Bonus Exam: Life Insurance
Decreasing term insurance is used to
cover a mortgage
Is the premium in a survivorship life policy based on the age of the insured? ***
*** Yes
The NAIC is NOT one of the independent rating services that publishes guides to insurance companies' financial integrity: True or False
True
What is the cost of coverage based on for group life insurance?
the average age and the ratio of men to women
What type of an interest rate is guaranteed in universal life policies? !!!
!!! contract interest rate
_______________________ is an example of a physical hazard !!!
!!! diabetes
Considering the principles of liquidity, how would the policyowner use today's cash value in a life insurance policy?
use it for emergency expenses
How long is the grace period for an individual life insurance policy? !!!
!!! 1 month
Industrial life insurance is best described as
$2K or less in coverage and premiums are collected by an agent
In a life insurance application, all of the following signatures will be required EXCEPT A) the home office underwriter B) the insured C) the owner (if different from the insured) D) the agent
A) the home office underwriter
What is NOT a standard exclusion in a life insurance policy?
Disability
Under which condition would life insurance proceeds be taxable by the Federal government?
If there is a transfer for value
Accidentally misstating the date of birth on an insurance application is NOT considered a fraudulent insurance act: true or false?
True
An aleatory contract is based on what kind of exchange?
Unequal exchanges of value
Statistical probabilities of loss for a particular class of insureds is best predicted when the insured group is
larger
An annuity would normally be purchased by an individual who wants to
provide income for retirement
A whole life policy that will generate immediate cash value is
single premium policy
In a joint life annuity,
payments stop the first annuitant dies
What is the tax penalty for withdrawing money from an annuity prior to age 59 1/2? !!!
!!! 10%
How many hours of continuing education must licensees complete during each period?
24
An insured and his spouse recently had a child. Which rider would allow the couple to insure the child for a limited period of time at a specified amount?
children's term rider
If the annuitant dies before the annuity start date, !!!
!!! the interest is taxable
How are policy loans calculated? !!!
!!! the policy's cash value minus unpaid loans and accrued interest
Under what circumstances will the contingent beneficiary receive the death benefit? ***
***if the primary beneficiary dies before the insured
This is not a penalty for violations of state insurance laws:
community service
What is the difference between straight life and a 20-pay whole life policy? !!!
!!! premium payment period
Key person insurance can provide protection for economic losses to a business EXCEPT !!!!
!!! to pay the death benefit to the estate of the insured
An Ordinary Straight Life policy ****
*** does not have a guaranteed death benefit
An IRA owner who is 57 years old wants to make a withdrawal from her traditional IRA. What penalty will be imposed?***
***10%
Which of the following would be true of both fixed-period and fixed-amount settlement options? A) the size of installments decreases after a certain period of time B) both guarantee payment for the life of the beneficiary C) both guarantee that the principal and interest will be fully paid out D) the amount of payments is based on the recipient's life expectancy
C) both guarantee that the principal and interest will be fully paid out
An insured decides to surrender his Whole Life policy. The cash value at surrender is higher than the premiums paid into the policy due to interest. What part of the surrender value would be income taxable?
The difference between the premiums paid and the cash value
All of the following are true of credit life EXCEPT A) the death benefit cannot exceed the amount of the loan B) the premium payment is included in the loan payment C) the creditor is the policyowner D) the insured names the beneficiary
The insured names the beneficiary (?)
How will life insurance proceeds that are paid as a lump sum be received by the beneficiary?
free of federal income tax
A distribution from an employer-sponsored retirement plan or an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within !!!
!!! 60 days
An individual has $200K convertible term life insurance policy. If they choose, they can !!!
!!! convert to whole life policy for the same face amount without proof of insurability
If a retirement plan or annuity is "qualified", this means ****
***it satisfies IRS requirements for favorable tax treatment
In a deferred annuity, the difference between the accumulation value and the surrender value is the ***
***surrender charge
According to the Common Disaster clause, if the insured and the primary beneficiary are killed in the same accident and it cannot be determined who died first, what will be assumed? ***
***the primary beneficiary died before the insurer
What is not a component of an insurance policy premium?****
***number of beneficiaries
Which term refers to the nontaxable portion of each annuity benefit payment? !!!
!!! cost base
What is the most common name for a single policy that is designed to insure two or more lives with a standard premium, and that pays the death benefit upon the first death? ****
***Joint Life
When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?
as a fiduciary
The entire contract includes
the policy and provisions, a copy of the application, and any riders, waivers, or endorsements
An annuity has accumulated the cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive !!!
!!! $70K
Which term is used to define the period of time during which an annuitant makes payment into an annuity?
accumulation period
An IRA contribution can be made from ***
*** cash
The Superintendent may issue a temporary producer's license that lasts for a maximum of
180 days
The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT A) purchase of a new home B) approximately every 3 years between the ages of 25 and 40 C) birth of a child D) marriage
A) purchase of a new home
__________________________ is a correct statement concerning the Medical Information Bureau
The MIB assists underwriters in evaluating and classifying risks
How much pre-licensing education is required for an insurance agent license?
20 hours for each line of insurance
An agent moves from an apartment to a new house. He must notify the Superintendent of the address change within how many days?
30
An example of an alien insurer doing business in this state is one formed under the laws of: A) Puerto Rico B) Mexico C) District of Columbia D) Arizona
B) Mexico
What is the exclusion ratio used to determine?
The annuity benefit to be excluded from taxes
If a loan request is for payment of due premiums on the policy, how soon must the insurer issue a loan?
immediately
A reason for individuals to purchase life insurance is
it creates an immediate estate
____________________________ is NOT true of the agent's implied authority
it is specifically stated in the contract
Which of the following statements is incorrect concerning Modified Endowment Contracts (MECs) !!! A) a primary purpose of the regulations governing MECs was to reduce incentives for the use of insurance as a short-term investment vehicle B) a distribution from an MEC may be subject to a 10% penalty if withdrawn prior to 59 1/2 C) an MEC must always pass the 7 pay test D) a life insurance policy failing the 7 pay test is classified as an MEC
!!! C) an MEC must always pass the 7 pay test
A married couple wants to include the entire family in their whole life policy under one rider. Which rider would help them achieve this goal? !!!
!!! family term
Which portion of a nonqualified annuity payment is taxable? !!!
!!! interest earned on principal
If a life insurance company uses HIV testing as a part of its underwriting, when must the applicant be notified of the procedure? !!!
!!! prior to performance of the test
A licensed agent moves to another state on March 1st. He notifies the Superintendent of the change of address on March 15th & requests a nonresident license. What will happen?***
***The licensed will be changed to nonresident without any fees or additional applications
Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policyowner select?
joint and survivor
An annuitant pays the annuity premium on the 14th of each month. Which best describes the arrangement ? a-Flexible b-lump sum c-single d-level
level
The Human Life Value approach to determining Life insurance needs is based upon which of the following ideas?
loss of breadwinner's income
An insurer established a new rate for its group insurance policies. Which authority is in charge of approving the change?
the Superintendent
A life insurance policy can be backdated to affect a lower premium for up to a maximum of how many months? !!!!
!!! 3 months
_________________________ best depicts the law of large numbers !!!
!!! the larger the pool of risks under study, the more accurate the predictions will be
When must an insurer provide the Superintendent of Insurance with an annual written statement certifying compliance with cybersecurity requirements?
February 15 (???)
What does the Guaranty Association guard against?
Insurer insolvency
An Equity Indexed Annuity will grow based upon
Performance of a recognized index
Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insured's death was caused by an accident as defined in the policy?
an accidental death rider
This is an example of an insurer participating in an unfair trade practice of discrimination:
charging the insured higher premiums based on her race
During the accumulation phase of a fixed annuity, the annuitant's interest rate is based on a minimum rate as specified in the contract, or the current interest rate, whichever is
higher
A life insurance agent may transact viatical settlement contracts
if licensed more than 5 years and if viatical settlement activities are incidental to the agent's insurance transactions
What is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance?
insurance application
The reduction of premium option uses the dividend to reduce
next year's premium
Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles?
standard
Within fifteen days of notifying the Superintendent of the termination of an appointment, the insurer must send a copy of the notification to
the agent
Which policy can be described as a flexible premium adjustable life?
universal life
What is the maximum time period between the Superintendent's examination of books and records of domestic insurers? !!!
!!! 5 years
In this state the owner gets a "free look" of a specified number of days from
delivery of the policy
An insured purchases a nonparticipating whole life policy, which excludes
dividends
If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do?
inform the insurance company
Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes
waiver of premium rider
Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is
taxed as ordinary income
Which of the following is NOT an example of the company's location of incorporation? A) alien B) authorized C) domestic D) foreign
b) authorized
In life insurance, who is NOT required to have insurable interest in the insured?
the beneficiary
The waiver of cost insurance rider
the rider expires when the insured reaches age 60
If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the policyowner?
when the policy is delivered
Which of the following would NOT trigger the payment of the accelerated Death Benefits? *** A) requiring an organ transplant for the insured to survive B) being permanently institutionalized C) being permanently disabled D) terminal illness
*** C) being permanently disabled
When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?****
***extended term
Premiums collected on behalf of the insurance company by an agent will be held in what capacity?
Fiduciary
If an insured dies and it is discovered that the insured misstated their age or gender, the life insurance company will
adjust the death benefit to what the premium would have purchased at the actual age or gender
Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse as long as there is cash value?
automatic premium loan option
Answers to questions in an insurance application are called representations, and as such, they are
believed to be true to the best of the applicant's knowledge
What best describes the difference between joint life and joint and survivor annuity payment options?
In joint life, the benefits stop after the first death
All of the following are true of group life insurance EXCEPT !!!! A) the insureds each own their own contract B) evidence of insurability is usually not required C) premium rates are based upon the average age, gender, and purpose of the group D) when the insured terminates membership in the group, the coverage can be converted to whole life
The insureds each own their own contract !!!!!
A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend? !!!
!!! payor benefit
If an insured purchases an insurance policy with a large deductible what risk management technique is the insured exercising? !!!
!!! retention
What is the purpose of the surrender charge in a deferred annuity?
to compensate the company for loss of investment value
