Practice Exam: Learning Mode 2
The validity of the policy cannot be contested once it has been in force for at least how many years after its date of issue?
2 years
All of the following are included within the Insurance Commissioner's duties EXCEPT: A) Writing North Carolina insurance laws. B) Reporting any violations of insurance laws to the Attorney General. C) Conducting investigation of all domestic insurers. D) Reviewing the insurers' annual reports.
A) Writing North Carolina insurance laws.
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
What happens when a policy is surrendered for its cash value?
Coverage ends, and the policy cannot be reinstated
In increasing and decreasing term policies, which policy component fluctuates during the policy term?
Death benefit
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?
Illegal under any circumstances
A Return of Premium term life policy is written as what type of term coverage?
Increasing
The type of term insurance that provides increasing death benefits as the insured ages is called what?
Increasing term
What are the two components of a universal policy?
Insurance and cash account
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
If the applicant has not fully met the requirements for licensing, the Commissioner will do what?
Refuse to issue the license and notify the applicant in writing
The Commissioner reports any violations of insurance laws and regulations to who?
The Attorney General
If a licensee fails to notify the Commissioner of insurer insolvency, if known or suspected, and to provide a statement of relevant facts, which of the following is TRUE?
The Commissioner will issue a cease and desist order.
The regulation of the insurance industry primarily rests with what?
The State
Who does an insurance agent represent?
The insurer
If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?
The loan amounts are deducted from the death benefit
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable whole life has a guaranteed death benefit
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
The main difference between immediate and deferred annuities is what?
When the income payments begin
How must a replacing producer respond to an applicant wishing to replace existing life insurance?
a Notice Regarding Replacement
Which of the following applicants would NOT qualify for a Keogh Plan? a) Someone who has been employed for more than 12 months b) Someone who is over 25 years of age c) Someone who works for a self-employed individual d) Someone who works 400 hours per year
d) Someone who works 400 hours per year *A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.
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
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?
$50,000
How long is a free-look period for replacement policies?
30 days *The replacing insurer must provide to the policyowner notice of the right to return the policy or contract within 30 days of the delivery of the contract and receive an unconditional full refund of all premiums.
An agent has completed a total of 30 hours of continuing education (CE) during a license renewal period. How many of these hours may the agent apply toward the next CE compliance period?
6
All of the following are true regarding a decreasing term policy EXCEPT: A O The payable premium amount steadily declines throughout the duration of the contract. B O The death benefit is $0 at the end of the policy term. C O The contract pays only in the event of death during the term and there is no cash value. D O The face amount steadily declines throughout the duration of the contract.
A) The payable premium amount steadily declines throughout the duration of the contract
If a life insurance policy contains a minimum 10-day unconditional refund provision (free-look), when is the latest that the buyer's guide and policy summary must be delivered?
At the time of policy delivery
What does "level" refer to in level term insurance?
Face amount
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed amount
The automatic premium loan provision is activated at the end of the what?
Grace Period
Which of the following policies is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy?
Graded premium whole life
The death benefit under the Universal Life Option B does what?
Gradually increases each year by the amount that the cash value increases
Which of the following policy components contains the company's promise to pay?
Insuring clause
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
Jumping juvenile policy
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
Jumping juvenile policy *While many policies provide a level death benefit, Jumping Juvenile policies provide a low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21).
Variable Whole Life insurance is based on what type of premium?
Level fixed
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period and nothing if death occurs after the 20-year period. What type of policy is this?
Level term
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
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
In which of the following instances would the premium be tax deductible?
Premiums paid by an employer on a $30,000 group term life insurance plan for employees
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
They are tax deferred until withdrawn
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities
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?
Universal Life
Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract?
Viatical settlement provider
Which of the following is INCORRECT regarding a $100,000 20-year level premium? a) The policy will expire at the end of the 20-year period. b) The policy premiums will remain level for 20 years. c) If the insured dies before the policy expired, the beneficiary will receive $100,000. d) At the end of 20 years, the policy's cash value will equal $100,000.
d) At the end of 20 years, the policy's cash value will equal $100,000. *Term policies do not develop cash values. All the other statements are
All of the following are duties and responsibilities of producers at the time of application EXCEPT: A) Change any incorrect statement on the application by personally initialing next to the corrected statement. B) Explain the nature and type of any receipt the producer is giving to the applicant. C) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. D) Check to make sure that there are no unanswered questions on the application.
A) Change any incorrect statement on the application by personally initialing next to the corrected statement.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? A) The insured may choose to convert to term or permanent individual coverage. B) The insured would not need to prove insurability for a conversion policy. C) The insured may convert coverage to an individual policy within 31 days. D)The premium for individual coverage will be based upon the insured's attained age.
A) The insured may choose to convert to term or permanent individual coverage.
At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?
Adjustable Life
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 *With paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
All of the following are true regarding a decreasing term policy EXCEPT: a) The payable premium amount steadily declines throughout the duration of the contract b) The death benefit is $0 at the end of the policy term. c) The contract pays only in the event of death during the term and there is no cash value. d) The face amount steadily declines throughout the duration of the contract.
a) The payable premium amount steadily declines throughout the duration of the contract *Premiums remain level with a decreasing term policy; only the face amount decreases.
If a licensee fails to notify the Commissioner of insurer insolvency, if known or suspected, and to provide a statement of relevant facts, which of the following is TRUE? a) The person will be subject to a fine. b) There will be no repercussions for that, reporting of insurer insolvencies is voluntary. c) The Commissioner may suspend or revoke the person's license. d) The Commissioner will issue a cease and desist order.
c) The Commissioner may suspend or revoke the person's license. *It is the duty of any licensed person, or employee or representative of an insurance company to notify the Commissioner pf any violations of the General Statutes of the Insurance Code, or insurer insolvency. The Commissioner may suspend, revoke, or refuse to renew the license of any licensee who willfully fails to comply with this section of the Insurance Code.