Pre-Licensing Insurance Class

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

What is the definition of a unilateral contract?

One sided: only one party makes an enforceable promise

Which Universal Life option has gradually increasing cash value and a level death benefit?

Option A

Which of the following has the right to convert the existing term coverage to permanent insurance?

Policyowner

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

The Gramm-Leach-Bliley act was passed to

Protect private customer information filed with a financial institution.

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

What is the main purpose of a 401k plan?

Retirement

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?

Return the application to the applicant for completion

Which of the following types of annuities will generally provide the highest monthly income?

Straight life

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination?

The Insurer

Which of the following is INCORRECT concerning a noncontributory group plan?

The employees receive individual policies

In a single employer group plan, what is the name of the policy issued to the employer?

Master Contract

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?

100% participation of members is required in noncontributory plans

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)

403 (b) Plan (TSA)

What is the waiting period on Waiver of Premium rider in life insurance policies?

6 months

Which of the following is the required number of participants in a contributory group plan?

75%

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in

Adjustment in the amount of death benefit

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

Aleatory

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's..

Ancestry

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT

Applicant's past income

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash Option

What does liquidity refer to in a life insurance policy?

Cash values can be borrowed at any time

If an applicant for a life insurance policy is found to be substandard risk, the insurance company is most likely to

Charge a higher premium

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms to the contract. This is called

Consideration

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration

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

Which policy component decreases in decreasing term insurance?

Face amount

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

Fair Credit Reporting Act

Which of the following is an eligibility requirement for social security disability income benefits?

Have attained fully insured status

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a fixed period

Which of the following policy components contains the company's promise to pay?

Insuring clause

Which of the following is true of a qualified plan?

It has tax benefit for both employer and employee

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

The insured's age at death

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

In a life settlement contract, who does the life settlement broker represent?

The owner

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits

All of the following are true regarding a decreasing term policy EXCEPT

The payable premium amount steadily declines throughout the duration of 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

In terms of parties to a contract, which of the following does not describe a competent party?

The person must have at least completed secondary education.

All of the following are true about variable products EXCEPT

The premiums are invested in the insurer's general account

All of the following would be eligible to establish a Keogh retirement plan Except?

The president and employee of a family corporation

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

Which of the following is TRUE about nonforfeiture values?

They are required by state law to be included in the policy

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities

What is the purpose of a disclosure statement in life insurance policies?

To explain features and benefits of a proposed policy to the consumer

Which employees of an insurance company are responsible for the final risk selection?

Underwriters

Social Security was created to provide all of the following benefits except

Unemployment income

Which of the following policies would have an IRS corridor or gap between the cash value and the death benefit?

Universal Life - Option A

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

All of the following statements are true regarding tax-qualified annuities EXCEPT

employer contributions are not tax deductible

Life income joint and survivor settlement option guarantees

income for 2 or more recipients until they die

Who bears all of the investment risk in a fixed annuity?

insurance company

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

owner's rights

If an agent wishes to sell variable life policies, what license must the agent obtain?

securities

For variable products, underlying assets must be kept in

separate account

The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case?

the benficiary

Whose responsibility is it to ensure the application is filled out

the producer

What is the purpose of the buyer's guide?

to allow the consumer to compare the costs of different policies

An absolute assignment is a

transfer of all ownership rights in a policy