Insurance Full Exam
Which of the following statements is TRUE about a policy assignment - it authorizes an agent to modify the policy - it transfers rights of ownership from the owner to another person - it is the same as the beneficiary designation - it permits the beneficiary to designate the person to receive the benefits
it transfers rights of ownership from the owner to another person - the policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment)
Which statement is NOT true regarding Straight Life Policy? - the face value of the policy is paid to the insured at age 100 - it usually develops cash value by the end of the third policy year - it has the lowest annual premium of the three types of whole life policies - its premium steadily decreases over time, in response to its growing cash value
its premium steadily decreases over time, in response to its growing cash value
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specific age, what type of policy is this? - single premium policy - jumping juvenile policy - limited pay whole life policy - modified life insurance policy
jumping juvenile policy - provide low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21)
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? - limited pay life - variable life - adjustable life - graded premium life
limited pay life - the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would the right policy be for this client? - limited pay whole life - interest-sensitive whole life - life annuity with period certain - increasing term
limited pay whole life - premium payments will cease at her age 65, but coverage will continue to her death or age 100
When an applicant purchased a life insurance policy, the agent dated the application 4 months prior. When asked by the applicant, the agent said he was allowed to backdate the policies up to 6 months if it would - eliminate pre-existing conditions - help him meet a sales quota for that period - lower the insured's premium - shorten the condensability period
lower the insured's premium
Using a class designation for beneficiaries means - naming beneficiaries as a group - not naming beneficiaries - naming an estate as the beneficiary - naming each beneficiary by his or her name
naming beneficiaries as a group - ex: all my children
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? - the entire contract provision - the consideration clause - assignment rights - owner's rights
owner's rights
What is the major difference between a stock company and a mutual company? - ownership - amount of benefits - number of producers - types of policies issued
ownership - mutual companies are owned by policyholders - stock companies are owned by stockholders
Which of the following is NOT true about a joint and survivor annuity benefit option? - this option guarantees income for two or more recipients - the surviving annuitant may receive reduced payments - payments stop after the first death among the annuitants - a period certain option may be included
payments stop after the first death among annuitants - joint and survivor annuity will pay until the last annuitant has died
Which of the following riders would NOT cause the death benefit to increase? - guaranteed insurability rider - cost of living rider - accidental death rider - payor benefit rider
payor benefit rider - this does not increase the death benefit; only pays the premium if the payor is disabled or dies
An applicant wants to buy a policy that has a cash value element. Which type should she buy? - investment - term - permanent - stock
permanent - permanent insurance provides lifetime death protection and a savings or cash value option
Which of the following lines of authority describes property and casualty insurance sold for noncommercial purposes? - Variable Annuity Products - casualty - credit - personal lines
personal lines - personal lines is property and casualty insurance coverage sold to individuals and families for noncommercial purposes
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to - purchase a single premium policy for a reduced face amount - purchase a term rider to attach to the policy - pay back all premiums owed plus interest - receive payments for a fixed amount
purchase a single premium policy for a reduced face amount
An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario? - contract review - revision of consideration - re-entry - preferred premium reduction
re-entry - upon the end of a term policy with guaranteed renewable option, the insured may answer medical questions to prove insurability and qualify for a discounted premium rate
Which nonforfeiture option provides coverage for the longest period of time? - accumulated at interest - reduced paid up - extended term - paid up option
reduced paid up option
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? - paid up addition - accumulation at interest - cash option - reduction of premium
reduction of premium
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all the premiums paid. Which rider is attached to the policy? - return of premium - cost of living - decreased term - accidental death
return of premium - pays the beneficiary the face amount of the policy, but also the amount that had been paid in premiums - death must occur prior to a certain age in order for the premium amount to be returned
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the - contingent beneficiary - irrevocable beneficiary - revocable beneficiary - secondary beneficiary
revocable beneficiary - irrevocable beneficiaries have a vested interest in the policy, so the policyowner may not be able to exercise certain rights without their consent
Events in which a person has both the chance of winning or losing are classified as - retained risk - speculative risk - insurable - pure risk
speculative risk - not insurable
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable? -annuitant - spouse - charitable organization - dependents
spouse
during the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal? - nontaxable interest may be withdrawn first, but the 10% penalty will be imposed if under age 59 1/2 - both interest and principle are taxed; no other penalties are imposed - neither interest nor principle is taxed, but penalties may be imposed - taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 1/2
taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 1/2
What is reinsurance? - an agreement between an originating insurer and a ceding insurer - an agreement between a domestic insurer and a foreign insurer - an agreement between an insurer and an insured - an agreement between a ceding insurer and an assuming insurer
an agreement between a ceding insurer and an assuming insurer
Who can make changes to the policy once it is in effect? - the agent - an executive officer of the insurer - the insured - the policyowner
an executive officer of the insurer - any changes must be endorsed and attached to the policy over the signature of an authorized officer of that insurer
The LEAST expensive first-year premium is found in which of the following policies? - level term - annually renewable term - increasing term - decreasing term
annually renewable term - purest form of insurance
Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? - assumed - apparent - express - implied
apparent - appearance or the assumption based on the actions, words, or deeds of the principle
Which of the following may NOT be included in an insurance company's advertisement? - the policies limitations or exclusions - the name of a specific agent - an identification of a limited policy as a limited policy - that its policies are covered by a state guaranty association
that its policies are covered by a state guaranty association
In order to get a nonresident license in this state a producer must - pass the nonresident state exam and satisfy their continuing education requirements - represent an agency located in this state - surrender their license in their state of residence - apply and pay a fee to a nonresident state that reciprocates
apply and pay a fee to a nonresident state that reciprocates
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? - annuitization - bail-out - surrender - nonforfeiture
bail-out - allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe
Which of the following is TRUE about a class designation? - beneficiaries are not identified by name - beneficiaries must be part of the insured's immediate family - it is not allowed - it determines the succession of beneficiaries
beneficiaries are not identified by name - a class of beneficiary is using a designation such as "my children"
Which of the following is NOT true regarding the annuitant? - the annuitant must be a natural person - the annuitant cannot be the same person as the annuity owner - the annuitant's life expectancy is taken into consideration for the annuity - the annuitant receives the annuity benefits
the annuitant cannot be the same person as the annuity owner
What is the time period called during which the surviving spouse of the insured does not receive Social Security income benefits? - waiver of premium - retention of capital - probationary period - blackout period
blackout period - begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60 - no benefits are paid during this time
Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced? - consumer price indices - policy cost indices - cost comparison methods - policy cost guides
cost comparison methods
A key person insurance policy can pay for which of the following? - costs of training a replacement - loss of personal income - workers compensation - hospital bills of the key employee
costs of training a replacement - a key person insurance policy will pay for costs of running the business and replacing the employee
Which of the following would be the beneficiary in credit life insurance? - company - borrower - creditor - insured
creditor
Which of the following terms is used to name the nontaxed return of unused premiums? - interest - surrender - dividend - premium return
dividend - not considered to be income for tax purposes, since they are a return of unused premiums
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called - key person policy - fraternal association - aleatory contract - executive bonus
executive bonus
What type of premium do both Universal Life and Variable Universal Life policies have? - increasing - flexible - level fixed - decreasing
flexible - premium can be increased or decreased as the policyowner chooses - as long as there is enough value in the policy to fund the death benefit
The automatic premium loan provision is activated at the end of the - elimination period - policy period - grace period - free-look period
grace period
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? - implied - apparent - assumed - express
implied
Which authority it NOT stated in an agent's contract but is required for the agent to conduct business? - assumed - express - implied - apparent
implied - not every detail of an agent's authority can be written in a contract
Life income joint and survivor settlement option guarantees - income for 2 or more recipients until they die - payment of interest of death proceeds - payout of the entire death benefit - equal payments to all recipients
income for 2 or more recipients until they die
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n) - medical examination - attending physician statement - inspection report - medical information bureau report
inspection report - may be ordered about an applicant from an independent investigating firm or credit agency - general report of the applicant's finances, character, work, hobbies, and habits
Which statement regarding insurable risks is NOT correct? - an insurable risk must involve a loss that is definite as to cause, time, place, and amount - insureds cannot be randomly selected - insurance cannot be mandatory - the insurable risk needs to be statistically predictable
insureds cannot be randomly selected
Which of the following best describes the MIB? - it is a member organization that protects insured against insolvent insurers - it is a rating organization for health insurance - it is a nonprofit organization that maintains underwriting information on applicants for life and health insurance - it is a government agency that collects medical information on the insured from the insurance companies
it is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
Which of the following best describes annually renewable term insurance? - neither the premium nor the death benefit is affected by the insured's age - it provides an annually increasing death benefit - it is level term insurance - it requires proof of insurability at each renewal
it is level term insurance
All of the following are characteristics of a group life insurance plan EXCEPT - the cost of the plan is determined by the average age of the group - there is a requirement to prove insurability on the part of the participants - the participants receive a Certificate of Insurance as their proof of insurance - a minimum number of participants is required in order to underwrite the plan
there is a requirement to prove insurability on the part of the participants
Which of the following is NOT true regarding Equity Indexed Annuities? - they earn lower interest rates than fixed annuities - the insurance company keeps a percentage of the returns - they have guaranteed minimum interest rates - they are less risky than variable annuities
they earn lower interest rates than fixed annuities
For what reason may a life insurance producer backdate a life insurance policy? - to avoid an increase in premium rate for the insured - to meet sales quotas established by the insurer - to make a policy effective during a period when the agent's appointment was in force - to shorten the period of contestability
to avoid an increase in premium rate for the insured
The paid-up addition option uses the dividend - to purchase a one-year term insurance in the amount of the cash value - to reduce the next year's premium - to accumulate additional savings for retirement - to purchase a smaller amount of the same type of insurance as the original policy
to purchase a smaller amount of the same type of insurance as the original policy
The paid-up addition options uses the dividend - to accumulate additional savings for retirement - to purchase smaller amount of the same type of insurance as the original policy - to purchase a one-year term insurance in the amount of the cash value - to reduce the next year's premium
to reduce the next year's premium
What kind of policy allows withdrawals or partial surrenders? - term policy - variable whole life - universal life - 20 pay life
universal life
An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that the financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? - viatical settlement - estate liquidation - nonpayment of premium - change of beneficiary
viatical settlement
An insurance company receives an application with some information missing and issues the policy anyway. What is this called? - aleatory - waiver - estoppel - subrogation
waiver
When must an applicant be notified that an insurer is gathering information about him/her? - when consulting any source except for the applicant - the insurer has the right to contact any source deemed necessary without having to inform the insured - the insured is considered to be informed upon receipt of a Notice of Investigation, which is delivered at the time of application - when consulting a source other than the applicant or public records
when consulting a source other than the applicant or public records
When is the earliest a policy may go into effect - when the first premium is paid and the policy has been delivered - when the insurer approves the application - after the underwriter reviews the policy - when the application is signed and a check is given to the agent
when the application is signed and a check is given to the agent
When would a 20-pay whole life policy endow? - after 20 payments - in 20 years - when the insured reaches age 100 - at the insureds age 65
when the insured reaches age 100
When would life insurance policy proceeds be included in the insured's taxable estate? - when there are incidents of ownership at the time of death - if the insured's spouse is the policyowner - if the insured transfers ownership of the policy or makes a gift of the policy 5 years prior to his or her death - when the beneficiary is named in the policy
when there are incidents of ownership at the time of death
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? - distributions before age 59 1/2 incur a 10% penalty on policy gains - policy loans are taxable distributions - accumulations are tax deferred - withdrawals are not taxable
withdrawals are not taxable - any distributions from MEC's are taxable, including withdrawals and policy loans - all of the other statements are true
An agent selling variable annuities must be registered with - the guaranty association - SEC - FINRA - department of Insurance
FINRA
A tornado that destroys property would be an example of which of the following? - a loss - a physical hazard - a peril - a pure risk
a peril - a peril is the cause of loss insured against in an insurance policy
Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? - a notice regarding replacement - a privacy notice - a buyers guide - a policy summary
a policy summary - includes all of the listed information and must be delivered along with a new policy
Which of the following is NOT an allowable 1035 exchange? - a life insurance policy is exchanged for an annuity - a whole life insurance policy is exchanged for a term insurance policy - a whole life insurance policy is exchanged for a Universal life insurance policy - an annuity is exchanged for another annuity
a whole life insurance policy is exchanged for a term insurance policy
Every producer must maintain a place of business in Arizona - with the exception of resident licensees - an maintain an approval rating of 60% - that is approved by the director - accessible to the public
accessible to the public
The death protection component of Universal Life Insurance is always - decreasing term - annually renewable term - whole life - adjustable life
annually renewable term
Which of the following is the basic source of information used by the company in the risk selection process? - consumer report - application - agent's report - warranty
application
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his - experience rating - group rate - insurer's scheduled rate - attained age
attained age
The premium of a survivorship life policy compared with that of joint life policy would be - as high - half the amount - lower - higher
lower - survivorship pays on the last death rather than the first death
Insurance is the transfer of - peril - risk - loss - hazard
risk
Which of the following would provide an underwriter with information concerning an applicant's health history? - a medical examination - the agent's report - the inspection report - the medical information bureau
the medical information bureau
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? - the contract can be issued without an annuitant - the annuitant must be a natural person - a corporation can be an annuitant as long as it is also the owner - a corporation can be an annuitant as long as the beneficiary is a natural person
the annuitant must be a natural person - owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person
Which of the following statements about group life is correct? - the cost of coverage is based on the ratio of men and women in the group - the premiums are higher than an individual policy because there is no medical exam - the group sponsor receives a Certificate of Insurance - The policy can be converted to an individual term insurance policy
the cost of coverage is based on the ratio of men and women in the group
An Adjustable Life policyowner can change which of the following policy features? - the insured - the coverage period - the mortality expense - the investment account
the coverage period
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 a medical exam. If the policy is issued, what would be the policy's effective date? - the date of application - the date of medical exam - the date of policy delivery - the date of issue
the date of medical exam - if the company acknowledges the receipt of the premium with a conditional receipt, the policy is in effect on the date of the application or the date of the medical exam (whichever is later)
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? - the death benefit can be increased by providing evidence of insurability - the death benefit cannot be increased - the death benefit can be increased only when the policy has developed a cash value - the death benefit can be increased only by exchanging the existing policy for a new one
the death benefit can be increased by providing evidence of insurability
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? - the key employee is the owner and the employer is the beneficiary - the employer is the owner and beneficiary - the employer is the owner and the key employee is the beneficiary - the key employee is the owner and beneficiary
the employer is the owner and beneficiary - with the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary
What is the advantage of reinstating a policy instead of applying for a new one? - proof of insurability is not required - the face amount can be increased - the cash values have gained interest while the policy was lapsed - the original age is used for premium determination
the original age is used for premium determination
All of the following are true regarding a decreasing term policy EXCEPT - the payable premium amount steadily declines throughout the duration of the contract - the death benefit is $0 at the end of the policy term - the contract pays only in the event of death during the term and there is no cash value - the face amount steadily declines throughout the duration of the contract
the payable premium amount steadily declines throughout the duration of the contract
All of the following statements are true regarding installments for a fixed amount EXCEPT - this option pays a specific amount until the funds are exhausted - the annuitant may select how big the payments will be - the payments will stop when the annuitant dies - value of the account and future earnings will determine the time period for the benefits
the payments will stop when the annuitant dies
All of the following statements are true regarding installments for a fixed amount EXCEPT - the payment will stop when the annuitant dies - value of the account and future earnings will determine the time period for the benefits - this option pays a specific amount until the funds are exhausted - the annuitant may select how big the payments will be
the payments will stop when the annuitant dies
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT - the employer pays a bonus to a selected employee to fund the policy - it is considered a nonqualified employee benefit - the policy is owned by the company - any type of insurance policy may be used
the policy is owned by the company - the policy is owned by the employee
What must happen when an individual policy or annuity has been personally delivered to the policyowner? - the policyowner must sign a delivery receipt - the policyowner must pay the annual premium in full - the producer must go over the policy with the policyowner - a notary public must witness the exchange
the policyowner must sign a delivery receipt
Under an extended term nonforfeiture option, the policy cash value is converted to - a lower face amount than the whole life policy - a higher face amount than the whole life policy - the same face amount as in the whole life policy - the face amount equal to the cash value
the same face amount as in the whole life policy
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT - the premium - amount of insurance - type of investment - length of coverage
the type of investment - owner of an adjustable life policy can: increase or decrease the premium, change the premium-paying period, increase or decrease the face amount of coverage, change the period of protection
