AZ Life Insurance Exam Prep Study Guide
-Secondary
A Contingent Beneficiary has the __________ right to collect an Insured's death benefit.
-False
A Representation and a Warranty mean the same thing. -True -False
-Allows for a portion of the premium to be placed in a separate investment account.
A Variable Universal life insurance policy: -Allows for a portion of the premium to be placed in a separate investment account. -Can never span a policyholder's entire lifetime. -Does not permit the build up of a cash value. -Does not provide a death benefit similar to a whole life policy.
-Contract
A life insurance Policy is a(n) __________________ that requires the Insurer to pay the Death Benefit of the policy to the policy Beneficiary when the insured dies. -Annuity -Underwriting -Promise -Contract
-False
A new medical exam is required when converting from a Term life policy to a Whole life policy. -True -False -It depends upon the age of the policyholder
-Actuarial Table
A table containing the odds of whether a person will live and until their next birthday is called a(n): -Bar Graph -Annuity -Life Graph -Actuarial Table
-Third-party policy
Aaron wants to buy an insurance policy and serve as the Beneficiary in the event that his daughter Cheryl passes away. What type of policy will Aaron purchase? -First-party policy -Third-party policy -Second-party policy -Indirect policy -None of the above
-Flexible
Adjustable Life policies are _______________ compared to other types of policies. -Strict -Flexible -Risky -Illegal
-Average Wage Indexing (AWI)
Alice is seeking a life insurance Policy that offers payouts once she retires, so she needs to estimate her Social Security Income. Her individual Social Security earnings are determined by analyzing the entirety of the earnings level of society for the year that Alice turns 60 years old, in coordination with the terms of the _______________. -Consumer Price Index (CPI) -Producer Licensing Model Act (PLMA) -Average Wage Indexing (AWI)
-Proceeds are taxed at half of the Beneficiary's tax rate.
All but which of the following are the (3) tax benefits associated with Equity-Indexed Life Insurance policies? -Proceeds are taxed at half of the Beneficiary's tax rate. -Tax managed retirement income. -Accumulation of Cash Values is tax-deferred. -Proceeds are transferred at death tax free.
-They are known for their very flexible payment terms
All but which of the following are true about Whole life insurance policies? -They are a traditional type of life insurance policy -They are more restrictive than adjustable policies -They are known for their very flexible payment terms -Each premium payment is the same -It is not easy to change the face amount
-There is usually a smooth transfer of a business to the beneficiary upon the death of the business owner.
All but which of the following are true about having Sole Proprietorship within a life insurance policy? -There is usually a smooth transfer of a business to the beneficiary upon the death of the business owner. -A sole proprietor has special needs and risks with respect to life coverage. -There are considerable costs when transitioning from a dead business owner to their beneficiary. -When a sole proprietor dies, so does their business.
-Semi-annually
All but which of the following represent forms of Premium payments? -Level -Graded -Flexible -Single payment -Semi-annually
-Morality and Expense (M&E) fee
An Insurance Charge for an Annuity is also known as: -an Investment management fee -a Rider charge -a Morality and Expense (M&E) fee -a Surrender charge
-False
An insurance Underwriter investigates the death of an Insured and pays out claims. -True -False -Insufficient information is provided -May vary based upon the insurer
-Accidental Death and Dismemberment (AD&D)
An insurance company is permitted to restrict or exclude a life insurance Death Benefit Payout if the death is caused by inherently Risky Activity. But, for temporary participation in a dangerous activity, which policy is still an option? -Whole -Universal -Term -Accidental Death and Dismemberment (AD&D) -None of the above
-Yes, IF the insured has no living relatives.
Can a friend of an Insured possess an insurable interest in the Insured? -No, a friend can never have an insurable interest in an insured. -No, UNLESS the official beneficiary gives consent. -Yes, IF the insured has no living relatives. -Yes, IF the insured has given the friend consideration.
-Indexed
Candy is worried that an upcoming predicted period of high inflation will erode the Death Benefits in her life insurance policy. What Provision can be used to prevent the loss of her Death Benefit? -CPI -Convertible -Modified Endowment -Indexed
-Universal Life
Carly calls you seeking assistance with purchasing a life insurance Policy that has both low-cost Premiums and also a savings component to it. What type of Policy is best for Carly? -Ordinary Life -Universal Life -Straight Life -Prorated Life -Whole Life
-The Federal Fair Credit Reporting Act (FCRA)
Covered Insurance Company rejects Hayden's insurance application, because they do not believe he will be able to pay the Premiums based on a review of his payment of his credit card bills. What law requires Covered to send Hayden a notice? -the Federal Fair Credit Reporting Act (FCRA) -the Medical Information Bureau (MIB) -the Producer Licensing Model Act (PLMA) -the Health Insurance Portability and Accountability act (HIPPA)
-False
Edmond suffered from a kidney condition that is controlled with medical treatment. He wants to purchase a life insurance policy. His pre-existing condition prevents him from getting a policy. -True -False
-His coverage may be limited.
Elish owns a personal airplane. He asks you to provide options for life insurance. What should you tell him about his potential coverage? -It is illegal for an insurer to restrict his coverage. -His coverage may be limited. -There should be no limitations on his coverage. -All life insurance policies exclude losses due to aeronautical activities.
-Termination of the policy by the insurance company
Evelyn takes a loan from her life policy. She fails to pay the interest on the loan. Eventually, the amount of her loan exceeds the Cash Value. What will be the most significant result? -Termination of the policy by the insurance company -Penalties and Surcharges -Renewal of the Payment Period -A demand for payment request from the Insurer
-No taxes will be owed.
Fernando has a life insurance Policy that permits withdrawals. He needs to make a withdrawal from the Cash Value to make emergency repairs on his car. What are the tax implications for Fernando if he has a typical life Policy? -No taxes will be owed. -Taxes will be owed at his regular tax rate. -Taxes will be paid, pursuant to the standard rate specified in the insurance contract. -No taxes will be owed even if he withdraws dividends.
-Jill will get a payout representing the amount of coverage that Fred's premium would have qualified for at his true age when the policy was purchased.
Fred passed away and his daughter Jill seeks to obtain the payout of his $1,000,000 life insurance Policy. When she speaks with the Insurance Company, she finds out that her father miss-stated his age when he died. Fred was 78, not 65, as his policy indicated. Jill is upset at the prospect at not obtaining the Payout. How will the misstatement of Fred's age affect the payout? -It will not have an effect, since the carrier had the burden of verifying Fred's true age. -No effect, because the policy is a legally binding contract. -The policy will be deemed no and void and the premiums will be returned without interest. -Jill will get a payout representing the amount of coverage that Fred's premium would have qualified for at his true age when the policy was purchased. -If Jill pays the difference between Fred's Premium payment in the Premium payments that would have been charged if Fred provided his true age, Jill will get the full Payout.
-Decreasing Term
Fredo is looking for a Term policy where the payout is more when he is younger, since he has young kids which type of Term policy is right for Fredo? -Level Term -Decreasing Term -Graded Term -Single Premium Term -Flexible Term
-Single Premium Whole
Gerry is 85 years old. He wants to make one large upfront Premium payment to pay off the total of the Premiums due for his Whole life policy, so he does not need to worry about making periodic payments. What type of life insurance Policy will Gerry need? -Whole Life -Limited Pay Whole -Single Premium Whole -Adjustable Whole
-Key Person insurance
Gregster Corp. manufactures complaxes. The company hires Katie Katers, one of the few complax experts in the world. She creates a top-secret program to enable Gregster Corp. to become the best manufacturer of Complaxes in the world. In the event that Katie dies, Gregster Corp. will sustain a huge financial loss. Which of the following will help Gregster Corp. minimize the risk? -Key Person insurance -Management coverage -Non-Qualified coverage -Contributory coverage
-None of the above.
Greta calls insurance agent Bonnie and asks Bonnie to add the President of the United States as a Beneficiary on her life insurance Policy, even though Greta has never met the president. If the president is added as a Beneficiary, will the president be able to receive proceeds when Greta dies? -Yes, but only if the president is a contingent beneficiary. -No, the president has no insurable interest. -Yes, but only if the president is an irrevocable beneficiary. -Yes, but only if the president consents. -None of the above.
-Pay a higher premium
Guyson is an avid Skydiver. He wants to purchase a life insurance policy that will not exclude a skydiving death, so his six young children are not left in a financial mess. What is the best option for Guyson? -Purchase a short term Accidental Death and Dismemberment (AD&D) policy -Omit the exclusion from the policy by crossing it out -Pay a higher Premium
-Conversion Privilege
Hector works for a software company, where he is provided with life insurance coverage through an employer sponsored Group life policy. He decides to leave that job and start his own software consulting business, but is concerned about losing life insurance coverage. Which Provision in the Group life policy may permit him to continue to have coverage? -Conversion Privilege -529 -Rollover -Policy evolution
-Level
Henderson wants to purchase a Term life policy where the Death Benefit does not decrease as she gets older. Henderson needs a _______________ Term life insurance policy. -Level -Decreasing
-Interest Only Lump Sum
Hershel is purchasing a life insurance Policy and naming his daughter Jean as the Sole Beneficiary. Which of the following is NOT an available Settlement option? -Interest Only Lump Sum -Fixed Period Installments -Fixed Amount Installments -Lump Sum -Life Income
-30 days
How long is the typical Grace Period for Premiums that are not paid by the due date? -30 days -15 days -10 days -There is none
-They automatically transfer their title to the new policy owner.
If the ownership of a Policyholder is sold, what becomes the status of the Beneficiary? -They cannot be changed. -only Revocable Beneficiaries can be changed. -Any Beneficiary can be changed at the insurance Policyholder's sole discretion. -They automatically transfer their title to the new policy owner.
-WILL make an insurance payout if the exclusionary period is over
In the event that a Whole life insurance policyholder commits suicide, the Policy: -Is deemed null and void -Is paid out in full -Requires return of the premiums paid -WILL make an insurance payout if the exclusionary period is over
-Another insurance carrier requests information about the applicant.
In which of the following situations is an Insurer NOT required to provide a Privacy Practice Disclosure and obtain valid Disclosure Authorization from the applicant? -Another insurance carrier requests information about the applicant. -When the insured renews or makes any changes to the insurance policy. -An insurance company obtains personal financial information from the applicant. -The insurer emails a financial data storage bank, requesting data about the applicant.
-No. The insurance company should have rejected the application for the missing answer when the application was originally submitted.
Inez completes a life insurance application, but fails to answer questions related to tobacco use. Her application is approved. 10 years later, Inez dies from lung cancer, though she had never smoked before. Is the insurance company allowed to disclaim coverage because of the missing answer? -No. The insurance company should have rejected the application for the missing answer when the application was originally submitted. -Yes, because Inez's death could be connected to the missing answer. -No. Inez was never a smoker. -Yes. The burden is on the applicant to ensure that all questions are properly answered. -Yes, as long as the application was signed.
-a Brokerage can offer products from several insurance companies.
Jeanine works for Hedley Insurance Agency, while her cousin Hester works for Cambrill Insurance Brokerage. What is the difference between the two types of entities? -an Agency works on behalf of several insurers. -a Brokerage represents only one carrier. -They are essentially the same. -a Brokerage can offer products from several insurance companies.
-a Waiver of Premium Rider
Jerry wants to purchase a life insurance policy, but is worried that his failing hip will render him disabled and unable to pay the policy Premiums. What option could you suggest to Jerry? -Disability Forgiveness -a Qualified policy -a Non-Qualified policy -Do not purchase life insurance -a Waiver of Premium Rider
-Limited Pay
Juarez is a 45 year old Architect. He visits your insurance office seeking a life insurance Policy, but does not want to make premium payments for the rest of his life because he fears he will be forced into early retirement due to his health issues. He wants to make 10 to 20 payments in total, rather than making a payment every month. What type of life insurance Policy is suitable for Juarez? -Limited Pay -Single Premium -Multiple Payment -Adjustable -Whole Life
-Partial Surrender
Katilyn takes only a small amount out of the cash value of her life policy. Which Settlement option is she using? -Partial Withdrawal -Partial Surrender -Conditional Surrender -None of the above
-Free Look
Ken wants to purchase a life insurance policy as soon as possible, but he also wants the option to continue to shop around and have the ability to change policies if he finds a better policy. Which policy Provision will benefit Kent? -Sample Period -Free Look -First Look -Tryout Clause -Review Period
-The response will not amount to an essential condition to the formation of the insurance contract
Kernel Is completing a life insurance application. A question asks for the causes of death of her parents. Her mother died of cancer, while her father died of kidney disease. Which of the following is true? -Her response will be a Warranty -The question is asking for a Guarantee -The answer will not be a Representation -The response will not amount to an essential condition to the formation of the insurance contract
-I, II and III
Lorenzo visits your insurance office to reach life insurance policies for the people employed by his software company. Which of the following should be considered when providing him with advice? I. The business itself II. The risks involved III. The employees IV. The customers V. The location of the business -I, II and V -II and III -I, II and III -I, II, III, IV and V -II only
-Contributory
Ned owns a small printing business and wants to offer Group life insurance coverage to his employees. Which type of plan will require BOTH Ned and his employees to pay the policy Premium? -Contributory -Non-Contributory -Shared Premium -Standard Group
-False
Ordinary life insurance may also be referred to as Whole life insurance or Universal life insurance. -True -False
-After the sale
Providing extensive customer service to a client is usually most important: -Prior to the sale -After the sale -At the moment of the sale -None of the above
-Life Income
Rachel is the Beneficiary of a life insurance policy. The insured has passed away. She reviews the various payout settlement options. Rachel chooses the option that operates like an annuity. What option did she choose for the payout? -Periodic annuitized payout -Fixed period installments -Fixed amount installments -Life Income
-Assets are not accessible by a judgment creditor
Saheed owns a valuable business, but often gets sued because his products sometimes cause personal injury. Which advantage of a Tax-Qualified policy will provide an advantage to Saheed? -Assets are not accessible by a judgment creditor -Ratings applied to the policy are tax-deductible -Qualified plans prevent breaches in coverage -Premiums and contributions are tax deductible
-a Guaranteed Insurability rider
Sandra seeks life insurance coverage. She is young, but has minor health issues and a very high earning potential. She would like to purchase a Policy that will allow her to increase her coverage in the future without the need for another medical screening. What option would you recommend to Sandra? -an IME waiver rider -a Contributory rider -a Non-Contributory rider -a Guaranteed Insurability rider -a Waiver-of-Premium rider
-All of the above
Starr Corp. has a Group life insurance policy. When a new employee is hired, which represents the amount of time the employee could wait for coverage to begin? -60 days -12 months -6 months -90 days -All of the above
-Yes, the signature is required when an examining physician's statement as part of the application.
Steve seeks to have his life insured. As part of his application process, a statement from an examining physician is included. Does the examining physician have to sign the life policy application? -No, only the signatures of the insured and agent are required. -No, only the signature of the applicant is required. -Yes, but only if the insured and applicant are not the same person. -Yes, the signature is required when an examining physician's statement as part of the application.
-Whole and Term
The (2) main types of Life Insurance Policies are: -Whole and Term -Whole and Universal -Ordinary and Straight -Whole and Ordinary -All of the above
-Upfront Compensation plans
The (4) types of Non-Qualified life insurance plans include all of the following, except: -Deferred Compensation -Split-Dollar plans -Executive Bonus plans -Group-Term Carve Out plans -Upfront Compensation plans
-Group life policies
The federal Anti-Money Laundering laws do not apply to _______________. -Whole life policies -Group life policies -Annuities -An insurance product containing an investment element -None of the above
-True
The main difference between Universal life insurance and Variable Whole life insurance is that a Universal life policy has defined guarantees. -True -False
-Evaluating risk
The most important task of an Underwriter is: -Evaluating risk -Reviewing medical histories -Setting premium rates -Excepting or rejecting applicants
-Insured
The name of the person who is covered by the insurance Policy is the: -Insured -Insuree -Insurer -Trustee
-Greater than
The premium for a Whole life policy is usually ________________ the premium of a Term life policy: -Less than -The same as -Greater than -Half the cost of -One-third of
-Consumer Price Index (CPI)
The term for measuring the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services is called the ______________. -Modified Endowment Contract (MEC) -Average Wage Indexing (AWI) -Consumer Price Index (CPI)
-Defined contribution
Tico's employer provides a 401(k) Account as a benefit. What type of account is Tico's 401(k) Account? -Defined Benefit -Roth IRA -Defined Contribution -Traditional IRA
-A uniform set of insurance regulations
What does the Producer Licensing Model Act (PLMA) provide? -A uniform set of insurance regulations -Disability income -A double payout -Private Life Maturity Assets
-A uniform set of insurance regulations
What does the Producer Licensing Model Act (PLMA) provide? -A uniform set of insurance regulations -Disability income -A double payout -Private Life Maturity Assets
-Universal coverage provides the Beneficiary with a fixed Death Benefit.
What is a primary difference between Universal life insurance and Variable Whole life insurance? -Universal coverage provides the Beneficiary with a fixed Death Benefit. -Variable Whole life insurance policies provide little to no discretion when choosing a Death Benefit. -Variable Whole life insurance policies provide no flexibility on the minimum payments. -Universal life insurance policies provide flexibility with the Death Benefit.
-100%
What is an Annuity's vested percentage at the end of the Term? -0% -100% -99% -75% -None of the above
-Actuary
What is another name for the Mathematician who calculates the likelihood that certain events will occur and the what the price of the insurance policy should be based on the likelihood that the events will happen? -Economist -Actuary -Statistician -Computator
-100
What is the maximum age that the Benefit Level of a typical life Policy extends to? -100 -95 -105 -90 -85
-Primary Insurance Amount (PIA)
What is the name of the formula for determining a person's Social Security Benefit? -Social Security Income (SSI) -Primary Insurance Amount (PIA) -Modified Endowment Contract (MEC) -Social Security Disability Income (SSDI)
-Automatic Premium Loan
What is the name of the optional policy Provision that guarantees a Policyholder will NOT miss a Premium Payment? -Automatic Premium Loan -Grace period -Autopay -Cash value loan
-Viatical Settlement
What is the name of the process of selling the policy for less than the amount of the Death Benefit? -Viatical Settlement -Conversion Transfer -Cash out sale -Settlement of cash value
-to Cover the cost of an Investment Vehicle
What is the primary purpose of a Stranger Originated Life Insurance (STOLI) life policy? -to Have Life Insurance for the protection of loved ones -to Cover the cost of an Investment Vehicle -to Help the elderly -think Adhere to federal law
-Vesting
What is the term that relates to the amount of money that an Insured is entitled to withdraw from an annuity? -Vesting -Build up -Defined benefit -Single Premium Deferred Annuity (SPDA)
-the Producer Licensing Model Act (PLMA)
What regulations provide a single set of requirements that can be utilized by the state to create their own insurance regulations? -the Sherman Antitrust Act -the Producer Licensing Model Act (PLMA) -the Clayton Act -the American Insurance Association (AIA)
-Equity-Indexed Universal
What type of Universal life policy offers a Policyholder the ability to increase the Cash Value of the policy based on changes in the stock index? -Equity-Indexed Universal -Equity Interest -Current assumption -Excess Interest
-Grace Period
When an insured fails to make a premium payment by the due date, what is the name of the period that begins? -Termination Period -Graceful period -Grace Period -Past-Due Period -Interim Period
-The payments could be changed.
When renewing a policy with a level Premium payment schedule, _______________. -The payments never change. -The payments only change if the Insured requests an amendment to the payment schedule. -The payments could be changed at the sole discretion of the carrier. -The payments could be changed. -None of the above.
-Incontestability
Which Provision in an insurance Policy prevents the insurance company from requiring the Insured to confirm any statements made on the Policy after more than two years have passed from the Policy inception date? -Irrevocation -Incontestability -Viatical
-Independent Insurance Brokers
Which entities are not required to have Anti-Money Laundering (AML) programs? -Independent Insurance Brokers -Insurance Brokers who have partnerships with Insurance Companies -Insurance Producers who have partnerships with Insurance Companies -Insurance Producers and Brokers who have partnerships with Financial Institutions -None of the above
-Taxes cannot be deferred
Which is not true about Single Premium Annuities? -There are two types -The policy owner can make a single upfront Premium payment -Taxes cannot be deferred -Taxes may be deferred depending upon the option chosen
-Signatures of the Insured, the Agent, and the Applicant
Which is required to create a valid application for an insurance policy, when the Applicant is not the same person as the Insured? -Signatures of the Insured, and the Applicant -Signatures of the Applicant, and the Agent -Signatures of the Insured, the Agent, and the Applicant -Signatures of the Insured, the Agent, the Applicant, and the Insured's personal physician
-Insuring Clause
Which is the most important Provision in an insurance policy, describing all of the coverage details? -Policy Rider -Insuring Clause -Modified Endowment
-the Client interview
Which is the most important part in selling a life insurance Policy to a Client? -collecting the Premiums -the Client Interview -Following up after the sale -Providing a gift to the client to obtain business -None of the above
-Sell life policies
Which of the following functions does an Underwriter NOT perform? -the Evaluation of Risk -the Review of Medical Histories -the Selling of life Policies -the Determination of the Premium Payment amount(s)
-the Medical Information Bureau (MIB)
Which of the following helps Insurance Companies reduce their risk of insuring someone who could put an Insurance Company at risk? -the Medical Information Bureau (MIB) -the Consumer Price Index (CPI) -the Producer Licensing Model Act (PLMA)
-None of the above
Which of the following is NOT a type of Beneficiary? -Primary -Contingent -Irrevocable -None of the above
-Assets are accessible by a judgment creditor
Which of the following is NOT true about a Tax-Qualified life insurance policy? -Premiums and contributions are tax deductible -Qualified plans prevent breaches in coverage -Ratings applied to the policy are tax-deductible -Assets are accessible by a judgment creditor
-Premiums are deductible when the policy benefits are paid out
Which of the following is incorrect about the taxation of an individual's life insurance Policy? -Beneficiaries typically do not pay taxes on the Death Benefit -Premiums are deductible when the policy benefits are paid out -Premiums are generally not tax-deductible in the year paid -None of the above
-Prorated Life
Which of the following is not a type of Whole life policy? -Traditional Whole Life -Prorated Life -Variable Universal Life -Universal Life
-All earnings and dividends are taxed in the year earned.
Which of the following is not true about a Cash Value Life Insurance Policy? -Dividends are not taxed as income in the year they are earned. -No tax obligations arise for any earnings at years end. -An individual's earnings that are gained can increase on a tax deferred basis until a cash out. -All earnings and dividends are taxed in the year earned.
-The policy includes a guaranteed ability to raise the coverage amount later on
Which of the following is the biggest advantage of an increasing Term life insurance policy? -Level payments -the Conversion feature -It is a Whole policy -The policy includes a guaranteed ability to raise the coverage amount later on -None of the above
-All of the above
Which of the following is true about Convertible Term life policies?: -A new Medical Exam is NOT usually required to perform the Conversion -They provide financial flexibility -Timely payment of Premiums is required -the Conversion can be done immediately once coverage is in effect -All of the above
-None of the above
Which of the following is true about the process whereby an Insured sells the policy to a Private Party? -the Insured shall still receive the Death Benefit amount -the Private Party will not receive the Death Benefit amount -the Insured receives less than the Cash Surrender Value -None of the above
-Equity-Interest
Which of the following whole life policies does not earn interest based on stock market movements? -Interest Sensitive -Excess Interest -Current Assumption -Equity-Interest
-Spouse Term Insurance Rider
Which policy document allows an Insured with a Whole life policy to obtain Term coverage for a spouse? -Spouse Term Insurance Rider -Term Life Rider -Spouse Convertible Rider -All of the above
-Rider
Which term reflects an amendment to an insurance policy that becomes part of it and changes the payable benefits? -Consideration -Rider -Revision -Adjustable
-Irrevocable
Which type of Beneficiary must first consent to an Insured's decision to remove a Beneficiary from a life insurance policy? -Primary -Secondary -Revocable -Irrevocable -All of the above
-The payout is distributed and fixed and equal installment payments over a specified time period
With a Fixed Installment Settlement option: -The payout is distributed through fixed level installment payments over a specified time period -It is like an annuity -The proceeds are paid out monthly from the face amount and interest -The interest is paid out and the face amount is paid out later
-False
With a Last Survivor annuity, the payments will stop after the death of the first spouse. -True -False -Insufficient information is provided
-United States vs. Southeastern Underwriters Association
_______________ determined that the sale of an insurance product from an entity in one state to an entity in a different state constitutes as Interstate Commerce. -Paul vs. Virginia -The "Clayton" Antitrust Act -Sherman Antitrust Act -United States vs. Southeastern Underwriters Association
