214 License
Which of the following statements about noncontributory group life insurance is FALSE?
A minimum # of employees is required to participate (no min number required).
A term life rider offers the insured
Additional Life Coverage
The exchange of unequal values reflects:
Aleatory
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received.
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral Assignment
applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
Conditional
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
What type of group insurance plan involves employees sharing the cost?
Contributory Plan
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be
Converted to an individual permanent policy at an individual rate
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Dividends payable to a policyowner are:
Declared by the insurance company.
Additional coverage can be added to a Whole Life policy by adding a(n)
Decreasing Term Rider
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred Annuity
Under a trustee group life policy, who would be eligible for a certificate of coverage?
Employees
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary Responsibility
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?
Flexible Installment Deferred
M completes an application for health insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect, EXCEPT:
Free look period has expired
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
The type of annuity that can be purchased with one monetary deposit is called a(n)
Immediate Annuity
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)
Immediate Annuity
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner.
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n):
Installment Refund Annuity
A life insurance policy would be considered a wagering contract WITHOUT:
Insurable Interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
Insurable interest in the proposed insured
The accelerated death benefit provision in a life insurance policy is also known as a
Living Benefit
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
Marital Status
When a life policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
Who has the right to change a revocable beneficiary?
Policyowner
Which of the following describes a participating insurance policy?
Policyowners are entitled to receive dividends
All of these are considered sources of underwriting information about an applicant EXCEPT
Rating Services.
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions.
Upon delivery of a rated insurance policy, the Producer must obtain each of the following EXCEPT:
Signed HIPAA disclosure
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security
Which of these is not a source of funding for Social Security benefits?
The Fed. Gov.
A policy of adhesion can only be modified by whom?
The Insurance Company
Who makes the legally enforceable promises in a unilateral contract?
The Insurance Company
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
Upon Policy Delivery, a signed statement of good health is requested from the applicant. Why would this be necessary?
The initial premium was NOT submitted with the application.
Under a Graded Premium Whole Life Policy
The premium increases each year during the early years of the contract and remains the same after that time
The consideration clause of insurance contract includes
The schedule and amount of premium payments
At what point does an informal agreement become a binding contract?
When consideration is provided by one of the parties to the contract
A $20,000 life insurance policy application is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?
When the applicant receives the policy and pays the initial premium.
When is the face amount of a Whole Life policy paid?
When the insured dies, or the policy's maturity, whichever comes first!
A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
Whole Life Policy
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole Life Policy
STOLI is when a person purchases life insurance only to then sell it to
a third party with no insurable interest
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
extra premium
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit.
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a
$25,000 individual whole life policy
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
Which of the following arrangements allows one to bypass insurable interest laws?
(STOLI) or Investor Originated Life Insurance
___ % of personal life insurance premiums is usually deductible for federal income tax purporses.
0%
Which of these would be considered a Limited-Pay-Life policy?
Life Paid Up at Age 70
Group life insurance policies are usually written as:
Annually Renewable Term
Before a life insurance policy is issued, which of these components of the contract is required?
Applicants signature on application
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
The automatic premium loan provision is designed to
Avoid a policy lapse
T is the policyowner for a life insurance policy with an irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the
Beneficiary
Company XYZ offers a term life insurance plan to its employees. What does each employee covered under this plan receive?
Certificate of Insurance
Suicide committed in contestable period
Claims are denied under the Suicide clause of the policy
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex Wife
A universal life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and
Expense Charges
D owns a Whole life policy that was purchased 10 years ago. If premium payments suddenly stop and D takes no additional action, which Nonforfeiture option will the insurer likely proceed with?
Extended Term (allows policyowner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole life policy.
Which of the following nonforfeiture options offers the highest death benefit?
Extended Term Option
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
Fair Credit Reporting Act
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance Policy
In a life insurance contract, an insurance company's promise to pay stated benefits is called the :
Insuring Clause
A life insurance arrangement which circumvents insurable interest values is called
Investor Originated Life Insurance (IOLI)
A policyowners rights are limited under which beneficiary designation?
Irrevocable
The Accidental Death and Dismembering (AD&D) provision in a life insurance policy would pay additional benefits if the insured:
Is blinded in an accident.
Which of the following combination of plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Joint Life Policy
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level Term Policy (pays same death benefit if insured dies any time during policy)
T has an annuity that guarantees and income payments for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
Life Annuity with Period Certain
Which settlement options pays a stated amount to an annuitant but no residual value to a beneficiary?
Life Income
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy
Owner's Rights
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
PIA or Primary Insurance Amount
K owns a whole life policy. If K wants an increasing death benefit to protect against inflation, which dividend option should she choose.
Paid Up Option
The underwriting process includes the following EXCEPT:
Policy Loan
The ____ has the right to change the beneficiary on a life insurance policy.
Policyowner
The ____ is authorized to assign a life insurance policy as collateral for a loan.
Policyowner
A variable annuity has which of the following characteristics?
Underlying equity investments.
All of these are considered benefits under SSN except for:
Unemployment
Life and health insurance policies are
Unilateral Contracts (one makes promise, other can only accept by performance
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as:
Universal Life Policy
Term life policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
Varies according to the contract
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Variable Whole Life Policy
both an insurance and securities product
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
proceeds will be paid to K's estate if P dies within a specified time.
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
the Policyowner(investor)
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. Which factor would affect her decision the most?
the cost
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is
the cost
What is the underlying concept regarding level premiums?
the early years are charged more than what is needed, then levels out.
