Life policies/Provision & Options/Riders/Annuities
An insured purchased a 15 year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
$200,000
If a $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
$3,000
An insurer has been found guilty of a Code violation regarding replacement. The insurer then repeats the violation. What will be the minimum penalty?
$30,000
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.
At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?
Adjustable life
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
Adjusted to the insured's age at the time of renewal
The LEAST expensive first year premium is found in which of the following policies?
Annually Renewal Term
All of the following statements are correct regarding credit life insurance EXCEPT
Benefits are paid to the borrower's beneficiary
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
What limits the amount that a policyowner may borrow from a whole life insurance policy?
Cash value
A tax-sheltered annuity is a special tax-favored retirement plan available to
Certain groups of employees only
What happens when a policy is surrendered for its cash value ?
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
Credit life
Which of the following is TRUE about credit life insurance?
Creditor is the policyowner
Which of the following is NOT allowed in credit life insurance?
Creditor requiring that a debtor buys insurance from a certain insurer
Which of the following is NOT fundable by annuities?
Death benefits
An agent selling variable annuities must be registered with
FINRA
What does "level" refer to in level term insurance?
Face amount
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term rider
Which of the following policies is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy?
Graded premium whole life
What kind of policy issues certificates of insurance to insureds?
Group insurance
Which of the following annuity riders ensures investors will receive a set amount of income annually?
Guaranteed Minimum Income Benefit
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without providing insurability, the policy includes a
Guaranteed insurability rider
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?
Guaranteed surrender value
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
Joint and survivor
Which of the following statements is INCORRECT regarding IRAs?
Married couples are required to purchase a jointly owned IRA
One of the advantages of a family life insurance policy that provides coverage for children is that it
May be converted to permanent insurance for the children without requiring evidence of insurability
The right of the applicant to rescind the policy for a full refund of all premiums
Must be clearly stated in the policy's text
Which of the following documents must be provided to the policyowner or applicant during policy replacement?
Notice Regarding Replacement
Which of the following best describes a pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?
Reduction of Premium
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance
Replacement rule
Which of the following best describes taxation during the accumulation period of an annuity?
Taxes are deferred
All of the following employees may use a 403(b) plan for their retirement EXCEPT
The CEO of a private corporation
Upon death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does it mean?
The beneficiary will only receive payments of the interest earned on the death benefit
What method is used to determine the taxable portion of each annuity payment?
The exclusion ratio
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
Which of the following statements is TRUE concerning irrevocable beneficiaries?
They can be changed only with the written consent of that beneficiary
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium
The paid up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%
To which of the following products does the Replacement Regulation apply?
Whole life insurance
What is the minimum free-look period for newly issued life insurance policies in this state?
10 days
The notice to senior consumers regarding their right to cancel a policy must be printed on the cover or policy jacket in at least what type of print?
12 point bold print
During the cancellation period, an insurer must refund any premiums and policy fees within how many days of written cancellation notice by the insurer?
30
All insurance policies and annuity contracts delivered to senior citizens in the State of California are subject to a cancellation period of at least
30 days
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
50% tax on the amount not distributed as required
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death?
A minor son of the insured
A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from terminal illness or injury is called
Accelerated Benefit provision
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?
Cost of Living Rider
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called
Cost of living rider
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?
Distributions are taxable
Which of the following terms is used to name the non taxed return of unused premiums?
Dividend
Which of the following types of insurance covers the whole family in a single contract?
Family Policy
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income
Which of the following life insurance policies does NOT build cash value?
Guaranteed universal life
A Return of Premium term life policy is written as what type of term coverage?
Increasing
Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?
Insurer's guaranteed minimum rate of interest
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
Which of the following best describes annually renewable term insurance?
It is a level term insurance
In Modified Life policies, what happens to the premium?
It is level at the beginning and increases after the first few years
When a reduced paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary?
It will decrease the benefits paid to the beneficiary
An insured buys a 5 year level premium policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when the policy was originally purchased
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount
Concerning Juvenile Life Insurance, which of the following statements is INCORRECT?
Juvenile Life is classified as any life insurance purchased by a minor
Which of the following is an example of a limited-pay life policy?
Life-Paid-up at Age 65
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all life insurance policies that will be replaced
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One year term option
Which Universal Life option has gradually increasing cash value and a level death benefit?
Option A
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
Paid up additions
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
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value
All of the following are responsibilities of every long-term care insurer in California EXCEPT
Provide enough business to solicit long-term care insurance
An insured has the right to cancel a policy by written notification to the insurer. This notification may be mailed to the insurer or returned to the original agent who made the sale. Upon receipt of the cancellation request, the insurer will
Refund any premiums and policy fees within 30 days of notice if the policy is within the cancellation period specified by the insurer
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration
The following are features of the Indexed Universal Life EXCEPT
Sale of this product requires a securities license
All of the following topics may be included in the continuing education requirement for long-term care insurance EXCEPT
Sales techniques and overcoming client objectives in the purchase of long-term care insurance
A domestic insurer issuing variable contracts must establish one or more
Separate accounts
The ownership provision entitles the policyowner to do all of the following EXCEPT
Set premium rates
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
The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?
The cash value will be paid to the annuitant's estate
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to
The contingent beneficiary
Which of the following describes the tax advantage of a qualified retirement plan?
The earnings in the plan accumulate tax deferred
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.
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
The interest is not taxable since it remains inside the insurance policy
An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?
The interest will continue to accumulate tax deferred
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits
An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?
The policy will terminate when the loan amount with interest equals or exceeds the cash value
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account
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
Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?
They are tax free to terminally ill insured
The waiver of Cost of Insurance rider is found in what type of insurance?
Universal Life
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
The survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of premium
Every individual life insurance policy must provide for a free-look provision that lasts for at least
10 days
