Life/Health Chapters 5-7
What is the term for a policy element that adds or takes away coverage? Select one: a. Policy b. Contract c. Rider d. Clause
The correct answer is: Rider
All of the following are ownership rights, EXCEPT: Select one: a. Right to name a beneficiary b. Right to take out a policy loan c. Right to make changes to the policy d. Right of assignment
The correct answer is: Right to make changes to the policy
The insuring clause of a policy includes all of the following, EXCEPT: Select one: a. The names of covered individuals b. The amount of the policy premium c. The effective date of the policy d. The period of coverage of the policy
The correct answer is: The amount of the policy premium
All of the following statements are true about the accidental death benefit (ADB), EXCEPT: Select one: a. The amount paid is one half of the face amount of the life insurance policy. b. The policy pays an additional sum if the insured dies due to an accident. c. The insured must die within a certain time period after the accident (usually 90 days). d. The accidental death benefit does not build cash value.
The correct answer is: The amount paid is one half of the face amount of the life insurance policy.
What happens if an insured commits suicide 3 years after the policy inception? Select one: a. No benefit is paid. b. The death benefit is paid. c. The premiums are refunded. d. Nothing
The correct answer is: The death benefit is paid.
When Dakota's life insurance policy was written, it stated on the policy that Dakota was male. However, Dakota is female. On average, women tend to live several years longer than men. When Dakota died this misstatement was discovered. How did this impact the policy? Select one: a. The premium was increased. b. The death benefit was increased. c. The death benefit was lowered. d. The premium was lowered.
The correct answer is: The death benefit was increased.
All of the following are true regarding group term life insurance, EXCEPT: Select one: a. Group life insurance is most often issued as guaranteed annual renewable term. b. The policy is issued for one year and may be renewed annually with evidence of insurability. c. Premiums may be raised at renewal d. Group term insurance may cover the insured's dependents, such as a spouse and children.
The correct answer is: The policy is issued for one year and may be renewed annually with evidence of insurability.
Of the following individuals, who has the right to change the beneficiary designations in a life insurance policy? Select one: a. The insured b. The policyowner c. The revocable beneficiary d. The insurance company
The correct answer is: The policyowner
Annuities protect against: Select one: a. The risk of prolonged life b. The risk of premature death c. The risk of accident or sickness d. The risk of disability
The correct answer is: The risk of prolonged life
All of the following statements regarding annuities are true, EXCEPT: Select one: a. The more guarantees an annuity has, the lower the annuity payment. b. Life annuities provide income that an annuitant cannot outlive. c. Upon annuitization, cash value taken in one lump-sum is not taxable. d. The annuity certain does not guarantee life income.
The correct answer is: Upon annuitization, cash value taken in one lump-sum is not taxable.
For which of the following annuities must an agent have a securities license in order to sell? Select one: a. Variable annuity b. Equity indexed annuity c. SPDA d. Fixed annuity
The correct answer is: Variable annuity
Extended term is another option of the nonforfeiture provision. If Clarice opts to no longer pay the premiums on her $100,000 whole life policy and exchanges it for an extended term policy, what will be the face value of the term insurance policy? Select one: a. $10,000 b. $25,000 c. $50,000 d. $100,000
The correct answer is: $100,000
What is the minimum participation rate of eligible employees for non-contributory plans? Select one: a. 100% b. 75% c. 50% d. 67%
The correct answer is: 100%
How long is the loan period on STOLI arrangements? Select one: a. 2 years b. 1 year c. 3 years d. 4 years
The correct answer is: 2 years
In most states, the period of contestability for material misrepresentations made on a life insurance application is: Select one: a. 90 days b. 2 years c. 10 days d. 3 years
The correct answer is: 2 years
ABC Insurer sells a $500,000 single premium immediate annuity to four different people. Who receives the largest check? Select one: a. 18-year old female b. 25-year old male c. 60-year old female d. 60-year old male
The correct answer is: 60-year old male
The principal sum of a AD&D rider attached to a life insurance policy pays: Select one: a. A principal sum if the insured loses one leg b. A principal sum if the insured loses both arms c. A principal sum if the insured loses one hand d. A principal sum if the insured loses vision in one eye
The correct answer is: A principal sum if the insured loses both arms
Immediate annuities must be purchased with: Select one: a. A single premium b. Level premiums c. Flexible premiums d. A single premium only after the annuitant reaches the age of 59
The correct answer is: A single premium
All of the following are nonforfeiture options, EXCEPT: Select one: a. Cash surrender value b. Reduced paid-up insurance c. Accumulate at interest d. Extended term
The correct answer is: Accumulate at interest
Which of the following classifications of employees is not used for the purpose of determining group insurance eligibility? Select one: a. Full-time or part-time/seasonal b. Salaried or hourly c. Union or non-union d. Age or gender
The correct answer is: Age or gender
The amount of each monthly payment for a straight life annuity is based on the annuitant's: Select one: a. Age b. Sex c. Age and sex d. Age, sex, and amount of money in the annuity upon annuitization
The correct answer is: Age, sex, and amount of money in the annuity upon annuitization
Premiums for a joint and survivor life annuity are based on the annuitants': Select one: a. Ages only b. Sex only c. Ages and sex d. Ages, sex and geographic location
The correct answer is: Ages and sex
Which of the following is a personal use of annuities? Select one: a. Life income b. IRAs c. Tax-deferred growth/cash accumulation d. All of the above
The correct answer is: All of the above
The person who receives annuity payments is the: Select one: a. Insurer b. Contract owner c. Beneficiary d. Annuitant
The correct answer is: Annuitant
What is the term given to the person receiving annuity payments? Select one: a. Receiver b. Payor c. Annuitant d. None of the above
The correct answer is: Annuitant
Many factors are taken into consideration when determining the premiums for an annuity. These factors include all but: Select one: a. Annuitant's age b. Annuitant's sex c. Annuitant's ethnicity d. Annuitant's payout amoun
The correct answer is: Annuitant's ethnicity
All of the following are factors that determine the annuity payout amount, EXCEPT: Select one: a. Annuity cash accumulation b. Loading c. Annuitant's marital status d. Annuitant's age
The correct answer is: Annuitant's marital status
Who are the named individuals or entities the policyowner designates to receive life insurance policy proceeds upon the insured's death? Select one: a. Insureds b. Policyowners c. Insurers d. Beneficiaries
The correct answer is: Beneficiaries
Which life insurance dividend option does not increase a policy's cash value? Select one: a. Cash payment b. Paid-up insurance c. Paid-up additions d. All the above
The correct answer is: Cash payment
If used, this nonforfeiture option does not allow the policyowner to reinstate the original policy: Select one: a. All nonforfeiture options b. Cash surrender value c. Extended term d. Reduced paid-up
The correct answer is: Cash surrender value
Which of the following is a beneficiary designation based on a group of people with shared characteristics? Select one: a. Class designation b. Individual c. Trust d. Blanket group
The correct answer is: Class designation
Julie applies for a life insurance policy. Her consideration consists of: Select one: a. Application b. Initial premium c. Completed application and initial premium d. Statements made on the application and promise to pay premiums
The correct answer is: Completed application and initial premium
What is the term attributed to the balance of a deferred annuity paid to a beneficiary if the annuitant dies during the accumulation phase of a deferred annuity? Select one: a. Nonforfeiture options b. Surrender charges c. Death benefits d. Annuitization
The correct answer is: Death benefits
What is a disadvantage of fixed annuities? Select one: a. Knowing the exact amount of each annuity payment b. Potential for higher interest earnings c. Earning potential may not be enough to offset the effects of inflation d. Investment in the insurer's separate account, which has the potential for higher yields
The correct answer is: Earning potential may not be enough to offset the effects of inflation
What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage? Select one: a. None b. Cash surrender value c. Extended term d. Reduced paid-up insurance
The correct answer is: Extended term
Which nonforfeiture option is the "automatic" option? Select one: a. None b. Extended term option c. Reduced paid-up d. Cash surrender
The correct answer is: Extended term option
Which of the following is life insurance that covers federal employees? Select one: a. Group life b. Group health c. SGLI d. FEGLI
The correct answer is: FEGLI
Which annuity provides a guaranteed minimum rate of return? Select one: a. Single premium immediate annuity b. Single premium deferred annuity c. Fixed annuity d. Variable annuity
The correct answer is: Fixed annuity
Which of the following is characteristic of fixed annuities? Select one: a. Variable interest rates during the pay-in period b. Fixed interest rates during the payout period c. Annuity payment amounts are flexible. d. Premiums are invested in the insurer's separate account.
The correct answer is: Fixed interest rates during the payout period
All of the following are standard provisions under a group life insurance policy, EXCEPT: Select one: a. Grace period of 61 days b. 2-year contestability period c. Entire contract consists of the policy and application d. Conversion right
The correct answer is: Grace period of 61 days
Withdrawals or partial surrenders can be made on the cash value of a universal life policy. Which of the following is specified in the policy? Select one: a. How to convert the withdrawal to a loan b. How much can be withdrawn c. The amount of tax on the withdrawal, if it is over basis d. Timing on repaying the withdrawal
The correct answer is: How much can be withdrawn
Under what conditions will the waiver of premium rider pay benefits? Select one: a. If the insured is disabled b. If the insured is partially disabled c. If the insured is totally disabled d. If the insured is totally and permanently disabled
The correct answer is: If the insured is totally and permanently disabled
Of the following life insurance settlement options, which pays only the interest earned on the principal in periodic payments? Select one: a. Life income b. Fixed-amount installment c. Joint and survivor d. Interest-only
The correct answer is: Interest-only
Which of the following settlements of a life insurance policy is taxable? Select one: a. Lump sum b. Paid up additions c. Interest-only d. Double indemnity
The correct answer is: Interest-only
Which of the following annuity payout options pays benefits to two annuitants, where payments will be made to the surviving annuitant for life upon the first annuitant's death? Select one: a. Joint and survivor b. Period certain c. Straight life d. None of the above
The correct answer is: Joint and survivor
Which of the following in not an annuities classification that fits into the structure and design of an annuity? Select one: a. Funding method b. Date income payments begin c. Law of large numbers d. Investment configuration
The correct answer is: Law of large numbers
Some riders can affect the death benefit of a life insurance policy. Which of the following riders can decrease the death benefit? Select one: a. Payor rider b. Waiver of premium rider c. Long-term care rider d. Family term rider
The correct answer is: Long-term care rider
Marty purchases an annuity for his younger brother, Jacob. If Jacob is the person who will be receiving annuity payments, which of the following statements is true? Select one: a. Marty is the contract owner and annuitant. b. Jacob is the contract owner and annuitant. c. Marty is the annuitant and Jacob is the contract owner. d. Marty is the contract owner and Jacob is the annuitant.
The correct answer is: Marty is the contract owner and Jacob is the annuitant.
What type of group insurance plan allows the policyowner to pay the minimum amount of premium for anticipated claims and the insurer pays the excess? Select one: a. Minimum premium b. Retrospective premium c. Shared-funding d. Administrative Services Only (ASO)
The correct answer is: Minimum premium
All of the following are characteristics of tax-sheltered annuities, EXCEPT: Select one: a. Tax-sheltered annuities are available to tax-exempt nonprofit organizations and public schools. b. The employer establishes the tax-sheltered annuity and contributions made by employees are non-taxable. c. The purpose of tax-sheltered annuities is to save money for retirement income. d. Money invested in a tax-sheltered annuity is taxable upon deposit.
The correct answer is: Money invested in a tax-sheltered annuity is taxable upon deposit.
Group insurance plans in which the policyowner pays all of the premiums are called: Select one: a. Contributory plans b. Non-contributory plans c. Fully contributory plans d. Payor plans
The correct answer is: Non-contributory plans
The automatic dividend option is: Select one: a. Paid-up additions b. Cash payment c. One-year term d. Paid-up insurance
The correct answer is: Paid-up additions
This dividend option provides additional permanent coverage: Select one: a. Paid-up additions b. One-year term c. Accumulate at interest d. Cash payment
The correct answer is: Paid-up additions
What are the two phases of an annuity? Select one: a. Income phase and payout phase b. Pay-in phase and payout phase c. Accumulation phase and pay-in phase d. None of the above
The correct answer is: Pay-in phase and payout phase
Which annuity payout option has a distinct beginning and ending? Select one: a. Cash b. Lump-sum c. Life annuity d. Period certain
The correct answer is: Period certain
Which of the following is not a payout option that pays the annuitant for life? Select one: a. Period certain option b. Cash refund c. Installment refund d. Life annuity with period certain
The correct answer is: Period certain option
What is the term used to describe a group's ability to pay premiums and renew group coverage? Select one: a. Persistency b. Continuity c. Consistency d. Payability
The correct answer is: Persistency
If an irrevocable beneficiary is named on a life insurance policy, all of the following statements are true, EXCEPT: Select one: a. The policy owner pays the premium. b. Irrevocable beneficiaries must consent to the policy owner canceling the policy. c. Policy owners need consent to assign the policy. d. Policy owners can borrow from cash value without consent.
The correct answer is: Policy owners can borrow from cash value without consent.
What are the most common uses of annuities? Select one: a. Providing temporary income b. Paying health insurance costs c. Paying life insurance premiums d. Providing lifetime income and accumulating money
The correct answer is: Providing lifetime income and accumulating money
What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value? Select one: a. Extended term b. Cash surrender value c. Reduced paid-up insurance d. None
The correct answer is: Reduced paid-up insurance
Which of the following is not a dividend option? Select one: a. Reduction of premium payments b. Paid-up additions c. Reduced paid-up insurance d. Cash payments
The correct answer is: Reduced paid-up insurance
Adrian bought an annuity for herself. After a few years, she begins to receive annuity payments. When she dies, her best friend will receive the balance of principal. Which of the following annuities best describes the annuity Adrian bought? Select one: a. Refund life b. Straight life c. Joint and survivor life d. All of the above
The correct answer is: Refund life
The Common Disaster Clause: Select one: a. Assumes that in a common accident involving the insured and primary beneficiary, the primary beneficiary is assumed to have died first b. Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit in a common disaster between the insured and the primary beneficiary c. Pays double the death benefit d. Cancels and voids a life insurance polic
The correct answer is: Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit in a common disaster between the insured and the primary beneficiary
An insured commits suicide while the suicide clause is in effect. What will the insurer do? Select one: a. Pay the death benefit b. Pay half the death benefit c. Return all premiums to the beneficiary d. Return all premiums plus interest to the beneficiary
The correct answer is: Return all premiums to the beneficiary
Mr. Brown committed suicide during the suicide clause of his insurance policy. The insurance company will: Select one: a. Cancel and void the policy b. Keep the entire death benefit c. Pay only the death benefit d. Return all premiums to the beneficiary
The correct answer is: Return all premiums to the beneficiary
Variable annuities have: Select one: a. Variable interest rates and benefits b. Fixed interest rates and benefits c. Fixed premiums d. Level benefits
The correct answer is: Variable interest rates and benefits
Collin buys a fixed deferred annuity. Upon annuitization, he chooses the life annuity with period certain payout option. Collin will receive $3,000 each month with a 15-year certain period. If Collin dies after seven years, how much will his beneficiary receive? Select one: a. $0 b. $252,000 c. $288,000 d. $540,000
The correct answer is: $288,000
The appropriate rider allows premium payments to be waived in the event of disability. What is the normal waiting period for premiums to be waived? Select one: a. 30 days b. 60 days c. 3 or 6 months d. 1 year
The correct answer is: 3 or 6 months
What is the standard number of days allotted to an employee to convert their group life policy to an individual life policy? Select one: a. 15 b. 31 c. 46 d. 60
The correct answer is: 31
How long must an individual have been insured under the group life insurance plan in order to be eligible for the conversion privilege? Select one: a. 6 months b. 12 months c. 5 years d. 10 years
The correct answer is: 5 years
All of the following are true of the straight life income option for annuities, EXCEPT: Select one: a. The straight life income option provides the largest periodic benefit. b. Payments stop upon the annuitant's death. c. A beneficiary will receive any balance of the annuity upon the annuitant's death. d. Payments consist of principal and interest.
The correct answer is: A beneficiary will receive any balance of the annuity upon the annuitant's death.
Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use? Select one: a. Cash surrender value b. Accumulation at interest c. Extended term d. None of the above
The correct answer is: Accumulation at interest
The phase during which premiums are paid into the annuity is the: Select one: a. Annuity phase b. Accumulation phase c. Annuitization phase d. Payout period phase
The correct answer is: Accumulation phase
What is the term that refers to the period of time in which premiums are paid into an annuity? Select one: a. Annuitization phase b. Payout period c. Accumulation phase d. Annuity phase
The correct answer is: Accumulation phase
What type of group health insurance plan is self-funded, but an insurer processes the claims? Select one: a. Minimum premium b. Retrospective premium c. Shared-funding d. Administrative Services Only (ASO)
The correct answer is: Administrative Services Only (ASO)
All of the following statements are correct, EXCEPT: Select one: a. With the cash refund option, the beneficiary receives the balance of premiums plus interest minus benefits paid in a lump-sum. b. All annuities have an annuity period, but may not have an accumulation period. c. The fixed period installment annuity makes periodic payments for a set period of time. d. All annuities are qualified.
The correct answer is: All annuities are qualified.
Gail has no children and has decided to make a gift of her life insurance to her alma mater. This type of assignment is voluntary and also usually absolute and complete. Specifics of this type of assignment include: Select one: a. The policyowner cannot recover surrendered rights. b. All the rights of the policy are assigned. c. All of the above d. The assignee has the right to use the cash value of the policy.
The correct answer is: All of the above
Life insurance policies that pay dividends are referred to as "participating policies". Participating policies pay dividends to policyholders. Which of the following is a true statement about dividends? Select one: a. Dividends are not taxable. b. Dividends are usually paid on an annual basis. c. Dividends are actually a return of overcharged premiums. d. All of the above
The correct answer is: All of the above
The surrender nonforfeiture option for annuities is: Select one: a. Only available for immediate annuities b. Not available for deferred annuities c. An option for contract owners who want to surrender the annuity, and receive the entire amount of premiums paid into the annuity minus surrender charges and prior withdrawals d. Typically refunded to the contract owner in periodic monthly payments
The correct answer is: An option for contract owners who want to surrender the annuity, and receive the entire amount of premiums paid into the annuity minus surrender charges and prior withdrawals
What is the term describing when the annuity's total cash value is converted into income payments? Select one: a. Accumulation phase b. Annuity phase c. Annuitization d. Pay-in period
The correct answer is: Annuitization
Which of the following best describes a contract in which the sole purpose is the systematic liquidation of accrued assets through periodic payments? Select one: a. Life insurance policy b. Annuity c. Modified endowment contract d. Qualified plan
The correct answer is: Annuity
Which life insurance rider affecting the policy's death benefit protects against the chance of depleting income during prolonged life? Select one: a. Annuity rider b. Cost of living rider c. Term rider d. Guaranteed insurability
The correct answer is: Annuity rider
What accounting unit is used during the annuity phase of a variable annuity? Select one: a. Accumulation unit b. Annuity unit c. Premium unit d. Contract unit
The correct answer is: Annuity unit
All of the following are true of the life with period certain annuity payout option, EXCEPT: Select one: a. The annuitant is provided with guaranteed income for life. b. Payments are guaranteed for a minimum number of years. c. Any balance in the annuity fund after the period certain ends is refunded to a beneficiary. d. The life with period certain option does not guarantee the full value of the annuity will be paid out.
The correct answer is: Any balance in the annuity fund after the period certain ends is refunded to a beneficiary.
Alex purchases a single premium immediate annuity on March 1. If he elects monthly annuity payments, when will he receive his first annuity payment? Select one: a. March 15th b. March 31st c. April 1st d. May 1st
The correct answer is: April 1st
All of the following are life insurance settlement options, EXCEPT: Select one: a. Interest only b. Fixed-period installments c. Automatic premium loan d. Life income
The correct answer is: Automatic premium loan
How do annuities provide guaranteed income for life? Select one: a. By systematically liquidating an estate b. By paying monthly disability income benefits c. By paying a lump-sum death benefit d. None of the above
The correct answer is: By systematically liquidating an estate
Lucas purchased an annuity for himself. He begins to receive annuity payments. If the amount of premium in the annuity has not been paid out upon his death, then his grandson will receive the balance. What type of annuity does Lucas have? Select one: a. Straight life b. Period Certain c. Cash Refund option d. Joint and survivor life
The correct answer is: Cash Refund option
What are the two types of refund life annuity payout options? Select one: a. Single life and multiple lives b. Cash refund and installment refund c. Life annuity with period certain and straight life d. Fixed period installment and fixed amount installment
The correct answer is: Cash refund and installment refund
Which of the following nonforfeiture options does not allow the insured to reinstate the policy: Select one: a. None b. Extended term option c. Reduced paid-up d. Cash surrender
The correct answer is: Cash surrender
All of the following statements are false regarding who may make modifications to a life insurance policy, EXCEPT: Select one: a. Modifications can be made by any employee of the insurer. b. Insurance producers can make any policy change. c. Only the insurer has the right to request changes to a policy. d. Changes to the policy can only be implemented by an executive officer of the insurer.
The correct answer is: Changes to the policy can only be implemented by an executive officer of the insurer.
Which clause states that the policy owner must pay something of value for the insurer's promise to pay benefits? Select one: a. Reinstatement clause b. Insuring clause c. Entire Contract clause d. Consideration clause
The correct answer is: Consideration clause
The person who owns the annuity and pays the premiums is the: Select one: a. Contract owner b. Annuitant c. Beneficiary d. Annuity
The correct answer is: Contract owner
The value of each accumulation unit varies: Select one: a. Daily b. Monthly c. Semiannually d. Annually
The correct answer is: Daily
All of the following are true regarding deferred annuities, EXCEPT: Select one: a. Deferred annuities have a payout period that begins after one year, or after many years from the annuity's purchase date. b. Deferred annuities must be purchased with multiple premium payments. c. During the accumulation period, the principal earns compound interest on a tax deferred basis. d. Deferred annuities are frequently used to build retirement funds.
The correct answer is: Deferred annuities must be purchased with multiple premium payments.
What would an insurance company do if an insured commits suicide within the contracts contestable period? Select one: a. Deny the claim due to the suicide clause b. Pay the claim in full c. Pay half the claim d. Return half the premiums
The correct answer is: Deny the claim due to the suicide clause
All of the following is true regarding lump-sum payment of life insurance policy proceeds, EXCEPT: Select one: a. Distribution is taxed. b. Distribution is not taxed. c. The policyowner has the right to select the settlement option. d. Cash payment, or lump-sum payment, is still a common way of receiving life insurance policy proceeds.
The correct answer is: Distribution is taxed.
All of the following statements are true regarding the annuity phase of an annuity, EXCEPT: Select one: a. Annuitization happens after the accumulation period and right before the annuity period. b. Upon annuitization, the annuity's total cash value is converted into income payments. c. Annuity payments are made monthly, quarterly, semiannually or annually. d. Each annuity payment is comprised of principal only.
The correct answer is: Each annuity payment is comprised of principal only.
Of the following, who will receive the largest monthly annuity benefit from a $100,000 single premium immediate annuity with 5-year period certain: Jane, age 40; Paul, age 40; or William, age 70? Select one: a. Paul b. Jane c. William d. Each receives the same amount
The correct answer is: Each receives the same amount
What is the term for the period when an individual is eligible for coverage under a contributory plan and may enroll in the group plan? Select one: a. Probationary period b. Eligibility period c. Elimination period d. Open enrollment period
The correct answer is: Eligibility period
All of the following statements are true of group life insurance contracts, EXCEPT: Select one: a. Insureds do not own the policy. b. The group must exist naturally. c. Enrollees must provide proof of insurability. d. Premiums are based on the claims experience of the group as a whole.
The correct answer is: Enrollees must provide proof of insurability.
Which provision prevents the insurer from making changes to a contract by citing documents not included in the policy itself? Select one: a. Entire Contract provision b. Free Look provision c. Reinstatment provision d. Incontestability clause / provision
The correct answer is: Entire Contract provision
When the extended term option is used, the face amount is: Select one: a. Equal to the original coverage b. Lower than the original coverage c. Higher than the original coverage d. The amount the cash value can purchase for the extended policy term
The correct answer is: Equal to the original coverage
Which of the following fixed annuities has a minimum rate of return and a current rate of return that is connected to the S&P 500? Select one: a. Fixed annuity b. Market value adjusted annuity c. FPDA d. Equity indexed annuity
The correct answer is: Equity indexed annuity
All of the following are true regarding group life insurance contracts, EXCEPT: Select one: a. They have a grace period. b. Members have the right to convert their policy. c. Evidence of insurability is never required for enrollment. d. The application may be attached to the policy.
The correct answer is: Evidence of insurability is never required for enrollment.
Which of the following is the method for rating group insurance premiums based on the prior claim history of the group? Select one: a. Experience rating b. Community rating c. Group rating d. Claims rating
The correct answer is: Experience rating
This annuity does not guarantee a life income, but pays a specific amount to the annuitant periodically: Select one: a. Fixed period installment annuity b. Fixed amount installment annuity c. Temporary annuity certain annuity d. Market value adjusted annuity
The correct answer is: Fixed amount installment annuity
Group insurance plans for non-employer groups in which the insured pays all the premiums are called: Select one: a. Contributory plans b. Non-contributory plans c. Fully contributory plans d. Payee plans
The correct answer is: Fully contributory plans
The stipulated period of time, allotted by the insurance company, to allow a policyholder to make an overdue payment while the policy remains in force and coverage is provided is called the _____________. Select one: a. Reinstatement clause b. Grace period c. Loan provision d. Consideration clause
The correct answer is: Grace period
Randy drives racecars and scuba dives in his spare time. Will he be able to purchase life insurance with these types of hobbies? Select one: a. He will not be able to purchase life insurance. b. He will be able to purchase life insurance but his premiums will be higher. c. The insurance company will make him carry extra insurance because of his hobbies. d. Yes, his hobbies will not impact the death benefit or premiums.
The correct answer is: He will be able to purchase life insurance but his premiums will be higher.
In addition to being a commercial pilot, Michael also flies his own private small plane. What will most likely happen when he applies for life insurance? Select one: a. The policy will exclude coverage for private aviation activities. b. He will be charged a higher premium to compensate for the added risk. c. He will not be able to buy life insurance. d. He will need to quit flying.
The correct answer is: He will be charged a higher premium to compensate for the added risk.
Chuck is in the military. How does this affect payment of the death benefit on his life policy? Select one: a. His military service does not affect the death benefit. b. His policy excludes death while on active military service. c. Death due to an act of war is not excluded. d. He will not be able to purchase life insurance.
The correct answer is: His policy excludes death while on active military service.
The two broad categories of annuities are ________ and ________ based on when the annuity phase begins. Select one: a. SPDA; SPIA b. SPIA; immediate c. Deferred; SPDA d. Immediate; deferred LH92014 Feedback
The correct answer is: Immediate; deferred
This provision identifies the named insured, type, and amount of coverage provided by the policy: Select one: a. Insuring clause b. Execution clause c. Consideration clause d. Policy face
The correct answer is: Insuring clause
A settlement option that would leave the proceeds of the insurance policy with the insurer and the insurer would pay interest to the beneficiary on an installment basis is called: Select one: a. Fixed period option b. Interest only option c. Life income option d. Withdrawal provision
The correct answer is: Interest only option
Which of the following explanations best describes the purpose of the waiver of premium provision of a life insurance policy? Select one: a. It decreases the monthly amount of an insured's premium payments. b. It decreases the frequency of an insured's premium payments. c. It waives the insured's premiums if the insured becomes disabled. d. It waives the insured's premiums if the insured is totally disabled before a specified age.
The correct answer is: It waives the insured's premiums if the insured is totally disabled before a specified age.
Annette and John are married and have an annuity in which payments will reduce to 2/3 of the original amount upon the death of the first annuitant. What annuity do they have? Select one: a. Joint life annuity b. Joint and 2/3 life annuity c. Joint and 1/2 life annuity d. Joint and survivor annuity
The correct answer is: Joint and 2/3 life annuity
Of the following settlement options for life insurance, which can result in the insurer paying more in benefits than the principal plus interest? Select one: a. Interest only b. Fixed-installment c. Fixed-period d. Life income
The correct answer is: Life income
Annuities perform the opposite function of: Select one: a. Life insurance b. Disability income c. Medical expense insurance d. Retirement plans
The correct answer is: Life insurance
Of the following, who will receive the largest monthly annuity benefit from a $100,000 single premium immediate annuity? Select one: a. Woman, age 40 b. Man, age 40 c. Woman, age 70 d. Man, age 70
The correct answer is: Man, age 70
Jennifer is trying to add her insurance premium payments to her budget. All of the following are accepted payment mode options, EXCEPT: Select one: a. When she feels like it b. Quarterly c. Monthly d. Annually
The correct answer is: When she feels like it
Which of the following is not true about the impact of the annuitant's sex on the premium payments? Select one: a. Men live more dangerously so their premiums are higher. b. Women live longer than men, so their premiums are higher. c. Both of the above. d. Neither of the above.
The correct answer is: Men live more dangerously so their premiums are higher.
The Guaranteed Insurability Rider, or GIR, allows the insured to buy: Select one: a. More insurance coverage at any time b. More insurance coverage at specified points in the future, without proof of insurability c. More insurance coverage when the insured retires, upon request by the insured d. More insurance coverage when the insured loses their job, with proof of insurability
The correct answer is: More insurance coverage at specified points in the future, without proof of insurability
Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value? Select one: a. Insuring clause b. Settlement option c. Nonforfeiture option d. Dividend option
The correct answer is: Nonforfeiture option
Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid? Select one: a. Assignment clause b. Nonforfeiture option c. Consideration clause d. Insuring clause
The correct answer is: Nonforfeiture option
George bought a $300,000 whole life policy when he was employed as a bank teller. Four years later, he changes jobs and begins working in a coal mine. If he is killed while working in the mine, what will the insurer do? Select one: a. Deny the claim because the insured's occupation listed in the application did not match the insured's actual occupation b. Void the policy c. Void the policy and return all premiums with interest to the insured's beneficiary d. Pay the claim
The correct answer is: Pay the claim
Marcella purchases a modified life insurance policy at the age of 31. Thinking she could get a slightly better rate on her policy, she lists her age as 21. If the insurance company discovers the error upon Marcella's death, what action will the insurance company take? Select one: a. Pay the death benefit based on Marcella's actual age b. Refund the premiums paid without interest c. Void the policy for misrepresentation and fraud d. Pay the full death benefit
The correct answer is: Pay the death benefit based on Marcella's actual age
Of the following life insurance policy riders, which does not alter the amount of the death benefit? Select one: a. Cost of living b. Return of premium c. Term d. Payor
The correct answer is: Payor
Pete's Plant Company purchases an annuity for its key employee. Which of the following statements is true? Select one: a. Pete's Plant Company is the annuitant and contract owner. b. Pete's Plant Company is the contract owner and the key employee is the annuitant. c. The key employee is the contract owner and annuitant. d. Pete's Plant Company is the annuitant and the key employee is the contract owner.
The correct answer is: Pete's Plant Company is the contract owner and the key employee is the annuitant.
Mary and Philip are married. Philip named Mary as the primary beneficiary of his life insurance policy. His children from a prior marriage are contingent beneficiaries. Under the Uniform Simultaneous Death Act, who will receive the death benefit if Mary and Philip are in a car accident and there is no evidence of who died first? Select one: a. Mary's estate b. Philip's estate c. Mary's children from her prior marriage d. Philip's children from his prior marriage
The correct answer is: Philip's children from his prior marriage
The insured and the primary beneficiary are killed in a car accident. Which of the following is true according to the Uniform Simultaneous Death Act? Select one: a. Policy proceeds are paid as if the insured died first. b. Policy proceeds are paid as if the primary beneficiary died first. c. Policy proceeds are always paid to the primary beneficiary's estate. d. Even if the insured dies first, the primary beneficiary must outlive the insured by a certain number of days in order for the policy proceeds to be paid to the primary beneficiary's estate.
The correct answer is: Policy proceeds are paid as if the primary beneficiary died first.
In employer-sponsored group insurance, the employer is the _______________, and the employee is the _______________. Select one: a. Policyowner; insured b. Policyowner; beneficiary c. Insured; policyowner d. Insured; beneficiary
The correct answer is: Policyowner; insured
All of the following statements are true regarding the accumulation period in an annuity, EXCEPT: Select one: a. The accumulation period is the pay-in period. b. During the accumulation period, the contract owner makes premium payments into the annuity. c. During the accumulation period, the principal earns compound interest. d. Premiums are paid with pre-tax dollars.
The correct answer is: Premiums are paid with pre-tax dollars.
Which of the following statements is true regarding the taxation of premiums and interest in annuities? Select one: a. Principal (premiums) is paid with pre-tax dollars; interest is taxable income during the payout phase. b. Principal (premiums) is paid with after-tax dollars; interest is not taxable income during the payout phase. c. Principal (premiums) is paid with pre-tax dollars; interest is not taxable income during the payout phase. d. Principal (premiums) is paid with after-tax dollars; interest is taxable income during the payout phase.
The correct answer is: Principal (premiums) is paid with after-tax dollars; interest is taxable income during the payout phase.
What is the primary purpose of the entire contract provision in a life insurance policy? Select one: a. Provide specifics on when the premium are due b. Provide specifics on how premiums are paid c. Provide assurance that the policyholder has all necessary policy documents in their possession d. Provide details of policy loan provision
The correct answer is: Provide assurance that the policyholder has all necessary policy documents in their possession
Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment? Select one: a. Reduction of premium payments b. Accumulation at interest c. One-year term d. Paid-up additions
The correct answer is: Reduction of premium payments
Jon's life insurance policy contains a disability income benefit that will pay him a periodic income in the event he becomes disabled. What factor determines the amount of the benefit? Select one: a. If it is paid weekly b. The face amount of the policy c. If it is paid monthly d. The nature of the disability
The correct answer is: The face amount of the policy
If a policy loan is unpaid, the automatic premium loan provision has the effect of deducting the amount of the loan with interest from the death benefit. What should the policyowner do to avoid this reduction in the death benefit? Select one: a. Repay the loan with interest b. Nothing c. Repay the loan d. Supply the insurance company with proof of insurability
The correct answer is: Repay the loan with interest
Which life insurance rider pays an amount equal to the total premiums paid as long as the insured dies during a certain time period, as stated in the policy? Select one: a. Return of cash value b. Return of premium c. Waiver of premium d. Payor rider
The correct answer is: Return of premium
Which beneficiary designation is most appropriate for a person who wants to name his spouse as a beneficiary of his life insurance policy, and simultaneously retain full policy ownership rights? Select one: a. Full beneficiary b. Partial beneficiary c. Irrevocable beneficiary d. Revocable beneficiary
The correct answer is: Revocable beneficiary
Rick is planning on getting married next month. He currently has a $100,000 whole life participating policy. Because he is planning a family, he wants to increase his life insurance while keeping his costs down. Which of the following options would best suit his needs? Select one: a. Rick could use his dividends to purchase one-year term insurance. b. Dividends could be applied against Rick's future premium payments. c. He could allow the dividends to accumulate at interest. d. Rick could use the dividends to purchase paid-up additions.
The correct answer is: Rick could use the dividends to purchase paid-up additions.
In which of the following types of annuities does the payment period begin immediately after the annuity is purchased? Select one: a. SPIA b. SPDA c. Deferred d. None of the above
The correct answer is: SPIA
Jodeen purchases an annuity with a $40,000 lump-sum payment on July 15. She begins to receive monthly annuity payments on August 15. What type of annuity did she buy? Select one: a. SPIA b. SPDA c. Deferred d. None of the above
The correct answer is: SPIA
Nonforfeiture options are available to contract owners of all of the following, EXCEPT: Select one: a. SPDA b. SPIA c. FPDA d. Deferred annuity
The correct answer is: SPIA
Serena dies 15 days after her group life insurance coverage is terminated. She did not apply for individual coverage. Which of the following is true? Select one: a. Serena's beneficiary will receive 50% of the death benefit. b. Serena's beneficiary will receive the full death benefit. c. Serena's beneficiary will receive the death benefit minus the initial premium for the converted coverage. d. Serena's beneficiary will not receive the death benefit because Serena's group coverage was terminated.
The correct answer is: Serena's beneficiary will receive the full death benefit.
In addition to a life insurance producer license, producers selling variable products must have a(n): Select one: a. Annuity license b. Series 6 or 7 license c. Accident and health license d. Property and casualty license
The correct answer is: Series 6 or 7 license
All of the following are true regarding the period certain life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. The principal reduces to zero by the end of the period. c. The amount of each installment is based on the length of the period, the amount of the policy proceeds and the interest rate. d. Shorter payment periods result in lower payments.
The correct answer is: Shorter payment periods result in lower payments.
What type of premium is used to purchase an immediate annuity? Select one: a. Single b. Flexible c. Level d. Increasing
The correct answer is: Single
Which of the following prevents creditors from seizing life insurance policy proceeds as long as there is at least one living named beneficiary, excluding the insured's estate? Select one: a. Common disaster clause b. Facility of payment provision c. Uniform Simultaneous Death Act d. Spendthrift clause
The correct answer is: Spendthrift clause
Jacob begins to receive periodic annuity payments. Upon Jacob's death all annuity payments cease and the balance in the annuity is retained by the insurer. What annuity does Jacob have? Select one: a. Refund life annuity b. Life annuity with period certain c. Installment refund life annuity d. Straight life
The correct answer is: Straight life
Nick is single and retired at the age of 55. He does not have any dependent family members. Nick wants to purchase an annuity that will give him the largest monthly income. What annuity would you recommend to him? Select one: a. Straight life annuity b. Life annuity with period certain c. Refund life annuity d. Joint and survivor life annuity
The correct answer is: Straight life annuity
Gerry forgets to pay his life insurance premium, and the policy lapses. If he is within the reinstatement period and decides to reinstate his policy, he will be required to take all of the following actions, EXCEPT: Select one: a. Pay all past-due premiums b. Pay any back-due interest on an outstanding policy loan c. Surrender or cancel the policy within 10 years of the reinstatement date d. Provide proof of evidence of insurability
The correct answer is: Surrender or cancel the policy within 10 years of the reinstatement date
Which of the following is the best definition of an annuity? Select one: a. Death protection b. Cash supplement c. Systematic liquidation of an estate d. Savings account
The correct answer is: Systematic liquidation of an estate
Some policies offer the policyholder the opportunity to purchase additional insurance when they get married, or have children. What is the factor that determines the rate of the additional coverage? Select one: a. The initial date of the policy b. The attained age of the insured when the additional insurance is purchased c. The exclusion of a waiver of premium rider d. The reason for wanting the additional insurance
The correct answer is: The attained age of the insured when the additional insurance is purchased
All of the following options are available if the only logical beneficiary is a minor, EXCEPT: Select one: a. A guardian can be appointed. b. The benefits can go directly to the estate of the insured. c. A trust can be established. d. The insurance company can hold the proceeds until the minor comes of age.
The correct answer is: The benefits can go directly to the estate of the insured.
James is past due on his life insurance premium by 5 days. His policy has a 30 day grace period. If James dies on day 15 of his grace period, what would the beneficiary receive? Select one: a. The full face amount, minus any past due premium b. A refund of past premiums c. The full face amount d. Nothing since James' premiums are past due
The correct answer is: The full face amount, minus any past due premium
Which of the following best describes the automatic premium loan provision of a life insurance policy? Select one: a. A policy loan in an amount up to the current cash value, less any existing indebtedness may be made. b. Modifications to the policy must be made by an authorized officer of the insurer and attached to the policy. c. The insurer will automatically use the policy cash value to pay an overdue premium. d. Withdrawals or partial surrenders of policy cash value can be made; the policy specifies how much can be withdrawn and at what frequency.
The correct answer is: The insurer will automatically use the policy cash value to pay an overdue premium.
When a juvenile covered by a payor rider reaches the specified age, what happens to the ownership of the policy? Select one: a. It stays with the original policyholder. b. The policy expires. c. The premium is reduced. d. The juvenile can assume ownership of the policy.
The correct answer is: The juvenile can assume ownership of the policy.
All of the following are true regarding the fixed-amount installment life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. Payments are made until the principal and interest reach zero. c. The length of time installments are paid depends on the amount of the policy proceeds. d. The larger the payment amount, the longer time period payments will be received.
The correct answer is: The larger the payment amount, the longer time period payments will be received.
Who may choose the settlement option for a life insurance policy? Select one: a. The insurer b. The policyowner c. The beneficiary d. The policyowner and the beneficiary
The correct answer is: The policyowner and the beneficiary
What portion of an annuity's death benefit is taxed? Select one: a. The portion that exceeds the cost-basis b. The premiums plus interest c. The premiums d. Death benefits are never taxed.
The correct answer is: The portion that exceeds the cost-basis
There are different kinds of beneficiaries in a life policy. When Alice dies, the death benefit will be paid to Walter. If Walter dies before Alice, the benefit would go to Alexander. Which of the following statements is true? Select one: a. The tertiary beneficiary is Walter and Alexander is the secondary beneficiary. b. Alexander is the tertiary beneficiary. c. The primary beneficiary is Walter and Alexander is the contingent beneficiary. d. Alice is the tertiary, as the policyholder, and Walter is the contingent beneficiary.
The correct answer is: The primary beneficiary is Walter and Alexander is the contingent beneficiary.
All of the following are true regarding the reduced paid-up insurance nonforfeiture option for life insurance policies, EXCEPT: Select one: a. With the reduced paid-up insurance option, the policy may be reinstated to the original face amount within the terms of the reinstatement provision. b. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing reduced paid-up insurance. c. The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value. d. The cash values act as a single premium to purchase reduced paid-up insurance.
The correct answer is: The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value.
A fixed period option pays policy proceeds in equal installments over a period of months or years. Which of the following is NOT considered when determining the amount of the installment? Select one: a. The amount of the proceeds b. The frequency of the payments c. The relationship of the beneficiary to the insured d. The rate of interest on the proceeds
The correct answer is: The relationship of the beneficiary to the insured
Which of the following best describes the return of premium rider Select one: a. The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy. b. The return of premium rider allows a whole life policy's cash value to be included in the death benefit. c. The return of premium rider allows a universal life policyowner who becomes disabled to waive the cost of death protection. d. The return of premium rider allows the policyowner to waive premium payments during a disability, and keeps the policy in force.
The correct answer is: The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy.
Annuities provide income the annuitant cannot outlive. What specifically is the risk that annuities protect against? Select one: a. The risk of unforeseen accident or sickness b. The risk of disability c. The risk of living too long and depleting financial resources and savings d. The risk of premature death
The correct answer is: The risk of living too long and depleting financial resources and savings
Annuities are defined as: Select one: a. The creation of an estate b. The systematic liquidation of an estate c. Income replacement d. A plan to pay medical expenses
The correct answer is: The systematic liquidation of an estate
Unlike group life insurance, insureds under franchise plans each receive: Select one: a. Their own policy b. A master contract only c. A certificate of insurance only d. A master contract and certificate of insurance
The correct answer is: Their own policy
Annuities have all of the following uses, EXCEPT: Select one: a. To provide life income b. To provide retirement income c. For education funds d. To provide tax-free income
The correct answer is: To provide tax-free income
How long is the suicide clause typically in effect? Select one: a. The entire policy term b. Two years from the policy effective date c. Two years prior to the insured's death d. Four years
The correct answer is: Two years from the policy effective date
This annuity is regulated as a securities product and agents selling this product must have a securities license: Select one: a. SPDA b. Equity indexed annuity c. Fixed annuity d. Variable annuity
The correct answer is: Variable annuity
Which of the following statements regarding the amount of each annuity payment is true? Select one: a. The younger the annuitant is, the higher the annuity payment. b. Fixed annuities have variable annuity payments. c. Variable annuities have fixed annuity payments. d. Women typically receive lower annuity payments.
The correct answer is: Women typically receive lower annuity payments.
Which of the following is not true about adverse selection in group insurance? Select one: a. The possibility of adverse selection is lower in group insurance. b. Seasonal employees are less likely to be insured than permanent employees. c. Younger people pose a great risk because of their lifestyles. d. Benefits must be pre-established.
The correct answer is: Younger people pose a great risk because of their lifestyles.
Riders covering additional insureds can be added to life policies. A popular rider is the children's term rider. All of the following can be covered by the children's term rider, EXCEPT: Select one: a. Younger siblings of the policyholder b. Step children c. Legally adopted children d. Biological children
The correct answer is: Younger siblings of the policyholder
Which of the following is not a use of annuities? Select one: a. Tax-free income b. Education funds c. Life income d. All of the above
Your answer is correct Tax must be paid on the interest earnings of annuities. The correct answer is: Tax-free income
