Life Insurance Study Guide
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase.
Authorized insurance companies are examined by the Commissioner at least once every
5 years.
Which of the following is NOT true regarding an annuity certain?
Benefits stop at the annuitant's death.
A legally acceptable attempt by an existing insurer to dissuade a current policyowner from the replacement of existing life insurance is called
Conservation.
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?
Defamation
All of the following would be difterent between qualified and nonqualified retirement plans EXCEPI
Taxation on accumulation
The violation of a cease and desist order may result in a fine of
$10,000.
Existing insurers must provide policyowners with a policy summary for the existing life insurance within how many days of receiving the written communication and replacement?
10
When a policy is replaced, replacing insurers must maintain a replacement register regarding that policy for
3 years.
If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
A full death benefit
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion
Which of the following would NOT be a violation of state insurance regulations?
Agent C uses her license to write only business other than controlled.
Which of the following would NOT be considered an unfair and deceptive practice?
Controlled business
A key person insurance policy can pay for which of the following?
Costs of training a replacement
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of
Defamation.
All of the following statements concerning dividends are true EXCEPT
Dividend amounts are guaranteed in the policy.
Insurers must screen all marketing plans to ensure that an advertisement does NOT use as the name of any kind of an annuity contract any phrase that
Does not include the word "annuity" unless accompanied by other clear language indicating it is an annuity.
Long-term care coverage may be available as any of the following options EXCEPT
Endorsement to a health policy.
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire contract.
When does a producer's license expire?
Every 2 years on the last day of the producer's birth month
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive
Nothing; the payments will cease.
All of the following are the most common variations in a Long-Term Care policy EXCEPT
Number of family dependents.
Which of the following is an example of a producer's fiduciary duty?
the trust that a client places in the producer in regard to handling premiums
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
Aleatory
Which of the following best describes fixed-period settlement option?
Both the principal and interest will be liquidated over a selected period of time.
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Conditional
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
All of the following statements are true regarding tax-aualified annuities EXCEPT
Employer contributions are not tax deductible.
All of the following statements are true regarding tax-qualified annuities EXCEPT
Employer contributions are not tax deductible.
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT
Erase the incorrect answer and record the correct answer.
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceased the insured
What type of insurance would be used for a Return of Premium rider?
Increasing Term
The Medical Information Bureau (MIB) was created to protect
Insurance companies from adverse selection by high risk persons.
All of the following are Nonforfeiture options EXCEPT
Interest only
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?
Interest only option
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time The policy is a/an
Interest-sensitive Whole Life
State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT
Inviting prospective clients to the grand opening of the company's new office.
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.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
Which of the following is NOT true regarding a nonqualified retirement plan?
It needs IRS approval.
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in a deferred annuity.
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
Joint life
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of
Misrepresentation.
Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
An agent license can be issued
Only to individuals.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
Pay the policy proceeds only if it would have issued the policy.
Which of the following is another term for the accumulation period of an annuity?
Pay-in period
Which of the following is NOT one of the three types of term coverage based on what happens to the face amount during the policy term?
Renewable
Whenever agents submit applications to insurers, they must also submit statements, signed by the applicant and agent, disclosing the involvement of
Replacement.
An insurance agent's responsibilities include all of the following EXCEPT
Represent the client.
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?
SEPs are suitable for large companies.
Which of the following statements about a suicide clause in a life insurance policy is TRUE?
Suicide is excluded for a specific period of years and covered thereafter.
The premiums paid by the employer in a business life insurance policy are
Tax deductible by the employer.
Which of the following is an example of a producer being involved in an unfair trade practice of rebating?
Telling a client that his first premium will be waived if he purchases the insurance policy today
Which of the following may NOT be included in an insurance company's advertisement?
That its policies are covered by a state Guaranty Association
Which of the following is NOT the consideration in a policy?
The application given to a prospective insured
If a life insurance policy has an irrevocable beneficiary designation,
The beneficiary can only be changed with written permission of the beneficiary.
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit.
The entire contract is made up of all of the following EXCEPT
The buyer's guide.
Which of the following is TRUE regarding the premium in term policies?
The premium is level for the term of the policy.
Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly?
The producer
How are contributions to a tax-sheltered annuity treated with regards to taxation?
They are not included as income for the employee, but are taxable upon distribution.
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
They are required by state law to be included in the policy.
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies
What is the purpose of Life Insurance Solicitation regulation?
To help consumers compare life insurance products in regard to their relative cost
Which of the following would be required to be licensed as an insurance producer?
A salaried employee who advertises and solicits insurance
All of the following would be excluded from the regulation on life insurance solicitation EXCEPT
A term life policy
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?
2 years
An insured recently discovered that the interest rate on his policy loan once again increased. Which of the following is the shortest amount of time that could have passed since the last change in the insured's interest rate?
3 months
In insurance, an offer is usually made when
An applicant submits an application to the insurer.
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Employer contributions made to a qualified plan
Are subject to vesting requirements.
When must insurable interest exist in a life insurance policy?
At the time of application
Which of the following best describes the aleatory nature of an insurance contract?
Exchange of unequal values
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
Executive bonus.
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
False advertising
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.
Which of the following would NOT be considered a purpose of life insurance solicitation regulations in Georgia?
Help buyers choose most qualified insurance producers
What is the main purpose of the Seven-pay Test?
It determines if the insurance policy is a MEC.
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
It does not guarantee that the entire principal amount will be paid out.
Which of the following is an IRS qualified retirement program for the self-employed?
Keogh plan
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole 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
Transacting insurance without a license in this state is considered a(n)
Misdemeanor.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
Required a premium increase each renewal.
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
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.
Which of the following types of insurers is owned by stockholders?
Stock
All of the following are unfair claims settlement practices EXCEPT
Suggesting negotiations in settling the claim.
Which of the following is called a "second-to-die" policy?
Survivorship life
All of the following are general requirements of a qualified plan EXCEPT
The plan must provide an offset for social security benefits.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
The policy is owned by the company.
Which of the following statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans.
Which of the following types of policies allows for a flexible premium and a variable investment component?
Variable universal life insurance
Which of the following types of policies will provide permanent protection?
Whole life
