Life Exam

Which of the following best describes annually renewable term insurance? A. Neither the premium nor the death benefit is affected by the insured's age B. It provides an annually increasing death benefit C. It is level-term insurance D. It requires proof of insurability at each renewal

C. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

Which nonforfeiture option has the highest amount of insurance protection? A. Decreasing term B. Reduced paid-up C. Extended term D. Conversion

C. The extended term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

Which of the following elements concerning buy-sell agreements is true? A. Buy-sell agreements pay in the event of a medical emergency. B. Buy-sell agreements are normally funded with a life insurance policy. C. Premium paid are deductible as a business expense. D. Benefits received are considered income taxable.

B. A buy-sell agreement is simply a contract that establishes what will be done with a business in the event that an owner dies. Buy-sell agreements are normally funded with a life insurance policy.

The Life and Health Guaranty Association maintains all of the following accounts EXCEPT A. A health insurance account B. An annuity account C. An unallocated annuity contract account D. An unallocated insurance account

D. For the purposes of administration and assessment the Iowa Life and Health Guaranty Association maintains a health insurance account, a life insurance account, an annuity account, and an unallocated annuity contract account.

Which of the following would be considered a non medical insurance application? A. An application on which the medical information is completed by the applicant and the agent only B. An application that does not ask any questions about the applicant's medical history. C. An application submitted with the Agent's report D. Any application for life insurance

A. An application on which all of the questions, including medical history questions, do not need to be completed by medical professionals, and may be completed by the application and the agent.

In a life settlement contract, whom does the life settlement broker represent? A. the insurer B. the beneficiary C. the life settlement intermediary D. the owner

D. Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only policyowners.

Which of the following features of the Indexed Whole Life policy is NOT fixed? A. Cash value growth B. Premium C. Death benefit D. Policy period

A. Under the Indexed Whole Life policy, the premium is fixed, and the death benefit is guaranteed. Cash value is dependent upon the performance of the equity index although a minimum cash value is guaranteed.

Which of the following best describes what the annuity period is? A. The period of time from the effective date of the contract to the date of its termination B. The period of time during which accumulated money is converted into income payments C. The period of time from the accumulation period to the annuitization period D. The period of time during which money is accumulated in an annuity

B. The annuity period is the time during which accumulated money is converted into an income stream.

Which of the following is the required number of participants in a contributory group plan? A. 50% B. 75% C. 100% D. 25%

C. Under a contributory group plan, an insurer will require that 75% of eligible employees be included in the plan.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A. Term to specified age B. Ordinary life polocy C. Limited pay whole life D. Level term

D. A 20-year term policy is written to provide a level death benefit for 20 years.

Which of the following is a permissible adjustable policy loan interest rate taken out in connection with a life insurance policy? A. the interest rate is negotiated at the time of solicitation; it is relative to the policy's premium, duration, renewability, and benefits. B. the interest rate is no greater than the rate used to compute the cash surrender value of the policy, plus 1% per year. C. the interest rate is fixed at 3%, and is compounded quarterly. D. the interest rate is relative to the attained age of the insured.

Adjustable interest rates on life insurance policy loans are subject to the Insurance Code. One of the permissible rates is a rate no greater than that used to compute cash surrender value of the policy, plus 1% per year.

Which of the following would be required to obtain a producer's license in this state? A. A person who underwrites applications for insurance for the insurer B. A trustee of an employee trust plan that is compensated indirectly by the company issuing the contract. C. A clerical employee that is only indirectly involved in the sale and solicitation of insurance and who is paid a fixed salary D. A person acting as a special agent who assists insurance producers by providing technical advice and assistance.

B. Officers, directors, and employees of an insurer or an insurance producer who are not directly involved in the sale and solicitation of the insurance and who are not directly compensated or indirectly by commissions, are exempt from insurance licensing requirements.

What is the timeframe for filing relevant Suspicious Activity Reports? A. Within 90 days of the suspicious transaction B. Within 30 days of initial discovery C. Within 30 days of the suspicious transaction D. Within 90 days of the initial discovery.

B. Relevant SAR reports must be filed with FinCEN within 30 days of initial discovery of a suspicious transaction.

Which of the 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

B. 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.

What is the advantage of reinstating a policy instead of applying for a new one? A. Proof of insurability is not required B. The face amount can be increased C. The cash values have gained interest while the policy was lapsed D. The original age is used for premium determination

D. The reinstatement provision allows the policy owner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policy owner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A. Amount of interest B. Size of each installment C. Predetermined length of time stated in the contract D. Length of income period

B. The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.

The type of insurance sold to a debtor and designed to pay the amount on a loan if the debtor dies before the loan is repaid is called: A. Multiple Protection Insurance B. Credit life C. Credit health D. Decreasing whole life

C. Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.

Which of the following is NOT true of life settlements? A. They could be sold for an amount greater than the current ash value. B. They involve insurance policies with large face amounts. C. The seller must be terminally ill. D. They could be used for a key person coverage.

C. With Life Settlements, unlike with viatical settlement, the seller doe snot need to be terminally ill. They usually involve life insurance policies with face amount of $250,000 or more, "key-person" coverage, corporate-owned policies, or policies representing excess coverage that no longer needed, and could be sold for an amount greater than the current cash value.

Which of the following documents must be provided to the policy owner or the applicant during policy replacement? A. Notice Regarding Replacement B. Disclosure Authorization Form C. Buyer's Guide and Policy Summary D. Policy Illustrations

A. During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

Which of the following is NOT true regarding the accumulation period of an annuity? A. It would not occur in a deferred annuity B. It is the period during which the annuity payments earn interest. C. It is the period over which the annuitant makes payments into an annuity. D. It is also known as the pay-in period.

A. The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? A. Option B B. Corridor Option C. Variable Option D. Option A

A. 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.

Which of the following type of insurance policies is most commonly used in credit life insurance? A. Equity indexed life B. Decreasing term C. Increasing term D. Whole life

B. Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. It is usually written as a decreasing term insurance.

The term "fixed" in a fixed annuity refers to all of the following EXCEPT A. Equal annuity payments B. Amount and length of payments C. Death benefits D. Guaranteed rate of interest

C. A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a death benefit.

An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies "Yes", which of the following best describes the agent's next steps: A. the agent must get his supervisor involved in the transaction B. the agent has no further duties. C. the agent must provide a replacement notice tot he applicant D. the agent must collect the existing policies and turn them over to the replacing insurer

C. In a replacement transaction, an agent must present to the applicant a Notice Regarding Replacement that is signed by the applicant and the agent.

In a life settlement contract, whom does the life settlement broker represent? A. The insurer B. The beneficiary C. The life settlement intermediary D. The owner

D. 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 policy owner.

Which of the following best defines target premium in a universal life policy? A. The corridor of insurance B. The recommended amount to keep the policy in force throughout its lifetime. C. The maximum amount the policy owner may pay on a policy D. The minimum amount to make sure the policy is annually renewable

B. The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Which of the following is NOT true regarding Equity Indexed Annuities? A. They have guaranteed minimum interest rates. B. They are less risky than variable annuities. C. They earn lower interest rates than fixed annuities D. The insurance company keeps a percentage of the returns.

C. 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 of the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn high interest rates than fixed annuities.

All of the following statements concerning the use of life insurance as Executive Bonus are correct EXCEPT: A. The employer pays a bonus to a selected employee to fund the policy. B. It is considered a non-qualified employee benefit. C. The policy is owned by the company. D. Any type of insurance policy may be use.

C. The policy owned by the employee.

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT: A. Fully insured status B. Waiting period of 5 months C. Being age 65 D. Inability to perform any gainful work.

C. The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and therefore is entitled to receive Social Security retirement, Medicare, and survivor benefits. The waiting, or elimination period for Social Security disability benefits is 5 months.

The death protection component of Universal Life insurance is always A. Increasing term B. Annually renewable term C. Whole Life D. Adjustable life

B. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

What is the purpose of a conditional receipt? A. It is intended to provide coverage on a date earlier than the date of the issuance of the policy. B. It guarantees the applicant that a policy will be issued in the amount applied for in the application. C. It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company. D. It is given by the agent only to applicant who fully prepay all scheduled premiums in advance of policy issue.

A. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

Items stipulated in the contract that the insurer will not provide coverage are found in the A. Exclusions clause B. Insuring clause C. Benefit payment clause D. Consideration clause

A. Exclusions are restrictions of coverage as stated in the policy.

Variable life insurance is based on what kind of premium? A. Graded B. Level fixed C. Increasing D. DecreasingIn which of the following cases will the i

B. Variable life insurance is a level fixed premium investment based product.

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? A. 3 days B. 5 days C. 10 days D. 14 days

A. Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.

Illustrations used int he sale of life insurance policies must contain all of the following EXCEPT: A. The rating classification of the illustration is based on B. A dividend option election C. The initial death benefit D. The insured's financial classification

D. An insured's financial status is not part of an illustration used in selling life insurance policies.

Who is a person other than a viator, that enters into a viatical settlement contract? A. Purchaser B. Effectuator C. Broker D. Provider

D. Viatical settlement provider means a person, other than a viator, that enters into or effectuates a viatical settlement contract.

Which of the following is NOT true regarding policy loans? A. A policy loan may be repaid after the policy is surrendered. B. Money borrowed from the cash value is taxable. C. Policy loans can be repaid at death. D. An insurer can charge interest on outstanding policy loans.

B. Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans.

Which of the following information will be stated in the consideration clause of a life insurance policy? A. The conditions for insurability B. The amount of premium payment C. The parties to the contract D. The time period allowed for the payment of premium

B. The consideration clause states the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.

Which nonforfeiture option provides coverage for the longest period of time? A. Accumulated interest B. Reduced paid-up C. Extended term D. Paid-up option

B. The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, the face amount is reduced to what the cash would pay.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. he is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? A. Pay nothing; there was a misrepresentation on the application. B. Pay the full death benefit and refund excess premium C. Pay reduced death benefit D. Pay full death benefit

C. The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However it does not apply to statements relating to age, sex, and identity.

Which of the following statements about the reinstatement provision is true? A. It permits reinstatement within 10 years after a policy has lapsed. B. It provides for reinstatement of a policy regardless of the insured's health. C. It guarantees the reinstatement of a policy that has been surrendered for cash. D. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

D. Upon policy reinstatement, the policy owner will be required to pay all back premium plus interest, and may be required to repay any outstanding loans and interest.

What type of insurance would be used for a Return of Premium rider? A. Annually renewable term B. Increasing term C. Level term D. Decreasing term

The Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but also all premiums previously paid are payable to the beneficiary.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A. Ordinary life policy B. Limited pay whole life C. Level term D. Term to specified age

C. A 20-year term policy is written to provide a level death benefit for 20 years.

Nonforfeiture values guarantee which of the following for the policyowner? A. That the dividends will be paid annually B. That the death benefit will be paid in a lumpsum C. That the policy premium will never incerase D. That the cash value will not be list.

D. Because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policyowner. Nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered.