Life Insurance Final Exam

On June 1, 2000, a client purchased a whole life policy with a face amount of $100,000 and an annual premium of $1,000. If the client died on July 4, 2015 without paying the annual premium due on June 1, how much will the insurer pay to the beneficiary?

$100,000

On employer group life, premiums paid by an employer for that portion of an employee's group life coverage in excess of $_________ are taxable as income to the employee.

$50,000

All life insurance policies and annuities offered for sale to individuals under age 60 in California shall provide a free look period of not less than ____ days nor more than ____ days.

10 / 30 days

On a noncontributory employer group life contract, what percentage of the eligible employees must enroll?

100%

All of the following criteria must be satisfied before a participant is eligible to receive social security disability income benefits EXCEPT:

12 month waiting period

A licensed life agent may transmit an application for insurance to an insurer for which the life agent is not appointed. If the insurer issues the policy, the insurer is considered to have authorized the agent to act on its behalf, and they must forward a notice of appointment to the Commissioner within ____ days after receiving the application.

14

On employer group life, dependent children may be covered from birth until age:

26

All life insurance policies and annuities offered for sale to a senior citizen in California shall provide a free look period of ____ days after the receipt of the policy, during which time the applicant may return the contract for a refund of all premiums paid.

30

Under social security, to be fully insured for full retirement, disability, death and survivor's benefits, an individual must have worked and contributed to social security for at least ____ calendar quarters.

40

Every life and disability agent must maintain all records at their principal place of business for a minimum of ____ years, readily available and open to the inspection of the Commissioner at all times.

5

The spouse of a currently insured social security participant who died is eligible to receive monthly life income benefits starting as early as age:

60

A licensee who has applied to renew a license is entitled to continue operating under his or her existing license for ____ days after its specified expiration date, or until notified by the department that the renewal application is deficient, whichever comes first, as long as the applicant has satisfied all the license renewal requirements.

60 days

All of the following are true regarding convertible term insurance EXCEPT:

A convertible term policy may be converted to any type of life insurance

All are true about representations EXCEPT:

A representation may be altered or withdrawn before or after the insurance is effected

The legal doctrine that states that any ambiguity in an insurance contract will be construed in favor of the insured is known as the Doctrine of:

Adhesion

At the time of application, life settlement brokers must disclose all of the following EXCEPT:

Affiliations between the broker and the person making an offer on a proposed life settlement contract

Which of the following is true regarding the accelerated benefits rider:

Amounts paid out will reduce the future death benefit payable to a beneficiary

When an applicant reveals conditions that require more information the underwriter will order:

An attending physician's statement

When ordering an attending physician's statement, the underwriter must include:

An authorization form signed by the applicant

The individual upon whose life an annuity is based on is known as the:

Annuitant

When must the beneficiary of a life insurance policy have an insurable interest in the insured:

At no time

Insurable interest must exist:

At the time of application

Life insurance applications must be signed by all of the following EXCEPT the:

Beneficiary

If a corporation enters into an agreement with a shareholder to purchase their shares if they die, they have entered into a:

Buy/sell agreement

A 30 year old applicant wants to buy a $100,000 ordinary life insurance policy with the lowest possible initial premium outlay. Which of the following should the agent recommend?

C Modified whole life

Licensees must print their license number on all of the following EXCEPT:

Correspondence

A comprehensive long-term care rider added to a life insurance policy will provide coverage for:

Custodial care in a nursing home and home based care

All of the following are true regarding key person life insurance EXCEPT:

Death benefits are taxable

When a new life insurance policy is classified as a modified endowment contract (MEC), the policyholder may be affected in all of the following ways EXCEPT:

Death benefits are taxable

Which type of term life insurance is usually used as mortgage redemption life insurance?

Decreasing

The process by which a mutual insurer becomes a stock insurance company is known as:

Demutualization

A non-taxable refund of premium that may be returned to a policyowner by an insurance company under a participating life insurance policy is known as a:

Dividend

All of the following are components of a life insurance policy premium EXCEPT:

Dividends

All of the following are true regarding participating life insurance policies issued by mutual insurers EXCEPT:

Dividends are guaranteed to be paid if the insurer makes a profit

The net profit of an insurer, less any dividends paid out, is known as their:

Earned Surplus

War and aviation are common types of life insurance:

Exclusions

A condition that could result in a loss is known as a:

Exposure

Which of the following is not a dividend option offered on participating life insurance policies:

Extended term

An applicant who wants to provide permanent life insurance on themselves and term life insurance coverage for their spouse and children all on one policy should purchase a:

Family policy

If a life insurance beneficiary wants all of the proceeds paid out to them in 10 years, they should select which of the following settlement options?

Fixed Period

All of the following would be considered to be ordinary life insurance EXCEPT:

Group

Which of the following life insurance riders allows the policyowner to increase coverage periodically without providing proof of insurability:

Guaranteed insurability

Every licensee must notify the Commissioner of a change in their email, residence, principal business or mailing address:

Immediately

Using the needs approach to quantifying, how much life insurance a client needs focuses on all of the following except:

Income replacement

The person whose life is covered by a life insurance policy is known as the:

Insured

All of the following are true regarding adverse selection EXCEPT:

Insurers may discriminate against those who may incur losses in order to avoid it

All of the following are true regarding a mortality table EXCEPT:

It shows which individuals will die each year at a given age

A renewable term life insurance policy has a(n):

Level death benefit with an increasing premium

A person who, for a fee paid by any person other than an insurer, advises any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract must be licensed as a:

Life and disability insurance analyst

Under the California Insurance Code, all of the following are insurable events EXCEPT:

Losing money playing the lottery

Many insurers follow the principle of indemnity. To indemnify means to:

Make whole

All are true regarding the reinstatement of a lapsed life insurance policy EXCEPT:

No new contestability clause or suicide exclusion may apply

A life insurance policy supplemental illustration may be furnished in addition to a basic illustration as long as it illustrates:

Non-guaranteed elements that are not guaranteed or not determined at policy issue

All of the following are true regarding concealment EXCEPT:

Only intentional concealment entitles an injured party to rescind the contract

All of the following are non-forfeiture options contained in a cash value life insurance policy EXCEPT:

Paid-up additions

The Commissioner may, without notice or hearing, suspend or revoke the permanent license of a licensee for any of the following reasons EXCEPT:

Placing before the public any advertisement which uses the existence of the California Life and Health Insurance Guarantee Association for the purpose of inducing the sale of insurance

The chance of loss without any possibility for gain is known as:

Pure risk

Which type of annuity has no accumulation period?

Single premium immediate

A hazard is defined as:

Something that increases the chance of loss

Upon annuitization, which annuity pay out option will generate the highest monthly payments?

Straight life

When recommending to a senior consumer an annuity purchase or the exchange of an annuity that results in another insurance transaction, a producer must have reasonable grounds for believing that the recommendation is:

Suitable

The rules regarding replacement apply when replacing which of the following types of life insurance?

Term life

Which of the following life insurance premiums is tax deductible?

That portion of the group life premium paid by the employer

All of the following are true regarding the waiver of premium rider when it is attached to a whole life insurance policy EXCEPT:

The amount of the waived premium due is treated as a policy loan

If an applicant for life insurance misstated their age on their application and dies five (5) years later:

The death benefit will be adjusted to what the premium paid would have purchased if the correct age was known

All of the following are true regarding the conversion privilege on employer group life EXCEPT:

The employer must pay the entire cost of the converted policy

The entire contract provision on a life insurance policy states:

The entire contract includes the policy and the application, if attached

Under the Internal Revenue Code section 1035, all of the following life insurance exchanges are tax deferred EXCEPT:

The exchange of an annuity for a life insurance policy

A policy shall specify all of the following EXCEPT:

The financial rating of the insurer

Which of the following insurance mathematical premises states that the greater the number of similar exposures, the easier it is to predict future losses?

The law of large numbers

Benefits of a group life policy must be paid to the employee's beneficiary, which may not be:

Their Employer

Under the CIC, all of the following are true when a person transacts insurance without a valid license EXCEPT:

They are guilty of a felony

Buying life insurance is a risk management process whereby a person elects to ____ the financial risk of their premature death.

Transfer

Which department of an insurer is responsible for the selection and classification of risks:

Underwriting

Which of the following is true regarding variable annuities?

Unit values fluctuate depending upon the performance of the separate account