CA Life Insurance Exam
How many days' notice must an insurer provide to an insured regarding the lapse of a policy due to outstanding loans? a) 7 days b) 10 days c) 15 days d) 30 days
D
The owner of a deferred annuity pays $100 in premium one month, and $130 the next month. Which of the following terms best describes this premium payment arrangement? a) Single premium b) Level premium c) Flexible premium d) Lump-sum premium
C
What does an annuity protect the annuitant against? a) Estate taxes b) The financial impact caused by premature death c) Living longer than expected d) Leaving beneficiaries without income
C
At what point would an automatic premium loan be generated? a) Upon the surrender of the policy b) Following the grace period c) Upon the insured's death d) Once the policy is delivered
B
Guaranteeing future dividends is considered to be an unfair or deceptive act known as a) Misrepresentation. b) Twisting. c) False financial statements. d) Rebating.
A
J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? a) Interest Only b) Joint and Survivor c) Fixed Amount d) Fixed Period
C
Considering the principles of liquidity, how would the policyowner use today's cash values in a life insurance policy? a) Use it for emergency expenses b) Secure a car loan next year c) Make a down payment on a home in 5 years d) Fund a retirement
A
All of the following are consideration in an insurance policy EXCEPT a) The promise to pay covered losses. b) The cash value in the policy. c) The statements on the application. d) The premium paid at the time of application.
B
An insured has a life insurance policy in the amount of $250,000 naming his wife as beneficiary. Upon his death, his beneficiary decides not to receive the death benefit for some time. When she finally receives the death benefit check, it's in the amount of $250,530. Is any portion of the proceeds that the beneficiary receives taxable? a) No, the beneficiary is qualified for a "Bereavement Exclusions" if the beneficiary is a spouse. b) Yes, proceeds in excess of face amount are taxable as interest. c) No, proceeds from a life insurance policy are not taxable. d) Yes, proceeds from a life insurance policy are taxable.
B
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the a) Secondary beneficiary. b) Contingent beneficiary. c) Irrevocable beneficiary. d) Revocable beneficiary.
D
Which of the following policies can be described as a flexible premium adjustable life policy? a) Credit Life b) Universal Life c) Whole Life d) Term Life
B
What type of insurer uses a formal sharing agreement? a) Stock insurers b) Mutual insurers c) Fraternal Benefit Societies d) Reciprocal insurers
D
Which type of authority is found in the agent's contract? a) Apparent b) Implied c) Assumed d) Express
D
Which of the following statements regarding HIV testing is NOT true? a) Test results must be sent to the Department of Insurance. b) Testing may be waived at the discretion of the insurer. c) The insurer is responsible for the cost of HIV testing. d) Written consent from the applicant is required prior to the examination.
A
An insured intentionally did not disclose a material fact on an application for insurance. This would be considered a) Misrepresentation. b) Concealment. c) Coercion. d) Avoidance.
B
A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend? a) Guaranteed insurability b) Automatic premium loan c) Waiver of premium d) Payor benefit
D
Restoring an insured financially after a claim is known as a) Adhesion. b) Restoration. c) Reasonable expectations. d) Indemnity.
D
Under which of the following conditions would life insurance proceeds be taxable by the federal government? a) If there is a transfer for value b) If collaterally assigned to a lender c) If taken as a lump sum d) If paid to the policyowner
A
In a variable life insurance policy, all of the following assets are held in the insurance company's general account EXCEPT a) Mortality reserves. b) Face amount reserves. c) Incidental benefit amounts. d) Cash surrender values.
D
Where are premiums from fixed annuities invested? a) A hedge fund b) A separate account c) A general account d) A variable annuity
C
Which of the following are generally NOT considered when underwriting group insurance? a) The group's past claim experience b) The size of the group c) The insureds' medical history d) The nature of the group
C
Which of the following is guaranteed under a variable whole life insurance policy? a) Minimum death benefit b) Interest rates c) Cash value d) Stock performance
A
All of the following are true regarding a producer's fiduciary responsibilities EXCEPT a) All monies must be accounted for and paid to the proper party. b) A producer who fails to pay trust funds to the company represented is guilty of theft. c) Producers may commingle personal funds with company funds. d) A producer who receives money for the sale or negotiation of an insurance contract must keep the funds in a separate trust account.
C
An agent offers life insurance for no cost to people buying property in a local development. When the Commissioner investigates the agent's actions, which of the following is NOT a likely consequence? a) The agent will be charged with a felony and/or up to 10 years in jail. b) A civil penalty of up to $5,000 if the actions were not willful and $10,000 fine if they were willful. c) A cease and desist order will be issued. d) A hearing will be called.
A
An agent who knowingly misrepresents material information for the purpose of inducing an insured to lapse, forfeit, change or surrender a life insurance policy or annuity has committed an illegal practice known as a) Twisting. b) Fraud. c) Concealment. d) Misrepresentation.
A
An insurance company that is owned by the policyholders is called a a) Mutual insurer. b) Fraternal insurer. c) Stock insurer. d) Reciprocal insurer.
A
What is the minimum number of members required for group life insurance in this state? a) 10 b) 15 c) 25 d) 100
A
What is the name of an organization that collects and compiles information from members concerning insurance claims in order to prevent insurance claims fraud? a) Insurance Claims Analysis Bureau b) Fraud Division c) Fair Claims Reporting Agency d) Insurance Guarantee Association
A
If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising? a) Avoidance b) Sharing c) Retention d) Transfer only
C
Which of the following riders provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years? a) Cost of Living Rider b) Accidental Death Rider c) Living Needs Rider d) Long-Term Care Rider
C
An agent selling variable annuities must be registered with a) Department of Insurance. b) The Guaranty Association. c) SEC. d) FINRA.
D
In a deferred annuity, the difference between the accumulation value and the surrender value is the a) Mortality charge. b) Interest credit. c) Front end load. d) Surrender charge.
D
What is the maximum penalty for releasing personal nonpublic information of multiple consumers without their consent? a) $2,500 b) $4,800 c) $160,000 d) $500,000
D
When an insured terminates membership in the insured group, the insured can convert to a) Whole life with proof of insurability. b) Term without proof of insurability. c) Term with proof of insurability. d) Whole life without proof of insurability.
D
When life insurance proceeds are used to pay inheritance taxes and federal estate taxes, it is known as a) Liquidity. b) Life settlement. c) Estate conservation. d) Estate creation.
C
An annuity owner receives the same guaranteed payment every month. What type of annuity is it? a) Immediate b) Guaranteed c) Single d) Fixed
D
All of the following statements are true regarding an Ordinary (Straight) Life policy EXCEPT a) It does not have a guaranteed death benefit. b) It is funded by a level premium. c) It builds cash value. d) If the insured lives to age 100, the policy matures, and the face amount is paid to the insured.
A
When assessing needs for life insurance, an individual may use retention, which means a) Maintaining assets at death. b) Keeping a life insurance policy until death. c) Raising capital. d) Purchasing life insurance.
A
. All insurance policies and annuity contracts delivered to senior citizens in the State of California are subject to a cancellation period of at least a) 20 days. b) 30 days. c) 45 days. d) 60 days.
B
What happens when a policy is surrendered for its cash value? a) The policy can be reinstated by paying back all policy loans and premiums. b) The policy can be converted to term coverage. c) Coverage ends and the policy cannot be reinstated. d) Coverage ends but the policy can be reinstated at any time.
C
To which of the following products does the Replacement Regulation apply? a) Group annuities b) Credit life insurance c) Converting an existing policy with the same insurer d) Whole life insurance
D
Which of the following is NOT a standard exclusion in life insurance policies? a) Hazardous occupation b) War and military service c) Aviation d) Disability
D
Which of the following is NOT a type of a hazard? a) Morale b) Exposure c) Physical d) Moral
B
Life insurance creates an immediate estate. Which of the following best explains this statement? The policy has cash values and nonforfeiture values. b) The policy generates immediate cash value. c) The death benefit will always be paid to the estate of the insured. d) The face value of the policy is payable to the beneficiary upon the death of the insured.
D
Without obtaining dual licensing, life-only agents may transact all of the following types of insurance EXCEPT a) Accidental death. b) Endowments. c) 24-hour care coverage. d) Disability income.
C
What are the continuing education requirements for agents who market long-term care insurance policies? a) 8 hours of long-term care specific education included in the regular CE requirements b) 4 hours of long-term care education every year c) 4 hours of long-term care education every 4 years d) 8 hours of long-term care specific education in addition to the regular CE requirements
A
Which of the following is true regarding a joint life annuity? a) The payments go to a beneficiary upon the last death. b) The payments go to the surviving annuitant after the first death. c) The payments stop at the first death. d) The payments stop at the last death.
C
Partners in a business want to make sure that if one of them were to pass away, their surviving family will receive a fair value for their portion in the business. What life insurance arrangement would be most suited for transitioning the business? a) Deferred Compensation Plan b) Executive Bonus Plan c) Split Dollar Plan d) Buy-Sell Agreement
D
The needs approach to calculating the amount of life insurance needed is based on a) Predicted needs of a family after the premature death of the insured. b) Whether or not the family is in the blackout period. c) Whether or not the insured has dependents. d) The estimate of what would be lost to the family in the event of the premature death of the insured.
A
Which of the following is a correct statement about annuities? a) Variable annuities provide minimum guaranteed rate of interest. b) Variable annuities place the funds into the company's general account. c) Fixed annuities have the annuitant assume the risks of investment. d) Fixed annuities do not provide protection against inflation.
D
All of the following are advantages of a qualified retirement plan EXCEPT a) The contribution is not taxable to the employee when made. b) The funds grow tax deferred. c) The income at retirement is tax free. d) The contribution is deductible to the employer.
C
The entire contract includes all of the following EXCEPT a) A copy of the application. b) Any riders or amendments. c) A buyer's guide. d) The life insurance policy.
C
Which of the following indicates the person upon whose life the annuity income amount is determined? a) Owner b) Insured c) Annuitant d) Beneficiary
C
If a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure? a) Prior notice is not required b) Prior to performance of the test c) Prior to ordering a physical examination d) Prior to solicitation of the policy
B
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a) Nonforfeiture option. b) Guaranteed insurability rider. c) Paid-up additions option. d) Cost of living provision.
B
What type of an interest rate is guaranteed in universal life policies? a) Adjustable interest rate b) Current interest rate c) Contract interest rate d) Nominal interest rate
C
Which of the following is NOT true regarding Equity Indexed Annuities? a) The insurance company keeps a percentage of the returns. b) They have guaranteed minimum interest rates. c) They are less risky than variable annuities. d) They earn lower interest rates than fixed annuities.
D
An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered a) Relinquished. b) Delivered. c) Mailed. d) Issued.
B
A Return of Premium term life policy is written as what type of term coverage? a) Increasing b) Decreasing c) Renewable d) Level
A
Which of the following entities conducts a post-selection process? a) Underwriters b) Producers c) The Commissioner d) Medical Information Bureau
A
Which of the following riders would NOT cause the Death Benefit to increase? a) Cost of Living Rider b) Accidental Death Rider c) Payor Benefit Rider d) Guaranteed Insurability Rider
C
The Commissioner of Insurance supervises and regulates the insurance affairs in the State of California, and is chosen by a) Admitted insurers. b) The Governor. c) The State Senate. d) The people.
D
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the a) Complete contract. b) Entire contract. c) Total contract. d) Aleatory contract.
B
Underwriters use all of these methods to protect the insurer against adverse selection EXCEPT a) Only accepting a small percentage of applicants. b) Accepting certain risks only at a higher rate. c) Restricting coverage. d) Refusing to accept a risk.
A
An individual receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy? a) Single Premium Deferred Annuity b) Single Premium Immediate Annuity c) Flexible Premium Deferred Annuity d) Flexible Premium Immediate Annuity
B
The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the insured made a material misstatement on the application. What is the most likely course of action for the insurer? a) No course of action allowed since the policy has already been issued b) Rescind the policy c) An administrative hearing by the Department of Insurance d) A hearing by a court of law to determine the appropriate actions The contestability period is still in force so the policy can be rescinded by the company for material misrepresentation on the application.
B
All of the following are examples of risk retention EXCEPT a) Copayments. b) Self-insurance. c) Premiums. d) Deductibles.
C
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? a) Fixed-period installments b) Life income c) Joint and Survivor d) Fixed-amount installments
C
What effect will the long-term care (LTC) rider have on the death benefit of a life insurance policy if LTC benefits were paid to the insured? a) Increase the death benefit by the amount paid into LTC b) Not affect the amount payable to the beneficiary c) Eliminate the death benefit d) Reduce the death benefit
D
What is the purpose of the surrender charge in a deferred annuity? a) To punish the annuitant for breach of contract b) To prevent the over funding of the annuity c) To provide additional revenue for the insurance company d) To compensate the company for loss of investment value
D
All of the following are true regarding the waiver of cost of insurance rider EXCEPT a) The rider waives insurance costs in the event the insured becomes disabled. b) The rider is only applicable to universal life policies. c) The rider cannot waive the cost of premiums that accumulate cash value. d) The rider expires when the insured reaches age 60.
D
An agent has completed 30 hours of continuing education by the end of a license period instead of the required 24 hours. What will happen to the 6 hours in excess? a) They will be credited toward the agent's commissions. b) The outcome will depend upon whether it is the agent's first license period or not. c) They will be lost. d) They will be carried over into the next licensing period.
D
If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions? a) Within 3 months of issuing the policy b) Within 30 days of issuing the policy c) At any time within the incontestable period d) Never; the insurer has waived its right to those answers by issuing the policy
D
Which of the following is the best definition of "indemnification"? a) The act of one person who agrees to restore an injured person to the condition he/she enjoyed prior to the loss b) A legal entity which acts on behalf of itself, accepting legal and civil responsibility for the actions it performs and making contracts in its own name c) A contract whereby the two parties involved agree to what things of value will be exchanged by the parties to the contract d) A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event
A
According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? a) The estate of the primary beneficiary and the contingent beneficiary split benefits equally. b) The insured died before the primary beneficiary. c) The primary beneficiary died before the insured. d) The deaths occurred at the same time.
C
An insurer that operates for one or more social, educational, charitable, benevolent, or religious purposes for the benefit of its members is known as a a) Reciprocal insurer. b) Stock insurer. c) Fraternal insurer. d) Mutual insurer.
C
When an insurer tries to discourage a policyholder from replacing an existing policy, this is called a) Retention effort. b) Adverse selection. c) Conservation effort. d) Negotiating.
C
If an insured is injured while committing an illegal act and the insured's health policy contains the Illegal Occupation provision, what percentage of the claim will be paid? a) 0% b) 50% c) 75% d) 100%
A
Any person to whom the Commissioner has issued a seizure order and who refuses to deliver any books, records, or assets of an insurer faces the following penalties: a) A misdemeanor punishable by a fine up to $1,000, a year in jail, or both. b) A misdemeanor punishable by a $5,000 fine, if unintentional, or $10,000, if intentional. c) Administrative fines only. d) A felony punishable by a fine up to $1,000, a year in prison, or both.
A
Which of the following best describes pure life annuity? a) It provides the highest monthly benefits. b) It continues payments to the beneficiary when the annuitant dies. c) It is also known as refund life annuity. d) It guarantees to pay out all the proceeds.
A
What is the maximum loan amount a policyowner may withdrawal from a variable universal life insurance policy? a) An amount equal to the first year of premium payments b) An amount not exceeding the cash value c) An amount up to the face amount of the policy d) Nothing; loans are not allowed under variable universal life
B
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) Birth of a child. b) Marriage. c) Purchase of a new home. d) Approximately every 3 years between the ages of 25 and 40.
C
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable? a) Charitable organization b) Dependents c) Annuitant d) Spouse
D
Which of the following best describes what the annuity period is? a) The period of time from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments
D
Which of the following is TRUE regarding the annuity period? a) It is also referred to as the accumulation period. b) It is the period of time during which the annuitant makes premium payments into the annuity. c) It may last for the lifetime of the annuitant. d) During this period of time the annuity payments grow interest tax deferred.
C
Which of the following is true regarding the spendthrift clause in life insurance policies? a) It is only used when the beneficiary is a minor. b) It is the same as irrevocable settlement clause. c) It can protect the policy proceeds from creditors of the beneficiary. d) It allows the beneficiary to select a different settlement option.
C
In a group life policy with a death benefit of more than $50,000 a) Premium cost above $50,000 is taxable as income to the employee. b) Premium cost below $50,000 is taxable as income to the insured. c) Premium cost is tax deferred. d) Premium cost is taxable to the employer.
A
All of the following are duties and responsibilities of producers at the time of application EXCEPT a) Change any incorrect statement on the application by personally initialing next to the corrected statement. b) Explain the nature and type of any receipt the producer is giving to the applicant. c) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. d) Check to make sure that there are no unanswered questions on the application.
A
All of the following are true regarding the federal Fair Credit Reporting Act EXCEPT a) Reports may be sent to anyone who requests one. b) Insurers are not required to give customers a copy of the report. c) It applies to credit reports ordered in connection with insurance, banking and employment. d) The customer must be notified if adverse action is taken as a result of a report.
A
All of the following statements about agents are true EXCEPT a) Exclusive agents work for themselves. b) Producers can be natural persons or corporations. c) Independent agents can be appointed by multiple insurers. d) Managing General Agents are responsible for hiring, training and supervising other agents.
A
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? a) 50% tax on the amount not distributed as required b) No penalties, since the owner is older than 59 ½ c) 10% for early withdrawal d) 15% for early withdrawal
A
An adjustable life policy can assume the form of a) Either term insurance or permanent insurance. b) Neither term insurance nor permanent insurance. c) Only term insurance. d) Only permanent insurance.
A
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? a) The date of medical exam b) The date of policy delivery c) The date of issue d) The date of application
A
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a) Single premium whole life. b) Modified Endowment Contract (MEC). c) Level term life. d) Graded premium whole life.
A
Applicants for insurance who are blind may be rated substandard for life insurance a) Only on the basis of information unrelated to their blindness. b) Only if they have been blind from birth. c) Only if their blindness resulted from an injury. d) Always, because they cannot avoid the risk of injury or death.
A
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? a) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. b) The insured's premiums will be waived until she is 21. c) The premiums will become tax deductible until the insured's 18th birthday. d) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected.
B
All of the following are personal uses of life insurance EXCEPT a) Cash accumulation. b) Buy-sell agreement. c) Survivor protection. d) Estate creation.
B
All of the following are true of annually renewable term insurance EXCEPT a) The policy renews regardless of the insured's health. b) Proof of insurability must be provided at each renewal. c) The premium increases each year. d) The death benefit remains level.
B
Which of the following best describes the MIB? a) It is a rating organization for health insurance. b) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. c) It is a government agency that collects medical information on the insured from the insurance companies. d) It is a member organization that protects insured against insolvent insurers.
B
Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum.
B
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) Premiums are taxable to the employee. b) Premiums are not tax deductible as a business expense. c) Premiums are tax deductible by the key employee. d) Premiums are tax deductible as a business expense.
B
Which of the following statements describes one of the reasons individuals purchase life insurance? a) It provides income an insured cannot outlive. b) It creates an immediate estate. c) It helps liquidate an estate through death proceeds. d) It always accumulates cash value.
B
Which of the following types of insurance is investment based, has a level fixed premium, and a nonguaranteed cash value? a) Credit life b) Variable whole life c) Interest-based life d) Universal life
B
A college student will graduate next year. His studies have limited his ability to work, so he has borrowed funds to pay for his education. He would like to start a permanent life insurance program that would cover his debt and still be affordable during the period he is establishing his earning potential. An appropriate policy would be a) Level Term to age 65. b) Single Premium Whole Life. c) Modified Whole Life. d) Current Assumption Whole Life
C
All of the following are true regarding the guaranteed insurability rider EXCEPT a) The insured may purchase additional coverage at the attained age. b) The insured may purchase additional insurance up to the amount specified in the base policy. c) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. d) This rider is available to all insureds with no additional premium.
D
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. b) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. c) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. d) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
D
The key factor of representation that allows the injured party to rescind the contract is a) That any misrepresentation is considered fraud. b) Representations are statements believed to be true and hold no legal consequences. c) The promise or assurance of the representation. d) If the representation is false in a material point.
D
The minimum interest rate on an equity indexed annuity is often based on a) The returns from the insurance company's separate account. b) The annuitant's individual stock portfolio. c) The insurance company's general account investments. d) An index like Standard & Poor's 500.
D
Which statement about Life Insurance Code and Ethics is NOT true? a) Agents are not permitted to advertise that an insurer is a member of any insurance guaranty association. b) The act of twisting could result in a license suspension for up to 3 years. c) Marketing plans to offer free insurance as an inducement to buy or rent real property are prohibited. d) Acts of fair and unfair discrimination are prohibited.
D
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Interest-sensitive whole life b) Life annuity with period certain c) Increasing term d) Limited pay whole life
D
Concerning the Family Protection Policy, all of the following statements are true EXCEPT a) Children, upon reaching the age of majority, are permitted to convert to an individual policy with proof of insurability. b) This type of policy consists of whole life on the base insured and riders on the others. c) Convertible term riders cover both the spouse and all children. d) Additional children born after the policy is issued are covered automatically at no extra cost.
A
Which statement is NOT true about insurance sales? a) Brokers represent insurers in negotiating coverage with various insureds. b) Insurance solicitors cannot transact life insurance. c) Agents and brokers must exercise care when using apparent authority during the sales process. d) Mass marketing techniques usually involve selling insurance without the use of an agent.
A
Which of the following describes the tax advantage of a qualified retirement plan? a) The earnings in the plan accumulate tax deferred. b) Distributions prior to age 59½ are tax deductible. c) Employer contributions are deductible as a business expense when the employee receives benefits. d) Employer contributions are not taxed when paid out to the employee.
A
Joe, age 63, was disabled and can no longer work. He meets the Social Security definition of total disability. How many work credits must Joe have accumulated to have the status of fully insured? a) 20 b) 40 c) 10 d) 6
B
How are contributions to a tax-sheltered annuity treated with regards to taxation? a) They are taxed as income for the employee. b) They are taxed as income for the employee, but are tax free upon withdrawal. c) They are not included as income for the employee, but are taxable upon distribution. d) They are never taxed.
C
How will life insurance proceeds that are paid as a lump sum received by the beneficiary? a) Taxed as investment income b) As tax-deductible income c) Free of federal income taxation d) Taxed as ordinary income
C
All of the following statements about indexed whole life insurance are correct EXCEPT a) The premium is fixed. b) There is a guaranteed minimum interest rate. c) The cash value depends on the performance of the equity index. d) The policy face amount remains level throughout the life of the policy.
D
All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT a) When concealment is unintentional. b) An intentional omission in determining if a warranty is false. c) The amount of paid claims exceeds the premiums paid. d) The violation of a material warranty.
C
Which of the following is NOT a component of an insurance policy premium? a) Insurer expenses b) Investment return c) Number of beneficiaries d) Mortality cost
C
Joe, Larry, and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement? a) Buy-up Distribution b) Business Continuation c) Shares Distribution d) Business Partner Disability Provision
B
In contrasting stock insurers with mutual insurers, which statement is true? a) Stock insurers are owned by the shareholders and issue nonparticipating policies. b) Stock dividends are tax free while policy dividends are taxable. c) Nonparticipating policies can pay out dividends to the policyholders. d) Mutual insurers are owned by the shareholders and issue participating policies.
A
In the event a notice sent to an insured's email is not received, an insurer must either confirm the insured's email or send a notice by regular mail within a) 5 business days. b) 7 business days. c) 10 business days. d) 30 business days.
A
When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option? a) Extended term b) Paid up additions c) Cash surrender value d) Reduced paid up
A
An individual has a $200,000 convertible term life insurance policy. If he chooses, he can a) Convert to a whole life policy for the same face amount without proof of insurability. b) Convert to another term policy with a lower face amount without proof of insurability. c) Purchase an individual annuity for any face amount using the 1035 exchange privilege. d) Purchase another term policy and increase his death benefit without proof of insurability.
A
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits? a) A portion of the benefit up to a limit is tax free; the rest is taxable income. b) Principal is tax free, but interest is taxed. c) The entire benefit will be received tax free. d) The entire living benefit is considered taxable income.
A
All of the following are true of the Survivorship Life policy EXCEPT a) It can insure more than 2 lives. b) The premium is based on the age of each insured. c) The death benefit is not paid until the last death. d) The premium would be lower than in a joint life policy.
B
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? a) The insured can transfer the policy to his friend and then notify the insurer of the change. b) The insured will need a written consent of the insurer. c) It is impossible to transfer a policy. d) The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it.
B
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? a) The key employee is the owner and the employer is the beneficiary. b) The employer is the owner and beneficiary. c) The employer is the owner and the key employee is the beneficiary. d) The key employee is the owner and beneficiary.
B
Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly? a) The applicant b) The producer c) The beneficiary of the applicant d) The insurance company
B
Life settlement contracts are put into effect by which of the following? a) A collateral assignment b) A nonforfeiture provision c) An absolute assignment d) The settlement options listed in the policy
C
Which of the following is NOT the consideration in a policy? a) The premium amount paid at the time of application b) The promise to pay covered losses c) The application given to a prospective insured d) Something of value exchanged between parties
C
How does insurance distribute the financial consequences of individual losses? a) It transfers the risk to a small number of persons insured. b) It transfers the risk to all persons insured. c) It retains the financial consequences. d) It transfers the risk to associates of the insured.
B
Life income joint and survivor settlement option guarantees a) Payment of interest on death proceeds. b) Payout of the entire death benefit. c) Equal payments to all recipients. d) Income for 2 or more recipients until they die.
D
Which of the following entities may NOT be an insurer? a) A limited liability company b) A natural person c) The Commissioner d) A business trust
C
Which of the following individuals would be a likely candidate to purchase a deferred annuity? a) Someone who wants to leave the death benefit to the beneficiaries b) Someone who cannot afford life insurance c) Someone who wants to grow retirement funds tax deferred d) Someone who needs to start receiving benefit payments within 6 months of the annuity purchase
C
Which of the following is NOT true regarding life analysts? a) They need to be licensed as analysts. b) An organization may act as a life analyst. c) They receive commissions from the insurer. d) They provide advice regarding insurance contracts.
C
Which of the following is true of the taxation of cash values in a business life insurance policy? a) Cash values are not taxable. b) Cash values are taxed immediately. c) Cash values grow tax deferred. d) Cash values are tax deductible.
C
Who does the spendthrift clause in a life insurance policy protect? a) The policyowner b) The creditors c) The beneficiary d) The insured
C
An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request? a) 3 days b) 5 days c) 10 days d) 30 days
A
As an insurer's field underwriter, a producer has all of the following responsibilities EXCEPT a) Issuing policies on behalf of the insurer. b) Completing applications. c) Soliciting insurance contracts. d) Collecting premiums.
A
In the event an annuitant dies during the accumulation period, and there is a beneficiary named in the annuity, annuity benefits would be paid to the a) Named beneficiary. b) Annuitant's estate. c) Next of kin. d) Insurance company.
A
What does the application of contract of adhesion mean? a) Since the insured does not participate in preparing the contract, any ambiguities would be resolved in favor of the insured. b) The holder of the contract has the ultimate power of promise. c) The insurer may go to another for representation. d) It makes sure that the insured does not get more than the value of the loss.
A
Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application b) Risk analysis c) The law of large numbers d) Agent's Report
A
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? a) When the policy is issued b) When the policy is delivered c) Within 15 days of the application date d) Within 30 days of policy issue
B
Which of the following best describes life annuity with period certain option? a) The maximum guarantee period is 10 years. b) The benefit payments cease with the death of the annuitant. c) It guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary. d) It provides the highest monthly benefit for an individual annuitant.
C
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? a) Good health b) Adhesion c) Conditional d) Aleatory
D
All of the following benefits are available under Social Security EXCEPT a) Death benefits. b) Welfare benefits. c) Old-age and retirement benefits. d) Disability benefits.
B
When is the company responsible for actions of its agents? a) Whenever the agent is acting within the conditions of the contract b) Whenever the agent is licensed c) Always: the agent's actions are presumed to be those of the company d) Never: agents represent clients, not companies
A
If an individual willfully violates provisions of the Fair Credit Reporting Act, what is the maximum civil penalty? a) $1,000 b) $2,500 c) $5,000 d) $10,000
B
In the Social Security blackout period, the surviving spouse will not receive benefits until the age of a) 59 1/2. b) 60. c) 65. d) 70 1/2
B
According to the life insurance replacement regulations, which of the following would be an example of policy replacement? a) A term policy expires, and the insured buys another term life policy. b) Term insurance is changed to a Whole Life policy. c) A lapsed policy is reinstated within a specific timeframe. d) A policy is reissued with a reduction in cash value.
D
Which of the following statements concerning the Medical Information Bureau is correct? a) The Medical Information Bureau report must be attached to each life insurance policy issued. b) All applicants for life insurance receive a copy of the findings of the life insurance medical examination. c) Information contained in the Medical Information Bureau report is available to all physicians. d) The Medical Information Bureau assists underwriters in evaluating and classifying risks.
D
Life settlement contracts are put into effect by which of the following? a) A nonforfeiture provision b) An absolute assignment c) The settlement options listed in the policy d) A collateral assignment All rights of ownership have been totally and permanently assigned, transferred or given to the life settlement provider. It has been an absolute assignment.
B
A whole life policy that will generate immediate cash value is a a) Single premium policy. b) Continuous premium policy. c) Variable life policy. d) Limited-pay policy.
A
A life insurance policy qualifies as a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid-up insurance in how many years? a) 3 years b) 5 years c) 7 years d) The life of the policy
C
If the annuitant dies before the annuity start date, which of the following is true? a) The interest will not be tax deferred. b) The interest is tax free if the beneficiary is a spouse. c) The interest is nontaxable. d) The interest is taxable.
D
The provision that sets forth the basic agreement between the insurer and the insured and states the insurer's promise to pay the death benefit upon the insured's death is called the a) Payment of claims. b) Declarations. c) Consideration. d) Insuring clause.
D
When may a representation be withdrawn by the applicant? a) Only after the insurance is in effect b) At any time as long as all parties agree c) It can never be withdrawn once submitted d) Only before the insurance is in effect
D
Which of the following is an example of liquidity in a life insurance contract? a) The death benefit paid to the beneficiary b) The flexible premium c) The money in a savings account d) The cash value available to the policyowner
D
Key person insurance can provide protection for all of the following economic losses to a business EXCEPT a) Fund the cost of training a current employee to perform the duties of a deceased employee. b) Pay the death benefit to the estate of the insured. c) Provide deferred compensation retirement benefit if the insured key person survives to retirement. d) Fund the expense of finding a suitable replacement following the death of an employee.
B
Which of the following is NOT a characteristic of variable insurance and annuities? a) Cash value is adjusted for inflation. b) Benefits are determined solely based on the policy premium. c) Cash value accumulates based on the performance of stocks. d) Benefits are not guaranteed.
B
Which of the following is consideration on the part of an insurer? a) Underwriting b) Paying a claim c) Decreasing premium amounts d) Paying the premium
B
Which of the following is true regarding pure life annuity settlement option? a) It guarantees income for a specified period of time. b) It provides the highest monthly benefit. c) It guarantees that all the proceeds will be paid out. d) The beneficiary will receive a refund of the principal.
B
Which statement best describes agreement as it relates to insurance contracts? a) Each party must offer something of value. b) One party accepts the exact terms of the other party's offer. c) The intent of the contract must be legally acceptable to both parties. d) All parties must be capable of entering into a contract.
B
Policies written on a third-party ownership basis are usually written to cover which of the following? a) Insured's estate b) Policyowner's estate c) Policyowner's minor children or business associates d) Policyowners who are not insureds Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.
C
Wagering on a sporting event is an example of what type of risk? a) Simple b) Pure c) Speculative d) Calculative
C
The minimum number of credits required for partially insured status for Social Security disability benefits is a) 4 credits. b) 6 credits. c) 10 credits. d) 40 credits.
B
The premium of a survivorship life policy compared with that of a joint life policy would be a) Half the amount. b) Lower. c) Higher. d) As high.
B
An insured committed suicide one year after his life insurance policy was issued. The insurer will a) Refund the premiums paid. b) Pay the policy's cash value. c) Pay the full death benefit to the beneficiary. d) Pay nothing.
A
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? a) Jumping juvenile policy b) Limited pay whole life policy c) Modified life insurance policy d) Single premium policy
A
The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as a) Legal hazard. b) Double indemnity. c) Legal risk. d) Fraud.
A
The owner of a whole life policy with an accidental death rider intentionally kills himself after having the policy for 18 months. What is the insurance company's course of action? a) Deny any payment of death benefit b) Deny only payment of the face amount but pay the rider since suicide is an accident c) Pay the face amount only because suicide is not an accident d) Pay twice the face amount
A
Which action by an insurer or its representatives is NOT considered an unfair claims violation? a) An agent advises a claimant to obtain the services of an attorney. b) A claims adjustor misrepresents pertinent policy provisions to dissuade an insured from making a claim. c) An agent does not respond to a claimant's communication concerning a claim where a response is required. d) The claims department fails to affirm or deny coverage within a reasonable period of time after proof of loss has been submitted.
A
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? a) $7,000 b) $3,000 c) $13,000 d) $10,000
B
When an insured receives a written binder, a) The insured will not have to submit an application to the insurer. b) The insured's coverage will be effective immediately. c) The insured will be locked into a contract for at least 2 years. d) The insured will be guaranteed premium rates for a specific amount of time.
B
Which of the following is the best definition of "indemnification"? a) A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event b) The act of one person who agrees to restore an injured person to the condition he/she enjoyed prior to the loss c) A legal entity which acts on behalf of itself, accepting legal and civil responsibility for the actions it performs and making contracts in its own name d) A contract whereby the two parties involved agree to what things of value will be exchanged by the parties to the contract
B
A policyowner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. This type of transaction is called a/n a) Investor-originated life insurance. b) Viatical settlement. c) Life settlement. d) 1035 exchange.
C
All of the following are true regarding a qualified annuity EXCEPT a) Funds accumulate on a tax-deferred basis. b) Employer contributions are not counted as income to the employee while the plan is in force. c) At distribution, all amounts received by the employee are tax free. d) Employer contributions are tax deductible as ordinary business expense.
C
All of the following statements about indexed whole life insurance are correct EXCEPT a) There is a guaranteed minimum interest rate. b) The cash value depends on the performance of the equity index. c) The policy face amount remains level throughout the life of the policy. d) The premium is fixed.
C
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a) The payments are not guaranteed for life. b) The insurer determines the amount for each payment. c) It is a life contingency option. d) It will pay the benefit only for a designated period of time.
C
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? a) Survivor Life b) Second-to-Die c) Common Disaster d) Accidental Death
C
At age 72, an individual is considering applying for MediCal so she can afford her medical bills. Today an agent is visiting the applicant's home in order to sell her an annuity product. Which of the following is true? a) The agent should recommend the annuity purchase to generate a commission. b) It is permissible for the agent to visit the applicant for the first time without providing a 24-hour advanced notice in writing. c) The agent cannot allow the applicant to purchase an annuity if after the purchase, she wouldn't qualify for MediCal. d) The agent should recommend an annuity instead of MediCal.
C
If an applicant submits the initial premium with an application, which action constitutes acceptance? a) The producer delivers the policy. b) The insurance company receives the application and initial premium. c) The underwriters approve the application. d) The applicant submits a statement of good health.
C
The family term rider incorporates a) Key person whole life and dependents term. b) Cost of living rider and family protection rider. c) Spouse term and children's term. d) Whole life and other-insured term.
C
The following are features of the Indexed Universal Life EXCEPT a) Adjustable death benefit. b) Policy's cash value is dependent on the performance of the equity index. c) Sale of this product requires a securities license. d) Flexible premium.
C
The policyowner has an option to pledge the life insurance policy as collateral for a bank loan. This is called a) A unilateral agreement. b) An absolute assignment. c) A collateral assignment. d) An insurance pledge.
C
What is the difference between a straight life policy and a 20-pay whole life policy? a) The face amount and cash value b) Policy maturity date c) Premium payment period d) The benefit settlement option
C
What is the purpose of the surrender charge in a deferred annuity? a) To prevent the over funding of the annuity b) To provide additional revenue for the insurance company c) To compensate the company for loss of investment value d) To punish the annuitant for breach of contract
C
For a contract to be enforceable by law, the purpose of the contract must be a) For financial gain. b) For the benefit of the general public. c) Of pure intent. d) Legal and not against public policy.
D
If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do? a) Change the applicant's answer to what the producer believes is correct b) Erase the answer once the applicant submits the application c) Refuse the applicant d) Inform the insurance company
D
In a noncontributory group policy a) 75% of all employees must elect to join the plan. b) 100% of employees must be allowed to participate. c) 75% of eligible employees must elect to join the plan. d) 100% of eligible employees must participate.
D
Which of the following products requires a securities license? a) Fixed annuity b) Equity Indexed annuity c) Deferred annuity d) Variable annuity
D