life insurance
A 27-year-old professional has limited income and can only budget $15 per month for life insurance. Which of the following life insurance policies would provide the largest face amount for that amount of premium? a)Term insurance b)Universal life c)Ordinary whole life d)30-pay life insurance
a
All of the following are true of key person insurance EXCEPT a)The plan is funded by permanent insurance only. b)There is no limitation on the number of key employee plans in force at any one time. c)The employer is the owner, payor and beneficiary of the policy. d)The key employee is the insured.
a
In addition to obtaining an insurance producer license, a business entity, in order to transact insurance, must have at least a)One individual licensed insurance producer .b)Certificate stating the kinds of insurance they currently offer. c)Membership in a state or local insurance association. d)None of the above
a
The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the a)Spendthrift clause .b)Benefit protection clause. c)Incontestability clause. d)Beneficiary protection clause.
a
The type of term insurance that provides increasing death benefits as the insured ages is called a)Increasing term. b)Flexible term. c)Interest-sensitive term. d)Age-sensitive term.
a
Which of the following is true about a defined benefit plan? a)High-salaried employees with only a few years until retirement receive the highest contribution. b)Low-salaried employees are excluded from the plan. c)All participating employees are vested immediately following a contribution to the plan. d)Contributions are made in regular fixed amounts.
a
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 - OptionA Bc)Equity Indexed Universal Lifed )Variable Universal Life
a
A resident of another state wishing to transact insurance in Alabama may obtain a nonresident producer license, without examination, upon meeting one of the following EXCEPT a)Provide the Commissioner with a letter of certificate from the resident state indicating the lines of insurance the applicant is qualified to sell .b)Been an executive officer of an insurance company. c)Hold a valid resident producer license in his or her state of residence for the same lines of insurance for which a nonresident license is being sought. d)Have completed a comparable initial educational requirement and/or written examination in the residential state.
b
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a)The premium for individual coverage will be based upon the insured's attained age. b)The insured may choose to convert to term or permanent individual coverage. c)The insured would not need to prove insurability for a conversion policy. d)The insured may convert coverage to an individual policy within 31 days.
b
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? a)The insured may renew the policy for another 10 years at the same premium rate. b)The insured may renew the policy for another 10 years, but at a higher premium rate. c)The insured must provide evidence of insurability to renew the policy. d)The insured may only convert the policy to another term policy.
b
Another name for a substandard risk classification is a)Elevated .b)Rated. c)Controlled. d)Declined.
b
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a)Effect of inflation on income over time .b)Predicted needs of the family after the insured's death. c)Insured's current and future income. d)Insured's annual expenses.
b
In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this? a)The right to raise premiums as a result of court rulings b)The right to determine the wording of a policy c)The right to refute the rulings d)The right to revoke the policy
b
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? a)Company is the owner, and the company pays the premium .b)Executive is the owner, and the executive pays the premium. c)Company is the owner, but the executive pays the premium. d)Board of directors is the owner, and the board of directors pays the premium.
b
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
b
he Life Insurance Solicitation Regulation was promulgated to do the following: a)Protect the insured against unfair trade practices. b)Provide adequate information to consumers regarding relative cost of insurance products. c)Compare coverage of policies during replacement. d)Outline prohibited practices in insurance solicitation.
b
All of the following are TRUE statements regarding the accumulation at interest option EXCEPTa)The interest is credited at a rate specified by the policy. b)The policyholder has the right to withdraw the accumulations at any time .c)The interest is not taxable since it remains inside the insurance policy. d)The annual dividend is retained by the company.
c
An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and a)Pay a lower renewal premium without evidence of insurability. b)Change the type of insurance without evidence of insurability. c)Pay a lower renewal premium by proving insurability. d)Change the type of insurance by proving insurability.
c
How long must producers keep records of insurance transactions under their license? a)7 years b)1 year c)3 years d)5 years
c
Term policies are available as Level, Increasing, and Decreasing. Which policy component fluctuates depending on the policy type? a)Cash value b)Nonforfeiture values c)Death benefit d)Premium
c
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? a)Personal b)Unilateral c)Conditional d)Adhesion
c
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a)Pay back all premiums owed plus interest. b)Receive payments for a fixed amount. c)Purchase a single premium policy for a reduced face amount. d)Purchase a term rider to attach to the policy.
c
When would a 20-pay whole life policy endow? a)After 20 payments b)In 20 years c)When the insured reaches age 100 d)At the insured's age 65
c
Which of the following information will be stated in the consideration clause of a life insurance policy? a)The time period allowed for the payment of premium b)The conditions for insurability c)The amount of premium payment d)The parties to the contract
c
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?a)Reciprocal b)Fraternal c)Stock d)Mutual
c
Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the worker's earnings and retirement age? a)OASDI b)QC c)PIA d)FICA
c
Which statement is NOT true regarding a Straight Life policy? a)It has the lowest annual premium of the three types of Whole Life policies. b)Its premium steadily decreases over time, in response to its growing cash value. c)The face value of the policy is paid to the insured at age 100. d)It usually develops cash value by the end of the third policy year.
c
Which statement regarding insurable risks is NOT correct? a)The insurable risk needs to be statistically predictable. b)An insurable risk must involve a loss that is definite as to cause, time, place and amount. c)Insureds cannot be randomly selected .d)Insurance cannot be mandatory.
c
All of the following are features and requirements of the Living Needs Rider EXCEPTa)It is usually available at no additional charge. b)The remainder of the policy proceeds is payable to the beneficiary at the insured's death. c)It provides funds for medical and nursing home expenses to a terminally ill insured. d)Diagnosis must indicate that death is expected within 3 years.
d
All of the following statements are true regarding group insurance EXCEPT a)The group sponsor is the policyholder. b)Participants in a group insurance plan are issued certificates of insurance. c)Small groups such as labor unions are eligible for group insurance. d)Participants in the policy each receive a policy.
d
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? a)The policy will be voided. b)The insurer will sue the insured for committing fraud. c)Because the insured is currently not a drug user, his policy will not be affected.
d
If another governmental agency takes legal action against a licensee, whose responsibility is it to report the action? a)The Department of Insurance b)The judge c)The person/entity requesting the action d)The licensee
d
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a)The beneficiary's life expectancy.b)Projected interest rates. c)Face amount of the policy. d)The insured's age at death .
d
Which of the following Life Insurance policies would be considered interest sensitive?a)Adjustable lifeb)Whole lifec)Increasing termd)Universal life
d
Which of the following is TRUE about a class designation?a)Beneficiaries must be part of the insured's immediate family. b)It is not allowed. c)It determines the succession of beneficiaries .d)Beneficiaries are not identified by name.
d