Life Insurance Exam

Events or conditions that increase the chances of an insured loss occurring are referred to as

1. Exposures. 2. Risks. 3. Perils. - 4. Hazards.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

- 1. Guaranteed insurability rider. 2. Paid-up additions option. 3. Cost of living provision. 4. Nonforfeiture option.

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

- 1. Indemnity 2. Stop-loss 3. Limited Benefits 4. Reasonable Coverage Expectations

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?

- 1. Limited-pay Life 2. Variable Life 3. Adjustable Life 4. Graded Premium Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.

An individual works for a manufacturing company. If he decides to fund a retirement plan for himself, for which of the following plans could he qualify?

- a) Individual Retirement Account b) 403(b) TSA c) HR-10 d) Simplified Employee Pension Plan All individuals with earned income may fund an IRA. HR-10 is designed for self-employed individuals; Simplified Employee Pension Plan is an employer funded retirement plan for employees; and 403(b) is a special tax-favored retirement plan available to employees of certain specified nonprofit organizations.

Adverse selection is a concept best described as

- a) Risks with higher probability of loss seeking insurance more often than other risks. b) Underwriters slanting the odds in favor of the company. c) Poor choices of applicants to be covered. d) Only offering coverage to good risks. Adverse selection means that there are more risks with higher probability of loss seeking to purchase and maintain insurance than the risks who present lower probability. Underwriters must guard against this.

All of the following are insurable events as defined in the Insurance Code EXCEPT

1. An insured goes to the hospital for a broken arm. 2. An insured is sued for libel and slander. - 3. An insured loses a large sum in a poker game. 4. A guest trips and breaks his leg in the insured's house.

All of the following statements are TRUE concerning Debtor Groups EXCEPT

1. An insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer. - 2. The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. 3. The debtors eligible for insurance under the policy shall all be the debtors of the creditor(s). 4. The premium for the policy shall be paid either from the creditor's funds, or from charges collected from the insured debtors, or from both. The amount of insurance of the life of any debtor may at no time exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor.

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?

1. Any federal report - 2. Consumer report 3. Inspection report 4. Agent's report

Written binders provide insurance before the policy is actually issued. The time period between the issuance of the binder and the policy's effective date is called

1. Binding period. 2. Interim term. - 3. Temporary term. 4. Grace period. The "temporary term" is the protection period offered by binding receipts. During this time period, an insurance company is liable for the maximum amount guaranteed under the binding receipt/temporary insurance agreemen

Which of the following would be the beneficiary in credit life insurance?

1. Borrower - 2. Creditor 3. Insured 4. Company The creditor is the owner and the beneficiary of the policy.

To which of the following situations does the Replacement Regulation apply?

1. Credit life insurance 2. Converting an existing policy with the same insurer - 3. Whole life insurance 4. Group annuities

A Return of Premium term life policy is written as what type of term coverage?

1. Decreasing 2. Renewable 3. Level - 4. Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

Representations in insurance contracts qualify as

1. Facts. - 2. Implied warranties. 3. Expressed warranties. 4. Misrepresentations.

All other factors being equal, which of the following types of annuities will generally provide the highest monthly income?

1. Installment Refund 2. Life with a 10-year Period Certain - 3. Straight Life 4. Joint and Survivor Pure or straight life annuity settlement option will only pay for as long as the annuitant lives; therefore, it has the potential to provide the highest monthly income. Any time a "period certain" option is included, it will reduce the monthly payout amount because, even if the annuitant dies, the company must continue to pay benefits for the period certain.

Which of the following includes information regarding a person's credit, character, reputation, and habits?

1. Insurability Report 2. Agent's Report - 3. Consumer Report 4. Consumer History

The Medical Information Bureau (MIB) was created to protect

1. Insureds from unreasonable underwriting requirements by the insurance companies. 2. Medical examiners that perform insurance physical examinations. - 3. Insurance companies from adverse selection by high risk persons. 4. Insurance departments from lawsuits by policyowners.

Which of the following factors determines the amount of each installment paid in a Life Income Option arrangement?

1. Recipient's health and death benefits 2. Projected life insurance and health insurance - 3. Recipient's life expectancy and amount of principal 4. Projected income

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

1. Life annuity with period certain 2. Increasing term - 3. Limited pay whole life 4. Interest-sensitive whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

After a cease and desist order is final, if the Commissioner finds that the person has continued to willfully violate the insurance code, what penalty may be applicable in addition to initial penalties?

1. Minimum $10,000 2. Maximum $5,000 3. Minimum $25,000 4. Maximum $55,000

Which of the following is true regarding a single life settlement option?

1. Payments continue until the entire principal is exhausted. 2. Proceeds are paid out in a lump sum. 3. It provides income for a specified period of time. - 4. It provides income the beneficiary cannot outlive. The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop

What limits the amount that a policyowner may borrow from a whole life insurance policy?

1. Premiums paid 2. Amount stated in the policy 3. Face amount - To which of the following situations does the Replacement Regulation apply?4. Cash value

In which of the following instances would the premium be tax deductible?

1. Premiums paid by an employer on the life of a key person - 2. Premiums paid by an employer on a $30,000 group term life insurance plan for employees 3. Premiums paid by an individual on his/her own life insurance 4. Premiums paid by a mother on her son's policy As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.

Which of the following individuals must have insurable interest in the insured?

1. Producer - 2. Policyowner 3. Beneficiary 4. Actuary

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

1. State records 2. Medical records - 3. Application 4. Interviews

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called

1. Supplemental add on. 2. Cost of living. - 3. Guaranteed insurability. 4. Waiver of cost of insurance.

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT

1. Tax delinquencies. 2. Late payments. 3. Failure to pay off a loan. - 4. Disputes regarding consumer report information.

What kind of policy does NOT typically require proof of insurability?

1. Term insurance 2. Individual insurance - 3. Group insurance 4. Variable universal life

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to

1. The insurance company. - 2. The insured's estate. 3. The insured's firstborn child. 4. Both children who share equally on a per-capita basis.

All of the following are true regarding the guaranteed insurability rider EXCEPT

1. The insured may purchase additional coverage at the attained age. 2. The insured may purchase additional insurance up to the amount specified in the base policy. 3. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. - 4. This rider is available to all insureds with no additional premium.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

1. Universal Life - Option B 2. Equity Indexed Universal Life 3. Variable Universal Life - 4. Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement option should he consider?

1. Variable annuity - 2. Annuity certain 3. Fixed annuity 4. Refund Life Annuity Certain option allows the annuitant to select the time period or the amount for the benefits. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

1. Variable life 2. Universal life 3. Whole life - 4. Decreasing term

Which of the following must an agent receive in order to sell variable life insurance policies?

1. Variable products license 2. Certificate of authority 3. SEC registration - 4. FINRA registration Agents selling variable life products must be registered with FINRA, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

1. Warranty - 2. Aleatory 3. Adhesion 4. Subrogation

During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal?

a) Both interest and principal are taxed; no other penalties are imposed. b) Neither interest nor principal is taxed, but penalties may be imposed. - c) Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 ½. d) Nontaxable principal may be withdrawn first, but the 10% penalty will be imposed if under age 59 ½. When money is withdrawn from the annuity during the accumulation phase, the amounts are taxed on a last in first out basis (LIFO). Therefore, all withdrawals will be taxable until the owner's cost basis is reached.

The causes of loss insured against in an insurance policy are known as

**1. Perils 2. Losses 3. Risks 4. Hazards

What is the term for a sales campaign conducted through the mail?

1. Direct-mail 2. Mass marketing 3. Advertising - 4. Direct-response

When an annuity is written, whose life expectancy is taken into account?

- 1. Annuitant 2. Beneficiary 3. Life expectancy is not a factor when writing an annuity. 4. Owner

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?

- 1. Conditional 2. Contingent 3. Aleatory 4. Unilateral

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

- 1. Decreasing term 2. Variable life 3. Universal life 4. Whole life

The insurance solicitor is only found in which field of insurance?

- 1. Fire and Casualty 2. Mortgage Guaranty 3. Life & Health 4. Disability

Which of the following is an example of a limited-pay life policy?

- 1. Life Paid-up at Age 65 2. Renewable Term to Age 70 3. Level Term Life 4. Straight Life

Which of the following would provide an underwriter with information concerning an applicant's health history?

1. The inspection report - 2. The Medical Information Bureau 3. A medical examination 4. The agent's report

When an insured receives a written binder

1. The insured will be guaranteed premium rates for a specific amount of time. 2. The insured will not have to submit an application to the insurer. - 3. The insured's coverage will be effective immediately. 4. The insured will be locked into a contract for at least 2 years.

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

1. Single life 2. Fixed-amount - 3. Life income with period certain 4. Joint and survivor

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

1. Smaller. 2. Older. 3. More active. - 4. Larger.

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called

1. Revocable designation. 2. Irrevocable designation. 3. Stirpes designation. - 4. Class designation.

At age 30, a man wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?

**1. Adjustable Life 2. Single Premium Whole Life 3. Interest-sensitive Whole Life 4. Decreasing Term

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of

**1. Rebating. 2. Coercion. 3. Twisting. 4. Controlled business.

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

**1. The insured's contingent beneficiary 2. The insurance company 3. The insured's estate 4. The primary beneficiary's estate

All of the following statements are correct regarding Credit Life Insurance EXCEPT

- 1. Benefits are paid to the borrower's beneficiary. 2. The amount of insurance permissible is limited per borrower. 3. Premiums are usually paid by the borrower. 4. Benefits are paid to the creditor.

An agent has how many days in which to receive an appointment after the issuance of an insurance contract?

1. 14 days 2. 21 days - 3. 30 days 4. 10 days

In which of the following examples would a contract between an insurer and prospective insured be legal?

1. The applicant is intoxicated at the time of application. 2. The applicant is a 12-year-old student. 3. The applicant is under the influence of medication at the time of application. - 4. The applicant has a prior felony conviction.

Which of the following is NOT a characteristic of pure risk?

1. The loss must be measurable in dollars. 2. The loss exposure must be large. - 3. The loss must be catastrophic. 4. The loss must be due to chance.

An Adjustable Life policyowner can change which of the following policy features?

1. The mortality expense. 2. The investment account. 3. The insured - 4. The coverage period.

In a group life insurance policy, the employer may select all of the following EXCEPT

1. The premium payor. - 2. The beneficiary. 3. The type of insurance. 4. The amount of insurance.

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an

- 1. Adjustable Life. 2. Interest-sensitive Whole Life. 3. Credit Life. 4. Annual Renewable Term.

Any insurer who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation

- 1. Be fined a sum of $10,000. 2. Be fined a sum no less than $30,000 and no more than $300,000. 3. Have his/her license suspended. 4. Be fined a sum of $1,000.

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

- 1. Charge a higher premium. 2. Require a yearly medical examination. 3. Lower its insurability standards. 4. Refuse to issue the policy.

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

- 1. Insuring clause 2. Entire contract clause 3. Beneficiary clause 4. Consideration clause

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

- 1. Issue the policy anyway and pay the face value to the beneficiary. 2. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. 3. Return the premium to Y's estate, since it has no obligation to pay the death claim. 4. Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

- 1. Joint Life Policy 2. Survivorship Life Policy 3. Second-to-Die 4. Family Income Policy

Which Universal Life option has a gradually increasing cash value and a level death benefit?

- 1. Option A 2. Juvenile life 3. Term insurance 4. Option B

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?

- 1. Pay a reduced death benefit 2. Pay the full death benefit 3. Pay nothing; there was a misrepresentation on the application 4. Pay the full death benefit and refund excess premium 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.

Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least

- 1. Semiannually 2. Monthly 3. Quarterly 4. Annually

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?

- 1. The annuitant must be a natural person. 2. A corporation can be an annuitant as long as it is also the owner. 3. A corporation can be an annuitant as long as the beneficiary is a natural person. 4. The contract can be issued without an annuitant.

Which of the following best describes a "non-medical application?"

- 1. The medical portion of an application that asks for medical information but does not require a medical exam 2. An application for a policy that only covers emergency care, not standard treatment for pre-existing or minor conditions. 3. A screening application that is issued before the medical application, assessing demographic and lifestyle factors. 4. An application that does not ask for a person's medical history or require a medical exam

Which of the following statements regarding policy dividends is true?

- 1. They are available in any life insurance policy. 2. They are guaranteed. 3. They are a refund of unearned premiums. 4. They are automatically paid out to policyholders.

All of the following topics may be included in the continuing education requirement for long-term care insurance EXCEPT

-1. Sales techniques and overcoming client objectives in the purchase of long-term care insurance. 2. Available long-term care services and facilities. 3. Alternatives to the purchase of private long-term care insurance. 4. The effect of inflation in eroding the value of benefits and the importance of inflation protection.

M is the owner of a $100,000 life policy with a triple indemnity rider for accidental death. When M is killed in a car accident, it is determined that the accident was his fault. The triple indemnity rider in M's policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

1. $0 2. $50,000 (50% of the policy value) - 3. $100,000 4. $300,000 (triple the amount of policy value)

The notice to senior consumers regarding their right to cancel a policy must be printed on the cover or policy jacket in at least what type of print?

1. 12-point standard print - 2. 12-point bold print 3. 14-point standard print 4. 14-point bold print

The DOI contacts Agent Bob about a claim that was settled two months ago. Within what timeframe must Bob issue a complete response?

1. 15 days 2. 21 days -3. 31 days 4. 90 days

If a person is disabled at age 27 and meets Social Security's definition of total disability, how many work credits must he/she have earned to receive benefits?

1. 20 credits 2. 6 credits 3. 40 credits - 4. 12 credits

Every individual life insurance policy must provide for a free-look provision that lasts for at least

1. 30 days. 2. 60 days. 3. 90 days. -4. 10 days.

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?

1. 401(k) Plan 2. Section 457 Deferred Compensation Plan - 3. Section 1035 Policy Exchange 4. Modified Endowment Exchange

The legal definition of "person" would NOT include which of the following?

1. A corporation - 2. A family 3. An individual human being 4. A business entity

Which of the following entities may NOT be an insurer?

1. A natural person -2. The Commissioner 3. A business trust 4. A limited liability company

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application?

1. Acknowledge the missed questions with a signature and continue the policy issue process 2. Proceed with issuing a policy - 3. Return to the applicant for completion 4. Answer the missed questions for the applicant

Which is TRUE about the cash surrender nonforfeiture option?

1. After the cash surrender, the insured is covered for a grace period of 1 month. 2. The policy remains active for some time after the policyholder opts for cash surrender. 3. The policyholder receives the original cash value of the policy. -4. Funds exceeding the premium paid are taxable as ordinary income.

If a loss occurs, insurance policies pay the proceeds to

1. Agent - 2. Beneficiary 3. Applicant 4. Insurer

An insurance partnership can continue with new partners as long as

1. All partners making up the new partnership petition the Commissioner. 2. The partnership files notice with the Department within 30 days and the change is approved. - 3. The new partner has applied with the Department. 4. The new partner was named by any departing partner.

Which of the following would be considered a nonmedical insurance application?

1. An application that does not ask any questions about the applicant's medical history 2. An application submitted with the Agent's Report 3. Any application for life insurance - 4. An application on which the medical information is completed by the applicant and the agent only

Who is eligible to purchase an IRA?

1. Anyone who has an established 401(k) 2. Only people who participate in their company retirement plan - 3. Anyone under the age of 70 1/2 who has earned income 4. Anyone who does not participate in their company retirement plan

An individual borrowed money at the bank to send his daughter to college. Instead of purchasing Credit Life insurance, he used an existing life insurance policy to secure the debt. This would be called a/an

1. Assignment of Ownership. - 2. Collateral Assignment. 3. Temporary Assignment. 4. Change of Beneficiary.

An insurance company and its agents must notify all applicants and policyholders of information-gathering processes utilized for written application transactions

1. At the time of delivery of the policy when personal information is only collected from the applicant, an insured under the policy, or public records. - 2. At the time of application for the policy when information is collected from sources other than the applicant, persons under the policy, or public records. 3. Both of these answers are correct. 4. Neither of these answers is correct.

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

1. Because the annuitization period has not started, the owner's estate will receive the money paid into the annuity. 2. The insurance company will retain the cash value and pay back the premiums to the owner's estate. 3. The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. - 4. The beneficiary will receive the greater of the money paid into the annuity or the cash value.

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

1. Both principal and interest 2. Neither principal nor interest 3. Principal only -4. Interest only

Which of the following are NOT fundable by annuities?

1. Cash accumulation for any reason 2. A person's retirement 3. Estate liquidation -4. Death benefits

What type of annuity activity will cause immediate taxation of the interest earned?

1. Changing a settlement option 2. Failing to make a planned contribution - 3. Surrendering the annuity for cash 4. Using the contract as collateral for a loan

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

1. Decreased death benefit at each renewal. - 2. Required a premium increase each renewal. 3. Built cash values. 4. Required proof of insurability every year.

Which of the following policy components contains the company's promise to pay?

1. Entire contract provision - 2. Insuring clause 3. Premium mode 4. Consideration clause

All of the following are the responsibilities of every long-term care insurer in California EXCEPT

1. Establish marketing procedures to assure excessive insurance is not sold or issued. 2. Submit to the Commissioner a list of all agents authorized to solicit individual consumers for the sale of long-term care insurance. - 3. Provide enough business to solicit long-term care insurance. 4. Establish marketing procedures to assure that any comparison of policies will be fair and accurate.

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?

1. Fill in the blanks to the best of the insurer's knowledge - 2. Return the application to the applicant for completion 3. Issue a policy anyway since the application has been submitted 4. Ask the producer who solicited the policy to complete and resign the application

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

1. Fixed period 2. Life income period certain 3. Extended term **4. Fixed amount

The following are features of the Indexed Universal Life EXCEPT

1. Flexible premium. 2. Adjustable death benefit. 3. Policy's cash value is dependent on the performance of the equity index. - 4. Sale of this product requires a securities license.

A dependent who is covered under a group medical policy files multiple claims for a single loss, thereby committing fraud. To what extent can the insurer deny benefits?

1. For all persons in the same employee classification as the employee sponsor of the dependent - 2. Only for that person who committed the fraud 3. For the family of the person who committed the fraud 4. For all insureds under that group policy

All of the following are true regarding a qualified annuity EXCEPT

1. Funds accumulate on a tax-deferred basis. 2. Employer contributions are not counted as income to the employee while the plan is in force. - 3. At distribution, all amounts received by the employee are tax free. 4. Employer contributions are tax deductible as ordinary business expense.

Who is responsible for equitably evaluating insurable risks and selecting and distributing to the insurer those that are profitable to the insurer?

1. Governor - 2. Underwriter 3. Insured 4. Insurance Commissioner

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

1. Has a constitution and by-laws. 2. Holds annual meetings. 3. Is contributory. - 4. Has at least 50 members.

How does an insured typically decide which settlement option to choose for his/her beneficiary?

1. He/she usually decides based on how many beneficiaries he/she has chosen to receive benefits. 2. He/she typically decides based on the advice of the insurer. 3. He/she decides based on the amount of the death benefit. - 4. He/she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income.

An agent is a legal person who acts on behalf of

1. Himself/herself. - 2. The principal. 3. The applicant. 4. The beneficiary.

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

1. Implied warranty. - 2. Utmost good faith. 3. Reasonable expectations. 4. A warranty.

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount

1. In lesser amounts for the remaining policy term of age 100. 2. Equal to the cash value surrendered from the policy. 3. The same as the original policy minus the cash value. - 4. Equal to the original policy for as long a period of time that the cash values will purchase.

Which two terms are associated directly with the way an annuity is funded?

1. Increasing or decreasing 2. Immediate or deferred 3. Renewable or convertible - 4. Single payment or periodic payments

Which of the following types of insurance policies is most commonly used in credit life insurance?

1. Increasing term 2. Whole life 3. Equity indexed life - 4. Decreasing term

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

1. Inflation Rider - 2. Cost of Living Rider 3. Value Adjustment Rider 4. Return of Premium Rider

During a pre-selection interview, an agent is allowed to do all of the following EXCEPT

1. Inquire about specific details of the applicant's health history. 2. Terminate the interview and reject the applicant. - 3. Ask questions that are not on the application but that are important for underwriting. 4. Provide the applicants with negative information regarding their risk.

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

1. Interviews 2. State records 3. Medical records - 4. Application

Which of the following statements about the reinstatement provision is true?

1. It guarantees the reinstatement of a policy that has been surrendered for cash. - 2. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. 3. It permits reinstatement within 10 years after a policy has lapsed. 4. It provides for reinstatement of a policy regardless of the insured's health.

Which statement is NOT true regarding a Straight Life policy?

1. It has the lowest annual premium of the three types of Whole Life policies. -2. Its premium steadily decreases over time, in response to its growing cash value. 3. The face value of the policy is paid to the insured at age 100. 4. It usually develops cash value by the end of the third policy year.

Which of the following is NOT true regarding the accumulation period of an annuity?

1. It is also known as the pay-in period. - 2. It would not occur in a deferred annuity. 3. It is the period during which the annuity payments earn interest. 4. It is the period over which the annuitant makes payments into an annuity.

Which of the following is TRUE regarding the accumulation period of an annuity?

1. It is also referred to as the annuity period. 2. It is a period of time during which the beneficiary receives income 3. It is limited to 10 years. - 4. It is a period during which the payments into the annuity grow tax deferred.

What is an advantage of the Temporary Insuring Agreement to the applicant?

1. It provides immediate coverage even if no money was paid with the application. 2. It guarantees that the insurance company will issue the policy as applied for. - 3. It gives the applicant immediate coverage. 4. It locks in the rate quoted by the agent. A Temporary Insuring Agreement helps bridge the gap between the applicant's request for an immediate coverage and the insurer's need for thorough underwriting. This agreement requires payment of the first premium at the time of application, but does not guarantee that a policy will be issued.

An insurer received a claim on May 1st. On May 31th, the claim was approved in its entity. By what date can the claimant expect the payment?

1. June 10th - 2. June 30th 3. July 10th 4. June 3rd

K purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?

1. Level - 2. Immediate 3. Whole life 4. Deferred

Employer contributions made to a qualified plan

1. May discriminate in favor of highly paid employees. 2. Are after-tax contributions. 3. Are taxed annually as salary. - 4. Are subject to vesting requirements.

A life insurance application is asking if the applicant has applied for any other life insurance within the past 6 months. The applicant states that he applied for $15,000 coverage from XYZ Co., but fails to mention the $150,000 coverage with DEF Co. The applicant is guilty of

1. Misrepresentation. 2. Representation. 3. Warranty. - 4. Concealment. According to CIC 380, neglecting to communicate that which a party knows and ought to communicate is concealment.

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

1. Mortality rate 2. Risk exposure 3. Morbidity - 4. Life expectancy

All of the following actions by a person could be described as risk avoidance EXCEPT

1. Never flying in an airplane. 2. Taking a flu shot each year. **3. Investing in the stock market. 4. Refusing to scuba dive.

The violation of a material warranty or other material provision of a policy allows

1. Only the insured to rescind. 2. Only the insurer to rescind. - 3. Both the insurer and the insured to rescind. 4. Neither the insurer nor the insured to rescind.

Which of the following best describes fixed-period settlement option?

1. Only the principal amount will be paid out within a specified period of time. 2. The death benefit must be paid out in a lump sum within a certain time period. 3. Income is guaranteed for the life of the beneficiary. - 4. Both the principal and interest will be liquidated over a selected period of time.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

1. Pay the policy proceeds up to an established limit. 2. Not pay the policy proceeds under any circumstances. 3. Automatically pay the policy proceeds. - 4. Pay the policy proceeds only if it would have issued the policy.

An insured and his spouse own a home. When the insured dies, the insurer pays the remaining balance on his home loan. Which type of life insurance provision/rider does this describe?

1. Payor Benefit 2. Accidental Death and Dismemberment 3. Family Term - 4. Mortgage Redemption

L's insurer has made all of the decisions regarding the provisions included in her policy. L finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?

1. Personal - 2. Adhesion 3. Unilateral 4. Conditional

Which of the following is NOT true regarding policy loans?

1. Policy loans can be repaid at death. 2. An insurer can charge interest on outstanding policy loans. 3. A policy loan may be repaid after the policy is surrendered. - 4. Money borrowed from the cash value is taxable.

Which of the following terms is defined by the California Insurance Code as unassigned funds that must be reported on a stock insurer's annual statement?

1. Premiums - 2. Earned surplus 3. Dividends 4. Earned income

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

1. Revocation of license - 2. $2,500 3. $1,000 4. $100 per violation

All of the following must be specified in an insurance policy EXCEPT

1. The risks insured against 2. The period during which the insurance is in force - 3. The financial rating of the insurer 4. The parties between whom the contract is made

The paid-up addition option uses the dividend

1. To purchase a one-year term insurance in the amount of the cash value. 2. To reduce the next year's premium. 3. To accumulate additional savings for retirement. - 4. To purchase a smaller amount of the same type of insurance as the original policy.

In forming an insurance contract, when does acceptance usually occur?

1. When an insured submits an application - 2. When an insurer approves a prepaid application 3. When an insurer delivers the policy 4. When an insurer receives an application

If the DOI contacts an agent about a claim, the agent must respond within ___ days, and if a claimant inquires about a claim, the response must be issued within ___ days.

21, 15

Which of the following is true regarding a policy with a face value less than $10,000?

a) If it's returned during the free look period, the contract will be cancelled, but the insurer will retain the premium paid. b) The policy can be cancelled with full refund of premium at any time. - c) If it's returned during the free look period, the agreement will be void. d) An insured cannot return the policy. If the owner returns the policy within the free-look period, the agreement will be void from its beginning. All premiums and any policy fees that have already been paid must be refunded to the owner.

Martha claims to have injured her back at work. She tells the doctor that she cannot bend, lift, or even sit comfortably without great pain. Based on Martha's statements, the doctor certifies her disability and she begins to receive disability benefits from the insurer. If it can be shown that Martha did not suffer the injury she has claimed or that she is not suffering the effects she is claiming, she will be charged with

a) Unfair claims practices. - b) Insurance fraud. c) Medical misrepresentation. d) Financial abuse of an insurer. This is an example of a person seeking an unlawful gain at the expense of an insurer, a fraud. (CIC 1871.4(a)(1))

Concerning AIDS and HIV risks, all of the following acts may subject an insurer to liability claims or fines EXCEPT

a. Disclosing test results to third party without applicant's consent. b. Requiring applicant to pay for HIV test in order to be underwritten. **c. Declining applicant for a positive HIV test result. d. Not providing counseling contacts and educational information about HIV and AIDS.