NC Life Insurance Final
An insurance application is not complete unless it has: Select one: a. The signature of the insured (unless not an adult), and the agent. b. A signature of an officer of the company. c. Signature of the beneficiary or beneficiaries. d. The signature of the physician who conducted the medical exam, and the medical records.
a. The signature of the insured (unless not an adult), and the agent.
Which of the following must happen before an HIV test is performed on an applicant? Select one: a. The insurer must inquire about the applicant's sexual orientation. b. A consent form must be signed by the applicant prior to the test. c. The Insurer must inform all non-entitled parties to the upcoming test. d. The insurer must inform the state Department of Health of upcoming test.
b. A consent form must be signed by the applicant prior to the test.
What is an agreement by which the insurer is bound to pay money as reimbursement for the destruction, loss, or injury of something in which the other party has an interest? Select one: a. A plan of insurance b. A contract of insurance c. An indemnity agreement d. A liability agreement
b. A contract of insurance
What are the two most common adjustments made during a month with a universal life insurance policy? Select one: a. Decrease premium and increase death benefit b. Cost of death protection deducted and current interest rate credited c. Lengthen premium-paying period and increase death benefit d. None of the above
b. Cost of death protection deducted and current interest rate credited
Credit life insurance is insurance upon the life of a: Select one: a. Creditor b. Debtor c. Dependent d. Key employee
b. Debtor
The Commissioner may suspend, revoke or refuse to issue or renew an agent license for which of the following reasons? Select one: a. Failure to pay alimony b. Failure to pay child support c. Failure to traffic fines d. Failure to pay federal income tax
b. Failure to pay child support
Becky is a 31 years old and knows she needs to start a retirement plan. She currently works in a bakery and is worried about how inflation would affect her retirement plan. Which annuity would be a good fit for her needs? Select one: a. Level premium fixed annuity b. Flexible premium deferred annuity c. Immediate annuity - single premium d. Deferred annuity - single premium
b. Flexible premium deferred annuity
What approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities? Select one: a. Human life value b. Needs c. Salary d. Social Security blackout
b. Needs
How are dividends treated for tax purposes? Select one: a. Always taxed b. Never taxed c. Depends on persons income d. Depends on the type policy
b. Never taxed
Mr. Jones, the insured, committed suicide after the expiration of the suicide clause in his life insurance policy. The insurer is obligated to: Select one: a. Refund the premiums paid. b. Pay the death benefit. c. Pay 50% of the death benefit d. Pay nothing.
b. Pay the death benefit.
Which of the following statements is not true about the tax liabilities for individual life insurance policies? Select one: a. If a policy is surrendered for its cash value some of the cash value may be subject to ordinary income tax. b. Policy loans are taxable as income. c. Policy premiums are not deductible for an individual life insurance policy. d. Accelerated benefits are tax free if they are qualified.
b. Policy loans are taxable as income.
Dylan tells the insurer to keep the dividend and apply it to his next premium. He is using which dividend option? Select one: a. Accumulate at interest b. Reduction of premium c. Paid-up addition d. Reduced paid-up
b. Reduction of premium
Jamie has a renewable term policy. Which of the following is not an incorrect statement about this type of policy. Select one: a. Renewability is at the insured's option. b. Renewability is the insurer's option. c. The insured must provide proof of insurability. d. Renewable term policies never have an age limit.
b. Renewability is the insurer's option.
Jacob, James and Jonathan are triplets, and all applied for the same type of insurance coverage at the same time. For James and Jonathan the rates were the same. Jacob's rate was quite a bit higher. What is the most likely reason for this difference? Select one: a. Consideration b. Risk classification c. Third-party ownership d. Insurable interest
b. Risk classification
Which type of life policy would best suit someone who retires in good health with a large amount of cash, whose investment goals are conservative? Select one: a. Level term insurance b. Single premium whole life insurance c. Limited premium whole life insurance d. Continuous premium straight life insurance
b. Single premium whole life insurance
Phil and Sarah bought a life policy in which both are insured. Sarah dies before Phil. If the policy pays the death benefit after Phil dies, it is a: Select one: a. Joint life b. Survivorship life c. Guaranteed renewable d. Convertible term
b. Survivorship life
Jeff has limited financial resources, but finds himself in a position where he needs a good deal of protection. A __________would probably best suit his needs at this time. Select one: a. Universal life b. Term policy c. Adjustable life d. AD&D
b. Term policy
If James has an increasing term policy, which of the following must increase? Select one: a. The premium b. The death benefit c. The taxes on the benefit d. The return of premium
b. The death benefit
Kim's policy remained in force for a certain number of days even though she forgot to pay the premium. The provision that allows this is called: Select one: a. The insuring clause b. The grace period provision c. The automatic premium loan d. The consideration clause
b. The grace period provision
Does a loan on the cash value of a life insurance policy accrue interest, and if so, how is the interest handled? Select one: a. No, the loan does not accrue interest, he is borrowing his own money. b. Yes, the interest can be paid annually, or added to the loan. c. Yes, the interest is added to the premium payment. d. None of the above
b. Yes, the interest can be paid annually, or added to the loan.
A one-sided agreement in which someone promises to do something in return for a payment is what type of contract? Select one: a. A conditional contract b. A contract of adhesion c. A unilateral contract d. An aleatory contract
c. A unilateral contract
A company incorporated or organized under the laws of any jurisdiction outside of the United States is: Select one: a. An international company b. A mutual company c. An alien company d. A foreign company
c. An alien company
The policyowner's obligation to pay the premium is the: Select one: a. Entire Contract b. Insuring Clause c. Consideration Clause d. Assignment Clause
c. Consideration Clause
What type of premiums payment can employers deduct as an ordinary business expense? Select one: a. Key employee b. Joint life if part of a business partnership c. Buy/sell agreements d. Group
d. Group
Insurers may refuse to insure someone for which of the following reasons? Select one: a. Blindness b. Race c. Ethnic origin d. Hobbies
d. Hobbies
A life insurance policy is not payable for suicide that occurs within: Select one: a. 2 years b. 3 years c. 4 years d. 5 years
a. 2 years
At what age would a qualified retirement plan distribution be premature? Select one: a. 59 b. 60 c. 65 d. 70 1/2
a. 59
Errors & Omissions are most likely to occur during: Select one: a. A replacement b. Underwriting c. The application process d. Delivery
a. A replacement
What is a transaction in which a new policy or contract is to be purchased if an existing policy or contract has been lapsed, forfeited, or surrendered? Select one: a. A replacement b. A reinstatement c. A termination d. A dispensation
a. A replacement
Life insurance death benefits that can be accessed tax-free when the insured is still alive are called: Select one: a. Accelerated benefits b. Viatical settlements c. Life settlements d. Chronically ill benefits
a. Accelerated benefits
In life insurance, insurable interest must be present at the time of: Select one: a. Application b. Delivery c. Death d. Never
a. Application
What is the biggest source of information used in underwriting? Select one: a. Application b. MIB c. HIPAA d. Representations
a. Application
Richard is thinking about transferring some of the ownership rights of his policy to his brother Randy. What term is used for this type of transfer? Select one: a. Assignment b. Endorsement c. Change of beneficiary d. Insurable interest
a. Assignment
Which of the following could be used to prevent a lapse in the payment of life insurance premiums? Select one: a. Automatic premium loan b. Cash loan c. Partial Surrender d. Waiver of premium
a. Automatic premium loan
Which of the following unfair trade practices does NOT involve misrepresentation? Select one: a. Boycott b. Churning c. Twisting d. Defamation
a. Boycott
Alex's life policy lapsed, which Nonforfeiture option would the insurer send him the value of the policy? Select one: a. Cash surrender b. Reduced paid-up c. Cash payment d. Reduction of premium
a. Cash surrender
If a person intentionally by means of any kind of false pretense obtains from any person within North Carolina any thing of value of $100,000 or more, the violation is a: Select one: a. Class C felony b. Class D felony c. Class G felony d. Class H felony
a. Class C felony
Dylan is looking at buying an equity-indexed life policy; it will likely be tied to: Select one: a. Dow Jones Industrial Average b. Consumer Price Index c. Inflation d. Gross Domestic Product
a. Dow Jones Industrial Average
An insurance applicant submits an application with a premium. After underwriting, the insurer sends back the policy, rated, with an impairment rider. What should the producer tell the applicant at delivery? Select one: a. Explain the issue and collect an additional premium. b. Explain that the policy is rated. c. Nothing d. Tell the applicant that they were declined.
a. Explain the issue and collect an additional premium.
The rider that you would pick if you want to be able to add coverage in the future, without having to show proof of insurability: Select one: a. Guaranteed insurability b. Payor c. Waiver of premium d. Consideration
a. Guaranteed insurability
What type policy would pay the death benefits after the first person dies, if it covers two or more lives? Select one: a. Joint life b. Survivorship life c. Term life d. Universal life
a. Joint life
Over-funded life insurance policies where the proceeds are subject to taxation are called: Select one: a. MECs b. Roth IRAs c. Section 1035 exchange d. Section 457 deferred compensation.
a. MECs
What is the term used to describe a person who tries to obtain information about a natural person, pretends to be someone he is not, or pretends to represent a person he is not representing? Select one: a. Pretext interview b. Misrepresentation c. Twisting d. Churning
a. Pretext interview
If more than one beneficiary is named, who is the first in line? Select one: a. Primary b. Contingent c. Revocable d. Irrevocable
a. Primary
In a life policy, a statement of good health is needed when: Select one: a. The application does not include the premium. b. The application includes the premium. c. The statement of good health is always needed. d. The statement of good health is never needed.
a. The application does not include the premium.
A person who is licensed as an agent represents: Select one: a. The insurer b. The insured c. The policyowner d. The Commissioner
a. The insurer
A soliciting agent represents: Select one: a. The insurer b. The insured c. The policyowner d. The Commissioner
a. The insurer
Blake died 20 days after his group life insurance coverage was terminated. He did not apply for individual coverage. Which of the following is true? Select one: a. His beneficiary will not receive the death benefit because his group coverage was terminated. b. His beneficiary will receive the death benefit minus the initial premium for the converted coverage. c. His beneficiary will receive the full death benefit. d. His beneficiary will receive 50% of the death benefit.
c. His beneficiary will receive the full death benefit.
What is the advantage of a payor benefit rider? Select one: a. It provides disability income. b. It provides additional insurance if the death is a result of an accident. c. It provides a temporary waiver of premium if the person paying the premium dies. d. It cancels the policy without penalty and returns premiums paid.
c. It provides a temporary waiver of premium if the person paying the premium dies.
Any reference to policy dividends must include a statement that dividends are: Select one: a. Variable depending on market trends b. Subject to capital gains taxes c. Not guaranteed d. Variable depending on economic conditions
c. Not guaranteed
On November 5, Zoe fills out an application for a life policy. On November 6, the agent accepts the premium for the policy. The policy is delivered on November 7. Which date does the Free Look period start? Select one: a. November 5 b. November 6 c. November 7 d. November 17
c. November 7
If an applicant states their age is 30 on an application for life insurance, when they were actually 37, what is the insurer likely to do? Select one: a. Pay the full death benefit based on the stated age. b. Refund the premiums paid without interest. c. Pay the death benefit based on the applicant's actual age. d. Void the policy for misrepresentation and fraud.
c. Pay the death benefit based on the applicant's actual age.
Gregory recently purchased a one-year term insurance policy. At the end of the year, he can purchase an identical policy without having to show proof of insurability. Why type of policy did he purchase? Select one: a. Decreasing term b. Increasing term c. Renewable term d. Level premium term
c. Renewable term
When Jason filled out his application his statements had to be ______________ to be considered legal. Select one: a. Guaranteed b. Contributory c. Representations d. Warranties
c. Representations
The life insurance rider that pays the face amount plus the total premiums paid into the policy is known as: Select one: a. Return of cash value b. Waiver of premium c. Return of premium d. Payor rider
c. Return of premium
The beneficiary designation that allows the policy to be changed without the beneficiary's consent: Select one: a. Primary b. Contingent c. Revocable d. Irrevocable
c. Revocable
The manner in which the proceeds of a life policy are handled are specified in what provision? Select one: a. Insuring clause b. Dividend options c. Settlement options d. Payment options
c. Settlement options
A fraternal benefit society is exempt from: Select one: a. Regulation b. Insurance laws c. State premium tax d. All taxes
c. State premium tax
The producer realizes that the prospective client omitted information about a prior illness. What should the producer do? Select one: a. The producer has no responsibility to report the omitted information. b. Nothing, because the MIB will catch it c. Tell the prospective client that a claim might be rejected later due to the omission. d. Assume the client will not make a claim until the incontestability period is over.
c. Tell the prospective client that a claim might be rejected later due to the omission.
Who must sign the notice regarding replacement? Select one: a. The applicant only b. The producer only c. The applicant and the producer d. The applicant, the producer and the insurer
c. The applicant and the producer
Boycott, coercion and intimidation are all types of: Select one: a. Legitimate business practices b. Marketing methods c. Unfair trade practices d. Unfair claim practices
c. Unfair trade practices
If the cash values of an annuity are invested in securities, it is a: Select one: a. Fixed annuity b. Deferred annuity c. Variable annuity d. Immediate annuity
c. Variable annuity
Investment risk is completely taken by the policyowner is what type policy? Select one: a. Universal life b. Adjustable life c. Variable universal life d. Whole life
c. Variable universal life
What is the advantage of a Waiver of Premium provision in a life policy? Select one: a. Reduce an insured's premiums. b. Increase an insured's coverage. c. Waive an insured's premiums if he/she becomes disabled. d. All of the above.
c. Waive an insured's premiums if he/she becomes disabled.
A decreasing term life policy would be the most appropriate for: Select one: a. A 57 year old schoolteacher that doesn't want any risk b. A 35 year old doctor with a lawyer wife and a child c. A 66 year old retired electrician d. A 41 year old lawyer who wants a policy to pay his mortgage if he dies
d. A 41 year old lawyer who wants a policy to pay his mortgage if he dies
Which rider on Diane's life policy will help her out when she is confined to a nursing home with a terminal illness? Select one: a. Return of premium rider b. Accidental death rider c. Consideration d. Accelerated benefit rider
d. Accelerated benefit rider
Life insurance applications require a signature from: Select one: a. The agent b. The insured c. The policyowner d. All of the above
d. All of the above
The Commissioner performs all of the following duties, EXCEPT: Select one: a. Issues certificates of authority and licenses b. Examines insurance companies c. Investigates insurers d. Amends insurance statutes
d. Amends insurance statutes
The North Carolina Life and Health Guaranty Association exercises its powers through the: Select one: a. The Attorney General b. Commissioner c. Governor d. Board of Directors
d. Board of Directors
What guarantees Jason the right to question the source and validity of consumer information used to rate a policy? Select one: a. MIB (Medical Information Bureau) b. Social Security Act c. State legislation d. Fair Credit Reporting Act
d. Fair Credit Reporting Act
On January 3, an application is submitted without the initial premium. The insurer requires a medical exam, and it is completed on January 15. On January 20, the insurer issued the policy standard, and the producer delivers it on January 22. When is coverage effective? Select one: a. January 3 b. January 15 c. January 20 d. January 22, after the statement of good health is signed, and the initial premium is paid.
d. January 22, after the statement of good health is signed, and the initial premium is paid.
The Beauty Shop Cosmetic Company purchases a life insurance policy on Anna, the company's leading salesperson. Which business continuation plan does this company have? Select one: a. Split-dollar b. Executive bonus plan c. Section 303 plan d. Key person insurance
d. Key person insurance
What kind of contract pays an income to an insured until the insured dies? Select one: a. Endowment b. Economatic whole life c. Variable whole life d. Life annuity
d. Life annuity
Which of the following factors does not influence the amount that an individual receives as monthly income under Social Security? Select one: a. PIA b. Insured status (fully/currently) c. Age d. Sex
d. Sex
The fact that the application is part of the policy is stated in: Select one: a. The ownership clause b. The options c. The insuring clause d. The entire contract
d. The entire contract
Who has the right to change the beneficiary on a life policy? Select one: a. The insured b. The insurer c. The beneficiary d. The policyowner
d. The policyowner
Jennifer made an additional premium payment on her Adjustable Life policy. Which of the following is not a way that her policy is affected by this payment? Select one: a. The length of her coverage may increase. b. The face amount of her policy may increase. c. The premium paying period may decrease. d. The value of nonforfeiture options may decrease.
d. The value of nonforfeiture options may decrease.