SIM LIFE INSURANCE
which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer if he died
a minor son of the insured because he does not have the legal capacity to release the benefits. the benefits must be passed down from another guardian or a trustee (MOM TO LINDSEY BC SHE IS A MINOR) -who WOULD get it: the wife of the deceased insured the former wife of the insured business partner
proper handling of premiums by a producer
a producer who hold premiums for 15 days must establish a Premium Fund Trust account (PFTA)--this is where all premiums are deposited
dividends
a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves). MONEY PAID TO SHAREHOLDERS
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must:
a) Send an actual certified copy of the entire report to the consumer.-no b) RESPOND TO THE CONSUMERS COMPLAINT-YES c) Defend the report if the agency feels it is accurate.-no d) Change the report.-no MUST RESPOND TO CONSUMER but is not required to do anything else at this time. if necessary, they will investigate the report later
Which of the following is a generally acceptable title for a PRODUCER to use in describing himself at the beginning of a sales presentation?
before sales presentation producers must give the name of the company they are representing and saying that they are acting on behalf of the company -they are a producer so they must call themselves a producer -they are NOT allowed to call them selves: "investment adviser" or "financial planner" to imply that their compensation is not related to sales
within how many days must a person being examined by a director for non financial business practices request a hearing after receiving the examination report
***10 DAYS!!***
The necessary qualifications for obtaining a producer's license in Illinois include all of the following
-18 years old -good business rep -completed prelicensing course -trustworthy
what is true about premium fund trust account (PFTA)
-It may be a depository for service fees and late charges -it is established to maintain all the PREMIUMS -It is a fiduciary account (when hear fiduciary account, think premiums) -it could NOT be used as claim pmt account
Which of the following statements is correct regarding a whole life policy?
-policyowner is entitled to policy loans -cash value/death benefit guaranteed -offer LEVEL premium based off issued age (not attained) -cash value is equal to face amount at the insured's age 100 -policyowner entitled to living benefits
Which of the following IS true concerning insurable interest
1. Husband or wife has insurable interest on their spouse 2. an individual has insurable interest on his own life 3. business partners have insurable interest on each other NOT TRUE: A debtor has insurable interest on the life of the lender (but a lender has insurable interest on a debtor--only to the extent of the debt)
all are rebates if offered to insured in sale of insurance:
1. stocks securities and bonds 2. an offer of employment 3. offer to share commissions offered by sale NOT dividends from a mutual insurer dividends from a mutual insurer are not considered rebating because the POLICY specifies that they MIGHT be paid so not rebating
What is true regarding equity indexed annuities??
1. the insurance company keeps a percentage of returns 2. they have guaranteed minimum interest rates 3.they are less risky than variable annuities 4.earn HIGHER interest rates than fixed annuities NOT TRUE: they earn lower interest rates than fixed annuities
The validity of coverage under a life insurance policy may not be contested/terminated, except for nonpayment of premium, after the policy has been in force for at least how many years?
2 years this is the incontestability clause that prevents insurer from denying a claim after 2 years
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
2,500 NOT: revocation of license
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
200,000 because DOUBLE INDEMNITY benefit -applicant did die within 90 days -the accident was not her fault -the fatal injuries were caused by the accident
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
3000 The difference between PREMIUMS PAID and CASH VALUE would be taxable. therefore the cash value (18000) minus premiums (15000)= 3000 CASH VALUE MINUS PREMIUMS
in order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under group plan for how many years??
5 YEARS
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
Automatic premium loan
a policy owner fails to pay the premium on his whole life policy AFTER the grace period passes but the policy remains in force due to what provision??
Automatic premium loan prevents unintentional lapse of a policy due to a nonpayment of a premium
Most agents try to collect the initial premium for submission WITH the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant
premium receipt to prove in records that the applicant did pay the premium with the application
Which is true regarding taxation of premiums in a key person, life insurance policy?
premiums are NOT tax deductible in a business expense businesses can not take tax deduction if key employee dies, benefits to business are received tax free
insurer discovered error in application. He must:
return it to the applicant for completion
underwriting process for life ins:
selection, classification,rating of risks
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
she is a MINOR so: If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.
what is true regarding suicide policy clause:
suicide is excluded for a specific period of years and covered thereafter
with what entity must a cooporation register with before it is allowed to operate as an insurance agnecy
the DIRECTOR
How are contributions to a TAX SHELTERED annuity treated in regards to taxation??
the are NOT included as income for the employee BUT they are taxable upon withdrawal Taxable income is the amount of income used to calculate an individual's or a company's income tax due. therefore this is good for the lady because she will not have this tax due but if it is taken out, then it will be taxed
Upon the death of the insured, the primary beneficiary discovers that the insured chose the INTEREST ONLY SETTLEMENT OPTION. What does this mean
the beneficiary will only receive payments on the interest earned on the death benefit (sucks for beneficiary)
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was HIS FAULT. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
the beneficiary will still only receive 100,000 because the accident was the insured's fault. since it was his fault, it will be voided. However, if it wasn't his fault, the beneficiary would receive 300,000 the death must occur within 90 days as well--if not then triple indemnity rider will be voided as well
If a nonresident if applying for a license in Illinois and his home state does not require continuing education for Illinois residents,
the continuing education in illinois will be WAIVED
40 year old man had a whole life policy and his wifre is the benficiary. she dies 10 years later. the man dies at 61 and has two growm children. assuming he never chnaged the beneficiary, the policy proceeds goes to
the estate
in a life settlement contract, the life settlement broker represents:
the owner Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners. NOT the insurer/agent
which of the following determined cash value of a VARIABLE life policy??
the performance of the policy portfolio the cash value of a variable life policy is NOT guaranteed so it depends of the performance of the portfolio where the insured has invested premiums
what defines "owner" as it pertains to life settlement contracts
the policy-owner of the life insurance policy
LEVEL TERM INSURANCE provides a level death benefit and a level premium during the policy TERM. If the policy renews at the end of a specified period of time, the policy premium will be:
the premium will be HIGHER because of the increased age of the insured since this is level term insurance it is for a specific term but when the term ENDS and the policy renews then there will be a new level premium for the next term because now the owner is older.
Target premium in a universal life policy
the recommended amount that should be paid on the policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime
what is the purpose of key person insurance??
to lessen the risk of financial loss because of the death of an employee who has specialized knowledge or skills or business contacts. it also pays for the training of a new employee
insurers are barred from requesting HIV tests
true
Which of the following type of discrimination by the company underwriters would be considered LEGAL
underwriters in policy benefits based on LIFE EXPECTANCY- legal -calculating life expectancy is totally ok illegal: -in premiums because of applicants blindness -in policy benefits based on marital status -in rates for person in the same class
unilateral contract
uni=one...ONE SIDED only one party makes an enforceable promise -the agent (me) can come up with a whole contract and write it up with all provisions and everything and the client can walk away at any time if he or she wants to -only one of the parties to the contract is legally bound to do anything
rider in whole life policy that allows comp to forgo collecting premium if the insured is disabled:
waiver of premium
Fiduciary responsibility apply in which of the following situations:
when handling PREMIUMS -producers have fiduciary responsibility when they are handling premiums -must be held in a fiduciary capacity and NOT commingled with personal funds
which policy type provides permanent protection
whole life Whole life policies are referred to as permanent protection, since as long as the premium is paid coverage will continue for the life of the insured. Both the PREMIUMS and DEATH benefit are guaranteed and will remain level for life.
When both parties of a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is:
Conditional the basis that certain CONDITIONS must be met
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered
DISCRIMINATION which is an unfair trade practice and therefore illegal. they both got the same policy so charging one twin more would be discrimination
If the owner of a WHOLE LIFE policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
FULL death benefit amount Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information
Fair credit reporting act -ensured that consumer reporting agencies are fair in their treatment to the customers
if a life policy allows policy owner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a:
GUARANTEED INSURABILITY RIDER
nonforfeiture clause:
Non-forfeiture options are ways in which cash values can be paid out to or used in the case the policy is lapsed or surrendered.
what allows insurer to relieve a minor insured from premium benefits if minors parents have dies/disables
PAYOR BENEFIT
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as
REBATING
what nonforfeiture option provides coverage for the longest period of time
REDUCED PAY UP
The policy-owner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the DIVIDENDS TO HELP PAY FOR HER NEXT PREMIUM What option would allow her to do this?
Reduction of premium option-- allows policy owner to apply policy dividends towards the next year's premium dividend is subtracted from dividend amount yielding a new premium for the next year HENCE "REDUCED premium"
In order for a firm to maintain its registration as a LEGAL insurance company, what must it do?
Submit a biennial fee to the Director Business entities are required to pay the license renewal fee to the Director to maintain their registration every TWO years (just like we have to maintain registration every 2 years)
the premiums paid by an employeer in a business life insurance policy are:
TAX DEDUCTIBLE by the employer The premiums that an employer pays for life insurance on an employee, whereby the policy is for the employee's benefit, are tax deductible to the employer as a business expense tax deducible is good because it may reduce your income tax bill by reducing taxable income think about how when dad pays for stuff for company how he charges it to company. similarly when things are for the company and for the employees it is tax deductible by employer
How many days is free look privilege
TEN days 10
children riders attached to whole life policies are usually issued to what type of insurance??
TERM life why??-- term coverage because the children will grow up and it will obviously expire and be different when kids are not minors anymore
A father purchases a life insurance policy on his teenage daughter and adds the PAYOR BENEFIT RIDER. In which of the following scenarios will the rider waive the payment of premium?
THE PAYOR BENEFIT only pays if the owner is disabled for 6 months SIX MONTHS
Licensees must inform the Director by any means acceptable to the Director of address within how many days:
THIRTY!
The policy loans provision states that the loan can be paid after how many years of premium payments
THREE The policy loans provision states that the insurer must advance to the policyowner a sum up to the policy's cash value after the full amount of premiums have been paid for THREE YEARS
An individual whose license is denied or revoked will be ineligible to apply for a license for a period of
THREE years!!!!!!!!!!!!!
A producer whose license is revoked or whose application for a license is denied will be ineligible to reapply for any license for at least
THREEE YEARS
What would help prevent a universal life policy from lapsing?
Target premium
general duties of director of insurance
The Director makes reasonable rules and regulations as necessary to implement the insurance code -conducts investigations as needed to determine whether any person has violated any insurance law or regulation; -conducts examinations, investigations and hearings as necessary for administering the insurance laws efficiently -and institutes such actions or other lawful proceedings as deemed necessary for enforcing insurance laws.
cash value
The cash value of an insurance contract, also called the cash surrender value or surrender value, is the cash amount offered to the policyowner by the issuing life carrier upon cancellation of the contract. This term is normally used with a life insurance or life annuity contract.
To which of the following policies would the state regulation on illustrations NOT apply?
The life insurance illustrations regulation applies to ALL individual and group policies except : variable life insurance; individual and group annuity contracts; credit life insurance; or life insurance policies and certificates with guaranteed scheduled death benefit of $10,000 or less, or illustrated death benefit of less than $15,000.
Which of the following is TRUE regarding the premium in term policies?
The premium in term policies is LEVEL during that term Only the amount of death benefit will change when term is expired, it can be renewed for another level premium but of course the premium will be higher due to the insured's attained age
A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the DISCLOSURE REGUALTION
The reps name and signature MUST appear on the MASTER POLICY -just on the master policy*********************** NOT: a) Disclosure regulation does not apply to limited insurance representatives. b) Disclosure regulation does not apply to group insurance. c) The name of the representative must be displayed on each certificate of insurance.
an insured owns a life insurance policy. to be able to pay for some of her medical bills, she withdraws a portion of her policy's cash value. There is a limit for withdrawal and the insurer charges a fee. policy insured most likley has=
UNIVERSAL LIFE
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
UNIVERSAL LIFE because universal life has a FLEXIBLE premium meaning you can kinda do with it want you want and you dont have to stick to the same premium each time. therefore, policyowner can pay more or less than the planned premium The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium
Under what conditions must an insured sign a Notice Regarding Replacement of Life Insurance or Annuity form?
When replacing a policy with a different INSURER that is under different ownership than the current company If an insured wants to replace his or her policy with another policy provided by a different insurer, the insured must sign a Notice Regarding Replacement of Life Insurance or Annuity form,
When is the earliest a policy may go into effect?
When the application is signed and the check is given to the agent A policy can be effective as early as the date of the application as long as the premium is submitted with the application and the policy is issued
Which of the following applies to the 10-day free-look privilege
permits the insured to look over the policy and if not pleased, return it within 10 days with full refund of premium
nonforfeiture options*****************
a. Cash surrender option - Policy owners may request an immediate cash disbursement when their policies are surrendered. b. Reduced paid-up option - The cash value is used as the premium for a single-premium whole life policy, at a lesser face amount/death benefit than the original policy. hence REDUCED pay out because the face amount is reduced c. Extended term option - The cash value is used to purchase a term insurance policy in an amount equal to the original policy's face value, however, when the term insurance expires there is no more protection.
two types of assignment:
absolute and collateral
An insurer has made all of the decisions regarding the provisions included in the insured's policy. The insured finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?
adhesion must accept policy as written NO negotiations
An agent uses an insurer's ILLUSTRATION. He obtains proper approval and does not change the illustration in any way. The illustration involves projected amounts, and the agent stipulates that the amount would not be guaranteed. Which of the following is true?
agent MUST stipulate that the illustration is not part of the contract An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list non-guaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values. (illustration=set of projections)
which life insurance settlement option guarantees payments for the lifetime of the recipient but also specifies a guaranteed period during which if the original recipient dies, the payments will continue to a designated beneficiary
life income with period certian think: recipient getting payments for LIFE so life income and there is a guarenteed period so PERIOD CERTAIN
type of policy that can be changed from one that does not accumulate cash to one that does is:
convertible term policy
What is true regarding annuity period
may last for a life time of annuitant
under which option for universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured
option B
an individual applied for ins policy and paid initial premium. the insurer issued a conditional recipt . five days later the applicant has to submit to a medical exam what is the policys effective date??
date of medical exam
decreasing term policy:
death benefit is 0 at end of policy term the face amount steadily declines throughout the contract pays only in the event of death during the term and there is no cash value
if beneficiary wants a guarentee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option
fixed period
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?
he or she can renew it again for the given term (10 years) BUT at a higher premium rate because he or she is now 10 years older so more risk=higher premium Policies that are GUARANTEED RENEWABLE and convertible may be renewed, WITHOUT EVIDENCE OF INSURABILITY for another like term, or may be converted to permanent insurance, without evidence of insurabilIty. CAN BE RENEWED OR CONVERTED TO PERMANENT INS
An agent wants to include an illustration written by his insurance company. Which of the following best describes the conditions under which she may use the illustration?
illustration must stay exactly as is
Life income joint and survivor settlement option guarantees:
income for two or more recipients until they die There is NO guarantee that all the life insurance proceeds will be paid out.
********** annually renewable TERM policies all provide level death benefits for a premium that:
increases annually with all level term policies, this provides a level death benefit for a term of one year, upon renewal the premium increases each year with age
three basic types of coverage that are available based on how the face amount changes during policy term:
increasing, decreasing, level
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?
inspection report
MIB was created to protect:
insurance companies from adverse selection from high risk companies
If a licensee charges any fee separate from a commission off of the insured's premium, and if the fee exceeds 10% of the premium's value, what must the licensee obtain?
insured's signature licencee always needs insured's signature!!!
purpose of 7-pay test:
it determines weather an insurance policy is OVER funded or if it is a MEC (modified endowed contract) the premiums paid during the first seven years of the policy must not exceed the total amount of net premiums
What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy? contingent =secondary!!!!
it determines who will get the benefits if the primary beneficiary also dies it is very common that the primary dies BEFORE the insured so if there is a contingent beneficiary then there is no issue trying to figure out who to give the money to if there is NO contingent beneficiary then the money goes into the insured's ESTATE
why is an EQUITY INDEXED ANNUITY considered a FIXED ANNUITY
it has a guaranteed MINIMUM interest rate
When a reduced paid-up non forfeiture option is chosen, what happens to the face amount of the policy?
it is reduced to the amount of what the cash value would buy as a single premium the cash value is used as a single premium to pay for a permanent policy with a reduced face amount (hence the name)
The type of settlement option which pays throughout the lifetimes of 2 or more beneficiaries is called
joint and survivorship
survivor-ship: insurer pays death benefit on
last death
A straight life policy has what kind of premium??
level annual premium for life of insured guaranteed death benefit
if policyowner, beneficiary and insured are all same ppl, who has policy rights
policyowner