LIFE INSURANCE 2

If an insurance company advertises for insurance sales in Illinois even though they are not licensed in the state to market insurance, this company is guilty of A: Misrepresentation B: Misappropriation C: False Advertising D: Twisting

A

The regulation that requires a producer to sign their name on an individual or group life or accident and health insurance application is called A: The Disclosure Rule B: The Insurance Fraud Prevention Act C: The Replacement Rule D: The Unfair Trade Practice Act

A

Group Life insurance death benefits are always paid tax free upon death of a covered insured, however, premiums paid by the Employer are: A: Tax Deductible B: Not Tax Deductible C: Tax Deductible only if the premiums exceed $50,000 D: None of the Above

A Premiums paid by a employer for group life premiums are tax deductible and benefits are paid tax free.

Before marketing annuities, a producer must complete an annuity suitability course which is ____ of continuing education credit. A: 4 hours B: 3 hours C: 12 hours D: 24 hours

A The Annuity Suitability course requirement is 4 hours of self-study continuing education.

If a producer receives a hearing notice from the director relating to a license revocation and the notice is mailed by the Director on July 1, when will the hearing actually take place? A: Between July 21 and July 31 B: Anytime after July 11 C: On July 21 D: On July 31

A The Director will set a hearing date on a license revocation that must be no less than 20 or more than 30 days from the date of the mailing of the notice by the director.

A Viatical Settlement Provider license has a renewal fee of: A: $1,500 B: $3,000 C: $5,000 D: $180 .

A To renew a Viatical License a fee of $1,500 applies annually

How long must insurers keep copies of all advertising materials? A: 4 years B: 3 years C: 2 years D: 1 year

A. An insurer must keep a copy of all advertising materials for 4 years or the next examination report, whichever is longer.

Which of the following statements regarding advertising is not true? A: A company making a general announcement about blanket coverage for a group is regulated as advertising. B: An agent knowingly omitting an important fact about coverage is illegal. C: An agent cannot state that dividends are guaranteed. D: Anything conveyed that misleads a prospective insured is illegal under advertising regulations.

A. An insurer that makes a general announcement about group or blanket coverage is excluded under advertising regulations.

People working with insurers who belong to the following organizations are exempt from licensing, EXCEPT: A: the president of a life insurance company who is paid commission directly from the sale of an insurance policy. B: an employer's association C: an advertising consultant D: a marketing consultant

A. Any person who is paid by commission directly from the sale of an insurance contract must hold the appropriate producer licensing authority.

How long does an insurance agency with a business entity license have to notify the Director pertaining to a change of business address? A: 30 days B: 15 day C: 90 days D: There is no requirement in this regard that applies to a business entity.

A. Change of address notice is required by all producers and business entities within 30 days of the move.

The regulation that specifies an agent's duty to ensure that a prospective buyer receive the best plan/coverage for the client's need is: A: Solicitation B: Replacement C: Advertisement D: Guaranty Association

A. Life Solicitation rules stipulate an agent's duty to recommend the best product/plan for the proposed insured's need.

A policy is purchased with an agent involved in the transaction. When must the policy summary be supplied? A: At policy delivery B: Before paying a premium C: At policy delivery if payment was not made with application D: At the policy's first anniversary

A. The summary must be delivered with the policy no matter what type of transaction the policy was.

A married couple wants to purchase a Survivorship life policy for their estate planning. The wife is in perfect health, but her husband has a chronic medical condition that will never improve. Will the underwriter likely approve the policy? A: No, both insureds have to be healthy for the policy. B: Yes, since the policy is last to die, only one insured generally has to be insurable. C: Yes, as long as they add a third insured to the policy. D: No, underwriting will deny any and all unhealthy insureds.

B

C has a Level term policy with a option to renew coverage before it expires. C bought the policy when they were 21 years old but they are renewing it at age 40. What age will premiums be based off of when C renews? A: Age 21 B: Age 40 C: Premiums are not allowed to increase. D: None of the Above

B When an insured renews a term policy, they pay premiums based off of attained age rates.

Producer J brokered $2,000,000 in insurance premiums last year. Based on this premium amount, what is the penalty (face) amount of the surety bond J is required to maintain in favor of the people of Illinois? A: $10,000 B: $50,000 C: $100,000 D: $200,000

B. A producer who is required to maintain a surety bond must hold a bond in the amount of $2,000 minimum or 5% of the previous year's brokered premiums, whichever is the greater amount up to a $50,000 penalty amount maximum. 5% of $2,000,000 equals $100,000 but the maximum bond required is $50,000.

When an insured transfers wealth at death, part of the benefits may be life insurance. In the case where proceeds are part of a entire valuation of wealth transfer upon death, they may be: A: Income Taxable B: Estate Taxable C: Tax Free D: Only Taxable if benefits are over $50,000

B. Any proceeds that are part of a wealthy transfer from an estate are estate taxable.

If an insurance company issues deceptive statements about its assets, this action is A: false advertising. B: an unfair trade practice. C: unfair discrimination. D: falsification.

B. It is an unfair trade practice for a carrier to be deceptive in relating financial information through reports to the public.

All of the following are not allowed under advertising regulations EXCEPT: A: Ads that state the policies are limited B: A genuine testimonial by a celebrity endorser C: An ad implying that a government entity approves the policy D: State that dividends are guaranteed on a television commercial

B. Testimonials and endorsements by any third party endorsers must be factual and genuine. The remaining answers are examples of what is not permitted by advertising laws.

Under Life Solicitation Rule, the definition that applies to a consumer that is most concerned about cash value buildup is referred to as: A: Life Insurance Net Payment Cost Index B: Life Insurance Surrender Cost Index C: Policy Summary D: Cash Dividends

B. Under Life Insurance Surrender Cost Index which explains cash surrender value over 10 or 20 years, is important when cash value is of primary importance to the policyholder.

An applicant for a life insurance policy may NOT have a whole life insurance policy denied solely for which one of the following reasons? A: Hobbies B: Past lawful foreign travel C: Occupation D: Tobacco use

B. Under Unfair Practices, using lawful foreign travel as a reason an applicant would be denied for coverage is discriminatory and would be an illegal practice.

J has a policy that requires that he meet certain conditions in order for the contract to be enforceable. J has a(an): A: Conditional Contract B: Unilateral Contract C: Contract of Adhesion D: Aleatory Contract

B. When one party has to perform legally in a contract, it is a unilateral contract right.

D has a policy from a participating insurer and receives a dividend. D would really like to increase her coverage without adding premium to the policy. The dividend option D should select is: A: Cash B: Paid-Up Addition C: One-Year Term Option D: Accumulation at Interest

B. With the Paid-Up Addition dividend option, the policyholder is allowed to increase their death benefit amount without adding to the premium.

How many days does the Director have to issue a final written order once a hearing has been held pertaining to a market conduct examination? A: Within 20 to 30 days B: 30 days C: 60 days D: 90 days

D

IRA's are: A: Available to anyone B: Available to anyone that has a 401K C: Available to anyone with earned income D: Available to anyone with earned income who has not attained age 70 1/2

D

All Viatical Settlement Providers must report on or before _______ of every year. A: January 1st B: Depends on License Issuance C: March 1st D: Birth month of the Licensee

C

Company A has a partnership with Company Z. There is an agreement in place that if the CEO of either company were to die, the other company would receive money to buy out the partnership. This is an example of: A: Buy/Sell Agreement B: Crosse Purchase plan C: Business Entity Plan D: Key Person

C

K has an Index annuity with the S&P 500 determining his interest rate performance. Last year the S&P 500 had 30% return. K's annuity will be accredited: A: The entire interest rate of 30% B: Whatever the company decides C: A high rate or return but it will be capped at a certain percentage. D: 3% fixed rate

C

Life Quiz: Question 10 On which date was the USA Patriot Act/Anti-money Laundering enacted? A: 22-Jun-88 B: 11-Sep-01 C: 26-Oct-01 D: 3-Jun-08

C

Under advertising regulations, ads regarding successive enrollment must be at least: A: 2 months apart B: 12 months apart C: 6 months apart D: 1 week apart

C

What is the main reason for the controlled business law? A: It is designed to prevent people from writing too much insurance on their own life. B: It is meant to stop people from writing any insurance on the life, risks or property of their close friends and relatives. C: The law seeks to prevent people from becoming insurance licensed to mainly write business on certain lives, risks and property that will deprive other producer's from making a living due to unfairness. D: It is designed to assure that anyone who wants to buy insurance from themselves will be able to do so.

C

H has just been diagnosed with a terminal illness and has been approached by a company to sell half of his proceeds to them while he is still alive in exchange for immediate cash payment. This transaction is known as a(an): A: Annuity B: Life Settlement C: Viatical Settlement D: Lottery winner

C A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.

Life Settlement Benefits are: A: always taxed as ordinary income B: received completely tax free C: taxed as ordinary income up to current cash value amounts D: fully taxed as capital gains.

C According to Life Settlement taxation IRS Revenue Ruling 2009-13, any additional profit up to current cash value amount is taxed as income and any payment exceeding cash value is subject to capital gains taxation.

What is the acceptable form(s) of purchase payment frequency during the pay-in period of an annuity? A: Single Premiums B: Flexible Premiums C: Both A and B, above. D: 20 Payments

C An annuitant can fund their annuity with single or deferred payments.

The insured and primary beneficiary have died in the same accident at the same time, however, there is no named contingent beneficiary. Who will receive the proceeds? A: A Charity B: The insured's next closest family member C: The insured's estate and thus subject to probate D: None of the Above

C If the insured and primary beneficiary die in a common disaster with no named contingent to collect proceeds, benefits are paid into the insured's estate and subject to the probate process.

Anytime a policy is purchased with the intent to sell the contract immediately or at a future date is: A: IOLI B: STOLI C: All of the Above D: None of the Above

C Investor Originated Life Insurance (IOLI) also known as Stranger Originated Life Insurance (STOLI) is a practice in which an investor induces an insured to buy a policy with the intention of the insured to sell the policy while they are alive for profit.

Before a life insurance application is signed, it is always advised that the producer: A: ask the insured for more money than the premium quote B: to share the commission with the applicant C: to make sure all questions are answered completely and no mistakes are made D: to call the underwriter and ask if the agent can drop off the policy at their house

C It is always advised that the producer double check that the application is filled out completely, accurately and to the best knowledge of the insured.

L has a policy loan outstanding and is due to receive a dividend. Which of the following actions will likely take place? A: L will not be able to take the dividend because of the outstanding loan. B: L will have to pay tax on the dividend because a loan is outstanding on the policy. C: The loan will not reduce the dividend payment as long as the premium is paid on time. D: L will have to pay more premium because it is illegal to take a dividend when a loan is outstanding.

C Policy loans will not reduce any future dividend payments as long as premiums are paid on time.

All of the following are allowed under Illustration Regulation EXCEPT: A: To show future non-guaranteed dividend option B: To project nonguaranteed benefits C: To allow a producer to combine guaranteed and nonguaranteed benefits into a single column D: To allow an insurer to have a specific format that all illustrations must follow

C The producer must keep separate columns for guaranteed and nonguaranteed elements and they must be labeled clearly and properly.

B owns and is insured by a policy that has one premium but also provides coverage for her spouse. B has: A: Double Indemnity B: Group Health Insurance C: Spouse coverage under an Other Insured Rider D: Long Term Care Rider

C. Because B has one policy, one premium but her spouse as a added insured, it is considered a other insured rider.

Which of the following is not true about Assignment? A: Assignment is the legal transfer of ownership of a life policy from one party to another. B: Insurable Interest is not required to assign a policy. C: When assignment takes place, the policy death benefit and insured will be changed. D: Assignment can be absolute and permanent or used for collateral for a loan.

C. If assignment occurs, it does not change the policy or insured, it simply changes the policy owner.

A Life Income Settlement Option: A: Guarantees that all of the proceeds will be paid out over the beneficiary's life. B: Will stop when the beneficiary dies and all proceeds unpaid goes to a contingent beneficiary C: Will stop when the beneficiary dies and all proceeds unpaid will be retained by the insurer D: All of the Above

C. In a Life Income option, all proceed payments stop when the beneficiary dies and any excess is retained by the insurer. Although not a guaranteed amount, if the beneficiary receives all proceeds and is still alive, they received income until they die.

What action would be required of a producer who fails to reinstate a lapsed producer license within the statutory allowed time period? A: The person is barred from entering the insurance business for 5 years. B: The person is barred from entering the insurance business for life. C: The person would be required to take a certified prelicensing course and state exam for each line or authority sought and then to submit an application with the payment of a $180 license fee. D: The person would be required to take a certified prelicensing course and state exam for each line or authority sought and then to submit an application with the payment of a $360 license fee. .

C. Once a producer license in not reinstated within one year from the date of lapse at the double fee of $360, the person must obtain the license in the same manner as any other unlicensed individual

J applied for a life policy without paying any premium. Three weeks into underwriting, J has been diagnosed with a dread disease. The insurer will take which of the following actions? A: The insurer will provide coverage as long as J pay as premium now B: The insurer will now have to give free coverage C: The insurer will deny coverage D: None of the Above

C. Since no payment was given at application time, there is no consideration for coverage and the insurer will deny the policy because of the change of health of the insured.

The Guaranty Association limits up to _____ of life insurance death benefit. A: $100,000 B: $200,000 C: $300,000 D: $500,000

C. The Guaranty Association limits $300,000 death benefit to be paid on one life regardless of contract actually held.

To sell a Variable Whole Life Policy, a producer must have a: A: Securities License B: A Life insurance producer License C: A and B D: None of the Above

C. To sell a Variable policy, a producer must be licensed in both securities and life insurance.

A prospective insured is seeking a life insurance policy that allows flexible premium payments as well as the potential interest rate that can keep pace or even exceed the inflation rate. Which policy should be recommended? A: Term Life B: Straight Whole Life C: Variable Universal Life D: Variable Whole Life

C. Variable Universal life allows flexible premium payments and in good market conditions, an interest rate that can keep pace or even exceed inflation rates.

Which of the following best describes a Return of Premium rider that is added to a permanent life policy? A: At no matter what age the insured dies, the premiums plus death benefit are paid out. B: The Return of Premium is usually added to the policy at no extra cost. C: It is an increasing term benefit rider to mirror premium payments that pays out in addition to the face amount if an insured dies before a predetermined age. D: All of the Above

C. When added to permanent life insurance, the Return of Premium rider utilizes a Increasing term rider as a benefit to mirror exact premium payments made until a certain age so that if the insured dies within the term rider, proceeds plus premiums are paid.

All of the following premiums for life policies purchased by a business are not tax deductible EXCEPT: A: Key Employee B: Entity Plan C: Cross Purchase Buy/Sell D: Group Life

D

Once a producer has been notified that her license has been suspended by the Director, how many days does she have in which to request a hearing, in writing, from the date the Director mailed the termination notice? A: 10 days B: 15 days C: 20 days D: 30 days

D. A producer has 30 days from the date a suspension, revocation or denial notice is mailed by the Director in which to make a written demand for a hearing on the matter.

Producer K is convicted of a felony on March 1 and the conviction judgment is entered officially on August 1. By which date must K report this felony conviction to the Director? A: K is required to do nothing as this information will be automatically forwarded to the Director by a uniform criminal computer database. B: K is not required to report anything until all of K's appeals rights have been exhausted through all state and/or federal courts. C: No later than March 31. D: No later than August 31.

D. A producer has a duty under law to report any felony conviction to the Director within 30 days of the entry date of the judgment of the felony conviction.

Which of the following components are guaranteed in a fixed annuity? A: Interest Rate B: Income C: Settlement Option D: All of the Above

D. In a fixed annuity, the insurer guarantees income payment, interest rate, and settlement option.