Life Insurance Exam Question (Texas)
When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What actions will the insurer take?
pay a reduced death benefit based on the insured's actual age
A life insurance applicant discloses his or her medical history in the
policy application
Which of the following would be considered a disadvantage of term insurance?
If the insured dies after the end of the term, there is no death benefits to the beneficiary
Which of the following best describes the purpose of the USA PATRIOT Act with regards to the insurance, what must the agent do?
Inform the insurance company
All the following may have an insurable interest in the insured EXCEPT
Insured's best friend
An individual owns a adjustable life policy. Sometimes in the future he wants to increase the death benefit. Which of the following statement is correct regarding the death benefits increases?
It can be increased by providing evidence of insurability.
Which of the following is true about the free-look period in a life insurance policy?
It commences when the policy is delivered
Which of the following statements is true regarding a universal life policy?
It is issued without a guaranteed interest rate
Which of the following is NOT a requirement of a qualified plan?
It must be temporary. (a qualified plan is permanent)
Which of the following is an example of a limited- pay life policy?
Life paid- up at age 65 (higher premium)
The primary purpose of an investigative consumer report is to assess an applicant's
Lifestyle and habits
If an agent fails to obtain an applicant's signature on the insurance application, the agent must
Return the application to the applicant for a signature.
What is the main responsibility of a company's underwriting unit?
Risk selection and classification( preferred, standard, substandard)
Which type of life insurance policy generates immediate cash value?
Single premium
A person of average physical condition and lifestyles would receive which underwriting classification?
Standard
With personal life insurance, the lumps- sum death benefits is received by the beneficiary
Tax Free
The advantage of qualified plans to employers is
Tax- deductible contributions
Term life insurance is referred to as
Temporary protection
The time period during which an annuitant contributes to an annuity is called
The accumulation period
If a life insurance policy has an irrevocable beneficiary designation,
The beneficiary can only be changed with written permission of the beneficiary.
Which of the following insurance arrangement will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
Third- party ownership
As a field underwriter, an agent is responsible for helping the insurer prevent adverse selection.
True
If an insurer issues a policy with unanswered questions on the application, the insurer has given up the right to use the missing information in underwriting.
True
Purchasing a surivorship life policy is less expensive than purchasing two individual policies.
True
The agent's report includes the agent's personal observation concerning the proposed insured.
True
The death benefit in a Universal Life policy is always annually renewable term...
True
Whole life insurance only endows at age 100.
True
Representation are statements made by the applicant for insurance that are
True to the best of the applicant's knowledge.
An insured receives a monthly summary of his life insurance policy. The cash value this month is significantly lower than it was last month. What type of policy is it?
Variable
Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes
Wavier of premium rider
The renewable provision allows the policyowner to renew the coverage at the expiration date.
Without evidence of insurability
A warranty is an
absolutely true statement
Who is considered the field underwriter
agent
With a traditional whole life policy, the death benefit
remains constant overtime
Statements made by the insured on the application are considered
representation
Underwriting is a process of
risk selection and classification
Which of the following classifications would result in a rated policy?
substandard
Which of the following is true of the fixed- period and fixed amount settlement options?
both guarantee that the principal and interest will be fully paid out (pay everything out )
The 10 % early withdrawal penalty from an IRA can be waived for
catastrophic medical expenses
What type of receipt is given to the applicant who submits the application with the premium payment?
conditional
Which provision of a life insurance policy states that the application is part of the contact?
entire contract
The shorter the premium-paying period of a whole life policy, the ____the total annual cost.
higher
Under what circumstances will the contingent beneficiary receive the death benefit?
if the primary beneficiary dies before the insured
A life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
incontestability clause (2 years)
The medical information bureau (MIB) membership consists of
insurers
What is insurance?
is a contract in which one party (the insurance company) agrees to idemnify (make whole) the insured party against loss, damage or liability arising from an unknown event.
All of the following are true regarding the guaranteed insurability rider EXCEPT
it is available automatically, for no extra premium
An annually renewable term policy
maintains a level premium each year
An insurer is required to obtain a signed disclosures authorization form when it intends to
obtain a consumer report (credit report)
If a life policy does not pass the 7-pay test, that policy
Becomes a modified Endowment Contract
Who receives the death benefit in a life insurance policy?
Beneficiary
Representations are statements made by the applicant that are
Considered true to the best of the applicant's knowledge
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumers report
A key- person insurance policy benefit will pay for which of the following?
Cost of training a replacement
Decreasing term graph, the line A that "\"?
Death benefits
The proceeds paid to the beneficiary of a life insurance policy are called the
Death benefits
In a group life polices, individual certificates are given to
Each insured person
A conditional receipt guarantees that coverage will begin on the date of application
False (after the first payment)
A spouse receives $5,000 a month until the principal and interest on her husband's life insurance policy have been paid out. Which settlement options did this beneficiary choose?
Fixed amount
Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?
Grace period provision
If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?
Inform the insurance company
The person who is covered by the insurance policy is referred to as the
Insured
Which nonprofit organization collects and maintains adverse medical data on insurance applicant ?
Medical Information Bureau
Which of the following is NOT true regarding policy loans?
Money burrowed from the cash value is taxable
What is the requirement for a number of employees in a SIMPLE plan?
No more than 100
Generally, the premium paid for personal life insurance is
Not tax deductible
An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?
On the date of the application
If no receipt is issued at the time application, a statement of good health is usually required at the time of
Policy Delivery
Example: Insured :Jane Smith Agent: Bob Policy : term life policy period: 5 year premium: $300
Policy Summary
Which of the following documents describes specific information about policy provisions and benefits?
Policy Summary
Decreasing term graph In the graphic below, what does line B represent? "---"
Premium
What is the term for the fee a policyowner must pay to the insurance company to maintain coverage ?
Premium
Which of the following is true regarding a joint life policy ?
Premium is based on the average age of the insureds
The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend options has the insured chosen?
Reduction of premium
Which of the following are Social Security benefits?
Retirement, disability, and survivors
What is the annuity accumulation period?
The pay in period
Insurance is the transfer of risk
True
Insurable interest must exist at the time of
application
The primary source of underwriting information is the
application
A beneficiary must have a insurable interest in the insured
False
Upon the insured's death, the beneficiary of a whole life policy will receive the face amount and the cash value
False
The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
The number of credits required to obtain a fully insured status to receives social security benefits is
40
Which law protects consumers against the circulation of inaccurate or obsolete information
Fair Credit Reporting Act
A substandard risk compared to a standard risk would pay
A higher premium
The Medical Information Bureau is
A source of medical information to alert insurers to adverse medical history
If the policy premium has not been submitted with the application, upon policy delivery the agent must obtain____from the insured.
A statement of GOOD health
In a life insurance policy, when must insurable interest exist?
A valid insurable interest may exist between the policyowners and the insured when they policy is insuring any of the following 1. policyowner's own life 2. the life of a family member (a spouse or a close blood relative) 3. The life of a business partner, key employees, or someone who has a financial obligation to the policy owner (such as debtor to a creditor)
Which of the following is considered a field underwriter?
An agent
Whose life expectancy is taken into consideration in an annuity?
Annuitant
Whose life expectancy is taken into consideration in annuity?
Annuitant
A document that provides information for underwriting purposes is the...
Application
Which of the following would be the main source of underwriting information used by the company in the risk selection process?
Application "90% information comes from the application"
When must insurable interest exist in life insurance?
Application or issues date
All of the following persons who do not have an employer-sponsored retirement plan would be eligible to set up contribution to a traditional IRA EXCEPT
Arelene, age 70, a nurse (70 1/2)
Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?
Assignment
All of the following are nonforfeiture options in life insurance policies EXCEPT
Automatic premium loans
When the insured purchase a new home, he wanted to purchase a life insurance policy that would protect his family against losing it should he die before the mortgage was paid. Which of the following polices is best suitable for that need?
Decreasing term
An individual inherited a large sum of money at age 40 and wanted to use it to provide a guaranteed income after his retirement at age 60. Which of the following types of annuities would best meet this need?
Deferred
Which of the following is NOT a standard exclusion in life insurance policies?
Disability
