Final exam test 3
How soon from the termination of debt under a credit life insurance policy must a creditor provide notice to the insurer?
60 days. In the event a credit life insurance policy is terminated, a creditor must provide the insurer with a notice of termination of debt within 60 days of the payoff date.
All of the following statements about the continuing education requirement in this state are true EXCEPT
All licensed agents must comply by January 1 of even-numbered years. Continuing education reporting period coincides with the license renewal date every 2 years.
Who is considered a nonresident agent?
An agent who resides in another state, but is licensed to write insurance in Texas. A nonresident agent is one who resides in a state other than Texas, but who has met the licensing requirements and is authorized to write insurance in the state of Texas.
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date. If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
False advertising. False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading.
Fixed annuities provide all of the following except
Hedge against inflation. Fixed annuities provide future income payments, equal monthly payments for life. Minimum guaranteed rate of interest
Which of the following best describes a misrepresentation?
Issuing sales material with exaggerated statements about policy benefits. Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.
Which of the following is true about the mandatory feee look in a life insurance policy?
It commences when the policy is delivered
What is the term for how frequently a policyowner is required to pay the policy premium?
Mode. The premium mode is the manner or frequency that the policyowner pays the policy premium.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT
Other insurance coverages. Part 2 of the application contains questions regarding the applicants' health history. Part I of the application includes questions regarding current coverage being applied for as well as any other insurance coverage with the same or other insurers.
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as
Rebating. Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up. The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.
According to the state nonforfeiture law for life insurance policies, insurers must offer at least one of the following nonforfeiture options EXCEPT
Reduction of premium. Reduction of premium is not a nonforfeiture option (it's a dividend option). The other answer choices are the required nonforfeiture options in life insurance policies issued in this state.
The Federal Fair Credit Reporting Act
Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
The regulations regarding replacement apply to which of the following?
Renewable term. Replacement rules apply to all life insurance policies except group life policies, group annuities, credit life or nonconvertible term which will expire in 5 years or less and cannot be renewed. Purchasing additional coverage under the GIR is not a replacement of coverage, simply an addition of coverage.
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule. Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
Term rider. Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner.
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The amount of the distribution is reduced by the amount of a 20% withholding tax. Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum IRA distributions begin. Since this client actually took a distribution (instead of making a trustee-to-trustee roll over), the distribution is subject to 20% withholding tax.
In a life settlement contract, whom does the life settlement broker represent?
The owner. Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.
In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have at least completed secondary education does NOT describe a competent party. The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
All of the following are requirements for life insurance illustrations EXCEPT
They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? Option B
Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
Grant is terminally ill, but has a life insurance policy with a cash surrender value and he wants to sell his policy to a private individual. Yodel is interested in purchasing the policy, but is only willing to pay less than the face value of the policy. What is the name of the process of selling the policy for less than the amount of the death benefit
Viatical settlement. A viatical settlement is the process whereby a policyholder sells a policy for less than the amount of the death benefit to a private individual. While the insured receives less than the death benefit amount, the insured receives more than the amount of its cash surrender value, so it can be an attractive option when the policyholder is chronically or terminally ill, since it enables the insured to obtain a lump sum settlement payment to live out the remainder of the insured's life without worrying about finances. The purchaser of the policy becomes the new policyholder and as long as the purchaser continues to make the required premium payments, the purchaser will receive the entire death benefit once the insured dies.
If a policy includes a free-look period of at least 10 days. The buyers guide may be delivered to the applicant
With the policy
What is the timeframe for filing relevant Suspicious Activity Reports?
Within 30 days of initial discovery. Relevant SAR reports must be filed with FinCEN within 30 days of initial discovery of a suspicious transaction.