Practice Exam: Learning Mode

Under the L&H Guaranty Association, the maximum benefit one contract holder may receive in benefits, regardless of the number of contracts held is how much?

$5,000,000 With respect to any one contract holder covered by unallocated annuity contract $5,000,000 in benefits, regardless of the number of contracts held by that contract holder

How long must whole life policies contain a table showing their guaranteed cash value at the end of each year (anniversary date)? How is the table shown?

-20 years -The table is shown per unit (per thousand)

What is the continuing education requirement in Ethics for agents in this state?

-3 hours every 2 years -All agents, regardless of how many licenses they hold, must complete 24 hours of CE every 2 years. 3 of these hours must be completed in a course that is classified as Ethics

Which the following statements is NOT true concerning insurable interest as it applies to life insurance?

-A debtor has an insurable interest in the life of a lender. -A lender has an insurable interest in the life of a debtor, but only to the extent of the debt. The debtor does not have an insurable interest in the life of the lender.

To sell variable life insurance an agent must receive all of the following except what?

-An SEC Registration -They would need a FINRA registration, a securities license, and a life insurance license

In cases when an applicant for insurance is blind or deaf, the insurer underwriting the policy may do which of the following?

-Apply the same standards as are used for applicants whose sight and hearing are not impaired. -Insurers cannot refuse to continue to insure an individual, limit the amount, or kind of coverage available to an individual, or charge an individual a different rate for the same coverage, solely because of blindness or partial blindness, or deafness or partial dafness

Straight Life Policies

-Have the lowest annual premium of the 3 types of whole life policies -The face value of the policy is paid to the insured at age 100 -It usually develops cash value by the end of the third policy year -They charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit

Installments for Fixed Annuity

-Installments for a fixed amount option has no life contingencies, meaning the payments will NOT stop when the annuitant dies. -A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living -The annuitant may select how big the payments will be -The value of the account and future earnings will determine the time period of the benefits

What decreases on a decreasing term policy?

-The face amount -NOT the premium

What are the two most important things about single life premium?

1. It may but a policy that is paid up for life 2. It has an immediate cash value

What 3 types of benefits does social security provide?

1.Retirement 2. Disability 3. Survivors

An individual purchased a 100k Joint Life Policy on himself and his wife. 8 years later, he died in an automobile accident. How much will his wife receive from the policy?

100k -In joint life policies, the death benefit is paid upon the first death only

the required privacy disclosure notice must be provided by the insurer to current policy holders at least once in any period of how many months?

12 months

Insurance companies are required to provide proof of loss forms to the claimant within how many days after receipt of notice of loss?

15 days

A licensee who ceases to maintain residency in north carolina is required to deliver any insurance licenses to the commissioner by mail or in person within how many days after terminating residency?

30 days

When an employee terminates coverage under a group insurance policy, coverage continues in force for how long?

31 days under the conversion privilege to covert to an individual policy

In north carolina the commissioner serves a term of how many years

4 years

An insured purchased a variable life insurance policy with a face amount of 50k. Over the life of the policy, stock performance declined, and the cash value fell to 10k. If the insured dies, how much will be paid out?

50k -The cash value of a variable life insurance policy in not guaranteed. -However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount

According to the entire contract provision, a policy must contain what?

A copy of the original application for insurance

Domestic vs. foreign Insurer

A domestic insurer's home office is in this state, a foreign insurer's is in another state and an alien insurer's is in another country

The Other Insured Rider

Allows you to purchase renewable term insurance on yourself, your spouse, child or business partner.

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 kind of policy would you recommend?

An endowment policy -Because the cash value in an endowment policy has to build up faster since the funds are intended to be used while the insured is alive, the premium for an endowment is considerably more expensive than an ordinary straight life policy

The death protection component of universal life insurance is always what?

Annually renewable term

The least expensive first year premium is found in which of the following policies?

Annually renewable term

What protects the insured from an unintentional policy lapse due to a nonpayment of premium?

Automatic Premium Loan

Are whole life benefits bundled or package?

Bundled

A rider that may be attached to a life insurance policy that will adjust the ace amount based upon a specific index, such as the Consumer Price Index, is called what?

Cost of Living Rider -Adjusts the face amount of a policy to maintain the relationship of the face amount and increases in the cost of living

Which of the following would not be an appropriate use of a deferred annuity?

Creating an estate. Annuities grow tax deferred, and are best suitable for accumulating retirement income or funds for children's college education. Unlike life insurance, annuities do not create an estate, but liquidate it

What policy is used to provide credit life insurance?

Decreasing term

What type of insurance would be the most suitable for mortgage protection?

Decreasing term, because it directly correlates with he amount of outstanding loan and length of time remaining on the mortgage

What term is used to name the nontaxed return of unused premiums?

Dividend

Which of the following describes an insurance company that has been formed under the laws of this state?

Domestic

Which type of nonforfeiture option has the highest amount of insurance protection?

Entended Term -It has the same face amount as the original policy but for a shorter period of time

Sally owns a policy in which she is covered as the bread winner with permanent insurance and with decreasing term insurance in the form of a rider. Wht type of policy is this?

Family Income Policy -If the insured dies during the income period of a family income policy, monthly benefits are paid to the survivors for the balance of the income phase. -The death benefit is then paid to the beneficiary -During the income phases, the insurer retains the cash value and death benefit to invest and generate interest

J applied for a life insurance policy on january 10. The policy was issued January 31. J's agent was vacationing at the time the policy was issued, so J did not recieve the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?

February 28th, or 10 days after the time the policy is delivered

When a policy owner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

Fixed Amount

Contributory vs Noncontributory Group Plan

In a contributory group life plan, 75% eligible employees must enroll In noncontributory, 100% of eligible employees must enroll, and the premium is covered by the employer

What does the guaranty association guard against?

Insurer insolvency

Universal Life Insurance is also known as what?

Interest Sensitive Whole Life

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments an expense factors, the cash values could change rom those shown in the policy at issue time. What type of policy is this?

Interest-sensitive Whole Life -Because the cash values are generated by investment, interest rates will affect the amount of the cash value

What is the purpose of guaranteed insurability?

It allows the insured to purchase specific amounts of additional insurance at specific times without providing proof of insurability

One of the advantages of a family life insurance policy that provides coverage for the children is that it what?

It can be converted to permanent insurance for the children without requiring proof of insurability

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue -Coverage commences on the date of the application or the date of the medical exam, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for

What describes annually renewable term insurance?

It is level term insurance that offers the most insurance at the lowest cost

Two brothers are starting a new business. They know it will take several years to build the business to the point that they can pay iff the debt accumulated in starting the business What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint life 0=-Would be least expensive because premiums are based on average age, and it would pay a death benefit only at the first death

What type of premium does straight life policy have?

Level

Which two terms are associated directly with premium?

Level or flexible

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life, because premium payments will cease at age 65, but coverage will continue until death or age 100

Would the premium of a survivorship life policy compared with that of a joint life policy be lower or higher?

Lower

What type of whole life policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy?

Modified Life Policy -Created to attract young professionals who have a large financial investment in their education and training, but starting their professional careers, they have limited resources to buy insurance. -Modified life is a permanent policy, but in the early years, the premiums are similar to that of a term policy; in later years, the premiums are increased to build cash values and cause the policy to endow

In key-person life insurance policies, are premiums tax deductible?

No, the business cannot take a tax deduction for the expense of the premium. BUT if the key employee dies, the benefits paid to the business are received tax free

When is the only time insurance producers are allowed to share or split commissions?

Only if both parties are properly licensed for that line of insurance

Children's riders attached to whole ife insurance policies are usually issued a what tyoe of insurance

Term

When an annuity is written whose life expectancy is taken into account

The annuitant The annuitant is the person whose age and life expectancy is going to be used to calculate the benefits of the annuity and who will receive the annuity payments. Usually, the annuitant and the owner are the same person, but it is not required.

Who is the beneficiary and owner of a credit life insurance policy?

The creditor

What is convertible term based on?

The current or attained age of the insured

A friend helped an insurance producer sell an insurance policy. The producer can share the commission with the friend if what?

The friend is licensed in the same line of insurance

An insured purchased a 10 year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

The insured may renew the policy for another 10 years, but at a higher premium rate

Annuity Period

The period of time during which accumulated money is converted into income payments

The policy owner of a universal life insurance policy can skip paying the premium and the policy will not lapse as long as what?

The policy contains a sufficient cash value to cover the cost of insurnace

All of the following are true about a insurability rider EXCEPT:

The rider is available to all insures with no additional premium -The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates, and events without providing insurability -The coverage is purchased at the insured attained age and the maximum allowable purchase is specified in the base policy -This rider usually expires at the insured's age 40

Family Income Policy Insurance

They involve adding decreasing term insurance to a basic whole life contract. Upon the death of the insured, the policy pays the beneficiary a monthly income for the balance of the family income coverage period.

Are Universal life benefits packaged or transparent?

Transparent (stand-alone)

If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater. True of False?

True

Which type of life insurance policy allows the policy owner to pay more or less than the planned premium?

Universal life -Annually renewable term policy with a cash value account -Allow policy holders to withdraw a LIMITED portion of the cash value and it is normally taxed

What is the license suspension period for a second offense of violating state rules regarding records and reports?

Up to 1 year for the second offense, and 1 to 6 months for the first offense

Which of the following life insurance policies allows a policyowner to take out a loan

Variable Universal Life

When does the 10-day free-loo period begin?

When the policy is delivered by the agent

Pretext Interview

Where a person, in an attempt to obtain information about a natural person, pretends to be someone he is not or pretends to represent a person he is not in fact representing

What two insurance policies reach maturity at the same time?

Whole Life and Limited Pay (reaches at age 100)

What happens if a deferred annuity is surrendered before the annuitization period?

the owner will receive the surrender value of the annuity if a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.