Life Insurance Exam - Chuck Johnson
A producer was found guilty of a 3rd violation of the Insurance Code. What would be the monetary penalty he will have to pay? 1. $25,000 2. $5,000 3. $10,000 4. $15,000
$10,000
Who is a third-party owner? 1. An irrevocable beneficiary 2. A policyowner who is not the insured 3. An insurer who issues a policy for two people 4. An employee in a group policy
A policyowner who is not the insured
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? 1. As of the first of the month after the policy issue 2. As of the policy issue date 3. As of the application date 4. As of the policy delivery date
As of the application date
A Universal Life insurance policy has two types of interest rates that are called
Guaranteed and Current
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
Guaranteed insurability
A Certification of License Status must include all of the following information EXCEPT (Choose from the following options) 1. Licensee's date of birth 2. Types of insurance for which the licensee is authorized 3. License reference number 4. Number of years a licensee has been in the business
Number of years a licensee has been in the business
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
A licensee violates an insurance regulation. A hearing is held, and the person is found guilty. If this is the person's first offense, the penalty is no more than
$5,000
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? (Choose from the following options) 1. 100% participation of members is required in noncontributory plans. 2. Each member covered receives a policy. 3. Coverage cannot be converted when an individual leaves the group. 4. Premiums are determined by age, occupation, and individual underwriting.
100% participation of members is required in noncontributory plans.
If an insurer cancels an agency contract, it must notify the Commissioner in writing within how many days? a) 10 b) 15 c) 20 d) 30
15 - correct
If an insurer cancels an agency contract, it must notify the Commissioner in writing within how many days? 1. 10 2. 15 3. 20 4. 30
30
Licensees must notify the Department within how many days of any change of address? (Choose from the following options) 1. 10 2. 15 3. 20 4. 30
30
A "certification of license status" report can be run on any currently licensed New Jersey producer, but can only contain information on formal disciplinary actions taken within the past a) 6 months. b) 4 years. c) 7 years. d) 10 years.
4 years.
The company owes premium money to the insured. The insurer gave the funds to the producer to return to the insured. Within how many days must the producer pay the insured? 1. 5 2. 10 3. 14 4. 30
5
How many days does a producer have to remit the collected premiums to the insurer? a. 3 business days b. 5 business days c. 10 calendar days d. 30 calendar days
5 business days
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? a. 7 days b. 10 days c. 3 days d. 5 days
5 days
If a telemarketer wants to make an unsolicited sales call to a potential customer, what is the earliest time the telemarketer can call the prospect's residence? (Choose from the following options) 1. 7 am 2. 8 am 3. 9 am 4. Noon
8am - Permissible calling hours for telemarketers are between 8am and 9pm.
An insurance producer is acting as a broker when he or she negotiates for an insurance contract on behalf of 1. Another insurance producer. 2. A client. 3. A financial institution. 4. The insurer.
A client.
According to the Entire Contract provision, a policy must contain (Choose from the following options) 1. Listing of the insured's former insurer(s) for incontestability provisions. 2. A copy of the original application for insurance. 3. A declarations page with a summary of insureds. 4. Buyer's guide to life insurance.
A copy of the original application for insurance.
Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? a. A privacy notice b. A buyer's guide c. A policy summary d. A notice regarding replacement
A policy summary
The term "illustration" in a life insurance policy refers to a. Pictures accompanying a policy b. charts and graphs c. A presentation of nonguaranteed elements of a policy d. A depiction of policy benefits and guarantees
A presentation of nonguaranteed elements of a policy
Which of the following is a duty of the Commissioner of insurance in this state? a. Amend rules and regulations b. Imprison Insurance Code violators c. Establish insurance rates d. Appoint individual producers
Amend rules and regulations
Periodic payments of accumulated funds best describes a. A universal life policy b. A group policy c. An annuity d. A survivorship life policy
An annuity
Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend? 1. A whole life policy 2. An endowment policy 3. A term policy 4. An annuity
An endowment policy
Who can make a fully deductible contribution to a traditional IRA? 1. A person whose contributions are funded by a return on investment 2. An individual not covered by an employer-sponsored plan who has earned income 3. Anybody: all IRA contributions are fully deductible regardless of income level 4. Someone making contributions to an educational IRA
An individual not covered by an employer-sponsored plan who has earned income
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered 1. A required disclosure. 2. A legal representation of the Association. 3. An unfair trade practice. 4. A misrepresentation.
An unfair trade practice.
Which of the following is the basic source of information used by the company on the risk selection process? a. Agent's report b. Warranty c. Consumer Report d. Application
Application
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT (Choose from the following options) 1. Employee and employer contributions are not counted as income to the employee for income tax purposes. 2. At distribution, all amounts received by the employee are tax free. 3. Employer contributions are tax deductible as ordinary business expense. 4. Funds accumulate on a tax-deferred basis.
At distribution, all amounts received by the employee are tax free.
When must insurable interest exist in a life insurance policy?
At the time of application
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? 1. Reinstatement 2. Reduced paid-up option 3. Automatic premium loan 4. Extended term
Automatic premium loan
The accelerated benefits provision will provide for an early payment of the death benefit when the insured (Choose from the following options) 1. Has earned enough credits. 2. Becomes disabled. 3. Becomes terminally ill. 4. Needs to borrow money.
Becomes terminally ill.
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.
Benefits are paid to the borrower's beneficiary.
How is the Insurance Guaranty Association funded?
By its members - authorized insurers
Which of the following would NOT be considered an exception to the National Do Not Call List? 1. Calls based from outside of the United States 2. Calls for which the consumer has given prior written permission 3. Calls which are not commercial or do not include unsolicited advertisements 4. Calls by or on behalf of tax-exempt nonprofit organizations
Calls based from outside of the United States
In order for an insurer to legally transact insurance, it must obtain which of the following? (Choose from the following options) 1. Certificate of Authority 2. Power of Authority 3. Director's Decree 4. Authorization of Power
Certificate of Authority
The Department can run a report on a specific producer that lists his or her license information, current license status, and the types of insurance that he or she can transact. What is the name of this report?
Certification of license status report
All of the following are duties and responsibilities of producers at the time of application EXCEPT 1. Explain the nature and type of any receipt the producer is giving to the applicant. 2. Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. 3. Check to make sure that there are no unanswered questions on the application. 4. Change any incorrect statement on the application by personally initialing next to the corrected statement.
Change any incorrect statement on the application by personally initialing next to the corrected statement.
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? a. Agent's report b. Any federal report c. Consumer report d. Inspection report
Consumer Report
Which of the following types of insurance would be written by a limited lines agent? a. Surplus lines insurance b. Term life insurance c. Credit Insurance d. Variable Life Insurance
Credit Insurance
Which of the following is true regarding the insurance amount in a credit life policy? (Choose from the following options) 1. Creditor may insure the debtor for an unlimited amount of coverage. 2. Allowable amount of coverage is determined by the State Insurance Commissioner. 3. The amount of coverage can be greater than the amount owed. 4. Creditor can only insure the debtor for the amount owed.
Creditor can only insure the debtor for the amount owed.
The term "fixed" in a fixed annuity refers to all of the following EXCEPT a. Death benefit b. Guaranteed rate of interest c. Equal annuity payments d. Amount and length of payments
Death benefit
Which of the following types of insurance policies is most commonly used in credit life insurance? 1. Equity indexed life 2. Decreasing term 3. Increasing term 4. Whole life
Decreasing term
What does "level" refer to in level term insurance? 1. Face amount 2. Premium 3. Cash value 4. Interest rate
Face amount
Using names or titles that have tendency to misrepresent the true nature of a policy is an example of what illegal practice? (Choose from the following options) 1. Rebating 2. False advertising 3. Defamation 4. Twisting
False advertising
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? (Choose from the following options) 1. Rebating 2. False financial statement 3. Defamation 4. Twisting
False financial statement
What is the advantage of having a qualified annuity? (Choose from the following options) 1. Higher dividends 2. Favorable tax treatment 3. No filing with the IRS 4. Receiving a lump-sum settlement tax free
Favorable tax treatment
All of the following are dividend options EXCEPT a) Fixed-period installments. b) Accumulated at interest c) Reduction of premium. d) Paid-up additions.
Fixed-period installments.
Both Universal Life and Variable Universal Life have a a. Decreasing premium b. Increasing premium c. Flexible premium d. Level fixed premium
Flexible premium
Which is TRUE about the cash surrender nonforfeiture option? (Choose from the following options) 1. The policy remains active for some time after the policyholder opts for cash surrender. 2. The policyholder receives the original cash value of the policy. 3. Funds exceeding the premium paid are taxable as ordinary income. 4. After the cash surrender, the insured is covered for a grace period of 1 month.
Funds exceeding the premium paid are taxable as ordinary income.
What required provision protects against unintentional lapse of the policy? (Choose from the following options) 1. Reinstatement 2. Grace period 3. Assignment 4. Payment of premiums
Grace period
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? 1. Defamation 2. Illegal 3. A legal advertising strategy 4. Unfair Discrimination
Illegal
Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain? 1. Independent Group Contract 2. Single 3. Nonqualified 4. Individual
Individual
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering an a. Inspection report b. Medical Information Bureau report c. Medical examination d. Attending Physician Statement
Inspection Report
Credit Life insurance 1. Has a maximum term for insurance of 20 years. 2. Insures the life of a debtor. 3. Is purchased on an installment basis. 4. Insures the life of a creditor.
Insures the life of a debtor.
All of the following are Nonforfeiture options EXCEPT 1. Reduced paid-up 2. Interest only 3. Cash surrender 4. Extended term
Interest only
Which of the following is not true about a group annuity? a. It can be qualified b. It can be tax deferred c. It can be owned by individual employees d. It can be noncontributory
It can be owned by individual employees
What is the main purpose of the Seven-pay Test? (Choose from the following options) 1. It guarantees interest minimum. 2. It determines if the insurance policy is an MEC. 3. It requires level premium payments for 7 years. 4. It ensures that the policy benefits are paid out in 7 years.
It determines if the insurance policy is an MEC.
Why is an equity indexed annuity considered to be a fixed annuity? a. It is not tied to an index like the S&P 500 b. It has a guaranteed minimum interest rate c. It has modest investment potential d. It has a fixed rate of return
It has a guaranteed minimum interest rate
In which of the following situations is it legal to limit coverage based on marital status? (Choose from the following options) 1. It is never legal to limit coverage based on marital status. 2. Excessive number of divorces, as defined by the Insurance Code 3. Legal separation during the application process 4. Divorce within the last six months of applying for insurance
It is never legal to limit coverage based on marital status.
An applicant who receives a preferred risk classification qualifies for (Choose from the following options) 1. Lower premiums than a person who receives a standard risk. 2. Dividends payable for lack of claims. 3. Higher premiums than a person who receives a sub-standard risk. 4. Higher premiums than a person who receives a standard risk.
Lower premiums than a person who receives a standard risk.
f a settlement option is not chosen by the beneficiary or policyowner, which option will be used?
Lump sum
Which of the following provides funding for the New Jersey Life and Health Guaranty Association? a. Fundraising B. Insolvent insurers c. Member insurers d. Tax payers
Member Insurers
Insurance is regulated a) Only on the level of social medicine, which is on both state and federal levels. b) Mostly on a federal level. c) Mostly on a state level. d) Evenly between the state and federal levels.
Mostly on a state level.
What was created to keep telemarketers from calling consumers who do not wish contacted? 1. Call Control Registry 2. National Do Not Call Registry 3. Confidential No Call Act 4. Freedom of Information Act
National Do Not Call Registry
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called 1. One-year term purchase. 2. Accumulation at interest. 3. Reduction of premiums. 4. Paid-up additions.
Paid-up additions
A participating insurance policy may do which of the following? a. Require 80% participation b. Pay dividends to the policyowner c. Provide group coverage d. Pay dividends to the stockholder
Pay dividends to the policyowner
Which of the following will be included in a policy summary? 1. Comparisons with similar policies 2. Primary and secondary beneficiary designations 3. Premium amounts and surrender values 4. Copies of illustrations and application
Premium amounts and surrender values
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a 1. Warranty. 2. Premium receipt. 3. Statement of good health. 4. Backdated receipt.
Premium receipt.
All of the following are characteristics of group life insurance EXCEPT (Choose from the following options) 1. Certificate holders may convert coverage to an individual policy without evidence of insurability. 2. Premiums are determined by the age, sex and occupation of each individual certificate holder. 3. Amount of coverage is determined according to nondiscriminatory rules. 4. Individuals covered under the policy receive a certificate of insurance.
Premiums are determined by the age, sex and occupation of each individual certificate holder.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? (Choose from the following options) 1. Proof of insurability is not required. 2. Medical exam 3. Her parents' federal income tax receipts 4. Medical exam and parents' medical history
Proof of insurability is not required.
The Federal Fair Credit Reporting Act a. Prevents money laundering b. Regulates consumer reports c. Protects customer privacy d. Regulates telemarketing
Regulates Consumer reports
Which of the following policies would be classified as a traditional level premium contract? a. Variable universal life b. Straight life c. Adjustable life d. Universal life
Straight life
Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy? (Choose from the following options) 1. Payor benefit rider 2. Substitute insured rider 3. Term rider 4. Guaranteed insurability rider
Substitute insured rider
Which of the following statements about a suicide clause in a life insurance policy is true? (Choose from the following options) 1. Suicide is covered as long as the policy is in force. 2. Suicide is excluded as long as the policy is in force. 3. Suicide is excluded for a specific period of years and covered thereafter. 4. Suicide is covered for a specific period of years and excluded thereafter.
Suicide is excluded for a specific period of years and covered thereafter.
Children's riders attached to whole life policies are usually issued as what type of insurance? 1. Adjustable life 2. Whole life 3. Term 4. Variable life
Term
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a. Unfair Trade Practices Law b. The Guaranty Association c. Consumer Privacy Act d. The Fair Credit Reporting Act
The Fair Credit Reporting Act
Which of the following entities established the Do-Not-Call Registry? (Choose from the following options) 1. The Consumer Protection Agency 2. The Federal Trade Commission 3. The Better Business Bureau 4. The NAIC
The Federal Trade Commission
All of the following entities regulate variable life policies EXCEPT a. The insurance department b. The Guaranty Association c. Federal Government d. The SEC
The Guaranty Association
Which of the following would provide an underwriter with information concerning an applicant's health history? a. The inspection report b. The Medical Information Bureau c. A medical examination d. The agent's report
The Medical Information Bureau
A candidate for a producer license passed his licensing exam 6 months ago but has not applied for a license yet. Which of the following is true? (Choose from the following options) 1. The candidate will need to apply for a license immediately. 2. The candidate has waited too long to apply for a license and must retake the examination. 3. The candidate does not need to apply for a license. After passing the exam, all required information is transmitted to the Insurance Department by the testing provider. 4. The candidate has 6 more months to apply for a license.
The candidate has 6 more months to apply for a license.
Investigative Consumer Reports
The customer's associates, friends, and neighbors provide the report's data
The Paul vs. Virginia case was decided in 1869. To what extent does the Supreme Court's decision still apply to insurance today?
The decision has changed. Insurance is considered to be interstate commerce, and is subject to regulation by the federal government.
Which of the following determines the cash value of a variable life policy? a. The policy's guarantees b. The premium mode c. The performance of the policy portfolio d. the company's general account
The performance of the policy portfolio
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? a. The insurer may deny coverage later, because of the information missing on the application. b. The policy will be interpreted as if the insurer waived its right to have an answer on the application. c. The policy will be interpreted as if the insured did not have an answer to the question. d. The policy will be void
The policy will be interpreted as if the insurer waived its right to have an answer on the application.
Which is true about a spouse term rider? 1. The rider is decreasing term insurance. 2. Coverage is allowed up to age 75. 3. The rider is usually level term insurance. 4. Coverage is allowed for an unlimited time.
The rider is usually level term insurance.
Which of the following is NOT true regarding Equity Indexed Annuities? (Choose from the following options) 1. They have guaranteed minimum interest rates. 2. They are less risky than variable annuities. 3. They earn lower interest rates than fixed annuities. 4. The insurance company keeps a percentage of the returns.
They earn lower interest rates than fixed annuities.
What is the purpose of establishing the target premium for a universal life policy? a. To accumulate cash value faster b. To pay up the policy faster c. To cover all policy expenses d. To keep the policy in force
To keep the policy in force
The paid-up addition option uses the dividend (Choose from the following options) 1. To accumulate additional savings for retirement. 2. To purchase a smaller amount of the same type of insurance as the original policy. 3. To purchase a one-year term insurance in the amount of the cash value. 4. To reduce the next year's premium.
To purchase a smaller amount of the same type of insurance as the original policy.
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 B b. Equity Indexed Universal Life c. Variable Universal Life d. Universal Life - Option A
Universal Life - Option A
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? 1. Variable life 2. Decreasing term 3. Straight whole life 4. Universal life
Universal life
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT (Choose from the following options) 1. Upon conversion, the death benefit of the permanent policy will be reduced by 50%. 2. Evidence of insurability is not required. 3. Most term policies contain a convertibility option. 4. Upon conversion, the premium for the permanent policy will be based upon attained age.
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
In a survivorship life policy, when does the insurer pay the death benefit? 1. Upon the last death 2. Upon the first death 3. Half at the first death, and half at the second death 4. If the insured survives to age 100
Upon the last death
Which of the following products requires a securities license? a. Fixed annuity b. Equity Indexed annuity c. Deferred annuity d. Variable annuity
Variable annuity
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called 1. Waiver of cost of insurance. 2. Payor benefit. 3. Waiver of premium. 4. Guaranteed insurability.
Waiver of premium.
If an applicant for a life insurance policy is found to be substandard risk, the insurance company is most likely to a. Require a yearly medical examination b. lower its insurability standards c. refuse to issue the policy d. charge a higher premium
charge a higher premium
What are the penalties for the first, second, and any subsequent violation of the New Jersey Fraud Prevention Act, respectively? a. $1,000; $5,000; $10,000 b. $10,000; $15,000; $20,000 c. $25,000; $50,000; $100,000 d. $5,000; $10,000; $15,000
d. $5,000; $10,000; $15,000
The death benefit under the Universal Life Option B a. Increases for the first few years of the policy, and then levels off b. remains level c. gradually increases each year by the amount that the cash value increases. d. decreases by the amount that the cash value increases
gradually increases each year by the amount that the cash value increases.
If an agent fails to obtain an applicant's signature on the application, the agent must a. sign the application, stating it was by the agent b. send the application to the insurer with a note explaining the absence of signature c. return the application to the applicant for a signature d. sign the application for the applicant
return the application to the applicant for a signature
Equity indexed annuities
seek higher returns
