CO Life Producer License
agents selling variable life must have what 3 things?
registered with FINRA, securities and producers license
define coercion
require as a condition to a loan that the applicant purchase insurance from a specific insurer
What is a Roth IRA?
retirement account funded with after tax contributions. grows tax free after 5 years
what is the difference between rollover and transfer?
rollover is tax free distribution from one retirement plan to another. transfer is a tax free transfer of funds from one program to IRA from one trustee to another
what is a viatical settlement?
separate contracts in which the insured sells the death benefit to a third party at discounted rate when insured has life threatening condition
if an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
settlement option
what is family term rider?
spouse + children term. provides level term life covering spouse and all kids when added to whole life
define spouse and childrens term rider
spouse term rider allows spouse to be added for a limited period of time and for a specified amount, usually expires at 65. children's term rider allows children of the insured to be added for limited period of time and amount. Expires when minor turns 18 or 21. allows temp life insurance on all kids for one premium
How do you make changes on an application?
start over with a fresh one or draw a line through the incorrect answer, fill in the correct answer and have applicant initial
what is the status clause and results clause?
status clause excludes all causes of death while insured is on active duty in military results clause excludes death benefit if insured is killed as result of act of war
What is replacement?
terminating an existing policy and obtaining a new one. Done by borrowing cash values to pay for a new policy or putting old policy into extended term or reduced payed up.
Who is the field underwriter?
agent is the field underwriter because they have solicited the potential insured.
the provision which states that both the policy and copy of application form the contract between the policy owner and the insurer is called?
entire contract
what is the premium mode?
frequency of premium payments - monthly, semi monthly, quarterly, annual
can insurance premiums or refunds received by producer be applied to any other obligation owed by insured to the producer?
no. must be applied according to their original purpose
what is the advantage of reinstating a policy instead of applying for a new one?
original age is used from premium determination
what is it called when the policy owner has the right to change beneficiary?
owners rights
who is the annuitant?
person who recieves benefit or payment from annuity and whom annuity is written. Annuiant and owner do not need to be same person but usually are.
any insurance producer using an assumed name under which the producer conducts business, must register the name with commissioner when?
prior to using assumed name
what is the difference between profit sharing and 401K?
profit sharing is when a portion of company profit is contributed to the plan with employees. 401K allows employees to take reduction of current salaries to put into 401K
What is the purpose of the Fair Credit Act Report?
protects against the circulation of inaccurate information
Define GIR (guaranteed insurability rider)
purchase additional coverage at future dates or events without evidence of insurability. Cannot be modified or defeated by existence of other riders
what policy is classified as a traditional level premium contract?
straight life
what are the advantages of a qualified plan to an employer?
tax deductible contributions, approved by IRS, plan cant discriminate, earnings grow tax deferred, all withdrawals are taxed
what is annually renewable term insurance (ART)?
term insurance where death benefit remains the same and policy may be renewed each year without proof of insurability but premiums increase
who is responsible for notifying the replacing insurer in a replacement life transaction?
the producer
When is a misrepresentation considered fraud?
when it is intentional or material
what is waiver of premium?
when premium is waived if insured becomes totally disabled. 6 m waiting period
what is interest sensitive whole life?
whole life policy that provides guaranteed benefit to age 100. premium based on risk, interest and expense. If values change then premium is lowed or raised. This policy provides same benefit as whole life with benefit of current interest rates
when the insured terminates coverage in group, what can he convert to?
whole life without proof of insurability
are premiums tax deductible to the employee as a business expense for group coverage?
yes
how long does an insurer have to notify commissioner if they terminate employment with a producer?
30 days after termination
How many hours of prelicening is needed for producer licening?
50h
to attain currently insured status under SS, a worker must have earned at least how many credits during the last 13 quarters?
6 credtis
an advertisement cannot use a word or phrase for an annuity contract that uses the word...
"annuity" unless accompanied by other clear language
what is the max a producer can be fined for violating a cease and desist order?
$500
What are a few examples of rebating?
1 rebates of premiums payable on the policy 2 special favors 3 advantages in the dividends or other benefits 4 stocks, bonds, securities and their dividends or profits
how long is a producer able to reinstate a licence after is has been canceled ?
1 year
In referring to Viatical settlements, what are the 4 concepts?
1. insured are viators 2. provider means a person that enters into the contract 3. producers represent the providers 4. brokers represent the insured
what 4 things must be in the anti fraud plan?
1. prevent, detect and investigate all forms of fraud 2. educate appropriate employees 3. provide hiring or contracting for one or more fraud investigators 4. report suspected fraud to law enforcement
What are the 5 items the commissioner of insurance does?
1. supervise insurance business 2. licensing 3. approve policies and forms 4. enforce insurance laws and impose penalties for violations 5. conduct examinations, investigations, hearings
how long do companies have to respond to Examination Request/Comment Form ?
10 days
noncontributory plans require how much participation of members?
100%
when the buyers guide and disclosure statement are not provided at or before time of application, the applicant is entitled to a free look period of how many days?
15
free look for new life begins policy is how long?
15 days
if producer doesn't provide a buyers guide and disclosure statement as time of application, how long is the free look period?
15 days
a purchaser of life insurance policy has the right to return the policy for a full refund of premium if done with in
15 days of delivery
an annuity is designed to provide which of the following financial features? 1. liquidation of principal and interest 2. favorable tax treatment 3. liquidation of estate
2 and 3
how long do companies have to respond to inquires form the Division of Insurance?
20 days
what are the continuing education requirements?
24h of CE, 3h on ethics and 18h in producers line of authority
what is the max penalty for habitual noncompliance with the Fair Credit Reporting Act?
2500
the maximum civil penalty per violation if an unauthorized entity violates the Commissioners cease and desist order?
25000
after a client signs a disclosure statement regarding additional fees charged by a producer, the producer must keep a copy of the statement for at least how many years
3 years from date of completion of services
free look period is how many days?
30
free look for replacement life is how long?
30 days
grace period is how many days?
31
what is the grace period for group life?
31 days
How many hours of state law is needed for your producer lisence?
4
a producer is required to remit premiums from a trust account to the insurer within how many days of receipt?
45 days
as a fiduciary, all premiums received must be remitted to the insurer within how many days of receipt?
45 days
for CE, what is the minimum amount of hours required for annuities?
4h
if producer hasnt met face to face with applicant or received an application for an annuity contract, when must he give documents?
5 business days after completion and receipt of application
if a consumer requests additional information concerning an investigative consumer report, how long does the insurer have to comply?
5 days
in order to qualify for a conversion form a group life policy to a individual policy of the same coverage, how long must the person been insured under group policy?
5 years
what is the max time for reinstatement after policy has lapsed?
5 years. have to provide evidence of insurability.
an employee quits her job where she has 10,000 in her qualified plan. It was paid directly to her. If she decided to rollover to a traditional IRA, how much can she receive and how long does she have to complete the tax free rollover?
8,000 and 60 days (rollovers must be completed within 60 days from time the money is taken out of the first plan. If distribution from the first plan is paid directly to the participant, 20% of $ is withheld by payor)
what are the 4 elements of an insurance contract?
Agreement - offer and acceptance, consideration, competent parties and legal purpose
What is the Buyers guide and when do you give it to the applicant?
Buyers guide gives generic info on life insurance policies. Must be given to prospective applicants prior to them accepting their initial premium. If a policy has a free look period than the buyers guide can be delivered with the policy
an insurer may not transact insurance in this state with out with of the following?
C of A
what is consideration?
Consideration is something of value that each party gives to the other. Insured pays premium Insurer promises to pay in event of loss
describe indexed annuities
Fixed annuity that invest aggressively for a higher return. Has guaranteed min interest rate. less risky than variable annuity but expected to earn higher interest rate than fixed.
Who bears all of the investment risk in a fixed annuity?
Insurance company.
What is insurance?
Insurance transfers the risk of loss from an individual or business to an insurance company, which in turn spreads the cost of unexpected losses to many individuals
if beneficiary receives payments of both principal and interest portions, which are taxable?
Interest only. If beneficiary takes lump sum, all are tax free.
What are the three basic types of term?
Level, increasing and decreasing. Regardless of type, premium is always level
an unfair trade practice of defamation is considered?
Misdemeanor
Are illustrations required to be apart of the contract?
NO
Is a person with HIV automatically declined?
No. The person may be declined for medical coverage solely based on HIV status, that would be discrimination
What is MIB (medical information bureau)?
Nonprofit trade organization. Used when underwriter needs more info on the applicants health history.
When was USA Patriot Act enacted?
Oct 26, 2001
What type of Life Insurance rider expires at age 18?
Payor benefit (used for juvenile policies)
What does representation mean and how does it differ from a warranty?
Representations are statements made that are believed to be true to the best of ones knowledge. A warranty is an absolutely true statement upon which the validity of the insurance policy depends
what policy generates immediate cash value?
Single Premium (has immediate cash due to lump sum payment )
Describe survivorship life and how it differs to joint life
Survivor life insured 2 or more lives for a premium that is based on a joint age. Survivorship pays on the last death rather than the first death resulting in a lower premium.
What is target premium in universal life?
Target premium is the recommended amount that should be paid in order to cover cost of insurance to keep policy going for life. The insurance component of universal is always annually renewable term insurance
When would an insured need to sign a statement of good health?
Upon delivery of policy if the policy wast prepaid
what is variable universal life and what are the features?
Variable life combines whole life with universal and investment options. 1. flexible premiums that can increase or decrease or skipped as long as there is cash value 2. increasing and decreasing the amount of insurance 3. cash withdraws or policy loans
Is accelerated benefits taxed?
When accelerated benefits are paid to a chronically ill insured, they are tax free up to a certain limit. Any amount received in excess of this dollar limit must be included in the insured gross income. answer: portion of benefit up to a limit is tax free and the rest in taxable
which of the following is correct regarding the replacement of an existing life insurance policy?
a replacement notice must be given out before taking the application
what is the difference between absolute assignment and collateral assignment?
absolute is a perminate change of ownership (parents buy policy on child and child takes over at 18). Insurable interest isn't needed for collateral
what are the 2 phases of annuity ?
accumulation: payments made into annuity annuitization -payments made to annuitant from annuity
A insured may reject the policy all together or accept, this is called?
adhesion
what is the least expensive first year premium payment?
annually renewable term. premium increases each year with the insureds attained age
when an annuity is written, whose life expectancy is taken into account?
annuitant
partners in a business enter into a buy sell agreement. What policy can be used for this agreement?
any form
Employer contrubutions made to a qualified plan
are subject to vesting requirnments
if the annuity contract is taken face to face, when must required documents be given?
before time of applicaiton
what is true of life settlements?
can be used for key person can be sold for amount great that current cash value involve insurance policies with large face amounts
if both husband and wife die in a head on collision (husband dies instantly and wife 15 days later) and the company pays the death benefit to the estate of the insured, what provision did the policy have?
common disaster
term employer includes?
counties, cities, incorporated towns, school districts, other political subdivisions of the state
what characteristic makes whole life permanent protection?
coverage until death or age 100
notwithstanding any other provision of law, each insurer admitted to transact the business of life insurance in this state must pay interest on the death benefit from what date?
date of death
an individual applied for insurance and paid premium. five days later the applicant takes exam. When is policy effective date?
date of exam
when an insurance producer receives an application for an annuity contact, what must they give with the application?
disclosure doc, buyers guide
a policy owner plans to change insurance coverage from one insurer to another. If the insurer starts a conservation effort, the insurer is doing what?
discouraging policy owners from dropping existing policies
all of the following information about the applicant is identified in the general information section of a life insurance application except?
education
what does level refer to in level term insurance?
face amount. They maintain the face amount (death benefit) throughout the policy, the premiums also remain the same.
what does the replacement rules apply to?
group policies, group annuities, credit life or nonconvertible term which will expire in 5 years or less
fixed annuities do not provide?
hedge against inflation
what are the penalties for fraud?
imprisonment, fines, denial of insurance and civil damages
What is consumer report?
includes info on consumer credit, character, reputation, habits
Return of Premium term life policy is written as what type of term coverage?
increasing (it also pays additional death benefit to the beneficiary equal to the amount of the premiums paid)
what type of insurance would be used for a ROP rider?
increasing term (when added to whole life, it allows the death benefit to be face amount plus premiums previously paid)
who can make a fully deductable contribution to a traditional IRA?
individual not covered by an employer sponsored plan who has earned income
what regulates variable life policies?
insurance department federal gov the SEC
Is the accumulation at interest option taxable?
interest is not taxable since it remains inside the insurance policy. The interest credited under this option is taxable, whether or not the policyholder receives it
policy owner wants to make sure that the benefit will pay a portion annually to his spouse but that the principal will be paid to children when they reach certain age, what settlement option?
interest only. insurance company retains the policy proceeds and pays interest on proceeds to beneficiary at regular intervals
if commissioner believer that an unauthorized person is engaging in the business in violation of insurance code, what can the commissioner do?
issue emergency cease and desist order
what is true regarding annuity period?
it may last for the lifetime of the annuitant. also time when $ is converted into an income stream
a policy will pay the death benefit if the insured dies during the 20 year premium paying period and nothing if death occurs after the 20 year period. what type of policy is this?
level term (20 year term policy)
Describe limited pay
limited pay whole life premiums are payed before age 100, like 20 pay or 65 pay. Annual premium is higher and cash value builds faster.
what information is not included in part 1 of the application?
medical background
fixed annuities provide what?
minimum guaranteed rate of interest future income payments equal monthly payments for life
a producer intentionally makes a statement which may mislead the insurance applicant, what is that called?
misrepresentation
Does the benificiary need to have insurable interest in the insured?
no
are employees considered to be policyholders in group life?
no
is collateral assignment an example of 3rd party ownership?
no
if you get a refund on a dividend is that considered a rebate?
no, since it is specified in the policy
Someone has a policy that he purchased 3 y ago when he was 40. He was killed in an accident and they discovered that he is actually 45y not 43y. What will the company do regarding death benefit?
pay a reduced death benefit
What is accidental death and dismemberment rider?
pays face amount for accidental death and pays % of amount (capital sum) for dismemberment.
Define accidental death rider
pays multiple (double or triple indemnity) of face amount if death is accident and death must occur within 90 days
what describes the specific information about a policy?
policy summary
The application is what in underwriting?
primary source of information
how may a CO producer become licensed in other states?
producer can get a nonresident license in all reciprocal states
when must insurers must complete claim investigations?
promptly
what nonforfeiture option provides coverage for the longest period of time?
reduced paid up allows protection until 100
policy owner pays for her insurance annually. She wants to use her dividends to pay for her next premium, what option allows her to do this?
reduction of premium
a producer wants to start using an assumed name for his business, what is required?
register name with commissioner
a domestic insurer issuing variable contracts must establish one or more?
separate accounts
in event of one or more parents dying prematurely, what is a good policy for needs of children?
survivor protection
a participant in a 401K plan takes a distrubiton and rolls inover to an IRA within 60 days. Is the amount taxed or withheld?
the amount is reduced by 20% withholding tax since he rolled into IRA instead of making a trustee to trustee roll over
who is responsible for covering the expenses associated with the examination of domestic insures?
the examined insurer
who has the right to assign incidents of ownership under a group life insurance policy?
the individual insured
what is not true for life settlements?
the seller must be terminally ill
What is Aleatory Contract?
there is an exchange of unequal amounts or values. (insurance contacts are aleatory)
the paid up addition option uses the dividend as?
to purchase a smaller amount of the same type of insurance as the original policy (single premium policy in additon to face amount)
a lender is requiring that a borrower purchases an insurance policy thought a particular insurer as a condition to the extension of credit. What is this called?
unfair practice of coercion
if only one party has made a legally enforceable promise, what contract is it?
unilateral contract
What is the most flexible policy?
universal bc you can take cash value to pay premium. There is insurance component and cash account.
which of the following terms will be permissible in describing a life insurance policy in company advertisements?
variable plan
are life insurance illustrations required to be apart of the contract?
yes
do the regulations regarding replacement apply to renewable term?
yes
does the replacement regulation apply for nonrenewable coverage expiring in 8 years ?
yes
upon reinstatement, is the policy owner required to pay overdue premiums?
yes
as a fiduciary, all returned premiums recieved from insurers must be remitted or credited to account of the person entitled within how many days of receipt?
30 days
how many days do producers have to report administrative actions taken against them in another jurisdiction?
30 days
how long does an individual have to inform the commissioner in writing about an address change?
30 days after change
What is accelerated benefits? What would the payable death benefit be?
allows early payment of portion of death benefit if there are terminally ill, etc. Max benefit is 50% but sometimes legal to pay 100% before death. Payable death benefit = face amount - amount withdrawn - earnings lost by insurer in interest
define rebating
any inducement offered to the insured in the sale of insurance products that isnt specified in the policy
If full premium was submitted with application and policy was issued 2 weeks later, when does the policy coverage begin?
application date
What are the nonforfeiture options?
cash surrender, reduced paid up or extended term
what are the 6 ways dividends can be payed?
cash, reduction of premiums, accumulation of interest (interest on dividents is taxable), paid up additions (increase death benefit), paid up option or one year term option (pay up policy early)
all insurance companies must maintain all books, documents, and other business records for how long?
current calendar year plus 2 prior calendar year
when a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase the term insurance that has face amount...
equal to the original policy for as long a period of time that the cash values will purchase
what is the difference between fixed and variable annuities?
fixed is guaranteed, fixed payment and premiums are in general account. variable annuities payment is not guaranteed, premium in separate account and invested in stocks and bonds
if an insured worker has earned 40 quarters of coverage, the workers status under SS disability is?
fully insured
when does a immediate annuity pay and when does a deferred annuity pay?
immediate- purchased with single premium and payed within 12m deferred- purchased lump sum or periodic payments, benefits start after 1 y (deferred are used to accumulate funds for retirement
What is the life insurance clause that prevents an insurance company from denying payment of death claim after specified period of time?
incontestability clause
What is Return of Premium life insurance?
increasing term insurance policy that pays additional death benefit to beneficiary equal to amount of premiums paid
Can cash value exceed death benefit in universal life option A?
no. if cash value exceeds, the policy isnt defined as life insurance for tax purposes and loses tax advantages.
what is MEC?
policy that fails a 7 pay test and loses the standard tax benefits of life insurance. cumulative premiums paid during the first 7 years of policy exeed total amount of level premium that would be required to pay the polciy up. Too much cash value in the first 7 years
