Life practice exams 2-7

If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?

The loan amounts are deducted from the death benefit.

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

All of the following are true regarding a decreasing term policy EXCEPT

The payable premium amount steadily declines throughout the duration of the contract.

All of the following statements are true regarding installments for a fixed amount EXCEPT

The payments will stop when the annuitant dies.

All of the following are true about variable products EXCEPT

The premiums are invested in the insurer's general account.

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

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

The type of investment.

Which of the following statements is TRUE concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary.

What is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee.

When would life insurance policy proceeds be included in the insured's taxable estate?

When there are any incidents of ownership at the time of death

Which of the following types of policies will provide permanent protection?

Whole Life

Which of the following is a risk classification used by underwriters for life insurance?

standard

An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?

He will have to pay a penalty if he is younger than 59½.

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower.

Which of the following statements is TRUE concerning whole life insurance?

Lump-sum death benefits are not taxable.

An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceases the insured

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

Income tax on distributions and no penalty.

Who makes up the Medical Information Bureau?

Insurers

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval.

Which of the following applies to the 10-day free-look privilege?

It permits the insured to return the policy for a full refund of premiums paid.

If $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 annuitant died after receiving $200 monthly for 10 years ($24,000 total) from a $30,000 installment refund annuity. His wife, as beneficiary, will now receive the same monthly benefit until her payments total

$6,000.

A producer has been notified by the Commissioner to stop using an unapproved trade name. How many days does the producer have to change the trade name before having to pay an additional fine?

10 days

Temporary licenses can last for how long?

180 days

A nonresident producer moves to another state. The producer must notify the Department of Insurance of the address change within how many days?

30

Insurer examinations must occur no less frequently than every

5 years.

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance.

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

A debtor has an insurable interest in the life of a lender.

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

A policy summary

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

It will pay double or triple the face amount.

Which of the following settlement options in life insurance is known as straight life?

Life income

Which of the following producers will be required to complete continuing education hours to renew his license?

A producer licensed 4 years ago who holds only one line of authority

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

All of the following are penalties for violating the statutes pertaining to sharing of commissions EXCEPT

Additional continuing education in ethics.

A producer's license has been revoked a second time for violating the Insurance Code. When can the producer apply for a new license?

After the revocation period

The death protection component of Universal Life Insurance is always

Annually Renewable Term

What type of life insurance is most commonly used for group plans?

Annually renewable term

When an annuity is written, whose life expectancy is taken into account?

Annuitant

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT

Applicant's past income.

Which of the following is the basic source of information used by the company in the risk selection process?

Application

SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees.

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

Automatic premium loan

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

What limits the amount that a policyowner may borrow from a whole life insurance policy?

Cash value

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases an insurance policy from the bank in the amount of the loan. This is an example of

Coercion

Which of the following is TRUE about credit life insurance?

Creditor is the policyowner.

The term "fixed" in a fixed annuity refers to all of the following EXCEPT

Death benefit

Which of the following is NOT fundable by annuities?

Death benefits

Which of the following is NOT an example of a valid insurable interest?

Debtor in the life of the creditor

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

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Discrimination

Which of the following would most directly affect the purchasing power of benefits paid on a fixed annuity?

Economic inflation

All of the following statements are true regarding tax-qualified annuities EXCEPT

Employer contributions are not tax deductible.

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.

What does "level" refer to in level term insurance?

Face Amount

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

From trustee to trustee

In life insurance policies, cash value increases

Grow tax deferred.

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

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report.

Using a class designation for beneficiaries means

Naming beneficiaries as a group.

All of the following are factors that an underwriter could use to select and classify risk EXCEPT

National origin.

Which of the following is not true, regarding the needs approach method of determining the value of an individuals life?

Need is predicted using the number of years until the insured's retirement

Under a pure life annuity, an income is payable by the company

Only for the life of the annuitant.

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 NOT true about a joint and survivor annuity benefit option?

Payments stop after the first death among the annuitants.

An insurer wants to obtain information from investigators regarding an applicant for insurance. What must insure do in order to legally acquire this information?

Present the insured with disclosure authorization notice.

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

Which of the following best describes a pure life annuity settlement option?

Pure life provides payments for as long as the annuitant is alive.

Another name for a substandard risk classification is

Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.

A producer in another state wants to become a producer in Louisiana. The other state gives the same privileges to Louisiana producers wanting to be licensed in that state as it does to its own producers. Louisiana, therefore, extends the licensing privileges to the prospective producer of the other state. What is this called?

Reciprocity

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

If an agent fails to obtain an applicant's signature on the application, the agent must

Return the application to the applicant for a signature.

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

SEPs are suitable for large companies.

After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

All of the following would be different between qualified and nonqualified retirement plans EXCEPT

Taxation on accumulation

All of the following employees may use a 403(b) plan for their retirement EXCEPT

The CEO of a private corporation.

If a producer is suspected of acting in violation of the Insurance Code, what authority would preside over a legal hearing regarding the matter?

The Commissioner

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?

The amount of the distribution is reduced by the amount of a 20% withholding tax.

All of the following statements about equity index annuities are correct EXCEPT

The annuitant receives a fixed amount of return.

The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

The beneficiary will receive the greater of the money paid into the annuity or the cash value.

Which of the following statements about group life is correct?

The cost of coverage is based on the ratio of men and women in the group.

Which of the following is TRUE regarding the insurance amount in a credit life policy?

The creditor can only insure the debtor for the amount owed.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability.

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?

The insurance company's general account

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 EXCEPT

The insured's age at death.

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate.

Which of the following are generally NOT considered when underwriting group insurance?

The insureds' medical history