Life insurance licensing
Which of the following is NOT true regarding the annuitant? a)The annuitant's life expectancy is taken into consideration for the annuity. b)The annuitant receives the annuity benefits. c)The annuitant must be a natural person. d)The annuitant cannot be the same person as the annuity owner.
d)The annuitant cannot be the same person as the annuity owner.
Which of the following is TRUE regarding the insurance amount in a credit life policy? a)The creditor may insure the debtor for an unlimited amount of coverage. b)Allowable amount of coverage is determined by the State Insurance Commissioner. c)The amount of coverage can be greater than the amount owed. d)The creditor can only insure the debtor for the amount owed.
d)The creditor can only insure the debtor for the amount owed.
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a)The annual dividend is retained by the company. b)The interest is credited at a rate specified by the policy. c)The policyholder has the right to withdraw the accumulations at any time. d)The interest is not taxable since it remains inside the insurance policy.
d)The interest is not taxable since it remains inside the insurance policy.
Which of the following determines the cash value of a variable life policy? a)The company's general account b)The policy's guarantees. c)The premium mode d)The performance of the policy portfolio
d)The performance of the policy portfolio
To which of the following products does the Replacement Regulation apply? a)Group annuities b)Credit life insurance c)Converting an existing policy with the same insurer d)Whole life insurance
d)Whole life insurance
What is the purpose of the buyer's guide? a)To allow the consumer to compare the costs of different policies b)To provide the name and address of the agent/producer issuing the policy c)To list all policy riders d)To provide information about the issued policy
a)To allow the consumer to compare the costs of different policies The buyer's guide provides generic information about life insurance policies and allows the consumer to compare the costs of different policies. The policy summary provides specific information about the issued policy, as well as the insurer's information.
All of the following statements concerning dividends are true EXCEPT a)Favorable investment results generate higher dividends. b)Dividend amounts are guaranteed in the policy. c)Lower insurance company costs generate higher dividends. d)They stem from favorable underwriting experience.
b)Dividend amounts are guaranteed in the policy.
In life insurance policies, cash value increases a)Are only taxed when the owner reaches age 65. b)Grow tax deferred. c)Are income taxable immediately. d)Are taxed annually.
b)Grow tax deferred.
Harry has just received his life insurance policy. In reviewing the title page, Harry was able to ascertain the following information EXCEPT a)His total annual premium amount. b)His spouse had been assigned the primary beneficiary. c)His children have been covered by a child rider. d)He had purchased a 20 year renewable term insurance policy in the face amount of $150,000.
b)His spouse had been assigned the primary beneficiary. Harry would not be able to ascertain from the title page who is the primary beneficiary of his life insurance policy.
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive a)The remainder of the principal. b)Nothing; the payments will cease. c)Guaranteed minimum benefit. d)The amount paid into the annuity.
b)Nothing; the payments will cease.
Which of the following individuals must have insurable interest in the insured? a)Producer b)Policyowner c)Beneficiary d)Underwriter
b)Policyowner
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
b)Straight Life
Which of the following entities may NOT be an insurer? a)A natural person b)The Commissioner c)A business trust d)A limited liability company
b)The Commissioner Any qualified person may be an insurer: a natural person, association, organization, partnership, business trust, limited liability company or corporation. The Commissioner of Insurance would not qualify to be an insurer at the same time.
In forming an insurance contract, when does acceptance usually occur? a)When an insured submits an application b)When an insurer's underwriter approves coverage c)When an insurer delivers the policy d)When an insurer receives an application
b)When an insurer's underwriter approves coverage
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT a)Funds accumulate on a tax-deferred basis. b)Employee and employer contributions are not counted as income to the employee for income tax purposes. c)At distribution, all amounts received by the employee are tax free. d)Employer contributions are tax deductible as ordinary business expense. Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.
c)At distribution, all amounts received by the employee are tax free.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a)Representation b)Adhesion c)Consideration d)Good faith
c)Consideration
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the a)Revocable beneficiary. b)Secondary beneficiary. c)Contingent beneficiary. d)Irrevocable beneficiary.
c)Contingent beneficiary.
If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT a)Utilities. b)Employee payroll. c)Loss of the owner's income. d)Rent.
c)Loss of the owner's income. If business owners want coverage for the loss of their own income due to total disability, they need to purchase a separate individual disability income policy.
Signing and dating a delivery receipt for a life insurance policy helps to establish all of the following timeframes EXCEPT a)The Free-Look Period. b)The Right of Rescission. c)The Grace Period. d)The Incontestability Period.
c)The Grace Period.
Which of the following is NOT a "person" for legal purposes? a)A family's living trust b)An incorporated, closely-held company c)A business partnership d)A family
d)A family
What type of insurance would be used for a Return of Premium rider? a)Level Term b)Decreasing Term c)Annually Renewable Term d)Increasing Term
d)Increasing Term
A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n): a)Underwriting gamble. b)Legal peril. c)Fiduciary risk. d)Legal hazard.
d)Legal hazard.
According to California Insurance Code, the term "shall" describes what kind of actions? a)Permissive b)Implied c)Directive d)Mandatory
d)Mandatory According to CIC 16, the word "shall" describes mandatory actions, and the word "may" describes permissive actions unless otherwise apparent from the context.
An independent agent may have contracts with which of the following? a)The Department of Insurance b)The Commissioner c)Brokers d)More than one insurer
d)More than one insurer
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a)Purchase a term rider to attach to the policy. b)Pay back all premiums owed plus interest. c)Receive payments for a fixed amount. d)Purchase a single premium policy for a reduced face amount.
d)Purchase a single premium policy for a reduced face amount.
The LEAST expensive first-year premium is found in which of the following policies? a)Annually Renewable Term b)Increasing Term c)Decreasing Term d)Level Term
a)Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
Employer contributions made to a qualified plan a)Are subject to vesting requirements. b)May discriminate in favor of highly paid employees. c)Are after-tax contributions. d)Are taxed annually as salary.
a)Are subject to vesting requirements. Qualified plans must have a vesting requirement.
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? a)As of the application date b)As of the policy delivery date c)As of the first of the month after the policy issue d)As of the policy issue date
a)As of the application date If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation a)Be fined a sum of $1,000. b)Be fined a sum of $10,000. c)Be administratively suspended from licensing for a period of 180 days. d)Be fined a sum of $5,000.
a)Be fined a sum of $1,000.
Any insurer who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation a)Be fined a sum of $10,000. b)Be fined a sum no less than $30,000 and no more than $300,000. c)Have his/her license suspended. d)Be fined a sum of $1,000.
a)Be fined a sum of $10,000.
Which of the following best describes fixed-period settlement option? a)Both the principal and interest will be liquidated over a selected period of time. b)Only the principal amount will be paid out within a specified period of time. c)The death benefit must be paid out in a lump sum within a certain time period. d)Income is guaranteed for the life of the beneficiary.
a)Both the principal and interest will be liquidated over a selected period of time.
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to a)Charge a higher premium. b)Require a yearly medical examination. c)Lower its insurability standards. d)Refuse to issue the policy.
a)Charge a higher premium. The premium rate will be adjusted to reflect the insurer's increased risk.
Which of the following is true regarding taxation of dividends in participating policies? a)Dividends are not taxable. b)Dividends are taxable only after a certain amount is accumulated annually. c)Dividends are taxable in some life insurance policies and nontaxable in others. d)Dividends are considered income for tax purposes.
a)Dividends are not taxable.
Regarding the taxation of Business Overhead policies, a)Premiums are deductible, and benefits are taxed. b)Premiums are not deductible, and benefits are taxed. c)Premiums are not deductible, but benefits are deductible. d)Premiums are not deductible, but expenses paid are deductible.
a)Premiums are deductible, and benefits are taxed.
A life insurance policy can be delivered by all of the following means, EXCEPT a)Priority mail. b)First class mail with a delivery receipt. c)Personal delivery by a trained employee of the insurer, with a delivery receipt. d)Certified mail.
a)Priority mail.
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a)Signed waiver of premium. b)Statement of good health. c)Payment of premium. d)Delivery receipt.
a)Signed waiver of premium.
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to a)The insured's estate. b)Probate. c)The state. d)The beneficiary's estate.
a)The insured's estate.
A property and casualty agent has been licensed for 7 years. How many continuing education hours must the agent complete this licensing period? a)30 b)24 c)15 d)0
b)24
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of a)Third-party ownership. b)A STOLI policy. c)A prearranged funeral plan. d)A viatical settlement.
b)A STOLI policy. Stranger-originated life insurance (STOLI) policies are usually purchased by people who have no relationship with the insured with the intention of selling them for life settlements.
The protection of the insurer from adverse selection is provided in part by a)A reduction in coverage. b)A profitable distribution of exposures. c)Reducing costs. d)A drop in applicants.
b)A profitable distribution of exposures. The profitable distribution of exposures, which balances poor risks and preferred risks with standard risks in the middle, protects insurers from adverse selection.
Which of the following would NOT be considered a form of direct response marketing? a)An insurance company's TV commercial b)A sign in an insurer's office c)An ad in a newspaper d)A circular mailed to a city's residents
b)A sign in an insurer's office The mass marketing of insurance products is considered direct response marketing.
Social security benefits are available for a surviving spouse until the youngest child reaches age 16. Benefits are again available for the spouse after reaching age 60. What is the time period called during which the surviving spouse does not receive benefits? a)Cancellation b)Blackout period c)Waiver of premium d)Annuitization period
b)Blackout period
If found material for underwriting, a misrepresentation a)Must have been in writing to affect a contract. b)Can void a contract. c)May be withdrawn. d)Does not affect either of the parties.
b)Can void a contract.
Which of the following is TRUE about credit life insurance? a)Debtor is the policy beneficiary. b)Creditor is the policyowner. c)Debtor is the annuitant. d)Creditor is the insured.
b)Creditor is the policyowner. In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.
In the state of California, who selects the Insurance Commissioner and for how long? a)The Governor, for no more than two four-year terms b)General election, for no more than two four-year terms c)General election, for one six-year term d)The Governor, for one six-year term
b)General election, for no more than two four-year terms CIC 12900 states that the Commissioner is an elected position and cannot exceed two four-year terms.
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 a)Nonforfeiture option. b)Guaranteed insurability rider. c)Paid-up additions option. d)Cost of living provision.
b)Guaranteed insurability rider.
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? a)Reasonable expectations b)Indemnity c)Stop-loss d)Consideration
b)Indemnity The principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits.
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? a)Waiver of Premium b)Payor Benefit c)Jumping Juvenile d)Juvenile Premium Provision
b)Payor Benefit
An insured committed suicide one year after his life insurance policy was issued. The insurer will a)Pay nothing. b)Refund the premiums paid. c)Pay the policy's cash value. d)Pay the full death benefit to the beneficiary.
b)Refund the premiums paid.
All of the following are true of key person insurance EXCEPT a)The key employee is the insured. b)The plan is funded by permanent insurance only. c)There is no limitation on the number of key employee plans in force at any one time. d)The employer is the owner, payor and beneficiary of the policy.
b)The plan is funded by permanent insurance only.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? a)When the agent submits the application to the company and the company issues a conditional receipt b)When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health c)On the designated effective date d)On the application date
b)When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most likely need to fill out a Statement of Good Health.
The Commissioner may suspend an applicant's license without a hearing if the applicant has had another professional license suspended or revoked within what time period? a)6 months b)12 months c)5 years d)7 years
c)5 years
For how long is an insurance company allowed to defer policy loan requests? a)30 days b)60 days c)6 months d)1 year
c)6 months Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.
As part of the continuing education requirement, what is the minimum number of hours of continuing education specific to long-term care insurance to be completed prior to each license renewal? a)4 b)6 c)8 d)12
c)8
What other term is used to refer to unintentional torts? a)Peril b)Breach of contract c)Negligence d)Hazard
c)Negligence
Anyone convicted of committing an insurance fraud may be fined up to the greater amount of double the value of the fraud or a)$50,000. b)$75,000. c)$100,000. d)$150,000.
d)$150,000. The Insurance Code sets the maximum penalty at $150,000 or double the amount of the fraud, whichever is greater.
Every individual life insurance policy must provide for a free-look provision that lasts for at least a)30 days. b)60 days. c)90 days. d)10 days.
d)10 days.
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a)A business partner of the insured b)The wife of the deceased insured c)The former wife of the deceased insured d)A minor son of the insured
d)A minor son of the insured
Which of the following settlement options in life insurance is known as straight life? a)Single life b)Life with period certain c)Fixed amount d)Life income
d)Life income The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.
Which nonforfeiture option provides coverage for the longest period of time? a)Extended term b)Paid-up option c)Accumulated at interest d)Reduced paid-up
d)Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.
Peril is most easily defined as a)An unhealthy attitude about safety. b)The chance of a loss occurring. c)Something that increases the chance of loss. d)The cause of loss insured against.
d)The cause of loss insured against.
How are contributions to a tax-sheltered annuity treated with regards to taxation? a)They are never taxed. b)They are taxed as income for the employee. c)They are taxed as income for the employee, but are tax free upon withdrawal. d)They are not included as income for the employee, but are taxable upon distribution.
d)They are not included as income for the employee, but are taxable upon distribution.
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a)Policy loans are taxable distributions. b)Accumulations are tax deferred. c)Withdrawals are not taxable. d)Distributions before age 59 1/2 incur a 10% penalty on policy gains.
c)Withdrawals are not taxable.
What is the penalty for IRA distributions that are below the required minimum for the year? a)10% b)25% c)50% d)60%
c)50% If there are no distributions at the required age, or if the distributions are not large enough, the penalty is 50% of the shortfall from the required annual amount.
All of the following statements are true regarding installments for a fixed amount EXCEPT a)The payments will stop when the annuitant dies. b)Value of the account and future earnings will determine the time period for the benefits. c)This option pays a specific amount until the funds are exhausted. d)The annuitant may select how big the payments will be.
a)The payments will stop when the annuitant dies.
According to the Code, how many separate requirements should an insurance policy have? a)4 b)6 c)8 d)10
b)6
Which of the following best describes what the annuity period is? a)The period of time from the effective date of the contract to the date of its termination b)The period of time during which accumulated money is converted into income payments c)The period of time from the accumulation period to the annuitization period d)The period of time during which money is accumulated in an annuity
b)The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.
What is the minimum free-look period for newly issued life insurance policies in this state? a)10 days b)20 days c)30 days d)90 days
a)10 days
If an insured changes his payment plan from monthly to annually, what happens to the total premium? a)Decreases b)Stays the same c)Doubles d)Increases
a)Decreases Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount.
The key factor of representation that allows the injured party to rescind the contract is a)If the representation is false in a material point. b)That any misrepresentation is considered fraud. c)Representations are statements believed to be true and hold no legal consequences. d)The promise or assurance of the representation.
a)If the representation is false in a material point. If a representation is false in a material point the injured party is entitled to rescind the contract from the time the representation becomes false.
Which of the following statements about a suicide clause in a life insurance policy is TRUE? a)Suicide is excluded for a specific period of years and covered thereafter. b)Suicide is covered for a specific period of years and excluded thereafter. c)Suicide is covered as long as the policy is in force. d)Suicide is excluded as long as the policy is in force.
a)Suicide is excluded for a specific period of years and covered thereafter.
Which of the following products requires a securities license? a)Variable annuity b)Fixed annuity c)Equity Indexed annuity d)Deferred annuity
a)Variable annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.
Which of the following is NOT an allowable 1035 exchange? a)A life insurance policy is exchanged for an annuity. b)A whole life insurance policy is exchanged for a term insurance policy. c)A whole life insurance policy is exchanged for a Universal life insurance policy. d)An annuity is exchanged for another annuity.
b)A whole life insurance policy is exchanged for a term insurance policy.
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? a)Inflation Rider b)Cost of Living Rider c)Value Adjustment Rider d)Return of Premium Rider
b)Cost of Living Rider The Cost of Living rider annually adjusts the policy's face value in accordance with the national rate of inflation or deflation. This rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time.
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? a)Company is the owner, and the company pays the premium. b)Executive is the owner, and the executive pays the premium. c)Company is the owner, but the executive pays the premium. d)Board of directors is the owner, and the board of directors pays the premium.
b)Executive is the owner, and the executive pays the premium.
Which of the following statements about the reinstatement provision is true? a)It guarantees the reinstatement of a policy that has been surrendered for cash. b)It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. c)It permits reinstatement within 10 years after a policy has lapsed. d)It provides for reinstatement of a policy regardless of the insured's health.
b)It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.
Which of the following is NOT a legitimate use of annuities by businesses? a)Providing deferred compensation for employees b)Providing an investment vehicle c)Creating a tax shelter d)Funding employee retirement plans
c)Creating a tax shelter
A contract which one party undertakes to indemnify another against loss is called a)Risk. b)Indemnity. c)Insurance. d)Adverse Selection.
c)Insurance. Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.
According to California Insurance Code, which of the following can be classified as an insurable event? a)Speculative risks b)Extreme levels of loss c)Pure risks d)Unpredictable losses
c)Pure risks Any event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him/her, may be insured against. The more predictable a loss, the more insurable it becomes. Only pure risks are insurable. Speculative losses are uninsurable.
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a)The death benefit can be increased only when the policy has developed a cash value. b)The death benefit can be increased only by exchanging the existing policy for a new one. c)The death benefit can be increased by providing evidence of insurability. d)The death benefit cannot be increased.
c)The death benefit can be increased by providing evidence of insurability.
Which of the following is a key distinction between variable whole life and variable universal life products? a)Variable whole life allows policy loans from the cash value. b)Variable universal life has a fixed premium. c)Variable whole life has a guaranteed death benefit. d)Variable universal life is regulated solely through FINRA.
c)Variable whole life has a guaranteed death benefit. Variable universal life insurance may or may not have a minimum death benefit, unlike variable whole life insurance which guarantees a minimum death benefit.
What happens when a policy is surrendered for its cash value? a)Coverage ends but the policy can be reinstated at any time. b)The policy can be reinstated by paying back all policy loans and premiums. c)The policy can be converted to term coverage. d)Coverage ends and the policy cannot be reinstated.
d)Coverage ends and the policy cannot be reinstated. Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated.
How does an insured typically decide which settlement option to choose for his/her beneficiary? a)He/she usually decides based on how many beneficiaries he/she has chosen to receive benefits. b)He/she typically decides based on the advice of the insurer. c)He/she decides based on the amount of the death benefit. d)He/she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income.
d)He/she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income. Typically, the settlement option is chosen by determining if the beneficiary will need one payment or income over a period of time.
Which of the following insureds have a right to cancel an individual life policy for a full refund within 30 days of policy delivery? a)All insureds b)Only insureds who have dependents c)Only preferred insureds d)Insureds who are 60 years of age or older
d)Insureds who are 60 years of age or older If the insured on the individual life policy or the annuitant on an annuity contract is 60 years of age or older, the insured has a right to cancel the policy for a full refund within 30 days.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a)One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. b)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. c)The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. d)The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.
b)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the 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? a)$0 b)$50,000 (50% of the policy value) c)$100,000 d)$300,000 (triple the amount of policy value)
c)$100,000 The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.
Which of the following types of insurance policies is most commonly used in credit life insurance? a)Whole life b)Equity indexed life c)Decreasing term d)Increasing term
c)Decreasing term Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. It is usually written as decreasing term insurance.
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a)Joint and survivor b)Fixed amount option c)Interest only option d)Life income with period certain
c)Interest only option
The continuing education requirement for the California Partnership for Long-Term Care policies a)Only needs to be completed if an actual sale occurs during that licensing period. b)Must be completed in addition to an agent's regular continuing education requirements. c)Is part of an agent's regular continuing education requirements. d)Does not apply to agents who hold a life license.
c)Is part of an agent's regular continuing education requirements.
Which of the following riders would NOT cause the Death Benefit to increase? a)Cost of Living Rider b)Accidental Death Rider c)Payor Benefit Rider d)Guaranteed Insurability Rider
c)Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a)Insured's annual expenses. b)Effect of inflation on income over time. c)Predicted needs of the family after the insured's death. d)Insured's current and future income.
c)Predicted needs of the family after the insured's death. The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.
What is the benefit of choosing extended term as a nonforfeiture option? a)It matures at age 100. b)It allows for coverage to continue beyond maturity date. c)It can be converted to a fixed annuity. d)It has the highest amount of insurance protection.
d)It has the highest amount of insurance protection.
Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? a)It must be assumed that the death of the insured will occur immediately. b)Need is predicted using the number of years until the insured's retirement. c)Coverage is based on the predicted needs of that family. d)The death of an insured must be premature.
b)Need is predicted using the number of years until the insured's retirement. In the needs approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.
All of the following are examples of risk retention EXCEPT a)Copayments. b)Self-insurance. c)Premiums. d)Deductibles.
c)Premiums.
Who is a third-party owner? a)An insurer who issues a policy for two people b)An employee in a group policy c)An irrevocable beneficiary d)A policyowner who is not the insured
d)A policyowner who is not the insured Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.
For variable products, underlying assets must be kept in a)A revenue account. b)A money market account. c)A general account. d)A separate account.
d)A separate account. Under a variable life insurance policy, assets must be placed in a separate fund, used primarily for the investment of stocks, bonds, and other security investment options.
All of the following are examples of third-party ownership of a life insurance policy EXCEPT a)An insured couple purchases a life insurance policy insuring the life of their grandson. b)A company purchases a life insurance policy on their manager, who is an important part of the operation. c)When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. d)An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.
d)An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.
What does "liquidity" refer to in a life insurance policy? a)The death benefit replaces the assets that would have accumulated if the insured had not died. b)The policyowner receives dividend checks each year. c)The insured receives payments each month in retirement. d)Cash values can be borrowed at any time.
d)Cash values can be borrowed at any time.
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary? a)It will not affect the benefits paid to the beneficiary. b)It will reduce the benefits by 70%. c)It will increase the benefits paid to the beneficiary. d)It will decrease the benefits paid to the beneficiary.
d)It will decrease the benefits paid to the beneficiary. Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of insurance is therefore reduced, which will decrease the benefits paid to the beneficiary.
In case of a loss, the indemnity provision in insurance policies a)Allows the insured to collect 20% more than the actual loss. b)Pays the insured a percentage of the loss above and beyond the loss. c)Pays the insured as much as 95% of the loss. d)Restores an insured person to the same financial state as before the loss.
d)Restores an insured person to the same financial state as before the loss. Indemnity (sometimes referred to as reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.
