AD Banker - Life Insurance
To encourage annuity holders to leave funds in the policy until retirement, insurance companies can assess a(n) __________ for withdrawals.
surrender charge
A key person is typically all of the following, except:
Not directly involved in sales, production, or service
A life agent who offers for sale, or sells any financial product based on its treatment under the Medi-Cal program must provide, in writing, a disclosure entitled:
Notice Regarding Standards for Medi-Cal Eligibility
A Child Rider is attached to a parent's life insurance policy. When the oldest child reaches the maximum age, what will be required if that child wants to convert to their own policy?
Notify insurer, proof of insurability is not required, and pay the first premium
When the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit:
Pays income tax on any gains at their own income tax rate
When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________.
The gross premium
Which of the following is true?
The insured and the policyowner are usually the same, but not necessarily
All of the following statements are true of a Juvenile policy, except:
The insured is the premium payor
An insured has a $100,000 loan. What is the maximum amount of coverage a Credit Life insurance policy could provide the insured?
$100,000
T owns a $50,000 Whole life policy. At age 47, T decides to stop paying premiums on the policy when it has $15,000 of cash value and exercise the Extended Term Option. T's term benefit will be:
$50,000
A $100,000 policy with a waiver of premium rider and $30,000 of cash value is in force. The base policy costs $750 and the rider is $50. What is the total premium annually the policyowner must pay to keep the policy in force if the policyowner decides to cancel the rider?
$750 (Riders such as the waiver of premium are a provided benefit for an additional cost, therefore if canceled, the annual premium would then become $750 ($800 - $50).
A license may be renewed without examination within _____ months of its expiration date by payment of a penalty fee equal to 50% of the 2-year license fee.
12
Individuals who have not been licensed life agents for the required time period who intend to transact life settlements must first complete at least how many hours of education on life settlement transactions?
15
The Social Security blackout period for surviving spouses begins when the youngest child reaches age ______, and ends when the surviving spouse reaches age ______.
16/60 (When the youngest child reaches age 16, the widow's/widower's blackout period begins. It continues until a surviving (non-remarried) spouse reaches age 60.)
For a replacement policy of individual life insurance and annuities (other than variable contracts), the free look period is at least how many days?
20
The Insurance Code requires producers who meet with prospective clients age 65 and older in their homes for the purpose of transacting life insurance, annuities, or disability insurance products to provide a written notice of the first meeting at least how many hours in advance?
24
There is a conversion period of how many days in which the employee may, upon termination of eligibility and without evidence of insurability, convert their group life insurance benefit to an individual permanent policy?
31
Under most circumstances, within how much time is an insurer expected to affirm or deny a claim? A
40 days
To have Currently Insured status under Social Security, a worker must have at least _____ quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.
6
A licensee who has applied to renew a license will be entitled to continue operating under the existing license for _____ days after its specified expiration date, or until notified by the Department that the renewal application is deficient, whichever comes first.
60
Under the California Annuity Suitability Education Requirements, a life-only agent who sells annuity products to individual consumers must complete an initial _____-hour training course prior to soliciting for sales. A
8
An applicant wants a Term Life insurance policy that will last for 20 years. They are willing to risk the premium fluctuating as long as there will be a maximum limit to the premium payment. The producer should show the applicant a(n):
A 20-Year Adjustable Premium B 20-Year Non-guaranteed Level Premium C 20-Year Indeterminate Premium D 20-Year Guaranteed Level Premium
A contract that allows an insured to be restored to the same financial condition as prior to the loss is considered:
A contract of indemnity
Any person who acts, offers to act, or assumes to act in a capacity that requires a license without holding that license is guilty of a ___________, punishable by a fine of up to $50,000 and/or 1 year in jail.
Misdemeanor
Social Security pays an eligible surviving spouse (or minor child) a one-time benefit upon the death of a covered worker. Which of the following is the amount of that benefit?
A one-time benefit of $255 is paid to a surviving spouse or child if they are eligible for Social Security benefits.
How is a life settlement transaction similar to a viatical settlement transaction?
A third party buys a life insurance policy for less than its face amount (A Life Settlement is similar to a viatical settlement in that it is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefit. There is no requirement for the insured to be terminally ill in order for a life settlement to occur. A policyowner may choose to sell their policy because the premiums are too high or they want to purchase a different policy. Note: If your state has particular Viatical or Life Settlement licensing and solicitation laws, they will be addressed in the state law chapter.)
All of the following are true, except:
A. A representation is a statement made in the application by the insured, which is guaranteed (answer) B. Proximate cause is the immediate or actual cause of a loss C. Reserves are accounting measurements of insurer's future obligations to the policyholder D. Under a unilateral contract, only one party is legally bound to future performance
All are correct statements concerning noncontributory group life, except: B
A. Only the plan sponsor is responsible for paying premiums B. Premiums are calculated by underwriting each individual in the group C. The Conversion period is 31 days D. If employer-sponsored, an employee must work a minimum number of hours per week to be eligible *Since no proof of insurability is required on the part of the plan participants, the insurer looks at the group collectively, factoring a number of variables.
A Section 1035 Exchange is permitted in each of the following transactions, except:
A. Whole Life Policy is exchanged for a Universal Life Policy B. An annuity contract is exchanged for another annuity contract C. A Variable Universal Life Policy is exchanged for an Equity-Indexed Annuity D. An annuity is exchanged for a Whole Life Policy (answer)
Which of the following situations will require proof of insurability?
Adjusting the face amount up on a Universal Life insurance policy with Option A death benefit selected (Requesting an increase in face amount always requires proof of insurability. The other scenarios are when the death benefit is driven up based on policy performance which essentially is a payout of the cash value growth.)
A Child Rider that is added to an insured's permanent policy includes which of the following features?
All children (beyond 14 or 15 days of age) are covered, and the rider may be converted to permanent coverage at a specified age without evidence of insurability (The benefit of a Child Rider is twofold. It provides basic coverage, and is convertible to a permanent policy without proof of insurability, when the child reaches the maximum age.)
The California Financial Information Privacy Act provides for all of the following as compared to the GLBA, except:
An Opt-Out standard concerning information sharing with unrelated third parties (The California Financial Information Privacy Act provides that the Opt-Out provisions of GLBA were changed to an Opt-In standard concerning information sharing with unrelated third parties.)
All of the following terms are the same regardless of if the policy is life insurance or an annuity, except:
Annuitant (owner, insurer, beneficiary - The annuitant in an annuity is the equivalent of the insured in a life insurance policy.)
The person offering themselves or another person to be insured by the contract best defines the:
Applicant
If a basic life insurance illustration is used by an insurance producer in the sale of life insurance and the policy is applied for as illustrated, a signed copy of that illustration must be submitted to the insurer and provided to the applicant:
At the time of policy application
What do both life insurance and annuities have in common?
Both are products based on a mortality table
An insurance plan owned by an employer, creditor, or association, providing coverage for the employees, debtors, or members, refers to which of the following?
Group Life Insurance
Policy delivery in California will be accomplished by all of the following, except:
Calling the applicant/insured to inform them that the policy was issued and keep in the client file (Policy delivery in California will be accomplished by personal delivery, with a signed receipt of delivery, registered or certified mail with a signed receipt of delivery, first-class mail with a signed receipt of delivery, or delivery by reasonable means, as determined by the Commissioner.)
An insured goes to the bank for a business start-up loan. Asking for more security, the bank agrees to accept a(n) __________ on a permanent life insurance policy owned by the customer.
Collateral assignment
An agent's license remains in active status as long as all of the following conditions are met, except:
Commission income equals or exceeds $25,000 (Under the California Insurance Code, an agent's license remains in active status as long as renewal fees are paid, continuing education requirements have been met, and at least one active Notice of Appointment is on file with the Commissioner.)
What provision establishes that if both the insured and the primary beneficiary die in the same accident, and it cannot be determined who died first, the insured will be presumed to have survived the beneficiary and proceeds will be paid to a named contingent beneficiary of the insured, or to the insured's estate?
Common Disaster Clause (The Common Disaster Clause is designed to rule in such situations. If a contingent beneficiary is named and is alive, they receive the proceeds. Otherwise they are paid to the insured's estate.)
Which is the correct term to describe a contract prepared by one party and submitted to the other party on a "take it or leave it" basis, without negotiations?
Contract of Adhesion
A group plan is designed to insure all of the following, except:
Creditors
Term Life insurance will not pay out a death claim in which of the following situations?
Death after the term expires
A current and prior HIV positive test result may be the basis for a life insurer to:
Decline the application for life insurance
In a presentation to the local life underwriter association, R wrongly stated that ABC insurer is in financial difficulty. R may be guilty of:
Defamation
What type of annuity is designed to start benefit payments many years from now and subjects the owner to investment risk?
Deferred Variable (annuity exposes the annuity holder to investment risk with income benefit payments starting more than one year after purchase.)
Which of the following is considered the responsibility of the California Commissioner of Insurance?
Establish policies and procedures for dealing with insurer insolvency
Generally, corporations can use annuities to fund all of the following, except:
Estate creation
If the premium can fluctuate at the policyowner's discretion, meaning it can be increased, decreased, or even skipped at any premium due date, what premium paying method was used?
Flexible (With a Flexible Premium, the premium can fluctuate at the policyowner's discretion, which means it can be increased, decreased, or even skipped at any premium due date as is the case with Universal and Variable Universal life policies.)
Factors that must be considered prior to the sale of an annuity to a senior include all of the following, except their:
Gender
Each of the following pertaining to group life insurance is true, except:
Group members are required to prove insurability (The primary benefit of group coverage is that proof of insurability on the part of the group participant is not required.)
E purchased policies on behalf of E's grandchildren. E wanted to be certain they could purchase additional policies at specified ages. E was able to do this by adding which rider?
Guaranteed Insurability rider
All of the following must be included in a Whole life policy, except:
Guaranteed dividend table
Qualified pension and profit-sharing plans were created by Congress to:
Help employees accumulate assets for retirement and provide tax advantages for contributions made by employers
Failure to repay a loan or loan interest will void a life insurance policy:
If the total amount due equals or exceeds the policy's cash values
The provision that limits the amount of time an insurer has to challenge a claim and void the contract upon proof of a material misstatement is called the ____________ clause.
Incontestability
Which of the following types of term life insurance can be written as a rider to provide cost of living or return of premium benefits?
Increasing term
What type of Term Life insurance policy has a policy premium that can fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns?
Indeterminate (Premium Term can have the premium fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns.)
A STOLI transaction is best defined as which of the following?
Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash (Investors, producers, or brokers with absolutely no personal or business connection with a person, who induce a purchase of a life insurance policy with the sole intent of selling that policy to institutional investors for an amount less than the death benefit, but greater than the policy's cash value is a STOLI transaction.)
Only a(n) __________ can guarantee to provide an income benefit payment for as long as the annuitant is alive.
Insurer
Which of the following scenarios will trigger an income tax due?
Interest earned on dividends left on deposit with the insurer
What happens to the overall annual premium cost once a term rider expires?
It decreases (A term rider is added to another policy at an additional cost. Once the rider has expired, the premium for that rider ends. Therefore, the overall annual premium cost will decrease.)
Universal Life is similar to Whole Life in all of the following ways
It provides a death benefit, Cash values accumulate based on premium deposits and interest, Any internal cash value growth is tax-deferred (Like Ordinary Whole Life (WL), Universal Life (UL) insurance features insurance protection and a savings element that grows on a tax-deferred basis. However, UL offers flexible premiums whereas WL does not.)
Which of the following best describes a Statement of Good Health?
It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date
A person who, for a fee, makes recommendations and advises an insured who has an interest in a life or disability insurance contract must be licensed as a:
Life and Disability Insurance Analyst (Life and disability insurance analysts also reviews clients' incomes, insurance, and investments, and makes insurance recommendations.)
If there is a number of premium payments, such as 20-pay, 30-pay or the premium is payable for a specified period of time, such as, to age 65, after which no further premium is required to be paid, what premium paying method was used?
Limited
Which of the following losses would not be covered under an insurance policy?
Loss of property during an operation of drug smuggling (A contract, including the insurance contract, is void if it is based on an illegal purpose or contrary to public policy. It will not be recognized by a court or enforceable by either party.)
Part 1 of the application consists of all of the following information, except:
Medical status of immediate family members, their ages and causes of death
T is the insured/owner of a $500,000 life insurance policy and dies leaving four surviving children, M, C, L, and B, and each child receives $125,000 upon T's death. This is an example of what type of distribution?
Per capita (as a class beneficiary designation. In other words, to share equally.)
The purpose of a certificate of authority is to:
Permit an insurance company to transact business
In a replacement transaction, why should the existing policy not be terminated until the replacing policy is issued and delivered?
Potential of new evidence of insurability being required (Since new evidence of insurability may be required, the existing policy should not be terminated until the replacing policy is issued and delivered.)
Which of the following statements correctly describes a Tax-Sheltered Annuity?
Qualified annuity plans benefitting public schools and nonprofit organization employees
M is age 30 when he applies for life insurance. The underwriter classifies M the same as a person age 40 and their policy is issued with a premium for a person age 40. What substandard rating has been applied to M's policy?
Rated-up Age
Which of the following is not within an agent's authority?
Representing the insured in an insurance transaction (An agent represents an insurer. A broker represents the insured.)
As a disciplinary measure, when a violation of the Insurance Code would justify suspension, revocation or denial of license, the Commissioner may revoke the permanent license and issue a:
Restricted license
The owner's rights include all of the following, except:
Selection of mortality table to use
Which of the following is not a responsibility of the Insurance Commissioner?
Set the rates for Workers' Compensation insurance
A hazard is best defined as:
Something that increases the chance of a loss
All internet advertisements by nonresident agents directed to California insurance consumers must clearly indicate the:
State of resident licensing
An employee who becomes entitled under the terms of the group policy to have an individual policy issued without evidence of insurability must:
Submit an application along with the initial premium
Which of the following life insurance policies provides coverage for two insureds with a No-Lapse Guarantee?
Survivorship Guaranteed Universal Life (Survivorship Guaranteed Universal Life has the same No-Lapse Guarantee as a Guaranteed Universal Life policy, but two lives are insured under one Universal Life policy.)
Which of the following best describes field underwriting?
Taking the time to probe beyond the stated questions on the application based upon the applicant's responses
Which of the following is enacted by the California legislation?
The California Insurance Code
To eliminate the use of life insurance as a short-term, tax-free savings vehicle, what tax law change took place?
The Modified Endowment Contract (MEC) rules were put into place
An agent's appointment remains in effect until any of the following takes place, except:
The agent attains the age of 65
Which of the following is false regarding Tax-Sheltered Annuities?
The contributions are after-tax
All of the following regarding Convertible Term Life insurance is true, except:
The conversion can take place at any time
M's policy was issued with an incorrect age. M was actually older than what was listed in the policy. Which of the following will the insurer most likely do if she had died 5 years after policy issue, but prior to this discovery?
The insurer would pay out a reduced benefit in proportion to the underpayment of premium (The Misstatement of Age or Sex provision allows the insurer to pay out the benefit that the correct premiums would have purchased. This means that the death benefit could be reduced if the age was understated.)
Which of the following is not a primary objective of the California Code of Regulations?
The interpretation of policy provisions
Which of the following is true regarding payment of premium?
The more frequent the payment, the greater the overall cost
Which of the following is responsible for paying the premiums due on a life insurance policy?
The policyowner
Who are the parties in a third-party life insurance ownership situation?
The policyowner, the insured, and the insurer
Which is true about the Law of Large Numbers?
The prediction of group loss is based upon past experience (The Law of Large Numbers gives predictability to losses of homogeneous groups, not to individual losses.)
Which of the following statements about Annual Renewable Term premiums is true?
The premium increases over time (Term premiums increase yearly as the policy renews up to a specified age. The premiums are initially less expensive than comparable permanent coverage, but the premiums increasing can be more expensive over time.)
Which of the following is a likely outcome if a buy-sell agreement in a two person partnership is not in place when one of the partners dies?
The surviving spouse of the deceased becomes the other partner
What is the relationship that must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid?
There must be an insurable interest
Which of the following is the reason why premiums paid on personal life insurance are not deductible?
They are considered a personal expense
A producer submits a completed application to the insurer along with the premium check after giving the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior to the insurer issuing a policy as applied for, what is the insurer's responsibility?
To pay the claim in full as long as the conditions of the receipt were fully satisfied by the insurer (Since all of the conditions of the receipt were satisfied is does not matter that the insured died prior to the policy being issued. Coverage was in effect as of the time the medical exam was completed.)
A surplus lines broker must do all of the following, except:
Use only an insurer identified on the List of Approved Surples Lines Insurers
Credit Life Insurance are:
Usually the individual debtor pays the premium monthly. The creditor must apply the insurance proceeds to the discharge of the loan. The insurance will terminate if the debt is prepaid or refinanced. The amount of the coverage is dependent upon the amount of indebtedness, not the duration of the loan.
Which rider allows a disabled insured policyowner to forgo future premiums on his or her whole life insurance policy while continuing to enjoy full policy benefits?
Waiver of Premium (If the insured policy owner were to become totally disabled, the Waiver of Premium Rider would waive future premiums for the duration of the disability and still allow the cash value and dividends to continue as though the premiums were being paid.)
Universal Life provides two death benefit options. Which of the following best describes Option B?
When the insured dies, the insurer will pay the face amount plus any accumulated values (Option B of a Universal Life policy pays the face amount stated in the contract, plus any cash value that was accumulated)
The general duties of the Commissioner of Insurance include all of the following, except:
While the Commissioner has the responsibility to interpret state insurance laws, they do not have the authority to amend them. Laws are written and amended by the state legislature.
What is the purpose of nonforfeiture values?
Without them, any cash values would be retained by the insurer when the policy lapses due to non-payment of premium
F purchases a life insurance policy and names their spouse J as beneficiary. They divorce several years later. If F dies before making any changes to the policy, can J still collect as the beneficiary?
Yes, J is the beneficiary
When the death of an insured occurs within a specified period, causing the policy to pay double or triple benefits, this policy must have which of the following riders?
accidental death rider aka double indemnity rider
With a Variable Life (VL) policy, which of the following is guaranteed?
death benefit
Surrender charges typically ____________ over time.
decrease
A(n) __________ annuity has its interest credit linked to the positive performance of a stock market index.
equity-indexed
A promise made in the insurance contract, such as "the insured will maintain an anti-theft device," is an example of:
express warranty (An express warranty is a promise written into the policy relating to the insured's risk and is considered a fact. Failure to comply with a warranty breaches the contract.)
The __________ allows an insurer to pay death benefits to anyone it deems to be entitled in the absence of a designated beneficiary.
facility of payment
X is 57 years old, and planning for their retirement. They do not know what their cash flow will look like over the next 10 years, but wants to fund an annuity to provide retirement income. Which of the following premium funding methods would be best for X to consider?
flexible
Permanent insurance is designed to provide coverage ___________.
for an entire lifetime
Taxation applies to any ________ on the cash value paid out as a withdrawal of a Universal life policy.
interest
A hazard is best defined as which of the following?
it increases the chance of loss
Which payment option pays an income to two annuitants while both are living, and stops upon the death of the first annuitant?
joint life
No one may transact insurance in California without a(n):
license
When a producer, agent, or broker makes a false statement about the benefits or the nature of an insurance policy, the person is guilty of:
misrepresentation
A life Insurance policyowner receives an annual dividend. One option for this dividend is to use it to offset the annual obligation to the insurer. What is this option called?
premium reduction
An agent will be found guilty of theft if they put which type of funds to personal use?
premiums collected
To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor.
probationary
When a producer offers a prospective insured a portable dishwasher as a bonus for purchasing a policy, they could be guilty of:
rebating (inducement to purchase insurance.)
W owns a $50,000 20-Pay life policy that W let lapse at the end of the fourth year. The nonforfeiture option providing the longest period of coverage would be:
reduced paid-up (provides the longest period of coverage. Extended Term would provide the most protection. Paid-up additions and paid-up are not nonforfeiture options, rather they are dividend options.)
The face amount of an Ordinary Whole Life policy _________ over the life of the policy.
remains the same
Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract(s) will be lapsed, forfeited, surrendered, terminated, reduced in value, amended with a reduction in benefit or term, have a reduced cash value, or is subjected to borrowing, is best known as a __________.
replacement
Which of the following terms means that the policyowner can change the beneficiary designation at any time and for any reason?
revocable
Which of the following policies is least likely to keep pace with inflation?
straight life (Since Straight Whole Life is a fixed benefit policy, it is most likely to lose purchasing power over time.)
A grandparent purchases a life insurance policy on their grandchild. This is an example of _________.
third-party ownership
Which of the following has the primary responsibility of determining acceptable risks?
underwriter
Flexible Premium Adjustable Life is another name for:
universal life