XCEL Solutions

Rob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals $250,000. Rob recently died at age 60. The death benefit would be

500,000

A Modified Endowment Contract (MEC) is best described as

A life insurance contract which accumulates cash values higher than the IRS will allow

Which of the following is an example of the insured's consideration?

A paid premium

If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?

A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age

Which of these is considered to be a Living Benefit option in a life insurance policy?

Accelerated death benefit

Which of the following is considered to be an alternative to a life settlement?

Accelerated death benefit rider

Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?

Accumulation at Interest Option

Of the following dividend options, which of these is taxable?

Accumulation at interest

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

Adverse selection

what is implied authority defined as?

Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties

Why are dividends from a mutual insurer not subject to taxation?

Because dividends are considered to be a return of premium

Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?

Can be converted to permanent coverage without evidence of insurability

Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period?

Decreasing term insurance

An example of risk sharing would be

Doctors pooling their money to cover malpractice exposures

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?

Endowment Policy

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?

Equity index whole life

A professional liability for which producers can be sued for mistakes of putting a policy into effect is called

Errors and omissions

Which of these riders will pay a death benefit if the insured's spouse dies?

Family term insurance rider

Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n)

Guaranteed insurability rider

Which of the following is considered to be an event or condition that increases the probability of an insured's loss?

Hazard

Which of the following is present when an applicant stands to lose value if the insured dies?

Insurable interest

Who is responsible for assembling the policy forms for insureds?

Insurance carriers

What kind of life insurance policy covers two or more people with death benefit payable upon the last person's death?

Last Survivor Life Insurance

The authority granted to a licensed producer is provided via the

Law of Agency

Insurance companies determine risk exposure by which of the following?

Law of large numbers and risk pooling

When a decreasing term policy is purchased, it contains a decreasing death benefit and

Level premiums

Which of these is not considered to be a common life insurance nonforfeiture option?

Life income annuity

Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive?

Nothing

What makes an insurance policy a unilateral contract?

Only the insurer is legally bound

What is known as the immediate specific event causing loss and giving rise to risk

Peril

Which situation accurately describes a reduced paid-up nonforfeiture option?

Policy has a decreased face amount

Under a Modified Endowment Contract, what are the likely tax consequences?

Pre-death distributions will become taxable

An individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging in

Risk avoidance

An insurer's claim settlement practices are regulated by the

State Insurance Departments

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?

Universal Life

All of these statements concerning whole life insurance are false EXCEPT

When a whole life policy is surrendered, income taxes may be owed

Which one of these would be the best example of a limited pay life insurance policy?

Whole life policy with premiums paid up after 20 years

The double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n)

accident

All of these are common exclusions to a life insurance policy EXCEPT

accidental death

Insurable interest does NOT occur in which of the following relationships?

business owner and business client

All of the following are elements of an insurance policy EXCEPT

claim forms

In an insurance contract, the element that shows each party is giving something of value is called

consideration

in order for a contract to be valid, it must

contain an offer and acceptance

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount of the policy

Fraternal Benefit Society has each other the following characteristics except

exist for profit

when the principal gives the agent authority in writing, its referred to as

express authority

A spouse and child can be added to the primary insured's coverage as what kind of rider?

family term

A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT

fare-paying passenger

The Do Not Call Registry offers exemptions for calls placed from all of the following except

insurance sales calls

How do insurers predict the increase of individual risks?

law of large numbers

A limited payment whole life policy provides

lifetime protection

An insurer's ability to make unpredictable payouts to policyowners is called

liquidity

All of the following are examples of pure risk EXCEPT

losing money at a casino

A guaranteed issue insurance policy has no

medical underwriting

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid

minus indebtedness and without interest

A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n)

partial surrender

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?

participating life insurance policy

The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of

past due premiums that have not been paid by the end of the grace period

A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n)

payor rider

The cause of a loss is referred to as

peril

The Fair Credit and Reporting Act's main purpose is to

protect consumers with guidelines regarding credit reporting and distribution

What is considered to be the primary reason for buying life insurance?

provide death benefits

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the

reinsurer

A life insurance policyowner does not have the right to

revoke an absolute assignment

Term insurance is appropriate for someone who

seeks temporary protection and lower premiums

In an insurance contract, the applicant's "consideration" is the

statements made in the application and the premium

a nonparticipating company is sometimes called a

stock insurer

If an insured dies during the grace period with no premiums paid

the policy would be payable, minus the premium amount

Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,

the protection ends

The free-look provision gives the policyowner

the right to return the policy for a full refund within a specified number of days

under a contract of adhesion

the terms must be accepted or rejected in full

Insurance represents the process of risk

transference

A securities license is required for a life insurance producer to sell

variable life insurance

According to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and its

Promises made

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes