Primerica Practice Exam 2

A client has missed her premium payment on her cash value policy, and the grace period has also lapsed. The policy is still in force because her insurer has been deducting the cost of the premium from her cash value. What provision allows this? A.) Automatic Premium Loan B.) Incontestability Clause C.) Reinstatement Provision D.) Over-draft protection

A.) Automatic Premium Loan

WHich of the following riders would provide for an insured to increase the face amount of their life insurance policy without proof of insurability? A.) Guaranteed insurability/future purchase option B.) Waiver of premium C.) Accelerated death benefit D.) Double indemnity rider

A.) Guaranteed insurability/future purchase option

Under which life settlement option does the insurer retain the death benefit but pays the beneficiary the earnings on the death benefit? A.) Interest only option B.) accumulate with interest option C.) life income option D.) cash option

A.) Interest only option

Brian purchased a variable life policy and died 25 months after the issue date. It is then discovered that Brian understated his age on the application. What will the insurer do in regard to the payment of the death benefit to the beneficiary? A.) the death benefit will be reduced to reflect the age discrepancy B.) the policy will be recinded and all premium paid will be refunded to the beneficiary C.) the full death benefit will be paid because the policy is over 2 years old D.) the death benefit will be paid to the estate of the insured for legal action

A.) the death benefit will be reduced to reflect the age discrepancy

Which of the following transactions would most likely to DECLINED due to lack of insurable interest? A.) A parent buys insurance on their adult child B.) An employee insures their employer in the fear of losing their job C.) A spouse insures the other spouse D.) A local hospital insures its cheif of surgery

An employee insures their employer in the fear of losing their job

Which statement is FALSE concerning insurance company regulations? A.) Insurers may not advertise their membership in the Guarantee Association B.) An insurer suffering from an impairment of their minimum required paid-in capital is labeled solvent C.) The commissioner may begin conservation proceedings against companies who cannot meet solvency regulations D.) An insurer may be liquidated of conservation proves to be futile

An insurer suffering from an impairment of their minimum required paid-in capital is labeled solvent

WHat is the minimum number of members required for group life insurance? A.) 15 B.) 10 C.) 25 D.) 100

B.) 10

Any person to whom the commissioner has issued a seizure order and who refuses to deliver any books, records, or assets of an insurer faces: A.) A felony punishable by a fine up to $1,000 a year in prision or both B.) A misdemeanor punishable by a fine up to $1,000 a year in jail or both C.) a misdemeanor punishable by a $5,000 fine, if unintentional, or $10,000, if intentional D.) Administrative fines only

B.) A misdemeanor punishable by a fine up to $1,000 a year in jail or both

In a group life policy with a death benefit of more than $50,000: A.) Premium cost is taxable to the employer B.) Premium cost for insurance above $50,000 is taxabe as income to the employee C.) Premium cost for insurance below $50,000 is taxable as income to the insured D.) Premium cost is tax deferred

B.) Premium cost for insurance above $50,000 is taxabe as income to the employee

Variable insurance and variable annuity products are regulated by: A.) SEC and FINRA B.) SEC, FINRA and DOI C.) DOI and FINRA D.) none of the above

B.) SEC, FINRA and DOI

Situations where the risk is increased by slippery floors, a habit of lying, or reckless drunk driving are best described by which of the following? A.) A peril B.) a hazard C.) pure risk D.) cause of loss

B.) a hazard

Which party has the legal authority to name or change the beneficiary? A.) insurer B.) policyowner C.) insured D.) agent

B.) policyowner

How many hours of continuing education are required per renewal for a life-only agent? A.) 20 hours, 4 hours must be in ethics B.) 20 hours, 2 hours must be in ethics C.) 24 hours, 4 hours must be in ethics D.) 24 hours, 2 hours must be in ethics

C.) 24 hours, 4 hours must be in ethics

According to the CIC, life-only agents must keep records of their transactions for: A.) 12 months B.) 3 years C.) 5 years D.) 7 years

C.) 5 years

At what age does Social Security Medicare program Part B start providing benefits? A.) 60 B.) 62 C.) 65 D.) 67

C.) 65

Which of the following is not a personal use of life insurance? A.) A client buys cash value insurance to fund their childrens college education B.) A client buys insurance to pay off their mortgage should they pass away prematurely C.) A client buys insurance to fund a buy-sell agreement D.) a client buys insurance to provide future income to a surviving spouse

C.) A client buys insurance to fund a buy-sell agreement

While collecting underwriting information, certain rules must be followed. Which of the following is incorrect? A.) Information contained on the non-medical application may result in the requirement for a physical exam B.) When credit is used to determine insurability, the applicant must be furnished with the name, address, and phone number of the credit agency used by the insurer C.) Post-claims underwriting is a valid and necessary means of determining the insurability of a potential applicant D.) Insurers may test for HIV after getting informed consent from the applicant, and may ask questions concerning the existence of the condition as long as they don't reveal information about sexual orientation

C.) Post-claims underwriting is a valid and necessary means of determining the insurability of a potential applicant

Who submits a request for life insurance to a company? A.) The beneficiary B.) The underwriter C.) The applicant D.) The agent

C.) The applicant

All of the following needs to be included on an application for life insurance except: A.) Life insurance with other insurers B.) The agents statement, if applicable C.) Signatures of the agent, proposed insured, and the owner D.) Disability income insurance

D.) Disability income insurance

In comparing the purchase of individual life insurance to acquiring group life, which statement is not true? A.) Group insurance is automatic and requires less medical information than the individual coverage B.) Group life tends to have a lower premium per person than individual life C.) Both provide a tax-free death benefit D.) Group insurance has a non-deductible premium while individual insurance has a tax deductible premium to the payor

D.) Group insurance has a non-deductible premium while individual insurance has a tax deductible premium to the payor

Which type of insurer requires an attorney-in-fact overseen by an advisory committee of subscribers? A.) Fraternal insurer B.) mutual insurer C.) reinsurer D.) reciprocal insurer

D.) reciprocal insurer

A client has a history of DUIs. To his insurer, they see him as a ________ hazard. A.) Physical B.) Moral C.) Morale D.) Legal

Morale

Which statement about reinstatement is FALSE? A.) Reinstatement usually requires an application with underwriting questions, but may not require any physical exams B.) Reinstatement requires payment of past due premium plus interest C.) A reinstated policys premium is based upon the insureds original pace D.) The reinstated policy is incontestable if the first time it was in force it already passed the two year mark

The reinstated policy is incontestable if the first time it was in force it already passed the two year mark

The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the applicant made a material misstatement on the application. What is the most likely course of action for the insurer? A.) Rescind the policy B.) An administrative hearing by the DOI C.) a hearing by court of law to determine the appropriate actions D.) no course of action allowed since the policy has already been issued

A.) Rescind the policy

The provision that protects the proceeds of a life insurance policy from attachment by the beneficiarys creditors after the insureds death is known as the: A.) Spendthrift (trust) clause B.) Common diaster clause C.) Incontestability clause D.) the beneficiary protection clause

A.) Spendthrift (trust) clause

In which type of policy does the insurer apply flexible premium to pay for the cost of insurance and expenses and then uses the remaining balance plus interest to build the cash value account? A.) Universal life B,) Adjustable life C.) Renewable term D.) whole life

A.) Universal life

In insurance, the agents have authorization to represent the company. The producers may exercise this relationship through: A.) express authority, implied authority and apparent authority B.) domestic authority, foreign authority and alien authority C.) underwriting department, actuarial department and claims department D.) reciprocal authority, risk retention and reinsurance

A.) express authority, implied authority and apparent authority

To authorize the release of an attending physician's report, the applicant must: A.) sign a consent form B.) Send a letter to the physician C.) Furnish the name of the physician D.) Submit to a physical examination

A.) sign a consent form

At age 72, Mrs. Smith is considering applying for Medi-Cal so she can afford her medicial bills. Today Agent Charles is visiting her home and wanting to sell her an annuity product. Which of the following is true? A.) its permissible for Agent Charles to visit Mrs.Smith for the first time without providing her a pre-meeting notice in writing 24hours in advance B.) Agent Charles cannot allow Mrs.Smith to purchase an annuity if after the purchase, Mrs. Smith wouldn't qualify for Medi-cal C.) Mrs. Smith must agree to meet with Agent Charles alone D.) Agent Charles should recommend the annuity purchase to assure he receives the greatest commission possible from the visit

B.) Agent Charles cannot allow Mrs.Smith to purchase an annuity if after the purchase, Mrs. Smith wouldn't qualify for Medi-cal

Ashley, the policy owner and insured, named Wendell as primary beneficiary and Barbara as contingent beneficiary. Just six weeks prior to Ashleys death, Wendell and Barbara are killed in a common diaster. The insurance proceeds will be received by whom? A.) Ashleys survivors B.) Ashleys estate C.) Split equally between the estates D.) Wendells estate

B.) Ashleys estate

Which statement is not true about insurance sales? A.) Mass marketing techniques usually involve selling insurance without the use of an agent B.) Brokers represent insurers in negotiating coverage with various insureds C.) Insurance agents are not authorized to sell life insurance D.) An agent or broker must exercise care when using apparent authority during the sales process

B.) Brokers represent insurers in negotiating coverage with various insureds

For an insurance contract, utmost good faith means: A.) the policyowner will be indemnified in case of loss B.) each party relies upon the truthfulness of the other C.) the contract just involves the policyowner and the insurer D.) each party is equally responible for the value of the policy

B.) each party relies upon the truthfulness of the other

All of the following statements about a policy grace period are false, except: A.) death during the grace period results in the denial of the claim B.) grace periods are typically 31 days C.) Returning the policy during the grace period results in a full refund of premiums D.) Not every insurer is required to provide a grace period

B.) grace periods are typically 31 days

A policyowner who cannot borrow the equity, change beneficiaries, assign a policy or stop paying premiums without the beneficiarys written consent has designated the beneficiary as a(n): A.) revocable beneficiary B.) irrevocable beneficiary C.) defined beneficiary D.) primary beneficiary

B.) irrevocable beneficiary

The Roth and Traditional IRAs have some similarities. Which of the following is not true? A.) both have penalties for early withdrawal B.) Both grow tax deferred C.) Both are tax deductible to the investor D.) Both allow the investor to invest for themselves and their non-income earning spouse

Both are tax deductible to the investor

For a flexible premium deferred annuity, the time during which the owner makes premium payments and the time before benefit payments begin is known as the: A.)Activity period B.) Annuity period C.) Accumulation period D.) Annuitization period

C.) Accumulation period

Which action by an insurer, or its representatives, is not considered an unfair claims violation? A.) a claims adjustor misrepresents pertinent facts or policy provisions to dissuade a client from making a claim B.) An agent does not respond to a claimants communication concerning a claim where a response is required C.) The claims department fails to affirm or deny coverage within a resonable period of time after proof of loss has been submitted D.) An agent advises a claimant to obtain the services of an attorney

D.) An agent advises a claimant to obtain the services of an attorney

All of the following statements about assignments are not false, except: A.) absolute assignments can be used for life settlement agreements B.) A lender may be repaid through the use of a collateral assignment C.) Absolute assignments involve the complete transfer of all policyowner rights in the insurance policy D.) Assignments need not be filed with the insurer if notarized and filed in county records

D.) Assignments need not be filed with the insurer if notarized and filed in county records

Which of the following statements is false in regard to a Life Paid-up at 65 whole life policy? A.) premium payments will be hihgher than a straight whole life policy B.) the policy will mature at the death of the insured or age 100, whichever occurs first C.) premium payments stop at age 65 D.) The policy will endow at age 65

D.) The policy will endow at age 65

Profit sharing plans: A.) are fixed liabilities to the business B.) often allow companies to delay distribution of each employees share C.) cannot be used along with other retirement programs D.) allow for a contribution of a specified proportion of company profits

D.) allow for a contribution of a specified proportion of company profits

In life insuracne, beneficiary succession is the method used to determine who will receive death proceeds. If the primary beneficiary is not living upon the death of the insured who will receive the payment? A.) third party beneficiary B.) revocable beneficiary C.) irrevocable beneficiary D.) contingent beneficiary

D.) contingent be

Which insurance is known for having a level premium with a fixed rate of return resulting in guaranteed cash value? A.) Adjustable life B.) Whole life C.) Variable Life D.) Universal Life

Whole life

The person who will receive the benefit of an annuity and whose life the payout is based upon when the contract is purchased is the: A.) Policyowner B.) annuitant C.) beneficiary D.) insured

annuitant

Which of the following is NOT an acceptable underwriting classification? A.) Sub-standard B.) Preferred C.) Declined D.) Standard

C.) Declined

Which statement best describes "agreement" as it relates to contracts? A.) the intent of the contract must be legally acceptable to both parties B.) all parties must be capable of entering into a contract C.) each party must offer something of value D.) one party accepts the exact terms of the other parts offer

D.) one party accepts the exact terms of the other parts offer

Which of the following is not a qualified 1035 exchange? A.) a whole life policy exchanged for a variable life policy B.) A variable annuity exchnaged for a variable universal life policy C.) A variable annuity exchanged for a fixd annuity D.) a universal life policy exchanged for a whole life policy

B.) A variable annuity exchnaged for a variable universal life policy

The commissioner can deny an applicant for a license after a hearing: A.) If the applicant doesn't lack integrity B.) If the applicant has permitted someone in their employment to violate the California Insurance Code C.) For applicants holding other professional licenses D.) For applicants seeking the license for the purpose of aiding the enforcement of the California Insurance Code

B.) If the applicant has permitted someone in their employment to violate the California Insurance Code

All of the following describe differences between binding receipts and conditional receipts, except: A.) conditional receipts are commonly used for life insurance applications B.) No claim is paid with either receipt until a policy is issued C.) The binding receipt always provides immediate coverage from the date of the receipt D.) The conditional receipt can provide coverage from the date of application once the application is later approved by underwriting

B.) No claim is paid with either receipt until a policy is issued

A client has purchased an annuity with an annual bonus she received at the end of last year. She has requested annual benefit payments to start at the end of this year. What type of annuity did she purchase? A.) FLexible premium deferred annuity B.) Single premium immediate annuity C.) Flexible premium immediate annuity D.) Single premium deferred annuity

B.) Single premium immediate annuity

Premiums paid into a variable annuity purchase which of the following? A.) annuity units B.) accumulation units C.) purchased units D.) paid-up units

B.) accumulation units

Which of the following is an incorrect statement about a client's privacy rights? A.) signed consent is required before an attending physicians statement (APS) will be completed B.) Abuse of information found within medical records could result in a HIPAA violation C.) A client does not have access to their MIB report as it belongs to the member's life insurers D.) Consent is required before an insurer may access an insureds credit history. Any entry may be disputed if in error

C.) A client does not have access to their MIB report as it belongs to the member's life insurers

An applicant has the right to know that the insurance company will collect certain personal information about their credit, character and reputation. The insurer may gain such information from: A.) A privacy notice B.) An application for insurance C.) A consumer report D.) A pretext interview

C.) A consumer report

According to the California DOI, an insurer whose articles of incorporation are registered in Oslo, Norway, is considered: A.) A domestic insurer B.) A foreign insurer C.) An alien insurer D.) An admitted insurer

C.) An alien insurer

All of the following statements about agents are true, except: A.) independent agents can be appointed by multiple insurers B.) if an agent submits business to an insurer that the agent is not appointed with, the insurer can submit a notice of appointment within 14 days to validate the relationship C.) Exclusive agents work for themselves D.) Agents need to complete 4 hours of ethics continuing education every license renewal as a part of their regular CE hours

C.) Exclusive agents work for themselves

What nonforfeiture option allows a policyowner to use the existing cash value to purchase a policy of the same face amount as the original policy but for a reduced amount of time? A.) Reduced paid-up insurance B.) Cash surrender value C.) Extended term insurance D.) Extended paid-up insurance

C.) Extended term insurance

A forty-five year old investor has been laid off from his job. In order to pay bills, he takes a premature distribution from his traditional IRA account. What tax penalties, if any, will he face? A.) None. Distributions during times of unemployment are not penalized B.) None. Distributions before the age of 59 1/2 are penalty-free C.) He will be required to pay a 10% tax penalty on the amount withdrawn D.) Since traditional IRAs are often tax deductible, the client owes the notmal taxes they avoided when they made their contribution

C.) He will be required to pay a 10% tax penalty on the amount withdrawn

Which of the following is considered ordinary insurance? A.) Renewable term insurance B.) Blanket policies C.) Mortgage redemption D.) Whole life insurance

C.) Mortgage redemption

Which of the following statements is not included in the Entire Contract clause? A.) All statement made by the insured in the application will be considered as representations, not warranties B.) A copy of the application, if used, must be attached to the policy C.) The insurer agrees to provide life insurance protection for the name insured which will be paid to a designated beneficiary when proof of death is received by the insurer D.) Only an executive officer can make changes to the contract

C.) The insurer agrees to provide life insurance protection for the name insured which will be paid to a designated beneficiary when proof of death is received by the insurer

An agent who knowingly misrepresents material information for the purpose of inducing a client to lapse, forfeit, change or surrender a life insurance policy or annuity has committed an illegal practice known as: A.) Concealment B.) Misrepresentation C.) Twisting D.) Fraud

C.) Twisting

A policy pays the face amount if the insured dies before a specified date, or lives to that specified date. This best describes: A.) term insurance B.) social security C.) an endowment policy D.) an annuity

C.) an endowment policy

An insurer invests the cash value of a fixed annuity in which of the following assets? A.) index account B.) blended account C.) general account D.) separate account

C.) general account

All of these statements about life insurance settlement options are false, except: A.) fixed amount is the default option when no option is selected B.) Life income payments are income tax free C.) life income with 10 years certain provides at least 120 months of payments D.) settlement options like fixed period are good ways to provide an income to a beneficiary who cannot handle large sums of money

C.) life income with 10 years certain provides at least 120 months of payments

Term insurance is best described by which of the following? A.) provides coverage to age 100, builds cash value, participates in dividend payments, high premium and is payable at the end of a preselected period B.) combines monthly income during a stated period with a death benefit, nonforfeiture provisions and greater flexibility during times of inflation C.) provides temporary protextion, builds no cash value, is less expensive, and may be renewed D.) provides the option to adjust the face amount, change anniversary dates, and automatically increases face amount at given age

C.) provides temporary protextion, builds no cash value, is less expensive, and may be renewed

Which of the following is not excluded from the California Life and Annuity Replacement Law? A.) purchasing credit life insurance for the purchase of a second home B.) purchasing group life insurance from a part-time employer C.) purchasing a new policy that will take the place of an existing policy D.) converting a convertible term policy to whole life insurance

C.) purchasing a new policy that will take the place of an existing policy

Which of the following is most likely to have a TSA? A.) corporate executive B.) small business owner C.) school district employee D.) employee of a blue chip corporation

C.) school district employee

Which of the following becomes part of the contract, is guaranteed to be true, and if untrue, may be grounds for rescinding the policy? A.) Facility of payment clause B.) contract of adhesion C.) warranty D.) Consideration

C.) warranty

Which statement below is least correct regarding the type of insurance that fits best with the applicants needs? A.) Applicants concerned with the increasing cost of living should purchase increasing term B.) Applicants wishing to pay off mortgage should they suffer a premature death might buy a decreasing term plan C.) Annual renewable term works well for employers looking to provide cost effective group life insurance for their employees D.) Convertible term can be purchased by applicants who may require a larger death benefit in the future

D.) Convertible term can be purchased by applicants who may require a larger death benefit in the future

A partial payment of proceeds to cover fianl expenses is paid to someone not designated as a beneficiary but acting in a legal or fiduciary capacity. This is provided in which provision? A.) Automatic Premium Loan B.) Payor Benefit C.) Cost of living D.) Facility of payment

D.) Facility of payment

All of the following statements about life insurance policy illustrations and the senior market are correct, except: A.) guaranteed elements must be emphasized in bold print B.) to be understandable, policy illustrations must follow certain formats so the insured can make informed buying decisions C.) Illustrations must note that they are only an illustration D.) The illustration will note the both guaranteed and non-guaranteed elements will remain unchanged for the years illustrated

D.) The illustration will note the both guaranteed and non-guaranteed elements will remain unchanged for the years illustrated

Which of the following are characteristics of renewable term? A.) allows the insured to apply for a new contract at the end of the term but there are no guarantees B.) allows the insured to exchange the temporary protection for a form of permanent insurance without evidence of insurability C.) allows the policyowner the opportunity to provide evidence of insurability at the end of the term with reduced premiums D.) allows the policyowner the opportunity to renew the policy at the end of the term, without evidence of insurability. The premium will increase.

D.) allows the policyowner the opportunity to renew the policy at the end of the term, without evidence of insurability. The premium will increase.

All of the following statement are true about participating and non participating policies, except: A.) They are sometimes referred to as par and non-par B.) Participating policies allow a policyowner to share in a mutual companys divisible surplus in the form of dividends C.) Non participating policies issue dividends to shareholders D.) non participating policies issue dividends to policyowners

D.) non participating policies issue dividends to policyowners

When an applicant makes a material statement believed to be true to the best of their knowledge, the statement is considered to a: A.) indemnity B.) estoppel C.) warranty D.) representation

D.) representation

All of the following are true about key person insurance, except: A.) the business is the applicant and the owner B.) the employee must give written consent by signing the application C.) the business is the beneficiary D.) the death benefit is taxable to the business

D.) the death benefit is taxable to the business

Which of the following cannot be used in a policy illustration if nonguaranteed elements are intended to pay future premiums? A.) Paid up additions B.) paid up premiums C.) Disappearing premiums D.) vanishing premiums

D.) vanishing premiums

All of the following statements about policy provisions are true, except: A.) Death during the grace period results in a full death benefit being paid B.) Suicide during the policys first two years results in policy recission C.) The insuring clause states the insurers promise to pay a death benefit if premiums are paid, and proof of death is received D.) The automatic premium loan can keep a policy in force when payments are missed and there is sufficient cash value to pay the premium

Death during the grace period results in a full death benefit being paid