NJ Life Insurance Test Qeustions
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a) The policyholder has the right to withdraw the accumulations at any time. b) The interest is not taxable since it remains inside the insurance policy. c) The annual dividend is retained by the company. d) The interest is credited at a rate specified by the policy.
B. The interest credited under this option is TAXABLE, whether or not the policyowner receives it.
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a) Policy loans are taxable distributions. b) Accumulations are tax deferred. c) Withdrawals are not taxable. d) Distributions before age 59 1/2 incur a 10% penalty on policy gains.
C. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? a) Conditional receipt b) Disclosure rule c) Fair Credit Reporting Act d) Consumer Privacy Act
C. The Fair Credit Reporting Act governs what information can be collected and how the information can be used.
Which of the following statements about the reinstatement provision is true? a) It permits reinstatement within 10 years after a policy has lapsed. b) It provides for reinstatement of a policy regardless of the insured's health. c) It guarantees the reinstatement of a policy that has been surrendered for cash. d) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
D Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.
An insurer cancelled a contract with a producer on April 1st. By what date must the insurer notify the Commissioner of this action? a)April 30th b)April 5th c)April 11th d)April 15th
D. If an insurer cancels an agency contract, it must notify the Commissioner in writing within 15 days.
Which of the following is true about the premium on the children's rider in a life insurance policy? a) It decreases when the oldest child reaches the age of 21. b) It increases when a newborn baby is added to the policy. c) It decreases when an adopted child is added to the policy. d) It remains the same no matter how many children are added to the policy.
D. The premium does not change on the inclusion of additional children; it is based on an average number of children
Which two terms are associated directly with the way an annuity is funded? a) Renewable or convertible b) Single payment or periodic payments c) Increasing or decreasing d) Immediate or deferred
B. Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.
A small employer owns a group health insurance policy. The employer does not pay the premium by the premium due date and fails again to pay by the end of the grace period. The insurer cancels the policy. Which of the following is true? a) The insurer will pay all losses only up to the premium due date. b)The insurer will pay all losses through the end of the grace period. c) The insurer will pay all losses continuing after the grace period ends. d) This varies with every insurer, so there is not enough information to answer this question.
B. If a group life or group health policy provides for automatic discontinuance of the policy for nonpayment of premium (after the grace period), the insurer is still liable for valid claims of covered losses incurred before the end of the grace period.
If an insurer cancels an agency contract, it must notify the Commissioner in writing within how many days? a) 10 b) 15 c) 20 d) 30
B. If an insurer cancels an agency contract, it must notify the Commissioner in writing within 15 days. Failure to do so will imply that an agency contract still exists.
Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider
B. Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.