CO Life General State Exam
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates specified in the contract with no evidence of insurability required
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole Life
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest Only
A Universal Life policy is sometimes referred to as an unbundled life policy because the owner can see the
Interest earned, cost of insurance, and expense charges
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
What kind of premium does a Whole Life policy have?
Level
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
A(n) __ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.
Revocable
__ of personal life insurance premiums is usually deductible for federal income tax purposes.
0%
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
A 15-year mortgage is best protected by what kind of policy?
15-year decreasing term
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay Life
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
59 1/2
A fiduciary responsibility is defined as
A relationship of special trust and confidence when a person is entrusted with another's funds
Under a Graded Premium policy, the premiums
Are lower during the policies early years
In a qualified retirement plan, the yearly contributions to an employee's account
Are restricted to maximum levels set by the IRS
Which of the following documents are NOT required to mention the Colorado Fraud Statute?
Certificates of authority
Which of the following consists of an offer, acceptance, and consideration?
Contract
Insurance policies are offered on a "take it or leave it" basis, which make them:
Contracts of Adhesion
What type of group insurance plan involves employees sharing the cost?
Contributory plan
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion
What is the purpose of the U.S.A. Patriot Act?
Detect and deter terrorism
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
In a life insurance policy, which feature states that the policy will not cover certain risks?
Exclusion
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
Extra premium
Which of the following words may be used in the advertisement of life insurance or annuities?
Guaranteed
In life insurance, the needs approach is used mostly to establish:
How much life insurance a client should apply for
A life insurance arrangement which circumvents insurable interest statutes is called:
Investor-Originated Life Insurance
An insured's ability to perform two or more activities of daily living may trigger which type of life policy rider?
Long term care
The entity whose sole purpose is sharing medical data among its member companies is called the
Medical Information Bureau (MIB)
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
None
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Insurance policies are considered aleatory contracts because
Performance is conditioned upon a future occurance
Which of these do NOT constitute policy delivery?
Policy issued with a rating
A Medical Information Report (MIB) may disclose which of the following:
Prior use of marijuana
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
Post-tax dollar contributions are found in:
Roth IRA Investments
Which of the following are Equity Indexed annuities typically invested in?
S&P 500
What is the Suicide provision designed to do?
Safeguard the insurer from an applicant who is contemplating suicide
Which of the following types of permanent life insurance policies offers the highest initial cash value?
Single premium
What type of life insurance are credit policies issued as?
Term
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term life
What kind of life insurance product covers children under their parent's policy?
Term rider
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
Variable Universal Life Policy
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
A life insurance policy that provides a policyowner with cash value along with a level face amount is called
Whole life
A policy that becomes a Modified Endowment Contract (MEC):
Will lose many of its tax advantages
In order to sell a (n)___ Life policy, a producer is required to register with Financial Industry Regulatory Authority (FINRA).
Variable
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
Variable
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
Amount of benefits available from other sources
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n)
Anti-Money Laundering Violation
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
The initial premium
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and
The initial premium
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000
An insurer that terminates a producer's appointment must inform the Commissioner within how many days?
30 days
A producer must remit premiums to the insurer within __ days after the receipt
45 days
When replacing an existing life insurance policy, the replacing insurer must notify the existing insurer within
5 business days
Which of these is an element of a Variable Life Policy?
A fixed, level premium
Traditional Individual Retirement Annuity (IRA) distributions must start by:
April 1st of the following year the participant attains age 70 1/2
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
Claims are denied under the Suicide clause of the policy
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral assignment
Insurance contracts are known as ___ because certain future conditions or acts must occur before any claims can be paid.
Conditional
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
Conditional
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is
Conditional, depending on the insurer's underwriting guidelines
The incontestable clause allows an insurer to
Contest a claim during the contestable period
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be
Converted to an individual permanent policy at an individual rate
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary responsibility
Which of the following offers an insurance applicant the right to review the contract and receive a full refund?
Free-look period
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT
Free-look period has expired
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus the $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
Increase face amount
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
Why is an applicant's signature required on a life insurance application?
To attest that the statements on the application are accurate to the best of the applicant's knowledge
Life and health insurance policies are
Unilateral contracts
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment rider (AD&D)
Variable Whole Life Insurance can be described as
Both an insurance and securities product
Which statement about a whole life policy is true?
Cash value may be borrowed against
The type of annuity that can be purchased with one monetary deposit is called a(n):
Immediate annuity
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
In an individual retirement account (IRA), rollover contributions are
Not limited by dollar amount
What is the maximum amount the Commissioner can fine an insurer for each violation of a cease and desist order?
$10,000
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?
6
An insurer may normally delay the payment of a cash value loan or surrender value for up to
6 months
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
Applicant's physician
How does the Commissioner attain his position?
Appointed by the governor
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the death benefit
Under an Interest Sensitive Whole Life policy,
Cash values are determined by interest rates
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
How are Roth IRA distributions normally taxed?
Distributions are received tax-free
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?
Flexible Installment Deferred
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT
K will forfeit the right to use the automatic loan provision upon reinstatement
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
Split-dollar plan
Why must an insurance applicant answer all questions on the application?
Statements and representations on the application are part of the consideration for issuing a policy
The premiums paid by an employer for his employee's group life insurance are usually considered to be
Tax-deductible to the employer
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
The initial premium was NOT submitted with the application
A policy of adhesion can only be modified by whom?
The insurance company
The amount of coverage on a group credit life policy is limited to
The insured's total loan value
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance
The Consideration clause of an insurance contract includes
The schedule and amount of premium payments
An insurer cannot deny a claim unless
There is a reasonable explanation of the claim
All of these are considered to be a benefit under Social Security EXCEPT
Unemployment
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
When is the face amount paid under a Joint Life and Survivor policy?
Upon the death of the last insured
A(n) __ annuity pays benefits based on units rather than stated dollar amounts.
Variable
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable life
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has
Waived one of its legal rights
When is it appropriate for a producer's spouse to be the primary beneficiary on an applicant's life insurance policy?
When insurable interest exists
Dividends paid from a life insurance policy are
issued by the insurer
All of these are considered sources of underwriting information about an applicant EXCEPT
Rating Services
In Colorado, all of the following are considered unfair trade practices EXCEPT
Replacement
Who is not eligible to receive commissions from the sale of an insurance product?
Corporate executive
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
If a producer completes an insurance application, collects the initial premium, and issues the appropriate receipt,
Coverage will be contingent upon the insurer's underwriting policies
Circulation of a maliciously critical statement about any insurer's financial condition to injure the insurer is called:
Defamation
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred
A variable insurance policy:
Does not guarantee a return on its investment accounts
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at Age 70
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
Interest on life insurance proceeds is
Required if the claim was not paid within 30 days of the date insurer received the claim
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
A Term Life rider offers the insured
Additional life coverage
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
Insured
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid
Mandatory income tax withholding on the transfer amount
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
All of the following statements are true regarding a policy's Grace Period, EXCEPT:
Past due premiums are waived
The __ has the right to change a life insurance policy's beneficiary.
Policyowner
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine
Probability of making timely premium payments
If a producer is going to deposit any premium into a bank account prior to remitting the funds to the insurer, he/she must use a
Separate insurance trust account
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
Insurable interest in the proposed insured
In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT:
Insured
Which of the following statements is true regarding the replacement of a life insurance policy in Colorado?
The replacing insurer must maintain copies of all records regarding the replacement for at least 5 years