Life - learn as you go

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A. $0 B.$200 C. $9,800 D. $10,000

$9,800 In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to

10 years

Within how many days must the insurer that terminates an agent's appointment notify the Commissioner?

30

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? A. $20,000 B. $25,000 C. $50,000 D. The face amount will be determined by the insurer

50,000 it would remain the same as when it purchased. The face of the term policy would be the same as the face amount provided under the whole life policy.

Which of the following is an example of a limited-pay life policy? ALife Paid-up at Age 65 BRenewable Term to Age 70 CLevel Term Life DStraight Life

A.

Which of the following premium payments modes will incur the lowest overall payment

A. Annual

Which of the following statements is TRUE about a policy assignment? AIt authorizes an agent to modify the policy. BIt transfers rights of ownership from the owner to another person. CIt is the same as a beneficiary designation. DIt permits the beneficiary to designate the person to receive the benefits.

B. It transfers rights of ownership from the owner to another person The policy owner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment)

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? AMedical exam and parents' medical history BProof of insurability is not required. CMedical exam DHer parents' federal income tax receipts

B. Proof of insurability is not required If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.

Which of the following best describes fixed-period settlement option? ABoth the principal and interest will be liquidated over a selected period of time. BOnly the principal amount will be paid out within a specified period of time. CThe death benefit must be paid out in a lump sum within a certain time period. DIncome is guaranteed for the life of the beneficiary.

Both the principal and interest will be liquidated over a selected period of time. Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.

In life insurance policies, cash value increases

Grow tax deferred.

What must happen when an individual policy or annuity has been personally delivered to the policy owner

The policy owner must sign a delivery receipt

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

unfair trade practice

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?

$100,000 In joint life policies, the death benefit is paid upon the first death only

Which statement best defines multiple employer welfare arrangement AA plan that provides hospice care for terminally ill employees BA government health plan that provides health care for the unemployed CA group health plan that covers medical expenses arising from work related injuries DA joining together by employers to provide health benefits for employee

A joining together by employers to provide health benefits for employee

Which of the following is an example of a limited-pay life policy ALife Paid-up at Age 65 BRenewable Term to Age 70 CLevel Term Life DStraight Life

A)Life Paid-up at Age 65 Reasons: Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

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? A. Decreasing term B. Variable life C. Universal life D. Whole life

A. Decreasing term A decreasing term policy's face amount decreases as the amount of debt is reduced

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? A. Third-party ownership B. An irrevocable beneficiary C. A buy-sell agreement D. Family term rider

A. Third-party ownership Contracts that are owned by someone other than the insured are known as third-party ownership. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.

All of the following are true regarding the guaranteed insurability rider expect AThis rider is available to all insureds with no additional premium. BThe insured may purchase additional coverage at the attained age. CThe insured may purchase additional insurance up to the amount specified in the base policy. DIt allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events.

A. This rider is available to all insureds with no additional premium The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.

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

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.

Which statement is not true regarding a straight life policy AIt has the lowest annual premium of the three types of Whole Life policies. BIts premium steadily decreases over time, in response to its growing cash value. CThe face value of the policy is paid to the insured at age 100. DIt usually develops cash value by the end of the third policy year.

Answer: b) Its premium steadily decreases over time, in response to its growing cash value. ~ Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

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 may be used to fund a buy-sell agreement.

The Commissioner of Insurance may examine books and records of any of the following EXCEPT AForeign insurance companies. BPolicyholders of any contract of insurance delivered in Mississippi. CPersons involved with the formation of an insurance company in Mississippi. DGeneral agents and managing agents authorized to transact insurance in the state.

B

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 A. Decreased death benefit at each renewal. B. Required a premium increase each renewal. C. Built cash values. D. Required proof of insurability every year.

B. Required a premium increase each renewal Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.

The Commissioner will examine financial records of every authorized insurer as often as deemed necessary, but at least every AYear. B2 years. C5 years. D7 years.

C

After receiving a cease and desist order, how long does a person have to request a hearing? A10 days B15 days C30 days D45 days

C. A person may petition the commissioner for a hearing within 30 days of receiving a cease and desist order

Which of the following is TRUE of a qualified plan? A. It may discriminate in favor of highly paid employees. B. It may allow unlimited contributions. C. It has a tax benefit for both employer and employee. D. It does not need to have a vesting schedule.

C. It has a tax benefit for both employer and employee A qualified plan is approved by the IRS, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? A. She can only convert her coverage without proof of insurability if she has the master policy. B. She must apply for a new policy, which requires her to provide proof of insurability. C. She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. D. She will still be covered under the group plan, but will have to pay an individual policy premium.

C. She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. If a person has life insurance under a group plan and then leaves the group, he/she may convert group coverage to individual coverage within 31 days of leaving the plan without proof of insurability.

All of the following statements are TRUE concerning Debtors Groups EXPECT AThe premium for the policy shall be paid either from the creditor's funds, or from charges collected from the insured debtors, or from both. BAn insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer. CThe amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. DThe debtors eligible for insurance under the policy shall all be the debtors of the creditor(s).

C. The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor The amount of insurance of the life of any debtor may at no time exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor.

insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called AAcceptance. BConsideration. CConditions. DUtmost good faith.

Consideration

According to the entire contract provision, what document must be made part of the insurance policy? A. Copy of original application B. Buyer's guide C. Agent's report D. Outline of coverage

Copy of the original application. An insurance contract must contain a copy of the original application.

All of the following are true regarding the issuance of group life insurance to labor unions EXCEPT APremiums may be paid through union funds. BOnly members of the union are eligible for coverage. CPremiums may be paid through individual member funds. DMembers cannot be excluded from coverage on the basis of insurability.

D.

Which of the following employees of an insurance producer must be licensed AA property inspector. BThe person designing insurance advertisements. CThe person training new producers. DA sub-agent selling on a commission basis

D. Any employee of an insurance producer who received payment related to the sale of insurance must be licensed

When an annuity is written, whose life expectancy is taken into account? ABeneficiary BLife expectancy is not a factor when writing an annuity. COwner DAnnuitant

D. The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.

When the insured selects the extended term non forfeiture option, the cash value will be used to purchase term insurance with face amount? In lesser amounts for the remaining policy term of age 100. BEqual to the cash value surrendered from the policy CThe same as the original policy minus the cash value DEqual to the original policy for as long as the cash values will purchase.

D. With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A. Pay the policy proceeds up to an established limit. B. Not pay the policy proceeds under any circumstances. C. Automatically pay the policy proceeds. D. Pay the policy proceeds only if it would have issued the policy.

D. Pay the policy proceeds only it would have issued the policy The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.

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 AUpon issuance of the policy. BWithin 30 days after the first premium payment was collected. CPrior to filling out an application for insurance. DWith the policy.

D. With the policy If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium.

Which of the following is not typically excluded from life policies

Death due to plane crash for a fare-paying passenger

Which policy component decreases in decreasing term insurance?

Face amount

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed period

Which of the following best describes annually renewable term insurance

It is level term insurance Annually renewable term is form of level term insurance that offers the most insurance at the lowest cost

After receiving a cease and desist order, a licensee requests a hearing regarding an alleged violation on Nov. 10. What is the earliest date the hearing can be held?

Nov 20 Hearings regarding alleged violations that result in cease and desist orders must be held between 10 and 30 days after the request for the hearing is filed. The request was filed on Nov. 10; therefore, the soonest the hearing can be held is Nov. 20.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

which of the following allows insurer to relieve a minor insured from premium payments if the minors parents have died or become disabled

Payor benefit

Insurance is the transfer of

Risk Insurance is a transfer of risk of loss from an individual or a business entity to an insurance company. Hazards are conditions that increase the probability of an insured loss occurring, and perils are causes of loss. Losses cannot be transferred.

Which of the following best details the underwriting process for life insurance

Selection, classification, and rating of risks

Which of the following would be considered a non qualified retirement plan? A. 401(k) B. Keogh plan C. Roth IRA D. Split dollar plan

Split-dollar plan examples of nonqualified plans are individual annuities and deferred compensation plans for highly paid executives, split-dollar insurance arrangements, and Section 162 executive bonus plans.

During the term of office as commissioner, that individual also serves as

State Fire Marshal

Which of the following statements about suicide clause in a life insurance policy is TRUE

Suicide is excluded for a specific period of years and covered thereafter.

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term

Which of the following is not true of life settlements

The seller must be terminally ill

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? AThose who have no history of claims BThose who have been insured under the plan for at least 5 years CThose who have worked in the company for at least 3 years DThose who have dependents

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

What is the purpose of the buyers guide ATo list all policy riders BTo provide information about the issued policy CTo allow the consumer to compare the costs of different policies DTo provide the name and address of the agent/producer issuing the policy

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.

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?

Universal life

Which of the following life insurance policies allows policyowner to take out a loan from the policy's cash value

Variable universal life Variable universal life policies have cash value, so they allow policy loans. Term insurance policies do not have cash value

When would a 20-pay whole life policy endow? AWhen the insured reaches age 100 BAt the insured's age 65 CAfter 20 payments DIn 20 years

When the insured reaches age 100

Which statement is NOT true regarding a straight life policy

a) It has the lowest annual premium of the three types of Whole Life policies. b) Its premium steadily decreases over time, in response to its growing cash value. c) The face value of the policy is paid to the insured at age 100. d) It usually develops cash value by the end of the third policy year. Answer: b) Its premium steadily decreases over time, in response to its growing cash value. ~ Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

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? A. Limited pay whole life B. Interest-sensitive whole life C. Life annuity with period certain D. Increasing term

a)Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

Which of the following is another term for an authorized insurer?

admitted

Which of the following best describes gross annual premium

annual cost of mortality plus expenses

Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated

annuity certain

What type of premium do both Universal Life and Variable Universal Life policies have?

flexible

Fixed annuities provide all of the following EXCEPT AMinimum guaranteed rate of interest. BFuture income payments. CHedge against inflation. DEqual monthly payments for life.

hedge against inflation

Life income joint and survivor settlement option guarantees

income for 2 or more recipients until they die

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 A. Adjustable life B. Interest-sensitive whole life C. Credit life D. Annual renewable term

interest-sensitive whole life Because the cash values are generated by investments, interest rates will affect the amount of the cash value.

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

long term care Long-term care rider provides for the payment of part of the death benefit (called accelerated benefits) in order to take care of the insured's health care expenses, which are incurred in a nursing or convalescent home.

Insurance is a contract that protects the insured from what?

loss

Which of the following riders would not cause the death benefit to increase A. Accidental death rider B. Payor benefit rider C. Guaranteed insurability rider D. Cost of living rider

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.