Questions from Practice Tests - Life
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
Revocable beneficiary.
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of
STOLI: Stranger-originated Life Insurance
Which two terms are associated directly with the way an annuity is funded?
Single payment or peridoic payments
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
When an applicant is applying for insurance their statements are called:
Representations are statements that are true to the best of the applicant's knowledge
If, after a hearing, the Commissioner determines that the person charged has violated insurance regulations and knows or should have known he/she was in violation, the amount of the fine will be
$1,000 for each violation, not to exceed $10,000 in a 6-month period.
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2,500
What is the maximum the Hawaii Insurance Guaranty Association will pay in life insurance death benefits?
$300,000
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined, and the cash value fell to $10,000. If the insured dies, how much will be paid out?
$50,000
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force
For how long does the Commissioner keep records detailing the proceedings of an insurer based in Hawaii?
1 year
An agent did not give the annuity applicant the disclosure document and the buyer's guide at the time of annuity application. When the annuity contract is issued, how long will the free-look period be?
15 days
In Hawaii, An insurer must appoint a licensee before he/she is authorized to transact insurance business. The insurer must file a notice of appointment within
15 days from the date of the first insurance application is submitted
In Hawaii, for how long does the Commissioner keep records detailing the proceedings of a foreign insurer?
3 years
For how long are licensees required to keep records of continuing education completion?
4 years
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
All of the following lines of insurance may be transacted by an insurer in Hawaii without a valid certificate of authority EXCEPT
A group life policy issued and delivered in Hawaii must be transacted in Hawaii with a valid certificate of authority.
Every year, the Commissioner submits to the Hawaii legislature a report that contains all of the following EXCEPT
A list of all new licensees and analysis of insurance contracts they transacted.
These are true about a joint and survivor annuity benefit option
A period certain option may be included, The surviving annuitant may receive reduced payments, This option guarantees income for two or more recipients, the surviving annuitant may receive reduced payments.
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
A waiver of premium
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
A warranty
What is another term for an authorized insurer?
Admitted, are considered authorized or admitted into the state as a legal insurer.
The LEAST expensive first-year premium is found in which of the following policies?
Annually Renewable Term is the purest form of term insurance The death benefit remains level, but the premium increases each year with the insured's attained age
Which of the following is TRUE about a class designation?
Beneficiaries are not identified by name.
Which of the following is NOT true regarding an annuity certain?
Benefits stop at the annuitant's death. Annuities Certain are short-term annuities which limit the amount paid to a certain fixed period or until a certain fixed amount is liquidated. There are no life contingencies.
In Hawaii, a person who intentionally violates any insurance rule or statute is subject to a penalty of
Between $100 and $10,000 per violation, or imprisonment of not more than 1 year, or both
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Conditional
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, something of value that each party gives to the other.
An insurance producer just sold an insurance policy to his sister. What kind of business is this?
Controlled Controlled business is legal as long as premiums paid on these policies do not exceed the premiums that the producer writes for other business.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
Defamation
Qualified plans have these tax advantages:
Employer contributions are tax deductible and are not taxed as income to the employee, the earnings in the plan accumulate tax-deferred; lump sum distributions to employees are eligible for favorable tax treatment
An agent selling variable annuities must be registered with:
FINRA, Because variable annuities are considered to be securities
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement?
False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
What type of premium do both Universal Life and Variable Universal Life policies have?
Flexible premiums
All of the following statements about equity index annuities are correct:
Guaranteed minimum interest rate, Are aggressive in nature, The interest rate is tied to an index such as the S&P 500
Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose
HR-10 (Keogh Plan).
All of the following could be grounds for license suspension or revocation EXCEPT
Having a record of a misdemeanor unrelated to insurance
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.
What type of insurance would be used for a Return of Premium rider?
Increasing Term Rider
What are the two components of a universal policy?
Insurance and cash account
What is surplus lines insurance?
Insurance placed with an unauthorized insurer
Which of the following policy components contains the company's promise to pay?
Insuring Clause
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Insuring clause
Which of the following best describes a misrepresentation?
Issuing sales material with exaggerated statements about policy benefits Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.
Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy?
It begins when the policy is delivered
Which of the following best describes the MIB?
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
Which of the following best describes annually renewable term insurance?
It is level term insurance
Which of the following best describes annually renewable term insurance?
It is level term insurance.
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.
Variable whole life insurance is based on what type of premium?
Level fixed, investment based product
Which two terms are associated directly with the premium?
Level or flexible
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
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
Which of the following is true regarding policy loans
Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on an outstanding policy loan.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report.
All of the following would be considered an insurance transaction EXCEPT
Obtaining an insurance license An insurance transaction means the carrying on of business in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance.
Traditional IRA contributions are tax deductible based on which of the following?
Owner's Income
Another name for a substandard risk classification is
Rated
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor Protection
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
Term rider
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
Term riders may be used to customize a permanent life insurance policy to meet the needs of the policy owner
The Commissioner of Insurance can
The Commissioner's duties include enforcing rules and regulations imposed by the Insurance Code, conducting examinations of insurance matters and determining whether any person has violated any provisions of the Code. The Commissioner must schedule a hearing if requested. The Commissioner does not adopt fines; those are established by law.
Which of the following would provide an underwriter with information concerning an applicant's health history?
The Medical Information Bureau will provide information about an applicant's medical history
All of the following statements are true regarding installments for a fixed period annuity settlement option
The annuitant selects the time period for the benefits; the insurer determines how much each payment will be The payments are not guaranteed for life, The insurer determines the amount for each payment
Which of the following is NOT the consideration in a policy?
The application given to a prospective insured
Which of the following is TRUE about nonforfeiture values?
The are required by state law to be in the policy
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 beneficiary
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.
In the Executive bonus plan, who is the owner and who pays the premium?
The executive is the owner and pays the premium
In life insurance policy replacement, which of the following entities is responsible for sending a letter notifying the policyowner of the right to receive information regarding the values of the existing policy?
The existing insurer must send a letter to the policyowner of the right to receive information regarding the values of the existing policy within 5 business days.
What does "level" refer to in level term insurance?
The face amount, maintain level death benefit (or face amount) throughout the term of the policy. the premium also remains consistent over the years
Types of Whole Life policies:
The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life.
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.
Who bears all of the investment risk in a fixed annuity?
The insurance company
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?
The insured's contingent beneficiary
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used in premium determination
All of the following are true regarding a decreasing term policy EXCEPT
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 an insured continually uses the automatic premium loan option to pay the policy premium,
The policy will terminate with the cash value is reduced to nothing.
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account.
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy. the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.
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 regarding taxation of accelerated benefits under a life insurance policy?
They are tax-free for the terminally ill insured
All of the following are requirements for life insurance illustrations
They may only be used as approved They must differentiate between guaranteed and projected amounts They must identify nonguaranteed values and Must clearly state that it is not part of the contract
Which of the following insurance arrangements will be appropriate for a parent purchasing a policy on a child where the parent is the policy owner:
Third-party ownership, owned by someone other than the insured
All of the following statements are true regarding installments for a fixed amount:
This option pays a specific amount until the funds are exhausted Has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living. Value of the account and future earnings will determine the time period for the benefits
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal life
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.
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. Variable universal life insurance may or may not have a minimum death benefit
All of the following are requirements of eligibility for Social Security disability income benefits:
Waiting period of 5 months, Inability to perform any gainful work, Fully insured status (earned 40 quarters of coverage)
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
War or military service
All of the following benefits are available under Social Security EXCEPT
Welfare
When would a 20-pay whole life policy endow?
When the insured reaches age 100
To ensure suitability of annuity products, producers must obtain relevant information about the consumer's:
age, income, financial status, tax status, financial experience and objectives. Beneficiary's age is not a suitability factor
A universal life insurance policy is best described as a:
flexible premium variable life policy. This policy combines term insurance with a saving component. And allows for adjustments in premiums and death benefits
Variable Whole Life insurance is based on what type of premium?
level fixed
An individual has been diagnosed with Alzheimer's. He's under a life insurance policy with the accelerated benefits rider, when benefits are paid they are:
tax free up to a certain limit