Guaranteed Exam

Which of the following premium modes would result in the lowest overall premium?

Annual

Which of the following will not be included in the buyer's guide?

Comparison of policy costs

An adjustable life policy can assume the form of

Either term insurance or permanent insurance

The human life value approach to determining life insurance needs is based upon which of the following ideas?

Loss of breadwinner's income

What is the purpose of the agent's report in the application process?

Provide additional information about the applicant to the underwriter

Which of the following statements is true regarding an agents report during the policy application process?

it provides the agents personal observations concerning the proposed insured

Which of the following best describes pure life annuity?

It provides the highest monthly benefits

If an agent follows the rules and terms of his agent contract, he is exercising his

express authority

Which of the following best describes life annuity with period certain option?

It guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary

Variable life insurance is regulated by all of the following entities EXCEPT

US Department of Treasury

How long do temporary producer's licenses last without acquiring an examination?

180 days

Which of the following is not a standard exclusion in life insurance policies?

disability

Which of the following is NOT a personal use of life insurance?

an individual buys insurance to fund a buy-sell agreement

All of the following are ways to handle risk EXCEPT

elimination

An annuitant pays the annuity premium on the 14th of each month. Which best describes the arrangement ?

level

Which term describes an individual who is domiciled and licensed as a resident producer in a state other than Michigan?

NonResident Producer

Applicants for a resident producer license must meet the following requirements EXCEPT?

Be at least 21 years old

In contrasting stock insurers with mutual insurers, which statement is true?

Stock insurers are owned by the shareholders and issue nonparticipating policies

Which dividend option will increase the death benefit?

Paid-up additions

What guarantees that the information explained in the insurance contract is true

warranty

Underwriters use all of these methods to protect the insurer against adverse selection EXCEPT

Only accepting a small percentage of applicants

While completing a life insurance application the applicant realizes that she should have answered an earlier question differently. What should the agent do to make the necessary change?

Cross out the incorrect information, write in the correct answer, and have the applicant initial the change

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?

Extended term

If a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure?

Prior to performance of the test

An individual purchases a life insurance policy and lists his parents as the beneficiaries. He is able to change beneficiaries at any time. What type of beneficiary designation does the policy have?

Revocable

To purchase insurance, the policy owner must face the possibility of losing money or something of value in the event of loss. What is this concept called

insurable interest

In order to reinstate a life insurance policy the insured must do all of the following except

Pay next year's premium in advance

All of the following are true of annually renewable term insurance except

proof of insurability must be provided at each renewal

If an annuity has a guaranteed minimum interest rate, this means

(b) The interest rate will never drop below the guaranteed minimum

The commissioner has determined that a producer is ineligible for appointment by an insurer. The commissioner myst notify the insurer within

5 days

An important fact about the financial status of an insurer was deliberately withheld. Which if the following terms best describes this action?

False financial statement

All of the following statements are true regarding an Ordinary (straight) life policy except

It does not have a guaranteed death benefit

How many hours of continuing education are required to maintain a counselor's license?

None

Once a temporary producer's license has expired its initial period, the person granted the temporary license must

Obtain a permanent license

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?

buy-sell agreement

A whole life policy is surrendered for a reduced-paid up policy. The cash value in the new policy will

continue to increase

Agents may be found guilty of defamation if they make a false statement that is intended to?

maliciously criticize another insurance company

Annuities certain limit the amount paid by the annuity to a certain fixed

period or fixed amount

Which of the following elements of an insurance contract requires payment of premium?

consideration

If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising?

retention

An insurance company that is owned by the policyholders is called a

Mutual insurer

Which of the following documents used in the underwriting process contains specific medical details about an applicant?

Attending Physician's Statement (APS)

In this state, what type of violation is rebating?

Misdemeanor

What is the difference between a straight life policy and a 20-pay whole life policy?

Premium payment period

All of the following are true about key-person insurance except

The death benefit is taxable to the business

Premiums collected on behalf of the insurance company by an agent will be held in what capacity?

Fiduciary

A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lender may be guilty of

coercion

A stock insurer is defined as an insurer

owned by its stockholders

Insurers CANNOT transact insurance in this state without a

Certificate of Authority

Under what circumstances will the contingent beneficiary receive the death benefit?

If the primary beneficiary dies before the insured

How are policy loans calculated?

Policy's cash value minus unpaid loans and accrued interest

Which of the following is not an indicator of a competent party?

business profession

An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium. Ten days later, his policy is still in effect and has not lapsed. Which policy provision allowed for this?

grace period

According to agency law, the producer always represents the

insurance company

How soon must an insurer send a notice of cancellation to an insurers prior to terminating a universal life policy?

30 days

A life insurance policy can be backdated to affect a lower premium for up to a maximum of how many months?

6 months

What is the cost of coverage based on for group life insurance?

The average age and the ratio of men to women

Which of the following is not true of the agents implied authority?

It is specifically stated in the contract

In a group life policy with a death benefit of more than $50,000

Premium cost above $50,000 is taxable as income to the employee

Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes

Waiver of premium rider

An IRA contribution can be made from which of the following?

cash

Which if the following statements concerning the medical information bureau is correct?

The MIB assists underwriters in evaluating & classifying risks

What is the exclusion ratio used to determine?

The annuity benefit to be excluded from taxes

With Adjustable Life, the owner can change all of the following EXCEPT

insured

A married couple wants to include the entire family in their whole life policy under one rider. Which of the following riders will help them achieve that goal?

Family term

In life insurance underwriting, all of the following are true regarding HIV testing EXCEPT

The person may be denied coverage based solely on the presence of HIV

Which if the following is TRUE of level term insurance?

The premium will increase or decrease based on current interest rates

In a group life policy with a death benefit of more than 50,000

Premium cost above $50,000 is taxable as income to the employee

How long do temporary producer's licenses last without requiring an examination?

180 days

The entire contract includes all of the following EXCEPT

Buyer's Guide

Which of the following statements describes one of the reasons individuals purchase life insurance?

it creates an immediate estate

A licensee fails to earn the required CE credits by the expiration of the 90 day grace period, and the license has been terminated for education. How much time does the licensee have to meet the CE requirement to be considered for license reinstatement?

1 year

If the insured does not receive the statement of policy information at least 5 days prior to the policy delivery, the free look period is extended to

31 days

Which of the following would NOT trigger the payment of Accelerated Death Benefits?

Being permanently disabled

Which of the following would be true of both the fixed-period and fixed amount settlement options

Both guarantee that the principal and interest will be fully paid out

An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount?

Children's term rider

Which of the following losses would likely be covered under the accidental death rider?

Death caused by a head-on collision

Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policyowner select?

Joint and survivor

An insured decides to surrender his Whole Life insurance policy. The cash value at surrender is higher than the premiums paid into the policy, due to interest. What part of the surrender value would be income taxable?

The difference between the premiums paid and the cash value

All of the following are general requirements of a qualified plan except

The plan must be temporary

When an insured terminates membership in the insured group, the insured can convert to

Whole life without proof of insurability

Which of the following would be required to become licensed as an insurance producer?

a customer service representative who solicits no more than one policy a year

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered

concealment

Which of the following is true regarding pure life annuity settlement option?

It provides the highest monthly benefit

The reduction of premium option uses the dividend to reduce

Next year's premium

During policy solicitation, an insurer exaggerates the financial condition of one of its competitors, and makes it sounds worse than it is. This is an example of an unfair trade practice of

defamation

Which of the following could reduce the amount of the death benefit?

Failure to repay a policy loan

When the owner of a participating whole life policy uses the dividend to provide more life insurance coverage, which of the following dividend options is being used?

Paid-up additions

The frequency and the amount of the premium payment are known as what?

Premium Mode

Which of the following is TRUE regarding premium in a 10-year level premium policy?

The premium will remain level for 10 years

When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured has not had any injuries or illness since the application date. What is this document called?

Statement of Good Health

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insured's death was cause by an accident as defined in the policy?

An Accidental Death Rider

There is a 10% penalty on the taxable portion of a deferred annuity when it is surrendered prior to what age?

59 1/2

Among the applicants in the same class and life expectancy, which of the following factors can be used to influence premium rates?

Occupation

An insured recently had a new home built and insisted in having smoke detectors installed in multiple places in the house. What method of handling risk is the insured using?

Reduction

An applicant for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a

Representation

When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?

As a fiduciary

Which of the following is not one of the requirements for obtaining a nonresident license in Michigan?

The applicant must complete pre licensing education and examination in the nonresident state

All of the following are true regarding the waiver of cost of insurance rider except

The rider expires when the insured reaches age 60

Answers to questions in an insurance application are called representations and, as such, they are

believed to be true to the best of the applicant's knowledge

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is

taxed as ordinary income

In life insurance, which of the following is NOT required to have insurable interest in the insured?

The beneficiary

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

Modified whole life

Which of the following does NOT constitute false advertising?

Stating that dividends are not guaranteed

Two individuals of the same age, health status, and life expectancy apply for individual insurance coverage. When policies are issued by the same insurer, the premium rates are different based on the insured's race. What practice does this describe?

Unfair discrimination

Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles?

standard