Module 11 - Laws and Rules Pertinent to Insurance

A producer must remit premiums to the insurer within ___ days after receipt. -10 -15 -30 -45

45

In Colorado, a life insurance applicant has __ days after policy delivery for a full refund of premium if not satisfied for any reason. -10 -15 -20 -25

15

If an applicant for an annuity refuses to provide suitability information, the producer should -Obtain consent from the insurer to proceed -Obtain the consumer's signed statement documenting his or her refusal to provide suitability information -Obtain consent from the Commissioner to proceed -Cancel the application

Obtain the consumer's signed statement documenting his or her refusal to provide suitability information

Which of the following is a duty of the Commissioner? -Writing insurance laws -Settling insurance rates -Reviewing and approving license applications -Settling sales quotas

Reviewing and approving license applications

When is it appropriate for a producer's spouse to be the primary beneficiary on an applicant's life insurance policy? -When written authorization is obtained from the client -When it is acceptable to the insurer -When written authorization is obtained from the Commissioner -When insurable interest exists

When insurable interest exists

On June 1, 2004 G takes out a $20,000 Whole Life insurance policy with an Accidental Death and Dismemberment rider. On July 15, 2005 G intentionally overdoses on sleeping pills and takes her own life. What will G's beneficiary receive as a death benefit? -$20,000 -$40,000 -$0 -The premiums that G paid in to the policy

$20,000: Colorado does not allow an insurer to deny a life insurance claim due to suicide after the policy has been in force for 1 year

Which of the following is an example of defamation? -A pamphlet listing a competitor's financial rating -A brochure including an untrue statement regarding a competitor's ability to pay claims -A verbal statement of a competitor's complaint ratio -A truthful estimate of the dividends

A brochure including an untrue statement regarding a competitor's ability to pay claims

Which of the following is CORRECT regarding a producer's fiduciary responsibility with client's funds? -A producer may commingle personal funds with funds paid by or to a client with the client's written permission -A producer may commingle personal funds with funds paid by or to a client with the insurer's written permission -A producer may commingle personal funds with funds paid by or to a client with prior approval from the Department fo Insurance -A producer may never commingle personal funds with funds paid by or to a client

A producer may never commingle personal funds with funds paid by or to a client

A life insurance applicant realized he failed to disclose material medical history and calls the producer. Any changes made to the application must be initialed by the -Producer -Applicant -Underwriter -Insurance Commissioner

Applicant: When an applicant makes a mistake in the information given to an producer in completing the application, the applicant can have the producer correct the information, but the applicant must be initial the correction

A producer that only sells insurance to family members is said to be engaging in -Family business -Controlled business -Domestic business -Personal business

Controlled business

Who is not eligible to receive commissions from the sale of an insurance product? -Licensed home office employee -Corporate executive -Personal producer -General agent

Corporate executive

G takes out a life insurance policy on October 8, 2008. On August 3, 2009, G takes his own life. When G's beneficiary files a claim, -The claim will be denied under the suicide provision -The claim will be paid under the settlement provision -The premiums will be returned under the free-look provision -The benefit will double under the accidental death provision

The claim will be denied under the suicide provision: After a life insurance policy has been in effect for 1 year, an insurer may not use an insured's suicide as a reason to refuse payment of policy benefits. This policy was in effect for less than 1 year.

A license is deemed to be used for a controlled business if during the immediately preceding 12-month period -The licensee wrote more than 10 policies on controlled business -The licensee's total premiums on controlled business exceeded the total premiums on all other business -The licensee wrote policies totaling more than $25,000 on controlled business -The licensee's total premiums on controlled business made up more than 25% of his total premiums

The licensee's total premiums on controlled business exceeded the total premiums on all other business

If producer offers to refund part of a prospect's premium in exchange for the purchase of a life insurance policy, the producer is committing the illegal act of -Rebating -Defamation -Twisting -Conversation

Rebating

If an insurer is authorized to conduct business in another state and wishes to conduct business in Colorado, it must -Receive a certificate of authority from the Federal government -Receive a certificate of authority from a reciprocal state -Receive a certificate of authority from a bordering state -Receive a certificate of authority from Colorado

Receive a certificate of authority from Colorado

A fiduciary responsibility is defined as -The responsibility the producer has to the appointing insurer -The responsibility of the insured to pay premiums in a timely fashion -A relationship of special trust and confidence when a person is entrusted with another's funds -The relationship between the broker and the insurer whose products are sold

A relationship of special trust and confidence when a person is entrusted with another's funds

An insurer that terminates a producer's appointment must inform the Commissioner within how many days? -15 -30 -45 -55

30

Renewing a producer's license requires __ hours of continued education every 2 years. -12 -18 -24 -36

24

When replacing an existing life insurance policy, the replacing insurer must notify the existing insurer within -5 business days -10 business days -15 business days -20 business days

5 business days

Which of the following statements regarding the Notice Regarding Replacement of Life Insurance is CORRECT? -It is presented to the applicant only on request -It must be presented to the applicant after the policy is issued -A copy of the notice must be signed by the applicant and submitted with the application -A copy of the notice must be reviewed and signed by both the policy applicant and beneficiary

A copy of the notice must be signed by the applicant and submitted with the application

Which of the following potential insurance sales would be subject to replacement regulations? -A new policy issued by the same insurer as part of a conversion privilege -A new policy that causes an existing life insurance policy to be surrendered -A credit life insurance policy that causes an existing credit life insurance policy to be forfeited -A new group life policy that is replacing an existing group life policy

A new policy that causes an existing life insurance policy to be surrendered

A company that has not been authorized to operate in Colorado is known as -A prohibited entity -A non-admitted insurer -An alien company -An undesirable carrier

A non-admitted insurer

How does the Commissioner attain this position? -Elected by the NAIC -Elected by residents of Colorado -Appointed by the Governor -Appointed by the State Senate

Appointed by the Governor and serves at the pleasure of the Governor

When may the Commissioner conduct an examination of an insurance company? -Maximum once per year -Maximum every 3 years -Maximum every 5 years -As often as deemed everywhere

As often as deemed necessary and at a minimum of once every 5 years

If an insurance company wishes to discriminate rates based on gender, it must -Receive prior approval from the department of insurance -Allow for no more than a 10% rate difference -Be justified by actuarial statistics -Disclose the rate difference on the application

Be justified by actuarial statistics

All of the following are considered a form of advertisement EXCEPT: -Communication or materials used within an insurer's own organization -Newspapers -Free lunch seminars -Telemarketing scripts

Communication or materials used within an insurer's own organization

If a producer completes an insurance application, collects the initial premium, and issues the appropriate receipt, -Coverage will begin the day of application -Coverage will be contingent upon the insurer's underwriting policies -Coverage will begin when the policy is delivered -Coverage will begin 14 days after the free-look period

Coverage will be contingent upon the insurer's underwriting policies

From what point must the insurer pay interest on the proceeds of a death claim? -Date insurer is notified of the death claim -Date claim is received by insurer -Date claim is postmarked -Date of death

Date of death

From what point must the insurer pay interest on the proceeds of a death claim? -Date insurer is notified of the death claim -Date claim is received by the insurer -Date claim is postmarked -Date of death

Date of death

Which of the following is an example of a misrepresentation? -Failing to affirm or deny coverage of claims within a reasonable time -Returning a portion of a premium as inducement to purchase insurance -Making malicious statements about an insurer -Describing a universal life policy as a security

Describing a universal life policy as a security

When may the Commissioner issue an emergency cease and desist order? -If there is suspicion of an insurance policy being replaced -If there is suspicion of an unauthorized person engaging in insurance business without being licensed -When an insurance agency does not reach their annual sales quota -For any reason the Commissioner sees appropriate

If there is suspicion of an unauthorized person engaging in insurance business without being licensed

Employer noncontributory group life policies must allow for all of the following EXCEPT -Conversion privilege -Insured can determine the benefit amount -Insured can name a beneficiary -Minimum participation requirements

Insured can determine the benefit amount

Which information is NOT included in the Colorado Supplement to the Summary of Benefits and Coverage form? -Insurer's prior year financials -Deductibles -Covered cancer screenings -Balanced biling

Insurer's prior year financials

Ultimately, who is responsible for a producer-generated advertisement? -Producer -Insurer -The department of Insurance -Life and Health Guaranty Association

Insurer: All advertisements, regardless of by whom written, created, designed or presented, are the responsibility of the insurer whose policies are advertised--even if they aren't directly aware of them

To be valid, a group life insurance policy -Must be issued to a group formed solely for the purpose of obtaining insurance -May not be issued to a group formed solely for the purpose of obtaining insurance -May not extend coverage to dependents -May not subject individuals to standards of insurability

May not be issued to a group formed solely for the purpose of obtaining insurance

Which of the following is required for a life insurance Lapse Notice? -Reason stated why the policy will lapse -Notice mailed to policy owner within 10 days before the effective date of lapse -Notice mailed to policy owner within 30 days before the effective date of lapse -Automatic premium loan explanation

Reason stated why the policy will lapse

Interest on life insurance proceeds is -Required if the claim was not paid within 30 days of death -Required if the claim was not paid within 30 days of the date insurer received the claim -8% -Not required in this state

Required if the claim was not paid within 30 days of the date insurer received the claim

Which of the following is an example of rebating? -Returning a portion of a premium as inducement to purchase insurance -Cancellation of an insurance policy without cause -Sale of mass-marketed insurance products -Offer of temporary insurance coverage

Returning a portion of a premium as inducement to purchase insurance

Under the suicide clause, a life insurance claim cannot be denied due to suicide after a period of __ __ from the policy's effective date. -1 year -2 years -3 years -4 years

1 year: Although most states in the country offer a 2 year Suicide clause, Colorado is one of the law exceptions with a 1 year provision

How long must a replacing insurer maintain the records of a replacement transaction? -2 years -3 years -4 years -5 years

5 years

When recommending the purchase or exchange of an annuity, a producer must determine the suitability of the purchase by performing all of the following EXCEPT -Have reasonable grounds for believing that the recommendation is suitable for the consumer -Make reasonable attempts to obtain suitability information -Obtain information such as financial status, tax status, and investment objectives -Determining the marital status of the applicant

Determining the marital status of the applicant

Which of the following offers an insurance applicant the right to review the contract and receive a full refund? -Free-look period -Probation period -Elimination period -Refund period

Free-look period

Which of the following words may be used in the advertisement of life insurance or annuities? -Risk-free -Guaranteed -Investment -Savings

Guaranteed

When a claim has been denied, the insurer must -Cancel the policy -Refund all paid premiums -Notify the producer -Issue a statement to the policy owner explaining the coverage, provision, or laws on which denial was based

Issue a statement to the policy owner explaining the coverage, provision, or laws on which denial was based

If a producer chooses to conduct business under an assumed name, when must notification be given to the Commissioner? -No notice is required -No later than 30 days after using the assumed name -Prior to using the assumed name -At the time of license renewal

Prior to using the assumed name

Licensing is required for all of the following EXCEPT -Limited lines credit -Surplus lines -Travel ticket selling -Selling prepaid legal services

Selling prepaid legal services

If a producer is going to deposit any premium into a bank account prior to remitting the funds to the insurer, he/she must use a -Separate insurance trust account -Joint savings account -Combined trust account -Bonded insurance trust account

Separate insurance trust account: Any such deposits are subject to Colorado fiduciary law

Colorado's replacement rules apply to all of the following types of insurance EXCEPT -1-year term -10-year term -20-year term -Single premium whole life

Single premium whole life: a notice of replacement would not be needed

The USA Patriot Act was signed in to law as a response to -The McCarran-Ferguson Act of 1945 -The Fair Credit Reporting Act of 1970 -The 9/11 terrorist attacks -The 1945 End of WWII Act

The 9/11 terrorist attacks

Which of the following statements is true regarding the replacement of a life insurance policy in Colorado? -The replacing insurer must maintain copies of all records regarding the replacement for at least 5 years -The producer must maintain copies of all records regarding the replacement for at least 5 years -The insurer whose policy is being replaced must keep all records regarding the replacement for at least 5 years -All parties must maintain copies of all records regarding the replacement for at least 10 years

The producer must maintain copies of all records regarding the replacement for at least 5 years

Which situation allows the producer to also be the beneficiary on a client's application for life insurance? -When no insurable interest exists -With the insurer's written authorization -When insurable interest exists -Never

When insurable interest exists

If an annuity application was not taken in person, an insurer must provide the applicant a Buyer's Guide -At the time of application -Within 5 business days of the insurer receiving the application -At the time of policy issue -At the time of policy delivery

Within 5 business days of the insurer receiving the application

Upon request, when must the Colorado Supplement to the Summary of Benefits and Coverage Form be provided? -Within 7 business days -Within 10 business days -Within 15 business days -Within 30 business days

Within 7 business days

When a minor is designated as the sole primary beneficiary, -A guardian will be court-appointed in the event of a death claim -A contingent beneficiary must be named -The minor has immediate access to all proceeds upon death of the insured -It is known as a tertiary beneficiary

A guardian will be court-appointed in the event of a death claim

In addition to suspending/revoking licenses and issuing fines, the Commissioner has the authority to do all of the following EXCEPT -Issue orders to carry out his duties -Issue prison sentences -Disclose information to any law enforcement agency to use in any criminal or civil investigation or prosecution -Conduct hearings

Issue prison sentences

Which of the following statement is CORRECT regarding insurable interest in a life insurance contract? -The beneficiary must have insurable interest in the insured at the time of death -If the beneficiary no longer has insurable interest in the insured during the contestable period, the policy must be cancelled -A new beneficiary must be designated if the original beneficiary no longer has insurable interest in the insured -A person generally is considered to have an unlimited insurable interest in himself or herself

A person generally is considered to have an unlimited insurable interest in himself or herself

A producer license may be suspended or revoked if the producer is found to be engaging in -Misrepresentation -Converting a term life policy to a whole life policy -Selling with a nonresident license -Replacement

Misrepresentation

A verbal or written statement which misleads a policy's features, benefits, or coverage is considered -Coercion -Rebating -Defamation -Misrepresentation

Misrepresentation

In Colorado, all of the following are considered unfair trade practices EXCEPT -Misrepresentation -Rebating -Replacement -Coercion

Replacement

Which of the following is NOT a problem when existing life insurance is replaced with new coverage? -The risk that a financial loss will occur when values in the existing policy end and new values are built in new coverage -Comprehensive coverage may increase under the new policy -The new policy may be based on the insured's attained age with higher premiums than existing coverage -The policy owner may pay additional costs for the new policy to issue

Comprehensive coverage may increase under the new policy