Life Insurance Practice HG
45.An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? (Choose from the following options)1. Nothing2. $50,0003. $100,0004. $200,000
100,000
55.What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? (Choose from the following options)1. Revocation of license2. $2,5003. $1,0004. $100 per violation
2500
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
The balance of the loan will be taken out of the death benefit
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? (Choose from the following options)1. Domestic2. Unauthorized3. Foreign4. Alien
Foreign
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
Decreasing term
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? (Choose from the following options)1. Defamation2. Undercutting3. Twisting4. Slandering
Defamation
Interest
During partial withdrawal from a universal life policy, which portion will be taxed?
When would a misrepresentation on the insurance application be considered fraud? (Choose from the following options)1. When the application is incomplete2. Any misrepresentation is considered fraud.3. If it is intentional and material4. Never: statements by the applicant are only representations.
If it is intentional and material
In which of the following cases will the insured be able to receive the full face amount from a whole life policy?
If the insured lives to age 100
A person takes out a loan in order to pay off his house. He dies several years later, having paid off only a small portion of the debt. Which of the following is true?a)The lender will not recover this money.b)The federal government will pay the balance to the lender.c)If the lender has credit insurance, this amount will be paid to the lender.d)The state government will pay the balance to the lender.
If the lender has credit insurance, this amount will be paid to the lender
Which of the following settlement options in life insurance is known as straight life?
Life income
Which of the following is TRUE regarding the insurance amount in a credit life policy? (Choose from the following options)1. Allowable amount of coverage is determined by the State Insurance Commissioner.2. The amount of coverage can be greater than the amount owed.3. The creditor can only insure the debtor for the amount owed.4. The creditor may insure the debtor for an unlimited amount of coverage.
The creditor can only insure the debtor for the amount owed
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
The date of medical exam.
43.If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? (Choose from the following options)1. The death benefit will be forfeited.2. The death benefit will be the same as the original face amount.3. The death benefit will be larger.4. The death benefit will be smaller.
The death benefit will be smaller.
Which of the following best defines target premium in a universal life policy? (Choose from the following options)1. The minimum amount to make sure the policy is annually renewable2. The corridor of insurance3. The recommended amount to keep the policy in force throughout its lifetime4. The maximum amount the policyowner may pay on a policy
The recommended amount to keep the policy in force throughout its lifetime
What is the purpose of settlement options?
They determine how death proceeds will be paid
Policy Assignment
Transfer of rights from one person to another
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?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
Which of the following documents must be provided to the policyowner or applicant during policy replacement? (Choose from the following options)1. Notice Regarding Replacement2. Disclosure Authorization Form3. Buyer's Guide and Policy Summary4. Policy illustrations
notice regarding replacement
Death benefits payable to a beneficiary under a life insurance policy are generallya)Exempt from income taxation if over $10,000.b)Not subject to income taxation by the Federal Government.c)Subject to income taxation by the Federal Government.d)Exempt from income taxation if under $10,000.
Not subject to income taxation by the Federal Government
What is the official name for the Social Security program?
Old Age Survivors Disability Insurance
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 allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor benefit
.Which of the following riders would NOT cause the Death Benefit to increase? (Choose from the following options)1. Cost of Living Rider2. Accidental Death Rider3. Payor Benefit Rider4. Guaranteed Insurability Rider
Payor benefit rider
What describes the specific information about a policy? (Choose from the following options)1. Illustrations2. Buyer's guide3. Producer's report4. Policy summary
Policy Summary
In which of the following instances would the premium be tax deductible?
Premiums paid by an employer on a $30,000 group term life insurance plan for employees
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan
.An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of (Choose from the following options)1. Twisting.2. Controlled business.3. Rebating.4. Coercion.
Rebating
What is the maximum fine for a single violation of the Insurance Code if a person knew or should have known that an act would result in a violation?a)$500b)$1,000c)$5,000d)$10,000
5,000
In Arkansas, what is the maximum interest rate that may be charged by an insurance company on a policy loan?
8%
When handling premium funds, insurance producers are acting in a (Choose from the following options)1. Special capacity.2. Fiduciary capacity.3. Accounting capacity.4. Financial capacity.
Fiduciary capacity
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
For 20 years or until the insured's death, whichever occurs first.
Which is true about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income
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
Guaranteed insurability rider.
What license or licenses are required to sell variable annuities?
Both Life insurance and securities licenses.
If, after a hearing, the Commissioner finds that a producer has committed any insurance unfair trade practice, the Commissioner may revoke or refuse to renew the producer's license, place the licensee on probationary status, or suspend a licensee for up to (Choose from the following options)1. 12 months.2. 24 months.3. 36 months.4. 48 months.
36 months
Which of the following is NOT true regarding a Certificate of Authority? (Choose from the following options)1. It may be necessary for transacting business in a specific state.2. It is equivalent to an insurance license.3. It is issued by the state department of insurance.4. It is issued to group insurance participants.
4. It is issued to group insurance participants.
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
A joint life policy
If an insurance producer's or consultant's license has lapsed,a)It can be reinstated within 36 months.b)It cannot be reinstated.c)A reinstatement fee is double the renewal fee.d)A new written examination is required.
A reinstatement fee is double the renewal fee
56.The minimum interest rate on an equity indexed annuity is often based on (Choose from the following options)1. An index like Standard & Poor's 500.2. The returns from the insurance company's separate account.3. The annuitant's individual stock portfolio.4. The insurance company's general account investments.
An index like Standard & Poor's 500
What is a foreign insurer? (Choose from the following options)1. An insurer with licensed agents doing business in other countries2. An insurer with licensed agents who are citizens in more than one country3. An insurer with a home office in another state4. An insurer with a home office in another country
An insurer with a home office in another state
When an annuity is written, whose life expectancy is taken into account
Annuitant
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an (Choose from the following options)1. Certified insurer.2. Self-insurer.3. Authorized insurer.4. Local insurer.
Authorized insurer
An insurance contract must contain all of the following to be considered legally binding EXCEPT
Beneficiary's consent
Which of the following best describes fixed-period settlement option? (Choose from the following options)1. The death benefit must be paid out in a lump sum within a certain time period.2. Income is guaranteed for the life of the beneficiary. 3. Both the principal and interest will be liquidated over a selected period of time.4. Only the principal amount will be paid out within a specified period of time.
Both the principal and interest will be liquidated over a selected period of time.
Which of the following statements concerning buy-sell agreements is true? (Choose from the following options)1. Buy-sell agreements pay in the event of a medical emergency.2. Buy-sell agreements are normally funded with a life insurance policy.3. Premiums paid are deductible as a business expense.4. Benefits received are considered income taxable.
Buy-sell agreements are normally funded with a life insurance policy.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? (Choose from the following options)1. Accumulation at Interest2. Cash option3. Reduction of Premium4. Annual Dividend Provision
Cash option
What term is used for replacing insurance policies for the sole purpose of making commissions? (Choose from the following options)1. Coercion2. Churning3. Misrepresentation4. Replacement
Churning
67.A producer's daughter, who is unlicensed, works part time in her father's insurance agency. She may perform all of the following activities EXCEPT (Choose from the following options)1. Collect premiums for in-force policies and explain coverages written by the producer.2. Make appointments for clients to meet with the producer.3. Assist the producer in completing applications for insurance.4. Call prospects and collect expiration dates on their existing policies.
Collect premiums for in-force policies and explain coverages written by the producer.
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Common disaster clause
54.What happens when a policy is surrendered for its cash value? (Choose from the following options)1. The policy can be reinstated by paying back all policy loans and premiums.2. The policy can be converted to term coverage.3. Coverage ends and the policy cannot be reinstated.4. Coverage ends but the policy can be reinstated at any time.
Coverage ends and the policy cannot be reinstated.
The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called (Choose from the following options)1. Multiple Protection insurance.2. Credit life.3. Credit health.4. Decreasing whole life.
Credit life
Which of the following is TRUE about credit life insurance? (Choose from the following options)1. Debtor is the annuitant.2. Creditor is the insured.3. Debtor is the policy beneficiary.4. Creditor is the policyowner.
Creditor is the policyowner.
Which of the following is NOT allowed in credit life insurance? (Choose from the following options)1. Creditor requiring that a debtor buys insurance from a certain insurer2. Creditor having a collateral assignment on the policy3. Creditor requiring that a debtor has a life insurance4. Creditor becoming a policy beneficiary
Creditor requiring that a debtor buys insurance from a certain insurer
Circulating deceptive sales material to the public is what type of Unfair Trade Practice? (Choose from the following options)1. Coercion2. Misrepresentation3. False advertising4. Defamation
False advertising
64.When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered (Choose from the following options)1. Controlled business.2. Adverse selection.3. Discrimination.4. Twisting.
Discrimination
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT (Choose from the following options)1. Stocks, securities, or bonds.2. An offer to share in commissions generated by the sale.3. Dividends from a mutual insurer.4. An offer of employment.
Dividends from a mutual insurer
49.When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? (Choose from the following options)1. Equal to the original policy for as long as the cash values will purchase.2. In lesser amounts for the remaining policy term of age 100.3. Equal to the cash value surrendered from the policy4. The same as the original policy minus the cash value
Equal to the original policy for as long as the cash values will purchase.
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? (Choose from the following options)1. Defamation2. Illegal3. A legal advertising strategy4. Unfair Discrimination
Illegal
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? (Choose from the following options)1. Illegal until endorsed by the Guaranty Association2. Legal, provided that the other insurers are paid royalties for the usage of their names3. Illegal under any circumstances4. Legal, provided that the information can be verified
Illegal under any circumstances
A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? (Choose from the following options)1. Deferred interest annuity2. Immediate annuity3. Variable annuity4. Flexible payment annuity
Immediate annuity
The 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 (Choose from the following options)1. Insuring clause.2. Misstatement of Age clause.3. Incontestability clause.4. Reinstatement clause.
Incontestability clause
What does the Life and Disability Insurance Guaranty Association guard against? (Choose from the following options)1. Double indemnity2. Rebating3. Insurer insolvency4. Insurance fraud
Insurer insolvency
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 and pay the face value to the beneficiary
Which of the following is correct regarding credit life insurance? (Choose from the following options)1. It insures the life of a creditor.2. It has a maximum term of 20 years.3. It insures the life of a debtor.4. It is purchased on an installment basis.
It insures the life of a debtor.
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called (Choose from the following options)1. Material misrepresentations.2. Fraudulent statements.3. Warranties.4. Common errors.
Material misrepresentations
68.Which of the following is NOT an unfair trade practice? (Choose from the following options)1. Negotiating claims2. Misrepresentation3. False advertising4. Boycott, coercion and intimidation
Negotiating claims
A producer in another state wants to become a producer in Arkansas. The other state gives the same privileges to Arkansas producers wanting to be licensed in that state as it does its own producers. Arkansas therefore extends the privileges of its producers to the prospective producer of the other state. What is this called? (Choose from the following options)1. Equanimity2. Equal privilege3. Reciprocity4. Fair exchange
Reciprocity
Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must (Choose from the following options)1. Defend the report if the agency feels it is accurate.2. Change the report.3. Send an actual certified copy of the entire report to the consumer.4. Respond to the consumer's complaint.
Respond to the consumer's complaints
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? (Choose from the following options)1. Answer the missed questions for the applicant2. Acknowledge the missed questions with a signature and continue the policy issue process3. Proceed with issuing a policy4. Return to the applicant for completion
Return to the applicant for completion
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?
SEPs are suitable for large companies
A domestic insurer issuing variable contracts must establish one or more
Separate accounts
All of the following are considered unfair trade practices in the business of insurance EXCEPTa)Defamation.b)Sharing commissions.c)Boycott.d)Rebating.
Sharing commissions
Which of the following is a risk classification used by underwriters for life insurance?
Standard
Which of the following types of risk will result in the highest premium?
Substandard risk
All of the following entities regulate variable life policies EXCEPT (Choose from the following options)1. The Insurance Department.2. The Guaranty Association.3. Federal government.4. The SEC.
The Guaranty Association
33.Which is NOT true about beneficiary designations? (Choose from the following options)1. The beneficiary must have insurable interest in the insured.2. The beneficiary may be a natural person.3. The policy does not have to have a beneficiary named in order to be valid.4. Trusts can be valid beneficiaries
The beneficiary must have insurable interest in the insured.
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?
The insured may renew the policy for another 10 years, but at a higher premium rate.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPTa)Face amount of the policy.b)The insured's age at death.c)The beneficiary's life expectancy.d)Projected interest rates.
The insured's age at death
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT (Choose from the following options)1. The policyholder has the right to withdraw the accumulations at any time.2. The interest is not taxable since it remains inside the insurance policy.3. The annual dividend is retained by the company.4. The interest is credited at a rate specified by the policy.
The interest is not taxable since it remains inside the insurance policy
Joint and Survivor
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called?
Which is generally true regarding insureds who have been classified as preferred risks? (Choose from the following options)1. They can decide when to pay their monthly premiums.2. They keep a higher percentage of any interest earned on their policies.3. Their premiums are lower.4. They can borrow higher amounts off of their policies.
Their premiums are lower
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
Third party ownership
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium
39.Why should the producer personally deliver the policy when the first premium has already been paid? (Choose from the following options)1. To make sure the policy is not stolen or lost2. To help the insured understand all aspects of the contract3. To ensure the producer gets paid commission4. To find out how the family has been doing since the initial presentation
To help the insured understand all aspects of the contract
What is the main justification for the existence of the State Insurance Department? (Choose from the following options)1. To protect the public2. To protect companies from malicious law suits3. To protect producers from the National Association of Insurance Commission4. To protect the State from harmful practices of companies and producers
To protect the public
For what reasons can a temporary license be issued? (Choose from the following options)1. To negotiate new insurance contracts2. When a licensee is overwhelmed by existing business and needs temporary help.3. To service existing business4. To solicit new business
To service existing business
80.When an insured terminates membership in the insured group, the insured can convert to (Choose from the following options)1. Whole life with proof of insurability.2. Term without proof of insurability.3. Term with proof of insurability.4. Whole life without proof of insurability.
Whole life without proof of insurability.
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than (Choose from the following options)1. With the policy.2. Upon issuance of the policy.3. Within 30 days after the first premium payment was collected.4. Prior to filling out an application for insurance.
With the policy.