
D) To cover decreased business earnings due to the death of a key employee
The policy owner, age 50, has been paying the premiums on his whole life policy for 15 years. He needs the equivalent of 1/3 of the cash value of his policy over the next two years. He wants to continue to have policy protection, and can afford to pay the premiums. Which of the following would appear to be his best course of action?
D) Use the policy loan provision to borrow money from the policy, but keep paying the policy premiums to keep the policy in force.
The insured is totally and permanently disabled. The insured's policy continues in force without the payment of a premium because the policy contains a:
D) Waiver of premium provision
