Life Insurance Exam Questions
Two business partners own life insurance on each other. If one partner dies, which of the following contracts will allow the other partner to buy 100 percent of the business interest? A: Buy and Sell Agreement B: Key Employee Life policy C: Survivorship Life D: Joint and Several Annuity
A: Buy and Sell Agreement
Which of the following group life requires at least 75 percent of the eligible members to participate? A: Contributory B: Noncontributory C: Participating D: Nonparticipating
A: Contributory
Which of the following amounts must increase in an increasing term policy? A: Death benefit B: Nonforfeiture values C: Interest rate D: Premium
A: Death benefit
Which of the following policy provisions states that the application is part of the policy? A: Entire Contract B: Ownership Clause C: Nonforfeiture option D: Assignment clause
A: Entire Contract
In the event of an insured's death, which of the following provides an income for the family during a designated period of time followed by a lump sum death benefit? A: Family Income rider B: Survivorship Life policy C: Joint Life policy D: Modified Life policy
A: Family Income rider
All of the following policies may be examples of third party ownership EXCEPT: A: Modified Life B: Group Life C: Split-dollar Life D: Key Employee Life
A: Modified Life
A client needs a substantial amount of protection but has limited financial resources. Which of the following insurance policies would BEST meet the client's needs? A: Term B: Endowment C: Whole Life D: Limited-Pay Life
A: Term
A policy owner names his wife as the primary beneficiary of his Universal Life policy on a revocable basis. He also names his three children as his secondary beneficiaries and his estate as his tertiary beneficiary. If the policyowner's wife predeceases him, and then he dies, who will receive the policy proceeds? A: The children B: The policyowner's estate C: The primary beneficiary's estate D: The tertiary beneficiary
A: The children
Which of the following policies is an interest-sensitive form of permanent protection? A: Universal Life B: Limited-Pay Life C: Graded Premium Whole Life D: Modified Whole Life
A: Universal Life
A type of annuity in which the cash values are invested in securities is called: A: Variable B: Deferred C: Fixed D: Joint and survivorship
A: Variable
The Waiver of Premium provision of a life policy allows the insurer to take which of the following actions? A: Waive an insured's premium if the insured becomes totally disabled before a certain age B: Waive an insured's premium if the insured becomes partially disabled for a minimum time C: Increase an insured's coverage at an attained age without imposing a premium increase D: Reduce an insured's premiums if the insured pays them annually instead of monthly
A: Waive an insured's premium if the insured becomes totally disabled before a certain age
In which of the following contracts is the Death benefit called the principal sum? A: Survivorship Annuity B: Accidental Death and Dismemberment (AD&D) C: Decreasing Term D: Joint Life
B: Accidental Death and Dismemberment (AD&D)
Which of the following statements is CORRECT about Group Life conversion privileges? A: Under the COBRA law, a departing employee may elect to remain a member of the Group Life plan for a limited period of time. B: Death during the conversion period is covered even if the departing employee chose not to convert the policy. C: A departing employee must individually pay the premium if the employee elects to be covered during the conversion period. D: If a departing employee elects to convert a life insurance policy, the insurer must offer Term insurance as one of the choices.
B: Death during the conversion period is covered even if the departing employee chose not to convert the policy.
An application for life insurance may question the validity and source of any consumer information developed under the: A: Medical Information Bureau Disclosure Act B: Fair Credit Reporting ACT (Insurance Information and Privacy Protection Act) C: Equal Employment Opportunity Act D: Medicare Act
B: Fair Credit Reporting ACT (Insurance Information and Privacy Protection Act)
An employer can deduct premium payments as an ordinary business expense for which of the following life coverages? A: Buy and Sell Agreements B: Group C: Key Employee D: Joint Life, if the business is named as the beneficiary
B: Group
Which of the following statements about a Renewable Term policy is CORRECT? A: It is renewable at the option of the insurer. B: It is renewable at the option of the insured. C: It is renewable at the option of the insurer, with proof of insurability. D: It is renewable at the option of the insured, with proof of insurability.
B: It is renewable at the option of the insured.
Which of the following provisions in a life policy specifies the manner in which proceeds will be paid to a beneficiary on the death of the insured? A: Nonforfeiture Options B: Settlement Options C: Conditions D: Modes of Payment
B: Settlement Options
An insurance producer takes an application for a life insurance policy but does not collect the initial premium. On delivery of the policy to the proposed insured, the producer must collect the initial premium and which of the following? A: A copy of the MIB report B: The insured's signed statement of continued good health C: A copy of the conditional receipt D: A copy of the temporary insurance agreement that covered the period between the application date and the delivery date
B: The insured's signed statement of continued good health
Which of the following statements is NOT correct about representations? A: They can be a part of the contract. B: They are true in every respect. C: They are assumed to be accurate. D: They influence the insurer's acceptance of the risk.
B: They are true in every respect.
If life insurance policy applicant is classified as a substandard risk, the insurance company will MOST likely: A: issue the policy with riders B: charge an extra premium C: require an annual medical examination D: lower the rate per thousand charged
B: charge an extra premium
Reinstatement of a life insurance policy requires an insured to take all of the following actions EXCEPT: A: provide evidence of insurability B: make collateral assignment to the insurer C: pay back interest on any outstanding policy loan D: pay all past-due premiums
B: make collateral assignment to the insurer
The PRIMARY purpose of an inspection report is to assess an applicant's: A: credit rating B: personal characteristics C: job performance D: health profile
B: personal characteristics
In life insurance, the Free Look provision begins on the: A: effective date of coverage B: policy delivery date C: date of application D: date that the insurer issued the policy
B: policy delivery date
The right to change a beneficiary designation is reserved for the: A: beneficiary B: policyowner C: insurer D: insured
B: policyowner
An applicant's statements on an application are considered to be legal: A: warranties B: representations C: guarantees D: waivers
B: representations
P wants to name her husband as the beneficiary of her life policy. However, she wished to retain all the rights of the ownership. P should have her husband named as the: A: irrevocable beneficiary B: revocable beneficiary C: secondary beneficiary D: tertiary beneficiary
B: revocable beneficiary
If an Adjustable Life policyowner makes an additional premium payments, the policy may be affected in all of the following ways EXCEPT the: A: premium paying period may decrease B: value of the Nonforfeiture Options may decrease C: face amount may increase D: length of coverage may increase
B: value of the Nonforfeiture Options may decrease
A life policy is usually contestable due to material misrepresentation on the application for a period of: A: 30 days B: 6 months C: 2 years D: 5 years
C: 2 years
A payor benefit rider provides which of the following benefits? A: A disability income benefit payable to the payor if the payor becomes disabled B: A permanent waiver of premium should the payor die C: A temporary waiver of premium should the payor die, until the insured reaches a predetermined age D: A double indemnity Death benefit payable to the beneficiary upon the death of the payor
C: A temporaty waiver of premium should the payor die, until the insured reaches a predetermined age
Which of the following features allows an insurance policy to remain in force for a specified number of days beyond the premium due date? A: Reinstatement provision B: Nonforfeiture Option C: Grade Period provision D: Consideration clause
C: Grade Period provision
R has just graduated from law school. R knows that R's future earnings will be much higher than they are now, but wants to purchase a permanent policy now to cover future needs. Which of the following policies would BEST suit R's needs? A: Increasing Term B: Life Paid-Up at 65 C: Modified Whole Life D: Annual Renewable Term
C: Modified Whole Life
Which of the following policy provisions provides the continuation of coverage despite nonpayment of premiums? A: Entire Contract B: Ownership clause C: Nonforfeiture Option D: Insuring clause
C: Nonforfeiture Option
An insured intentionally understates her age on her application for a life policy. At death, the insurer will take which of the following actions? A: Refuse to pay the claim based on material misrepresenatation on the application B: Pay the face amount of the policy of the death occurred after the end of the incontestable period C: Pay a reduced Death benefit based on the insured's actual age D: Pay the stated Death benefit plus the unpaid premium owed to the company as a result of the understated age
C: Pay a reduced Death benefit based on the insured's actual age
When an insured reaches age 65, the cash value of a 20-Pay Endowment at Age 65 policy is equal to which of the following amounts? A: The sum of the premiums paid plus the accumulated dividends B: The sum of the premiums paid only C: The face amount of the policy D: The total of the guaranteed cash value plus interest
C: The face amount of the policy
At which of the following times MUST a life insurance applicant be informed of their rights under the Fair Credit Reporting Act? A: During the initial appointment B: When the insured's application is completed C: When the policy is delivered D: Upon the initial premium receipt
C: When the policy delivered
If a policy contains a Guaranteed Insurability rider, the insured has the right to purchase: A: additional coverage when the insured reaches retirement age B: additional coverage whenever the insured changes jobs C: additional coverage at specified ages D: coverage on the insured's children withing thirty-one days after they are born
C: additional coverage at specified ages
Federal income tax laws generally treat proceeds of life insurance policies as: A: graduated taxes B: deferred taxes C: nontaxable D: tax credits
C: nontaxable
In life insurance, insurable interest must exist at the time the: A: producer delivers a policy B: proposed insured has a medical examination C: producer writes an application on a proposed insured D: beneficiary files a claim
C: producer writes an application on a proposed insured
An insured owns a $10,000 policy with a $4,000 cash value and a 6 percent interest rate. On January 1, the insured borrows $500 and pays one year's interest in advance. During the year, the insured does not repay any part of the loan or interest. If the insured dies on December 31, the beneficiary will be entitled to a MAXIMUM of: A: 3500 B: 6000 C: 9470 D: 9500
D: 9500
Which of the following annuities would BEST suit the needs of a 35-year-old factory worker who is concerned about inflation and wants to establish a retirement plan? A: A Single Premium Deferred Annuity B: A Single Premium Immediate Annuity C: A Level Premium Fixed Annuity D: A Flexible Premium Variable Annuity
D: A Flexible Premium Variable Annuity
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? A: Nonforfeiture B: Endorsement C: Transfer for value D: Assignment
D: Assignment
Which of the following policy provisions states a company's promise to pay benefits? A: Entire Contract B: Ownership clause C: Nonforfeiture Option D: Insuring clause
D: Insuring clause
A contract that promises to pay an income to an insured until his/her death is called: A: Family Income B: Modified Endowment C: Survivorship Life D: Life Annuity
D: Life Annuity
If an insured commits suicide after the Suicide clause in the insured's life insurance policy has expired, the insurer will take which of the following actions? A: Refused to pay the Death benefit or refund any premium B: Refund only the premiums paid C: Refund the premiums paid plus interest D: Pay the Death benefit
D: Pay the Death benefit
A producer takes applications from identical twins who want to buy the same type of policy in the same amount. The insurer issues the policies as applied for, but charges a 25 percent higher premium for one of the policies. The difference in premiums is probably due to which of the following factors? A: Incontestability B: Insurable Interest C: Consideration D: Risk classification
D: Risk classification
A life insurance application is incomplete if it is missing the signature of which of the following? A: A revocable beneficiary B: The president of the insurer C: The proposed insured's primary care physician D: The proposed adult insured
D: The proposed adult insured
Which of the following statements is CORRECT about the Paid-Up Additions in a participating Whole Life Policy? A: They are subject to underwriting approval. B: They do not generate dividends. C: They are considered Term policies. D: They are purchased on an attained age basis.
D: They are purchased on an attained age basis.
A contract that has its basic function the systematic liquidation of accumulated assets through periodic payments is called an: A: indemnity contract B: investment contract C: endowment D: annuity
D: annuity
If an applicant for life insurance submits a completed application to a producer without paying the first premium, coverage becomes effective when the: A: producer accepts the application B: applicant successfully completes the medical examination C: insurer approves the application D: policy is delivered and the premium paid
D: policy is delivered and the premium paid
Under the Social Security Retirement Benefits, all of the following factors will influence how much a retiring individual will receive as a monthly income benefit EXCEPT the individual's: A: age B: PIA C: "fully insured" or "currently insured" status D: sex
D: sex