Last Exam Life only
A misrepresentation or false warranty by an insured will NOT void the policy unless A) there was an intent to deceive or if it materially affects acceptance of the risk by the company B) the insured has more than 1 policy with the insurer C) the policy has been in force less than 1 year D) the insured agrees to drop the policy
A
A whole life policy A) requires the insured to pay the premium for life and endows at age 100 B) requires a single payment after which coverage is afforded for the whole life of the insured C) is paid up at some specific time and endows at 100 D) is paid up at some specific time and endows at 65
A
Any life insurance transaction in which it is known that a policy will be lapsed or surrendered or reissued with a decrease in cash value is considered to be A) a replacement transaction B) a renewal transaction C) a reinsurance transaction D) a reinstatement transaction
A
Which of the following premium payment modes is the most expensive? A) Annual B) Monthly C) Quarterly D) Semiannual
B
A universal life policy may be surrendered for its cash value A) within 30 days of an interest payment B) only if there are no outstanding loans C) only when the cash value equals the death benefit D) at any time
D
All of the following provisions of an adjustable life policy may be changed to meet the policyholder's needs EXCEPT A) the amount and/or frequency of premium payments B) the period of insurance protection C) the face amount of the policy D) the individual insured
D
What annuity settlement option would have no residual benefit to the beneficiary after the annuitant dies? A) Life income B) Fixed amount C) Fixed period D) Interest only
Life income
The underwriting classification which is most favorable to an insured is A) substandard B) preferred C) standard D) endowment
Prefered
In which type of contract is only one party's promises enforced? A) Aleatory B) Personal C) Legal D) Unilateral
Unilateral
Which is the proper term for a company owned by its policyowners? A) A legal insurance company B) A mutual insurance company C) A fraternal insurance company D) A stock insurance company
B
Which of the following types of risk are insurable? A) Whole risks B) Pure risks C) Speculative risks D) Partial risks
B Only has one possible outcome
An accounting measure used to determine a contract owner's interest in the separate account of a variable annuity before payments begin is called A) an annuity unit B) an installment certain C) a premium D) an accumulation unit
D
A policyowner allows a policy to lapse, and the insurance company converts the policy to the extended term option. Which of the following from the original policy will automatically carry over into the new policy? A) Accidental death benefit B) Waiver of premium C) Disability income D) Face value
D With the extended term option, the accumulated cash value is used to buy paid-up term insurance with the same face value as the original policy.
To be able to start operations, a mutual company must have all of the following EXCEPT A) a surplus as specified by the state B) a minimum number of producers with agency contracts signed C) the advanced premium payment for each application D) a minimum number of applications for insurance
B
What is the usual federal income tax treatment of individual life insurance? A) Non-deductibility of premiums, non-taxable death benefits B) Deductibility of premiums, taxable death benefits C) Non-deductibility of premiums, taxable death benefits D) Deductibility of premiums, non-taxable death benefits
A
Which of the following must a producer present to an applicant at the time of application when a life insurance policy is to be replaced? A) Important Notice Regarding Replacement of Life Insurance B) Insurer's Statement of Warranty C) Report of the Department of Insurance D) Notice Concerning Alternatives
A
An indeterminate premium policy offers A) term insurance with a fluctuating death benefit B) a low initial premium with succeeding premiums based on the company's investment return, mortality, and expenses C) whole life insurance with premium payments for a limited number of years D) high initial premium that gradually decreases over the years
B
In a universal life policy, the two adjustments usually made to the cash value account are A) guaranteed interest and current interest are credited B) cost of insurance protection is charged and current interest is credited C) premium and excess interest are charged D) guaranteed interest is charged and premium is credited
B
Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if all back premiums due A) have been repaid and fewer than 4 years have elapsed B) plus interest have been repaid and fewer than 3 years have elapsed C) have been repaid regardless of how much time has elapsed D) plus interest have been repaid and less than 1 year has elapsed
B
Premiums for which of the following policies are deductible by an individual for income tax purposes? A) Whole life policy B) None of these C) Universal life policy D) Term policy
B
When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company A) will pay the proceeds less the amount of extra premium that Jonas should have paid for the insurance B) will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age C) will not pay the policy proceeds D) must pay all the proceeds regardless of Jonas having given an incorrect age
B
When the cash value account of a universal life policy reaches zero, the policyowner must make a premium payment or A) the policy is indefinitely suspended B) the policy goes into the grace period C) nothing happens because the cash value account can never reach zero D) the policy is lapsed
B
Who are the owners of a mutual insurance company? A) Investors B) Policyowners C) Stockholders D) Directors
B
With respect to a 10-year level term policy, all of the following statements are correct EXCEPT A) the amount of insurance protection remains the same for the entire term B) premium payments increase gradually over the term C) if the insured survives 10 years, the policy may be renewed for another term D) the duration of the protection period is 10 years
B
Which of the following statements concerning federal income taxation of annuities is CORRECT? A) Premiums are taxable; distributions are not taxable. B) Annuity death benefits, in whole or in part, are taxable to the beneficiary. C) Premiums are tax deductible; distributions are not taxable. D) Annuity death benefits are never taxable to a beneficiary.
B As noted, contributions to a qualified annuity are deductible to the individual or employer
Which of the following is taxable as income? A) Policy loans B) Interest paid on policy dividends C) Policy dividends D) Insurance policy proceeds paid in a lump sum
B Dividends are considered return of premiums and are not taxable, but the interest paid on dividends incurs tax liability.
Which of the following policies could be expected to have the lowest premium? A) 30-pay life B) Whole life C) 20-pay life D) 15-pay endowment at age 65
B Payments on limited-pay policies are accelerated and larger than a whole life policy, in which premiums are paid throughout the life of the policy.
George, who has a group policy, may, upon leaving his place of employment A) convert it to permanent insurance, provided he's insurable, within a specified period B) convert it to permanent insurance without proof of insurability, within a specified period C) not convert it to permanent insurance but may convert it to term insurance on an individual basis D) convert it to permanent insurance at his original age, without proof of insurability, within a specified period
B usually 1 month
In life insurance, the entire contract is considered to be A) the insuring clause and riders, if any B) the specification pages and application C) the policy and application D) the insuring clause, application, and riders or endorsements referred to in the contract
C
Mr. and Mrs. Burden receive a monthly annuity payment. Mr. Burden dies, but Mrs. Burden continues to receive a monthly annuity payment. The Burdens have a A) joint life annuity settlement option. B) straight life annuity settlement option. C) joint life and survivorship annuity settlement option. D) life annuity with period certain settlement option.
C
Renewable term life insurance may be described as A) increasing death benefit, level premium B) reducing death benefit, level premium C) level death benefit, increasing premium D) level death benefit, decreasing premium
C
The difference between a customer and a consumer under the Gramm-Leach-Bliley Act is that A) a customer is a policyholder, whereas a consumer is an applicant B) a consumer is a policyholder, whereas a customer is an applicant C) a customer has an ongoing relationship with the insurer, whereas a consumer does not D) a consumer has an ongoing relationship with the insurer, whereas a customer does not
C
The tendency for poor risks to seek and be covered for insurance more than average risks is known as A) adverse choice B) adverse insurance C) adverse selection D) adverse underwriting
C
Which is the best description of dividends in a life insurance policy? A) Interest paid on the cash accumulation in a participating whole life policy B) A privilege of stock ownership C) A refund of divisible surplus to owners of participating policies D) A privilege of ownership in a nonparticipating policy
C
A flexible premium annuity provides for a flexible A) interest rate B) premium payment schedule C) premium payment amount D) annuity payout amount
C A flexible premium annuity allows the purchaser to vary the amount of the premium payment as long as the amount falls within a stated minimum and maximum.
Which of the following factors is NOT considered when using the needs approach to determine the kind and amount of insurance appropriate for an individual? A) Maintenance income for the family for a period after the death of the principal wage earner B) Needs for last illness and burial expenses C) The individual's net annual salary D) Continuing income for the surviving spouse
C The needs approach looks at what will be required to actually pay for final expenses and maintain the insured's family over time. The individual's net annual salary is a factor considered when using the human life value approach to determine the appropriate amount of insurance.
Which statement is an accurate description of life insurance policy dividends? A) They are likely to be larger in nonparticipating policies. B) Stock insurers pay dividends to policyowners; mutual insurers pay dividends to shareholders. C) They are not taxable and are not guaranteed. D) They are guaranteed to be paid, and they are taxable as income.
C Not taxable because they are considered a return of premium.
An example of unfair discrimination is best demonstrated by which of the following situations? A) An insurer refuses to issue a policy to an applicant who has been treated for drug dependency on two separate occasions in the previous 5 years. B) An insurer assigns a premium rating to an applicant who weighs 80 pounds more than a typical person of that age and sex. C) An insurer refuses to issue a policy to an applicant whose credit history suggests an inability to financially support the policy being applied for. D) An insurer assigns a premium rating to an applicant because of studies that suggest members of the applicant's race have a shorter-than-average life expectancy.
D
An insurance contract is an aleatory contract. This means A) the contract is one sided B) the contract is personal in nature C) the insurance company is relying on the truthfulness of the applicant D) equal value is not given by both parties to the contract
D
Annuity payments are taxable to the extent that they represent interest earned rather than capital returned. Which of the following methods is used to determine the tax-free portion of each annuity payment? A) Surtax ratio B) Annuitization formula C) Marginal tax formula D) Exclusion ratio
D
States give an insurer permission to transact insurance with a certificate of A) agency B) admittance C) convenience D) authority
D
When the answer to a typical medical history question in a life insurance application is "Yes," the usual result is A) claims will not be paid for any death as a result of that condition B) actuarial assumptions are invalidated, and the risk is assigned a substandard rating C) underwriting is not concerned if only one answer is "Yes" D) underwriting may require additional information to assess the risk
D
When underwriting group insurance, the underwriter generally A) requires extensive medical information from the group B) requires extensive medical information from each individual C) focuses on individual members of the group rather than the group as a whole D) focuses on the group as a whole rather than on individual members
D
When would an immediate premium annuity begin payments to an annuitant? A) any period after a year B) any period after the first quarter C) usually agreed upon by the annuitant and company D) usually a month
D
Which of the following factors may an insurer consider when deciding whether to require AIDS testing during underwriting? A) Sexual orientation B) Marital status C) Occupation D) Coverage amounts
D
Which of the following is a term life insurance policy? A) The policy has a face amount of $100,000, has an automatic premium loan provision, and premiums are payable to age 100. B) The policy has a face amount of $100,000, offers a choice of nonforfeiture options, and no additional premiums are required to be paid after 20 years. C) The policy has a face amount of $100,000, and the policyowner received an annual statement indicating the subaccounts are now valued at $23,500. D) The policy has a face amount of $100,000, every 5 years the premium increases, and at the end of 20 years the policy terminates with no cash value.
D
A child may be a dependent beyond the ages of 19 or 21 A) only if the child is permanently mentally and physically disabled at any age B) under no circumstances C) only if the child is permanently mentally or physically disabled at any age D) only if the child is permanently mentally or physically disabled before that age
D A child may be a dependent beyond the ages of 19 or 21 if that child is permanently mentally or physically disabled before the specified age.
If a group insurance plan is noncontributory A) individuals become immediately covered after completing the eligibility period B) individuals must complete the eligibility period and then enroll during the probationary period to avoid medical underwriting C) individuals must complete the probationary period and then enroll during the eligibility period to avoid medical underwriting D) all individuals become immediately covered after completing the probationary period
D If the group plan is noncontributory, all individuals become immediately covered after the probationary period. If the plan is contributory, the employees must first fulfill the probationary period and then must enroll within the eligibility period to avoid medical underwriting.
A limited pay life policy A) is available only for small face amounts B) cannot be purchased any longer because of tax law restrictions against it C) requires level premium payments for the entire lifetime of the insured D) requires premium payments for a specified number of years or until a specified age is reached
D In a limited pay life policy, the insured policyowner pays premiums for a specified time or until a specified age, and insurance protection continues throughout his life.
Which of the following statements regarding fixed annuities is NOT correct? A) the funds are invested in the insurer's general account B) there may be two levels of interest C) it is a fully guaranteed contract D) the amount of the benefit payments are not guaranteed
D The amount of the benefit payments with a fixed annuity are guaranteed.
If a universal life policy with the increasing death benefit option has an initial face amount of $75,000 and a cash value of $10,000, the actual death benefit will be A) $65,000 B) $10,000 C) $75,000 D) $85,000
D With an increasing death benefit universal life policy, the death benefit equals the face amount of the policy plus the cash value accumulated.
An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company A) may use the cash value to purchase a reduced amount of permanent insurance B) will automatically send the cash values of the policy to the policyowner C) is entitled to keep any accumulated cash values D) will automatically institute the extended term option
D extended term option is used automatically when a cash value policy is lapsed and the policyowner makes no choice of nonforfeiture option and no effort to reinstate the policy.
Premiums for a variable universal life policy A) can vary in amount but must be paid at specified intervals B) may not vary in amount but can vary as to payment schedule C) cannot vary in amount and must always be paid at specified intervals D) can vary in amount and payment schedule
D within certain limitations
A whole life insurance policy is returned to the issuing insurer 9 days after delivery by the agent. What portion of the premium will be refunded to the policyowner? A) 100% of cost of insurance and other policy expenses plus 100% of the value of the separate account, which could be less than the total premium paid B) 100% of the amount paid to the insurer C) 90% is the maximum that insurers are required to refund D) 100% of the premium minus all underwriting expenses
B
An insurance policy is a unilateral contract because A) only the insured is bound to live up to his side of the agreement B) neither party may default on the agreement C) only the insurance company is bound to live up to its side of the agreement D) either party may default on the agreement
C
Life insurance replacement regulations apply to which of the following kinds of insurance? A) Group life insurance B) Credit life insurance C) Most individual life insurance policies and annuities D) Industrial life insurance
C
Any attempt by an insurer or its agent to discourage a client from accepting another insurer's replacement policy is called A) twisting B) unfair competition C) misrepresentation D) conservation
D
Define twisting. A) Twisting is when the producer commingles funds from his personal account with the premium trust account. B) Twisting is when the producer makes an unfair policy comparison in order to get the insured to lapse 1 policy and purchase a different policy with the same insurer. C) Twisting is the use of force or threat to conclude an insurance transaction. D) Twisting is when the producer makes an unfair policy comparison in order to get the insured to lapse 1 policy and purchase a new policy with another insurer.
`D
When she was 40 years old, Diane bought a $30,000 life paid-up at age 70 policy. The policy had a $21,000 cash value when she died at age 75. The amount paid to her beneficiary was A) $51,000 B) $30,000 C) $0 D) $21,000
B
What nonforfeiture option allows a whole life policyowner to convert their insurance to a paid-up policy with a lower face amount than the original policy? A) Extended paid-up insurance B) Extended term insurance C) Reduced paid-up insurance D) Cash surrender value
C
Which of the following best describes the annuity period? A) The time during which premiums are paid to fund the annuity B) The principal factor in determining the annuity premium C) The time during which payments are made to the annuitant D) The period during which the amount of the annuity payment is determined
C
Which of the following would NOT be permitted as a Section 1035 policy exchange? A) An endowment contract exchanged for an annuity contract B) A life contract exchanged for another life contract C) An annuity contract exchanged for a life contract D) An annuity contract exchanged for another annuity contract
C An annuity contract can be exchanged only for another annuity contract under a Section 1035 exchange.
All statements and descriptions in any application for an insurance policy by an insured are deemed to be A) warranties and not representations B) both warranties and representations C) neither warranties nor representations D) representations and not warranties
D
At all times, agents must uphold their fiduciary duty. The best example of this is A) annually reviewing the insurance needs and coverage for a client B) assisting clients to choose the best coverage for their situation C) assuring claim forms are presented to the insurer within 3 business days D) promptly submitting an insured's premium to the home office
D
The type of policy that is paid up after a specified period of years and endows at age 100 is A) an endowment policy B) a single premium policy C) a whole life policy D) a limited pay policy
D
When a producer is made aware of an insured's death, the first task is to A) contact the beneficiary B) comfort the family C) provide financial counseling D) notify the insurance company
D
Money taken out of a modified endowment contract (MEC) A) is considered to be a return of premium B) will result in the policy being voided C) may be subject to unfavorable tax rules D) is always received income tax free
C
Angelo and Howard each apply for life insurance with an annual premium of $500. Both are standard risks. Angelo buys a 10-year renewable term policy, and Howard buys whole life. Which of the following statements is NOT true? A) Howard may use the cash value of his policy to purchase reduced paid-up insurance. B) Howard's policy will have a higher face amount than Angelo's, but Angelo's face amount will increase at each renewal. C) Howard's premium will remain level throughout the life of the contract, and Angelo's premium will increase at each renewal. D) Howard's policy will have a larger cash value than Angelo's.
B
