Insurance Exam 1

#82. An insured's long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged $100 per day. How much will the insurance company pay? a) $100 a day b) 80% of the total cost c) 20% of the total cost d) $120 a day

$120 a day

#11. When a policy is being replaced, the replacing company notifies the a) Policyholder. b) Commissioner. c) Beneficiaries. d) Replacement company.

Replacement company.

#25. In insurance, an offer is usually made when a) The agent hands the policy to the policyholder. b) An agent explains a policy to a potential applicant. c) An applicant submits an application to the insurer. d) The insurer approves the application and receives the initial premium.

An applicant submits an application to the insurer.

#12. In which of the following cases will the insured be able to receive the full face amount from a whole life policy? a) As soon as the cash value exceeds the face amount b) If there are no named beneficiaries when the policy is paid up c) At age 65 d) If the insured lives to age 100

If the insured lives to age 100

#75. Which of the following is NOT a type of whole life insurance? a) Level term b) Single premium c) Straight life d) Limited payment

Level term

#21. The interest earned on policy dividends is a) 40% taxable, similar to a capital gain. b) Taxable. c) Nontaxable. d) Tax deductible.

Taxable

#27. If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? a) The examiner b) The applicant c) The insurer d) The cost of the examination will be waived.

The insurer

#53. Which of the following statements is correct regarding a whole life policy? a) The policyowner is entitled to policy loans. b) Cash values are not guaranteed. c) The policy premium is based on the attained age. d) The death benefit may increase or decrease during the policy period.

The policyowner is entitled to policy loans.

#34. Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Universal Life - Option A b) Universal Life - Option B c) Equity Indexed Universal Life d) Variable Universal Life

Universal Life - Option A

#18. Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a) Representation b) Warranty c) Concealment d) Indemnity

Warranty

#40. Which of the following is TRUE regarding the accumulation period of an annuity? a) It is limited to 10 years. b) It is a period during which the payments into the annuity grow tax deferred. c) It is also referred to as the annuity period. d) It is a period of time during which the beneficiary receives income

It is a period during which the payments into the annuity grow tax deferred.

#79. Existing insurers must provide policyowners with a policy summary for the existing life insurance within how many days of receiving the written communication and replacement? a) 10 b) 20 c) 31 d) 5

10 days

#50. The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount? a) 65 b) 70 1/2 c) 90 d) 100

100

#57. An insured recently discovered that the interest rate on his policy loan once again increased. Which of the following is the shortest amount of time that could have passed since the last change in the insured's interest rate? a) 1 month b) 3 months c) 6 months d) 12 months

3 months

#78. When a policy is replaced, replacing insurers must maintain a replacement register regarding that policy until the conclusion of the next regular examination by the Insurance Department or for a) 5 years. b) 4 years. c) 2 years. d) 3 years.

3 years.

#35. An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Representation b) Adhesion c) Consideration d) Good faith

Consideration

#68. When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? a) Contract of adhesion b) Acceptance c) Consideration d) Legal purpose

Consideration

#52. All of the following statements are true regarding tax-qualified annuities EXCEPT a) Annuity earnings are tax deferred. b) They must be approved by the IRS. c) Withdrawals are taxed. d) Employer contributions are not tax deductible.

Employer contributions are not tax deductible.

#23. In life insurance policies, cash value increases a) Are income taxable immediately. b) Are taxed annually. c) Are only taxed when the owner reaches age 65. d) Grow tax deferred.

Grow tax deferred.

#66. Which of the following policy components contains the company's promise to pay? a) Entire contract provision b) Insuring clause c) Premium mode d) Owner's rights

Insuring clause

#77. Why is an equity indexed annuity considered to be a fixed annuity? a) It is not tied to an index like the S&P 500. b) It has a guaranteed minimum interest rate. c) It has modest investment potential. d) It has a fixed rate of return.

It has a guaranteed minimum interest rate.

#33. Which of the following is an example of a limited-pay life policy? a) Level Term Life b) Straight Life c) Life Paid-up at Age 65 d) Renewable Term to Age 70

Life Paid-up at Age 65

#44. Which of the following information about the applicant is NOT included in the General Information section of the application for insurance? a) Gender b) Occupation c) Marital status d) Medical background

Medical background

#39. What is the term for how frequently a policyowner is required to pay the policy premium? a) Consideration b) Mode c) Schedule d) Grace period

Mode

#65. After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a) Payments for life b) Yearly premium waiver and income c) Monthly premium waiver and monthly income d) Percentage of medical costs paid by the insurer

Monthly premium waiver and monthly income

#74. The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a) One-year term option. b) Paid-up option. c) Accelerated endowment. d) Paid-up additions.

One-year term option

#55. Which of the following will be included in a policy summary? a) Premium amounts and surrender values b) Copies of illustrations and application c) Comparisons with similar policies d) Primary and secondary beneficiary designations

Premium amounts and surrender values

#56. 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 policy delivery b) The date of issue c) The date of application d) The date of medical exam

The date of medical exam

#14. In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe? a) Unidirectional b) Aleatory c) Conditional d) Unilateral

Unilateral

#85. Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? a) Universal life b) Flexible life c) Variable life d) Adjustable life

Universal life

#29. Which of the following terms will be permissible in describing a life insurance policy in company advertisements? a) Variable plan b) Risk-free plan c) Investment plan d) Retirement plan

Variable plan

#2. Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? a) Decreasing term life b) Variable universal life c) Increasing term life d) Credit term life

Variable universal life

#60. Who can make a fully deductible contribution to a traditional IRA? a) Anybody; all IRA contributions are fully deductible regardless of income level b) Someone making contributions to an educational IRA c) A person whose contributions are funded by a return on investment d) An individual not covered by an employer-sponsored plan who has earned income

An individual not covered by an employer-sponsored plan who has earned income

#6. A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a) Assignment b) Automatic premium loan c) Waiver of premium d) Incontestability period

Automatic premium loan

#4. A Return of Premium term life policy is written as what type of term coverage? a) Renewable b) Level c) Increasing d) Decreasing

Increasing

#19. Which of the following statements is TRUE concerning the Accidental Death Rider? a) It is only available in group insurance. b) It will pay double or triple the face amount. c) It is also known as a triple indemnity rider. d) This rider is only available to insureds over the age of 65.

It will pay double or triple the face amount.

#61. All of the following are true regarding insurance policy loans EXCEPT a) The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. b) Policyowners can borrow up to the full amount of their whole life policy's cash value. c) Policy loans can be made on policies that do not accumulate cash value. d) The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies.

Policy loans can be made on policies that do not accumulate cash value.

#54. Which nonforfeiture option provides coverage for the longest period of time? a) Accumulated at interest b) Reduced paid-up c) Extended term d) Paid-up option

Reduced paid-up

#83. The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? a) Paid-up addition b) Accumulation at interest c) Cash option d) Reduction of premium

Reduction of premium

#67. Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a) Signed waiver of premium. b) Statement of good health. c) Payment of premium. d) Delivery receipt.

Signed waiver of premium.

#86. An IRA purchased by a small employer to cover employees is known as a a) Simplified Employee Pension plan. b) 401(k) plan. c) Defined contribution plan. d) 403(b) plan.

Simplified Employee Pension plan

#32. All of the following entities regulate variable life policies EXCEPT a) The SEC. b) The Insurance Department. c) The Guaranty Association. d) Federal government.

The Guaranty Association.

#8. Which of the following is TRUE regarding variable annuities? a) A person selling variable annuities is required to have only a life agent's license. b) The annuitant assumes the risks on investment. c) The funds are invested in the company's general account. d) The company guarantees a minimum interest rate.

The annuitant assumes the risks on investment.

#15. What is the advantage of reinstating a policy instead of applying for a new one? a) The cash values have gained interest while the policy was lapsed. b) The original age is used for premium determination. c) Proof of insurability is not required. d) The face amount can be increased.

The original age is used for premium determination.

#13. All of the following are true regarding a decreasing term policy EXCEPT a) The payable premium amount steadily declines throughout the duration of the contract. b) The death benefit is $0 at the end of the policy term. c) The contract pays only in the event of death during the term and there is no cash value. d) The face amount steadily declines throughout the duration of the contract.

The payable premium amount steadily declines throughout the duration of the contract.

#59. Which of the following is TRUE regarding the premium in term policies? a) The premium in term policies is not based on the insured's age. b) Decreasing term policy will have a decreasing premium. c) The premium is level for the term of the policy. d) Only level term policy has a level premium.

The premium is level for the term of the policy.