Life Insurance Licensing Questions

All of the following are requirements for life insurance illustrations EXCEPT

They must be part of the contract.

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

Which of the following types of insurance policies would perform the function of cash accumulation?

whole life

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

$2,500

The current interest rate on an equity index annuity is often based on

An index like Standard & Poor's 500.

Under which of the following circumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance

In classifying risk, the home office underwriting department will look at all of the following, except

Applicant's past income.

In whole life insurance, when is the policy cash value scheduled to equal the face amount?

At the insured's age 100

Which of the following is TRUE about a class designation?

Beneficiaries are not identified by name

All of the following duties are responsibilities of producers at the time of application EXCEPT

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?

Consumer report

Under which of the following conditions would life insurance proceeds be taxable by the federal government?

If there is a transfer for value

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?

Illegal under any circumstances

Which of the following bears the investment risk in a variable life insurance policy?

Policyowner

Which of the following will be included in a policy summary?

Premium amounts and surrender values

Who is the annuity owner?

The person who purchases the annuity

What consequences will occur if a producer acts without a bond that is required?

The producers license may be revoked

Which of the following best defines target premium in a universal life policy?

The recommended amount to keep the policy in force throughout its lifetime

Which is true about a spouse term rider?

The rider is usually level term insurance

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

the insured's premiums will be waived until she is 21.

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would become income taxable?

$3,000

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

How long must an insurer keep books and records of insurance transactions in the premium fund trust account?

7 years

What is policy replacement?

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value

All of the following could be considered rebates, if offered to an insured on the sale of insurance EXCEPT

Dividends from a mutual insurer.

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option

All of the following information needs to be included on an application for life insurance EXCEPT

Health insurance policies in force

If a licensee charges any fee separate from a commission off of the insured premium, and if the fee exceeds 10% of the premiums value, what must the licensee obtain?

Insured's signature

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

All of the following are nonforfeiture options EXCEPT

Interest only

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

Issue the policy anyway and pay the face value to the beneficiary

Which of the following is NOT a type of whole life insurance?

Level term

An insurance company that is owned by the policyholders is called a

Mutual insurer

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement

All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder.

If an actuary would like to sell life insurance policies, what licensure is needed?

Producer's license for life insurance

J's retirement plan meets all federal requirements and entitles him to certain tax benefits as the owner of the plan. What term best describes J's retirement plan

Qualified

A new life insurance policy is derived from a policy that was recently terminated. Which of the following terms best describes his policy?

Replacement

When an insured under a life insurance policy died, the designated beneficiary received the face value of the policy, as well as a refund of all the premiums paid. Which rider is attached to the policy?

Return of premium

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application?

Return to the applicant for completion

If an agent wishes to sell variable life policies, what license must the agent obtain?

Securities

Which type of life insurance policy generates immediate cash value?

Single Premium

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called

Single premium whole life

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

The benefit is received tax free

All of the following are correct regarding misrepresentation EXCEPT

The fines for misrepresentation range from $50 to $1,000.

The paid-up option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

Which of the following types of insurance is investment based, has a level fixed premium, and a nonguaranteed cash value?

Variable Whole Life

Insurance policies are not drawn up through negotiations, and an insured has a little to say about its provisions. What contract characteristic does this describe?

adhesion

The LEAST expensive first year premium is found in which of the following policies?

annually renewable term

A whole life policy is surrendered for a reduced paid-up policy. The cash value in the new policy will

continue to increase

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is

fully insured

Within how many days may a person who is being examined by the Director for nonfinancial business practices request a hearing after receiving the examination report?

10 days

The policy loans provision states that the insurer must advance to the policyowner a sum up to the policy's cash value after the full amount of premiums have been paid for how long?

3 years

What would be an advantage to naming a contingent (or secondary) beneficiary, and a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased.

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount

All of the following entities, regulate variable life policies EXCEPT

The Guaranty Association

As it relates to life settlements, the term " owner" means

The owner of the original life policy

A group insurance policy was solicited by a limited insurance representative. Which of the following is true, according to the disclosure regulation?

The representative's name and signature must appear on the master policy

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?

They are tax free to terminally ill insured

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies

Which of the following statements describes one of the reasons individuals purchase life insurance?

it creates an immediate estate

An annuitant pays the annuity premium on the 14th of each month. Which of the following best describes this arrangement?

level

What is the term for how frequently a policy owner is required to pay the policy premium?

mode

In the event an annuitant dies during the accumulation period, and there is a beneficiary named in the annuity, annuity benefits would be paid to the

named beneficiary

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

paid up option

Which of the following is another term for the accumulation period of an annuity

pay-in period

What are the three types of risk rating classifications in life insurance?

preferred, standard, substandard

All of the following are true of annually renewable term insurance EXCEPT

proof of insurability must be provided at each renewal

All of the following are advantages of a qualified retirement plan EXCEPT

the income at retirement is tax free

If a producers license is violated for criminal activity, what is the maximum amount that can be charged for each offense?

$10,000

Producers who broker insurance must file a bond along with the application for license. The bond must be issued in favor of the people of Illinois, and must be on a continuous form and for an amount equal to 5% of the premium brokered the previous year, NOT to exceed

$50,000

An IRA owner who is 57 years old wants to make a withdrawal from her traditional IRA. What penalty will be imposed?

10%

In order for a business partner to be eligible for a Keogh plan, what he/she must work full-time and own at least how much of the business?

10%

A producer failed to complete the required continuing education credits for this compliance period, and allowed his license to lapse. Within what time period after the deadline, may the license be reinstated?

12 months

When replacement is involved, the replacing insurer must send a notice to the existing insurance company that identify the insured and policies within how many days?

3 business days

An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request?

3 days

In the state of Illinois, a viatical settlement contract must contain an unconditional right to cancel. How long does this rate remain in effect?

30 days from the date the contract is executed

Records related to life insurance advertisements must be kept on file by the insurer for what minimum period of time?

4 years

Which of the following situations would describe a proper handling a premiums by a producer in this state?

A producer who holds premiums for 15 days establishes a Premium Fund Trust Account.

Temporary producer license can be issued to all of the following EXCEPT

A spouse of disabled licensed producer before and after the sale of the business

The purpose of the regulation regarding replacement of life insurance policies is to protect whom?

Consumers

In the event of a terminal illness or injury, accelerated benefits pay earlier than scheduled a portion of the policy's

Face amount

At what point would an automatic premium loan be generated?

Following the grace period

The death benefit under the Universal Life Option B

Gradually increases each year by the amount that the cash value increases

In a life insurance application, all of the following signatures will be required EXCEPT

Home office underwriter

Which of the following is not true regarding a deferred annuity?

Income payments begin within 1 year from the date of purchase

What are the two parts of a life insurance agreement?

Insurable interest and consent

All of the following statements are true regarding an ordinary (straight) life policy EXCEPT

It does not have a guaranteed death benefit

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?

It will likely be higher because the applicant is a substandard risk

Duties of the replacing insurer include all of the following EXCEPT

Keep records related to replacement for at least 5 years

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level term

An annual statement must be filed with the Director by a viatical settlement provider, each year, on or before

March 1

Which of the following would provide an underwriter with the information concerning an applicants health history?

Medical Information Bureau

Guaranteeing future dividends is considered to be an unfair or deceptive act known as

Misrepresentation

Cash value guarantees in a whole life policy are called

Nonforfeiture values

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A

A rider attached to a life insurance policy that provides coverage on the insured family members is called the

Other-insured rider

Which dividend option will increase the death benefit?

Paid-up additions

What effect will the long-term care (LTC) rider on the death benefit of a life insurance policy if LTC benefits were paid to the insured?

Reduce the death benefit

If a life insurance policy is purchased by someone who has no insurable interest in the insured, it is considered

STOLI

All of the following are prohibited under Illinois law EXCEPT

Stating which section the payment or denial of a claim is based upon

Life insurance can provide which of the following?

Survivor protection

Which of the following, when attached to a permanent life, insurance policy, allows the policy owner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

Term rider

With Adjustable Life, the owner can change all of the following EXCEPT

The insured

All of the following are true about the completion of prelicensing training EXCEPT

The requirement can be fulfilled by completing training through lecture course, home study or online

Keogh (HR-10) plans are qualified plans for

The self-employed

If a loan request is for payment of due premiums on the policy, how soon must the insurer issue a loan?

immediately

What is the limit to the number of 90 day temporary licenses that a person may hold?

no more than 1 per lifetime

Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles?

standard

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

Joint and survivor

How soon must the insurer pay a death benefit claim after receiving the proof of death?

2 months

An applicant for a fire insurance providers license must successfully complete an approved prelicensing education course of at least

20 hours

A producer receives notice that his license has been terminated. If the producer wants to have the charges reviewed in court, within what time period must the request be made?

30 days

An underwriter may obtain information on an applicants hobbies, financial status, and habits by ordering a(n)

Inspection report

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited Pay Life

Which policy component decreases in decreasing term insurance?

Face amount

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

A life insurance policy qualifies as a modified endowment contract (MEC) if the amount of premium paid exceeds the amount that would've provided paid up insurance in how many years?

7 years

Ronald is buying life insurance policies. He is unclear which one to buy, and his insurer explains the costs of similar plans, in addition to their basic features. Which rule requires the insurer to disclose such information?

Life Solicitation Rule

Which of the following is true regarding premium in a 10-year level premium policy?

The premium will remain level for 10 years

A viatical settlement is arranged between a viatical company and

The terminally ill insured

Which of the following types of insurance products would be appropriate for an individual with a low income and high insurance needs?

term insurance