PHP State License Exam Guide

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Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of a. Twisting b. Defamation c. Misrepresentation d. Rebating

a. Twisting

Solicitation rules would apply to which of the following types of coverage? a. Whole life b. Deferred annuity c. Variable life d. Group life

a. Whole life

Which of the following types of insurance would be written by a limited lines agent? a. Surplus lines insurance b. Term life insurance c. Credit insurance d. Variable life insurance

c. Credit insurance

Which component increases in the increasing term insurance? a. Interest on the proceeds b. Premium c. Death Benefit d. Cash value

c. Death Benefit

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a a. Attending Physician Statement b. Inspection Report c. Medical Information Bureau Report d. Medical Examination

b. Inspection report

The premium of a survivorship life policy compared with that of a joint life policy would be a. Half the amount b. Lower c. Higher d. As high

b. Lower

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? a. 1 b. 3 c. 5 d. 10

c. 5

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? a. 10 days b. 3 days c. 5 days d. 7 days

c. 5 days.

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs? a. Interest-sensitive whole life b. Decreasing term c. Adjustable life d. Single Premium Whole Life

c. Adjustable life

All of the following are dividend options EXCEPT a. Fixed-Period installments b. Accumulated at interest c. Reduction of premiums d. Paid-Up additions

A Universal life policy has two types of interest rates that are called a. Guaranteed and current b. Option A and Option B c. Fixed and Variable d. Minimum and Target

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a. The benefit is received tax free b. The benefit is subject to the exclusionary rule c. IRS has no jurisdiction d. The benefit is received as taxable income

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? a. Joint Life Policy b. Survivorship Life Policy c. Second-to-Die d. Family income Policy

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a. Pay the policy proceeds only if it would have issued the policy. b. Pay the policy proceeds up to an established limit. c. Not pay the policy proceeds under any circumstance. d. Automatically pay the policy proceeds.

All of the following are duties and responsibilities of producers at the time of application EXCEPT a. Change any incorrect statement on the application by personally initialing next to the corrected statement b. Explain the nature and type of any receipt the producer is giving to the applicant c. Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing d. Check to make sure that there are no unanswered questions on the application.

All of the following are true regarding rebates EXCEPT a. Rebates are allowed if it's in the best interest of the client b. Rebates are only allowed if specifically stated in the policy c. Rebating can be anything of economic value, given as inducement to buy d. Dividends are not considered to be rebates

All of the following statements are correct regarding credit life insurance EXCEPT a. Benefits are paid to the borrower's beneficiary b. The amount of insurance permissible is limited per borrower c. Premiums are usually paid by the borrower d. Benefits are paid to the creditor

All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT a. The employer can receive a current tax deduction for any contributions made to the plan. b. The plan is a legal method of accumulating money for retirement needs. c. The plan can discriminate as to who may participate. d. The plan is not approved for favorable tax treatment by the IRS

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a. Single Premium Whole Life b. Modified Endowment Contract (MEC) c. Level term life d. Graded premium whole life

An insured committed suicide 6 months after his life insurance policy was issued. The insurer will a. Refund the premiums paid b. Pay the policy's cash value c. Pay the full death benefit to the beneficiary d. Pay nothing

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? a. The insured may renew the policy for another 10 years, but at a higher premium rate. b. The insured must provide evidence of insurability to renew the policy c. The insured may only convert the policy to another term policy d. The insured may renew the policy for another 10 years at the same premium rate.

Fixed annuities provide all of the following EXCEPT a. Hedge against inflation b. Equal monthly payments for life c. Minimum guaranteed rate of interest d. Future income payments

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT a. Erase the incorrect answer and record the correct answer. b. Draw a line through the first answer, record the correct answer, and have the applicant initial the change. c. Note on the application the reason for change. d. Destroy the application and complete a new one.

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? a. The balance of the loan will be taken out of the death benefit b. The policy beneficiary receives the full death benefit c. The policy beneficiary takes over the loan payments d. The policy is rendered null and void

If a retirement plan or annuity is "qualified", this means a. It is approved by the IRS b. It has a penalty for early withdrawal c. It accepts after-tax contributions d. It is non-cancellable

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy? a. It is only taxable if the cash value exceeds the amount paid for premiums b. It is not considered to be taxable c. It is taxable only if it exceeds the amounts paid for premiums by 50% d. It is automatically taxable

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT a. Other insurance coverages b. Family health history c. Alcohol and tobacco consumption d. Recent surgeries

The Paul vs Virginia case was decided in 1869. To what extent does the Supreme Court's decision still apply to insurance today. a. The decision has changed. Insurance is considered to be interstate commerce, and is subject to regulation by the federal government. b. The decision has changed. Insurance and securities are now regulated by the same federal agency. c. It still stands in full. Insurance is not considered to be interstate commerce, and is not subject to regulation by the federal government. d. It still stands full. Insurance and securities are still regulated by two distinct agencies.

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? a. As of the application date. b. As of the policy delivery date. c. As of the first month after the policy issue date. d. As of the policy issue date.

The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a a. Convertible Term Policy b. Renewable Term Policy c. Decreasing Term Policy d. Whole life Policy

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must a. Respond to the consumer's complaint b. Defend the report if the agency feels it is accurate c. Change the report d. Send an actual certified copy of the entire report to the consumer

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a. Signed waiver of premium b. Statement of good health c. Payment of premium d. Delivery receipt

What is the purpose of the buyer's guide? a. To allow the consumer to compare the costs of different policies. b. To provide the name and address of the agents/producer issuing the policy. c. To list all policy riders. d. To provide information about the issued policy.

Which of the following best describes annually renewable term insurance? a. It is level term insurance b. It requires proof of insurability at each renewal c. Neither the premium nor the death benefit is affected by the insured's age d. It provides an annually increasing death benefit

Which of the following documents must be provided to the policyowner or applicant during policy replacement? a. Notice regarding replacement b. Disclosure authorization form c. Buyer's Guide and Policy Summary d. Policy illustrations

Which of the following is TRUE for both equity indexed annuities and fixed annuities? a. They have a guaranteed minimum interest rate b. They are both tied to an equity index c. Both are considered to be more risky than variable annuities d. They invest on a conservative basis

Which of the following is TRUE regarding the annuity period? a. It may last for the lifetime of the annuitant b. During this period of time the annuity grows interest tax deferred c. It is also referred to as the accumulation period d. It is the period of time during which the annuitant makes premium payments into the annuity.

Which of the following is a key distinction between variable whole life and variable universal life products? a. Variable whole life has a guaranteed death benefit b. Variable universal life is regulated solely through FINRA c. Variable whole life allows policy loans from the cash value d. Variable universal life has a fixed premium

Which of the following is an eligibility requirement for all Social Security Disability Income Benefits? a. Have attained fully insured status b. Be disabled for at least 1 year c. Have a permanent kidney failure d. Be at least age 50

Which of the following is true regarding license cancellation and reinstatement? a. The license needs to be returned to the Insurance department. It can be reinstated by filling out an application and paying a fee. b. The producer must allow it to lapse. After that point, it can be reinstated any time within the next 2 years, provided that the continuing education requirements have been met. c. The license needs to be returned to the Insurance Department. Once this occurs, it cannot be reinstated. d. The producer must complete a brief interview with the Commissioner's office. The license may be reinstated within 1 year.

Which of the following may NOT be included in an insurance company's advertisement? a. That its policies are covered by a state of Guaranty Association b. The policies limitations or exclusions c. The name of a specific agent d. An identification of a limited policy as a limited policy.

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? a. A debtor has an insurable interest in the life of a lender. b. Business partners have an insurable interest in each other. c. A husband or wife has an insurable interest in their spouse. d. An individual has an insurable interest in his or her own life.

Which of the following will NOT be an appropriate use of a deferred annuity? a. Creating an estate b. Accumulating retirement funds c. Accumulating funds in an IRA d. Funding a child's college education

Which of the following will be included in a policy summary? a. Premium amounts and surrender values. b. Copies of illustrations and application. c. Comparisons with similar policies. d. Primary and secondary beneficiary designations.

Who bears all of the investment risks in a fixed annuity? a. The insurance company b. The owner c. The beneficiary d. The annuitant

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a. Limited pay whole life b. Interest-sensitive whole life c. Life annuity with period certain d. Increasing term

By how many days does the discontinuance of a group policy insurance policy rate reduce the time limit for providing notice of claim or proof of loss? a. 0 days b. 5 days c. 15 days d. 30 days

a. 0 days

When an insurance producer sustains a spinal cord injury in a car wreck, he is rendered permanently disabled. In order to continue his business, his wife establishes an agreement with another producer to continue his business. This authorization will last for a maximum of a. 180 days b. 365 days c. 30 days d. 90 days

a. 180 days

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? a. 3 days b. 5 days c. 10 days d. 14 days

a. 3 days

If a producer has been convicted of a crime, he or she must notify the Commissioner within a. 30 days b. 10 days c. 15 days d. 20 days

a. 30 days

The company owes premium money to the insured. The insurer gave the funds to the producer to return to the insured. Within how many days must the producer pay the insured? a. 5 days b. 10 days c. 14 days d. 30 days

a. 5 days

An insurer must keep all sales material for at least how long? a. 5 years b. 6 years c. 8 years d. As long as the insurer remains in business

a. 5 years

Which of the following is the required number of participants in a contributory group plan? a. 75% b. 100% c. 25% d. 50%

a. 75%

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's a. Ancestry b. Credit History c. Habits d. Prior Insurance

a. Ancestry

Which of the following authorities is in charge of investigating claims held against licensees? a. Commissioner b. Governor c. State law enforcement d. Federal Bureau of Investigation

a. Commissioner

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a. Decreasing term b. Variable Life c. Universal Life d. Whole life

a. Decreasing term

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called an a. Executive bonus b. Key Person policy c. Fraternal association d. Aleatory contract

a. Executive bonus

The type of term insurance that provides increasing death benefits as the insured ages is called a. Increasing term b. Flexible term c. Interest-sensitive term d. Age-sensitive term

a. Increasing term

Which provision of life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid? a. Insuring clause b. Entire contract clause c. Beneficiary clause d. Consideration clause

a. Insuring clause

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a. Joint life b. Decreasing term c. Whole life d. Ordinary life

a. Joint life

Which option for Universal Life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a. Option B b. Corridor option c. Variable option d. Option A

a. Option B

Which of the following is another term for the accumulation period of an annuity? a. Pay-in period b. Premium period c. Liquidation period d. Annuity Period

a. Pay-in period

Which of the following allows the insurer to relieve a minor insured from premium payments, if the minor's parents have died or become disabled? a. Payor benefit b. Jumping Juvenile c. Juvenile Premium Provision d. Waiver of premium

a. Payor benefit

Equity Indexed Annuities a. Seek higher returns b. Are more risky than variable annuities c. Are security instruments d. Invest conservatively

a. Seek higher returns

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a. Settlement option b. Non-taxable exchange c. Nonforfeiture option d. Rollover

a. Settlement option

The responsibility of making certain that an application for insurance is filled out completely, correctly and to the best of his or her own knowledge is the responsibility of whom? a. The producer b. The beneficiary of the applicant c. The insurance company d. The applicant

a. The producer

A non-resident licensed producer decides to conduct business under an assumed name. Which of the following is true? a. The assumed name must be filed with the NAIC, the Commissioner of the domicile state, and the Commissioner of the state for which the non-resident producer is licensed. b. Non-resident producers may not conduct business under any name besides legal names. c. The assumed name must be submitted on the Uniform Assumed Title Form, with the appropriate fee. d. Non-resident producers need to take no action before conducting business under an assumed name.

All of the following actions can be described as twisting EXCEPT a. Making an incomplete comparison between the existing and proposed policies b. Explaining to client the advantages of permanent insurance over term and suggesting changing policies. c. Misrepresenting the terms and conditions of the existing policy to make the new one more attractive. d. Embellishing the terms of the proposed policy in order to convince the the insured to switch.

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT a. Employee and employer contributions are not counted as income to the employee for income tax purposes. b. At distribution, all amounts received by the employee are tax free. c. Employer contributions are tax deductible as ordinary business expense. d. Funds accumulate on a tax deferred basis

All of the following are characteristics of group life insurance EXCEPT a. Certificate holders may convert coverage to an individual policy without evidence of insurability b. Premiums are determined by the age, sex, and occupation of each individual certificate holder c. Amount of coverage is determined according to non-discriminatory rules d. Individuals covered under the policy receive a certificate of insurance.

All of the following are examples of third-party ownership of a life insurance policy EXCEPT a. When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. b. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan c. An insured couple purchases a life insurance policy insuring the life of their grandson d. A company purchases a life insurance policy on their manager, who is an important part of the operation

All of the following are the duties and responsibilities of producers at the time of application EXCEPT a. Check to make sure that there are no unanswered questions on the application. b. Change any incorrect statement on the application by personally initialing next to the corrected statement. c. Explain the nature and type of any receipt the producer is giving to the applicant. d. Probe beyond the the stated questions if the producer feels the applicant is misrepresenting or concealing information.

All of the following would be considered rebating EXCEPT a. An agent offers tickets to a baseball game as an inducement to buy insurance. b. An agent misrepresents policy benefits to convince a policyowner to replace policies. c. An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him. d. An agent offers to share his commission with a policyholder

All of the following would be eligible to establish a Keogh retirement plan EXCEPT a. A hair dresser who operates her business at her house b. The president and employee of a family corporation c. A sole proprietor of a service station who employs four employees d. A sole proprietor of film development store with no employees

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n) a. SEP b. 403 (b) Plan (TSA) c. Keogh Plan d. Roth IRA

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? a. When the agent submits the application to the company and the company issues a conditional receipt. b. When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health. c. On the designated effective date. d. On the application date.

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a. Graded premium whole life b. Single premium whole life c. Modified Endowment Contract (MEC) d. Level term life

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an a. Adjustable life b. Interest-sensitive whole life c. Credit life d. Annual Renewable Term

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? a. Legal, provided that the other insurers are paid royalties for the usage of their names b. Illegal under any circumstance c. Legal, provided that the information can be verified d. Illegal until endorsed by the Guaranty Association

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an a. Self insurer b. Authorized insurer c. Local insurer d. Certified insurer

Employer contributions made to a qualified plan a. Are taxed annually as salary b. Are subject to vesting requirements c. May discriminate in favor of highly paid employees d. Are after-tax contributions

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is a. Nonqualified annuity b. Modified endowment contract c. Accelerated benefit policy d. Endowment

If a policy includes a free-look period of at least 10 days, the Buyer's Guide must be delivered to the applicant a. Prior to filling out the application for insurance b. With the policy c. Upon issuance of the policy d. Within 30 days after the first premium payment was collected.

If an annuitant dies before annuitization occurs, what will the beneficiary receive? a. Cash value of the plan b. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount c. Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount d. Amount paid into the plan

If the issuance of a license is denied and a hearing is requested, which entity will be making determination whether or not the license should be issued? a. The Office Administrative law b. The Department of Insurance c. The NAIC d. The state courts

In New Jersey, the public is protected by a notice of discontinuance when a policy is discontinued for nonpayment of premiums. When a policy is discontinued, all the following are required EXCEPT A. ceasing to collect premium payments from group participants unless the group policyholder remains fully responsible for the benefits B. refund of premiums C. written notice to the policyholder D. a reminder of the date of discontinuance

In term policies, what happens to the premium throughout the term of the policy? a. Premium fluctuates b. Premium always remains level c. Premium gradually increases d. Premium gradually decreases

In which of the following instances would the premium be tax deductible? a. Premiums paid by an employer on the life of a key person b. Premiums paid by an employer on a $30,000 group term life insurance plan for employees c. Premiums paid by an individual on his/her own life insurance d. Premiums paid by a mother on her own son's policy

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a. The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. b. The beneficiary will receive the greater of the money paid into the annuity or the cash value. c. The owner's estate will receive the money paid into the annuity. d. The insurance company will retain the cash value and pay back the premiums to the owner's estate.

The death protection component of Universal life insurance is always a. Decreasing term b. Annually Renewable Term c. Whole Life d. Adjustable Life

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a. The death benefit can be increased only, by exchanging the existing policy for a new one b. The death benefit can be increased by providing evidence of insurability c. The death benefit cannot be increased d. The death benefit can be increased only when the policy has developed a cash value.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a. The contract can be issued without an annuitant b. The annuitant must be a natural person c. A corporation can be an annuitant as long as it is also the owner d. A corporation can be an annuitant as long as the beneficiary is a natural person.

To cancel an insurance producer license, the producer must a. Complete a brief telephone interview with the Insurance Department and submit the required paperwork. b. Send the license to the Insurance Department and request cancellation. c. Visit the Insurance Department in person and submit cancellation paperwork. d. Fail to write a business for 1 year or longer, which will automatically terminate the license

Under an extended term nonforfeiture option, the policy cash value is converted to a. A higher face amount than the whole life policy b. The same amount as in the whole life policy c. The face amount equal to the cash value d. A lower face amount than the whole life policy

What is the advantage of reinstating a policy instead of applying for a new one? a. The cash values have gained interest while the policy was lapsed b. The original age is used for premium determination c. Proof of insurability is not required d. The face amount can be increased

What is the purpose of a conditional receipt? a. It is given only to applicants who fully prepay the premium b. It is intended to provide coverage on a date prior to the policy issue c. It guarantees that a policy will be issued in the amount applied for d. It serves as proof that the applicant has been determined insurable.

What is the purpose of a disclosure statement in life insurance policies? a. To protect agents and insurers against lawsuits b. To explain features and benefits of a proposed policy to the consumer c. To obtain important underwriting information from the applicant d. To help consumers compare policy prices

When may an insurance company use suicide as a defense against paying a death claim? a. At no time b. When death occurs within a specified period of time after the policy was issued c. Only when there was a witness to the event d. At anytime suicide can be proven

When must insurable interest exist in a life policy? a. At the time of loss b. At the time of application c. At the time of policy delivery d. When there is a change of the beneficiary

Which of the following entities established the Do-Not-Call Registry? a. The Consumer Protection Agency b. The Federal Trade Commission c. The Better Business Bureau d. The NAIC

Which of the following is INCORRECT regarding a $100,000, 20-year level term policy? a. The policy will expire at the end of the 20-year period. b. At the end of 20 years, the policy's cash value will equal $100,000 c. The policy premiums will remain level for 20 years d. If the insured dies before the policy expired, the beneficiary will receive $100,000.

Which of the following is NOT a duty of the commissioner? a. Suspending or revoking b. Developing insurance rates c. Establishing a system of insurer and producer examinations d. Enforcing the Insurance Code

Which of the following is NOT an example of an insurable interest? a. Child in parent b. Debtor in Creditor c. Business Partners in each other d. Employer in employee

Which of the following is NOT true regarding the accumulation period of an annuity? a. It is also known as the pay-in period b. It would not occur in a deferred annuity c. It is the period during which the annuity payments earn interest d. It is the period over which the owners makes payments into an annuity.

Which of the following is an example of a producer being involved in an unfair trade practice of rebating? a. Making deceptive statements about a competitor b. Telling a client that his first premium will be waived if he purchases the insurance policy today c. Inducing the insured to drop a policy in favor of another one when it is not in the insured's best interest d. Charging a client a higher premium for the same policy as another client in the same insuring class.

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? a. There is a 10% penalty for early distribution of the death benefit b. They are tax free to terminally ill insured c. They are always taxable to chronically ill insured d. They are always taxed

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? a. Standard risk is also known as high exposure risk. b. Standard risk is representative of majority of the people. c. Standard risk pays a higher premium than a substandard risk. d. Standard risk requires extra rating.

Which of the following will NOT be considered unfair discrimination by insurers? a. Assigning different risk classifications to applicants based on gender identity. b. Discriminating in benefits and coverages based on the insured's habits and lifestyles. c. Charging applicants with similar health histories different premiums based on their ethnicity d. Cancelling individual coverage based on the marital status.

Which of the following would provide an underwriter with information concerning an applicant's health history? a. The inspection report b. The Medical Information Bureau c. A medical examination d. The agent's report

Which statement is NOT true regarding a straight life policy? a. It has the lowest annual premium of the three types of whole life policies b. Its premium steadily decreases over time, in response to it's growing cash value c. The face value of the policy is paid to the insured at age 100 d. It usually develops cash value by the end of the third policy year

If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? a. $7,000 b. $3,000 c. $13,000 d. $10,000

b. $3,000

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. 15

An insured replaces his current policy with one offered by another insurer. If he finds that he is unsatisfied with the new policy, within what period of time can he return it and receive a full refund? a. This is not possible with replacement policies unless a mistake was made by either of the insurers. b. 30 days c. 60 days d. 90 days

b. 30 days

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? a. 4 credits b. 6 credits c. 10 credits d. 40 credits

b. 6 credits

If a telemarketer wants to make an unsolicited sales call to a potential customer, what is the earliest time the telemarketer can call the prospect's residence? a. 7 am b. 8 am c. 9 am d. Noon

b. 8 am

What type of licensee represents the insurance company? a. Advisor b. Agent c. Broker d. Consultant

b. Agent

When transacting business in this state an insurer formed under the laws of another country is known as a/an a. Admitted insurer b. Alien insurer c. Domestic insurer d. Foreign insurer

b. Alien insurer

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 11th b. April 15th c. April 30th d. April 5th

b. April 15th

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as a. Defamation b. Coercion c. Rebating d. Misleading Advertising

b. Coercion

If an insurer and insured have a dispute about whether a particular loss is covered under a policy, which authority will settle the dispute? a. Consumer protection agency b. Court system c. Commissioner d. Federal Insurance Regulation Board

b. Court system

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called a. Multiple protection insurance b. Credit life c. Credit health d. Decreasing whole life

b. Credit life

The term "fixed" in a fixed annuity refers to all of the following EXCEPT a. Amount and length of payments b. Death benefit c. Guaranteed rate of interest d. Equal annuity payments

b. Death benefit

Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? a. Slandering b. Defamation c. Undercutting d. Twisting

b. Defamation

What does "level" refer to in level term insurance? a. Interest rate b. Face amount c. Premium d. Cash value

b. Face amount

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? a. Interest only b. Fixed Period c. Life with period certain d. Fixed Amount

b. Fixed Period

What type of premium do both Universal Life and Variable Universal life policies have? a. Increasing b. Flexible c. Level fixed d. Decreasing

b. Flexible

What required provision protects against unintentional lapse of the policy? a. Reinstatement b. Grace period c. Assignment d. Payment of Premiums

b. Grace period

A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? a. Variable b. Immediate c. Flexible d. Deferred

b. Immediate

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? a. Deferred interest annuity b. Immediate annuity c. Variable annuity d. Flexible payment annuity

b. Immediate annuity

Annually renewable term policies provide a level death benefit for a premium that a. Fluctuates b. Increases annually c. Decreases annually d. Remains level

b. Increases annually

What do individuals use to transfer their risk of loss to a larger group? a. Indemnity b. Insurance c. Insurable Interest d. Exposure

b. Insurance

All advertisements pertaining to the life insurance policies are the responsibility of the a. Consumer Protection Agency b. Insurer c. Commissioner d. Agency that produces them

b. Insurer

It is the responsibility of which of the following to make sure that an applicant/ policyholder has a policy summary and buyer's guide? a. Department of banking and insurance b. Insurer c. Applicant d. Commissioner

b. Insurer

Which of the following is NOT a type of whole life insurance? a. Limited payment b. Level term c. Single premium d. Straight life

b. Level Term

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a a. Warranty b. Premium receipt c. Statement of good health d. Backdated receipt

b. Premium Receipt

What is the primary purpose of a 401(k) plan? a. Life insurance distribution b. Retirement c. Education funds d. To receive dividends over a certain period

b. Retirement

Annuities can be used to fund which of the following? a. Estate creation b. Retirement plans c. Variable Life Insurance d. Group Life Insurance

b. Retirement Plans

The National Do Not Call Registry was created to regulate a. Insurance solicitors b. Telemarketers c. Field underwriters d. Insurers

b. Telemarketers

Which of the following Life Insurance policies would be considered interest sensitive? a. Increasing term b. Universal life c. Adjustable life d. Whole life

b. Universal life

A person takes out a loan in order to pay off his house. He dies several years later, having paid off only a small portion of the debt. Which of the following is true? A. the lender will not recover this money B. the federal government will pay the balance to the lender C. if the lender has credit insurance, this amount will be paid to the lender D. the state government will pay the balance to the lender

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a. Incontestability period b. Assignment c. Automatic premium loan d. Waiver of premium

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT a. Late payments b. Failure to pay off a loan c. Disputes regarding consumer report information d. Tax delinquencies

All of the following are requirements of eligibility of Social Security Disability income benefits EXCEPT a. Fully insured status b. Waiting period of 5 months c. Being age 65 d. Inability to perform any gainful work

All of the following are true regarding insurance policy loans EXCEPT a. The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy b. Policyowners can borrow up to the full amount of their whole life policy's cash value c. Policy loans can be made on policies that do not accumulate cash value. d. The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies

All of the following candidates for a resident license producer may be exempted from the examination requirement EXCEPT a. A person in public employment in the insurance field whose license terminated 10 months ago. b. A nonresident producer in good standing who is moving to this state. c. A resident producer licensed for property and casualty insurance applying for a Life Insurance license d. A professional who holds a Certified Financial Planner (CFP) designation

All of the following statements about equity indexed annuities is correct except a. The interest rate is tied to an index such as the Standard and Poor's 500 b. They invest on a more aggressive basis aiming for higher returns c. The annuitant receives a fixed amount of return d. They have a guaranteed minimum interest rate.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a. The employer pays a bonus to a selected employee to fund the policy b. It is considered a nonqualified employee benefit c. The policy is owned by the company d. Any type of insurance policy may be used

All the following are true of an annuity owner EXCEPT a. The owner has a right to name the beneficiary b. The owner is the party who may surrender the annuity c. The owner must be the party to receive benefits d. The owner pays the premiums on the annuity

What is the purpose of establishing the target premium for a universal life policy? a. To pay up the policy faster b. To cover all policy expenses c. To keep the policy in force d. To accumulate cash value faster

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) a. Flexible annuity b. Immediate annuity c. Equity Indexed Annuity d. Variable Annuity

An applicant who receives a preferred risk classification qualifies for a. Higher premiums than a person who receives a sub-standard risk b. Higher premiums than a person who receives a standard risk c. Lower premiums than a person who receives a standard risk d. Dividends payable for a lack of claims

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? a. She can only convert her coverage without proof of insurability if she has the master policy b. She must apply for a new policy, which requires her to provide proof of insurability c. She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. d. She will still be covered under the group plan, but will have to pay an individual policy premium.

During policy replacement, the replacing insurer must notify existing insurers within what time period? a. 30 days b. 90 days c. 5 business days d. 10 calendar days

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? a. Coverage cannot be converted when an individual leaves the group. b. Premiums are determined by age, occupation, and individual underwriting. c. 100% participation of members is required in noncontributory plans d. Each member covered receives a policy

How is an insurance consultant different from an insurance producer? a. A consultant does not get paid commissions. b. A consultant represents the insurer c. A consultant does not sell policies, but only offers advice d. A consultant does not need an insurance license

How is social security funded? a. Sales tax b. Federal grant money c. Taxes imposed on a worker's earned income d. State payroll taxes

If a life insurance policy has an irrevocable beneficiary designation, a. The owner can always change the beneficiary at will b. The beneficiary cannot be changed c. The beneficiary can only be changed with written permission of the beneficiary d. The beneficiary cannot be changed for at least 2 years

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? a. The policy beneficiary takes over the loan payments. b. The policy is rendered null and void c. The balance of the loan will be taken out of the death benefit d. The policy beneficiary receives the full death benefit

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to a. Lower its insurability standards b. Refuse to issue the policy c. Charge a higher premium d. Require a yearly medical examination

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a. The premium b. The amount of insurance c. The type of investment d. The length of coverage

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT a. Applicant's present physical condition b. Applicant's present occupation c. Applicant's past income d. Applicant's past medical history

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning policy premium? a. The applicant's habits and health do not affect premiums b. It will likely be lower because the applicant is a preferred risk c. It will likely be higher because the applicant is a substandard risk d. It will likely be the average premium issued to standard risks

The Federal Fair Credit Reporting Act a. Regulates telemarketing b. Prevents money laundering c. Regulates consumer reports d. Protects customer privacy

The company has issued a policy and delivered it to Producer B on May 1st, Monday. By what date must the policy be delivered to the insured? a. May 2nd (immediately) b. May 31st (within a month) c. May 10th (within 10 calendar days) d. May 12, Friday (within 10 business days)

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application? a. Acknowledge the missed questions with a signature and continue the policy issue process. b. Proceed with issuing a policy. c. Return to the applicant for completion. d. Answer the missed questions for the applicant.

The main difference between immediate and deferred annuities is a. The number of insureds b. The amount of each payment c. When the income payments begin d. How the annuity is purchased

The minimum interest rate on an equity indexed annuity is often based on a. The annuitant's individual stock portfolio b. The insurance company's general account investments c. An index like the Standard and Poor's 500 d. The returns from an insurance company separate account.

The premiums paid by the employer in a business life insurance policy are a. Always taxable to the employee b. Never taxable to the employee c. Tax deductible by the employer d. Tax deductible by the employee

The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower echelon employees. this plan would be funded with before tax corporate dollars, and it does not meet government approval standards. This annuity plan is: a. Subject to government standards b. Illegal c. A nonqualified annuity plan d. An executive annuity plan

What is a foreign insurer? a. An insurer with licensed agents doing business in other countries b. An insurer with licensed agents who are citizens in more than one country c. An insurer with a home office in another state d. An insurer with a home office in another country

When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, it's financial health is terrible, and the company will soon have to file from bankruptcy. Which of the following terms best describes the advertisement? a. Twisting b. Rebating c. False financial statement d. Defamation

When would a misrepresentation on the insurance application be considered fraud? a. When the application is incomplete b. Any misrepresentation is considered fraud c. If it is intentional and material d. Never: statements made by the applicant are only representations.

Which is NOT true about beneficiary designations? a. The policy does not have to have a beneficiary named in order to be valid b. Trusts can be valid beneficiaries c. The beneficiary must have an insurable interest in the insured d. The beneficiary may be a natural person

Which is TRUE about the cash surrender nonforfeiture option? a. The policy remains active for some time after the policyholder opts for cash surrender. b. The policyholder receives the original cash value of the policy c. Funds exceeding the premium paid are taxable as ordinary income d. After the cash surrender, the insured is covered for a grace period of one month.

Which is generally true regarding insureds who have been classified as preferred risks? a. They can decide when to pay their monthly premiums b. They keep a higher percentage of any interest earned on their policies. c. Their premiums are lower. d. They can borrow higher amounts off of their policies.

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? a. Single life b. Fixed-amount c. Life income with period certain d. Joint and Survivor

Which of the following applies to the 10-day free-look privilege? a. It can be waived only by the insurance company. b. It is granted only at the option of the agent. c. It permits the insured to return the policy for a full refund of premiums paid d. It allows the the insured 10 days to pay the initial premium.

Which of the following best describes the MIB? a. It is a member organization that protects insured against insolvent insurers. b. It is a rating organization for health insurance c. It is a non-profit organization that maintains underwriting information on applicants for life and health insurance d. It is a government agency that collects medical information on the insured from the insurance companies

Which of the following best describes the unfair trade practice of defamation? a. Issuing false advertising material b. Refusing to deal with other insurers c. Making derogatory oral statements about another insurer's financial condition d. Assuming the name and identity of another person.

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? a. A privacy notice b. A buyer's guide c. A policy summary d. A notice regarding replacement

Which of the following employees insured under a group life plan would be able to convert to individual insurance of the same coverage once the plan is terminated? a. Those who have dependents b. Those who have no history of claims c. Those who have been insured under the plan for at least 5 years d. Those who have worked in the company for at least 3 years

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? a. A buy-sell agreement b. Family term rider c. Third party ownership d. An irrevocable beneficiary

Which of the following is NOT true regarding Equity Indexed Annuities? a. They have guaranteed minimum interest rates b. They are less risky than variable annuities c. They earn lower interest rates than fixed annuities d. The insurance company keeps a percentage of the returns.

Which of the following is NOT typically excluded from life policies? a. Death that occurs while a person is committing a felony b. Death due to war or military service c. Death due to plane crash for a fare-paying passenger d. Self-inflicted death

Which of the following is true regarding taxation of dividends in participating policies? a. Dividends are taxable in some life insurance policies and non-taxable in others. b. Dividends are considered income for tax purposes. c. Dividends are not taxable d. Dividends are taxable only after a certain amount is accumulated annually.

Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? a. Credit term life b. Decreasing term life c. Variable Universal life d. Increasing term life

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a. The Guaranty Association b. Consumer Privacy Act c. The Fair Credit Reporting Act d. Unfair Trade Practices Law

Which of the following statements concerning buy-sell agreements is true? a. Benefits received are considered income taxable b. Buy-sell agreements pay in the event of a medical emergency c. Buy-sell agreements are normally funded with a life insurance policy d. Premiums paid are deductible as a business expense

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 59.5 incur a 10% penalty on policy gains.

Which of the following would be required to be licensed as an insurance producer? a. A salaried full-time employee who furnishes information for group insurance b. An insurance company director who performs executive, administrative, and managerial duties. c. A salaried employee who advertises and solicits insurance. d. A person whose activities are limited to producing insurance advertisements.

Which two terms are associated directly with the way an annuity is funded? a. Immediate or deferred b. Renewable or convertible c. Single payment or periodic payments d. Increasing or decreasing

Who is a third-party owner? a. An employee in a group policy b. An irrevocable beneficiary c. A policyowner who is not the insured d. An insurer who issues a policy for two people

Within how many days must a producer report claims to the insurer? a. 3 business days b. 5 calendar days c. 5 business days d. 3 calendar days

What is the maximum penalty for habitual willful noncompliance with the Fair Credit reporting act? a. $100 per violation b. Revocation of license c. $2,500 d. $1,000

c. $2,500

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a. $20,000 b. $25,000 c. $50,000 d. The face amount will be determined by the insurer

c. $50,000

An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out? a. $10,000 b. $40,000 c. $50,000 d. $60,000

c. $50,000

The maximum the Insurance guaranty association will pay to an individual for life insurance death benefit is A. $100,000 B. $250,000 C. $500,000 D. $1,000,000

c. $500,000

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a. $0 b. $200 c. $9,800 d. $10,000

c. $9,800

In order to become a producer in New Jersey, after submitting a licensing application, candidates must pass a licensing examination within a. 3 months b. 6 months c. 1 year d. 2 years

c. 1 year

If a producer dies or is rendered severely disabled, an unlicensed person can contract with another insurance producer to continue this person's insurance transactions for a. 90 days b. 100 days c. 180 days d. 365 days

c. 180 days

When an insurance producer negotiates for an insurance contract on behalf of a client, the producer is acting as an a. Consultant b. Agent c. Broker d. Solicitor

c. Broker

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision making-process? a. Policy summary b. Illustrations c. Buyer's Guide d. Insurance Index

c. Buyer's Guide

Which authority has the power to deny someone an insurance producer's license? a. Guaranty Association b. Federal Insurance Licensing Regulation Board c. Commissioner d. Insurance company

c. Commissioner

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? a. Agent's report b. Any federal report c. Consumer report d. Inspection report

c. Consumer report

When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered a. Controlled business b. Adverse selection c. Discrimination d. Twisting

c. Discrimination

All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT a. Gender b. Occupation c. Education d. Age

c. Education

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. Fair Credit Reporting Act

Using names or titles that have tendency to misrepresent the true nature of policy is an example of what illegal practice? a. Twisting b. Rebating c. False advertising d. Defamation

c. False Advertising

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is... a. Correctly insured b. Permanently insured c. Fully insured d. Partially insured

c. Fully Insured

What type of insurance would be used for a Return of Premium Rider a. Decreasing term b. Annually renewable term c. Increasing term d. Level term

c. Increasing term

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? a. Ordinary life policy b. Limited pay whole life c. Level Term d. Term to specified age

c. Level Term

Which of the following settlement options in life insurance is known as straight life? a. Life with period certain b. Fixed amount c. Life income d. Single life

c. Life Income

Traditional IRA contributions are tax deductible based on which of the following? a. Owner's age b. IRA limit c. Owner's income d. How long the plan has been in force

c. Owner's income

A domestic insurer issuing variable contracts must establish one or more a. Annuity accounts b. General accounts c. Separate accounts d. Liability accounts

c. Separate accounts

All of the following are considered limited lines of authority EXCEPT a. Travel insurance b. Bail Bonds c. Surplus lines d. Credit insurance

c. Surplus lines

Which of the following would help prevent a universal life policy from lapsing? a. Adjustable premium b. Corridor of insurance c. Target Premium d. Face amount

c. Target Premium

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? a. Variable life b. Adjustable life c. Universal life d. Flexible life

c. Universal life

Which of the following products requires a securities license? a. Equity indexed annuity b. Deferred annuity c. Variable annuity d. Fixed annuity

c. Variable annuity

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a. Indemnity b. Representation c. Warranty d. Concealment

c. Warranty

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be a. Certified b. Qualified c. Approved d. Authorized

d. Authorized

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a. No taxes are due since the plan participant is over age 59 1/2 b. There is a 10% early withdrawal penalty c. The amount distributed is subject to ordinary income tax d. The amount of the distribution is reduced by the amount of a 20% withholding tax.

A candidate for a producer license passed his licensing exam 6 months ago but has not applied for a license yet. Which of the following is true? a. The candidate will need to apply for a license immediately b. The candidate has waited too long to apply for a license and must retake the examination c. The candidate does not need to apply for a license. After passing the exam, all required information is transmitted to the Insurance Department by the testing provider d. The candidate has 6 more months to apply for a license

A certification of License Status must include all of the following information EXCEPT a. Licensee's date of birth b. Types of insurance for which the licensee is authorized c. Licensee reference number d. Number of years a licensee has been in the business

A group of 4 entrepreneurs decides to open an insurance company. Which of the following is true? a. None of the members have to be licensed as insurance producers, except for those who want to transact insurance business. b. At least 2 members must be licensed insurance producers. c. All 4 members must be licensed insurance producers, regardless of whether they are involved with the insurance transactions. d. At least 1 member must be a licensed insurance producer

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT: a. Explain the policy provisions, riders, and exclusions. b. Collect any premium due c. Explain the rating procedures if the policy is rated differently than applied for d. Disclose commissions earned from the sale of the policy.

A small employer owns a group health insurance policy. The employer neglects to pay the premium by the end of the grace period. Which of the following will happen? a. The policy will continue for the certificate holders only b. The certificate holders will be transferred to another policy c. The certificate holders will have to pay for all claims that were incurred after the premium due date d. The policy will terminate

All of the following are requirements for a non-resident license EXCEPT a. Holding an active license in the same line of authority in another state. b. Submitting a licensing application from the home state c. Paying the required fees d. Passing the New Jersey licensing examination

All of the following are requirements for life insurance illustrations EXCEPT a. They may only be used as approved. b. They must identify nonguaranteed values. c. They must differentiate between guaranteed and projected amounts. d. They must be part of the contract.

All of the following are true about variable products EXCEPT a. The minimum death benefit is guaranteed b. The cash value is not guaranteed c. Policyowners bear the investment risk d. The premiums are invested in the insurer's general account

All of the following are true of key person insurance EXCEPT a. There is no limitation on the number of key employee plans in force at any one time. b. The employer is the owner, payor, and beneficiary of the policy c. The key employee is the insured d. The plan is funded by permanent insurance only

All of the following employees may use a 403 (b) plan for their retirement EXCEPT a. A school bus driver b. A part-time classroom aide c. The vice president of a charitable organization d. The CEO of a private organization

All of the following professional designations are recognized by the department as acceptable substitutes for education and examination requirements EXCEPT a. Chartered property/Casualty underwriter (CPCU) b. Chartered financial consultant (ChFC) c. Chartered Life Underwriter (CLU) d. Professional Insurance Agent (PIA)

An applicant for a producer's license has successfully completed all of the steps necessary to obtain the license. The soon-to-be producer does not want to wait until he receives his license in order to begin working. Which of the following is possible? a. The person must wait until the license is issued. b. The person must apply for a shortened preliminary period. c. As long as the producer is appointed, he may begin working, and the license will be issued with a retroactive date. d. The person can obtain a temporary work authority.

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE? a. The premium would be returned to the insured's estate because the policy was not issued. b. The death claim will be rejected. c. The application will be voided. d. The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.

An employee is insured under her employer's life group plan. If she terminates her group coverage, which of the following statements is INCORRECT? a. The insured would not need to prove insurability for a conversion policy b. The insured may convert coverage to an individual policy within 31 days c. The premium for individual coverage will be based upon the insured's attained age d. The insured may choose to convert to term or permanent individual coverage

An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover? a. $8,000, no tax consequence b. $8,000, tax on growth only c. $10,000, tax on growth only d. $10,000, no tax consequence

An insurance producer refused to comply with a subpoena. What would be the producer's penalty for this violation? a. A fine and an imprisonment b. A fine up to $10,000 c. Imprisonment up to 6 months d. A fine up to $5,000

Annually renewable term policies provide a level death benefit for a premium that a. Decreases annually b. Remains level c. Fluctuates d. Increases annually

During replacement of life insurance, a replacing insurer must do which of the following? a. Guarantee a replacement for each existing policy b. Designate a new producer for a replaced policy c. Send a copy of the Notice regarding replacement to the department of insurance d. Obtain a list of all life insurance policies that will be replaced.

How long must producers and insurers maintain records of management of funds for insurance policies? a. 7 years b. 1 year after the examination by the Commissioner c. 3 years after opening an account d. 5 years after termination of coverage

How must a replacing producer respond to an applicant wishing to replace existing life insurance? a. The producer must collect the existing policies and turn them over to the replacing insurer. b. The producer must request the permission of the existing insurer. c. The producer has no specific duties. d. The producer must provide the applicant with a Notice Regarding Replacement.

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do? a. Sign the application for the applicant b. Sign the application, stating it was by the agent c. Send the application to the insurer with a note explaining the absence of signature d. Return the application to the applicant for a signature.

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a. A misrepresentation b. A required disclosure c. A legal representation of the Association d. An unfair trade practice

If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans? a. The policy is withheld until payments are met b. The loan amount is charged to the beneficiaries c. The loans are waived d. The loan amounts are deducted from the death benefit

In term policies, what happens to the premium throughout the term of the policy? a. Premium gradually increases b. Premium gradually decreases c. Premium fluctuates d. Premium always remains level

Insurance is regulated a. Evenly between the state and federal levels b. Only on the level of social medicine, which is on both state and federal levels. c. Mostly on a federal level d. Mostly on a state level

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a. Term insurance only b. Permanent insurance only c. Universal life insurance only d. Any form of life insurance

Proceeds from a life insurance policies are protected from the beneficiary's debt under all of the following circumstances EXCEPT a. The amount of debt exceeds the policy's face value b. The amount of debt exceeds 50% of the policy's face value c. There are no circumstances under which proceeds are protected from the beneficiary's debts. d. Some of the premiums were paid in an attempt to defraud creditors.

Representations are written or oral statements made by the applicant that are a. Guaranteed to be true b. Found to be false after further investigation c. Immaterial to the actual acceptability of the insurance contract d. Considered true to the best of the applicant's knowledge

The Medical Information Bureau (MIB) was created to protect a. Insurance departments from lawsuits by policyowners. b. Insureds from unreasonable underwriting requirements by the insurance companies. c. Medical examiners that perform insurance physical examinations. d. Insurance companies from adverse selection by high risk persons.

The death benefit under the Universal Life Policy Option B a. Decreases by the amount that the cash value increases b. Increases for the first few years of the policy, and then levels off c. Remains level d. Gradually increases each year by the amount that the cash value increases

The initial amount of credit life insurance may NOT exceed a. An amount set by statute and adjusted regularly for inflation b. The borrower's monthly income c. The borrower's annual income d. The amount to be repaid under the contract.

The paid-up addition option uses the dividend a. To purchase a one-year term insurance in the amount of the cash value. b. To reduce the next year's premium c. To accumulate additional savings for retirement d. To purchase a smaller amount of the same type of insurance as the original policy

The two types of assignments are a. Absolute and partial b. Complete and partial c. Complete and proportionate d. Absolute and collateral

What is a material misrepresentation? a. Any misstatement made by an applicant for insurance. b. Any misstatement made by the producer. c. Concealment d. A statement made by the applicant that, upon discovery, would affect the underwriting decision of the insurance company.

What is the official name for the Social Security Program? a. Social insurance program b. Defined Benefit Retirement Insurance c. Qualified Pension Plan d. Old Age Survivors Disability Income

What is the official name for the Social Security program? a. Social insurance program b. Defined Benefit Retirement Insurance c. Qualified Pension Plan d. Old Age Survivors Disability Insurance

What license or licenses are required to sell variable annuities? a. Only a life insurance b. Only a securities license c. No license is required d. Both a life insurance license and a securities license

What was created to keep telemarketers from calling consumers who do not wish to be contacted? a. Confidential No Call Act b. Freedom of information Act c. Call Control Registry d. National Do Not Call Registry

Term policies are available as level, increasing, and decreasing. Which policy component fluctuates depending on the policy type? a. Premium b. Cash value c. Nonforfeiture values d. Death benefit

d. Death benefit

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will a. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. b. Return the premium to Y's estate, since it has no obligation to to pay the death benefit claim. c. Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. d. Issue the policy anyway and pay the face value to the beneficiary.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a. Purchase a term rider to attach to the policy b. Pay back all premiums owed plus interest c. Receive payments for a fixed amount d. Purchase a single premium policy for a reduced face amount

When is the earliest a policy may go into effect? a. When the first premium is paid and the policy has been delivered. b. When the insurer approves the application. c. After the underwriter reviews the policy. d. When the application is signed and a check is given to the agent.

Which of the following determines the cash value of a variable life policy? a. The company's general account b. The policy's guarantees c. The premium mode d. The performance of the policy portfolio

Which of the following determines the cash value of a variable life policy? a. The company's general account b. The policy's guarantees c. The premium mode d. The performance of the policy ratio

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? a. An irrevocable beneficiary b. A buy-sell agreement c. Family term rider d. Third-party ownership

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a. Universal life - Option B b. Equity Indexed Universal Life c. Variable Universal Life d. Universal life - Option A

Which of the following statements about a suicide clause in a life insurance policy is true? a. Suicide is covered for a specific period of years and excluded thereafter. b. Suicide is covered as long as the policy is in force c. Suicide is excluded as long as the policy is in force d. Suicide is excluded for a specific period of years and covered thereafter.

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? a. Standard risk pays a higher premium than a substandard risk. b. Standard risk requires extra rating. c. Standard risk is also known as high exposure risk. d. Standard risk is representative of the majority of the people.

Which of the following statements is correct regarding a whole life policy? a. Cash values are not guaranteed b. The policy premium is based on the attained age c. The death benefit may increase or decrease during the policy period d. The policyowner is entitled to policy loans

Which of the following types of policies allows for a flexible premium and a variable investment component? a. Guaranteed issue variable life insurance b. Variable whole life insurance c. Whole life insurance d. Variable Universal Life Insurance

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy? a. The employer is the owner and the key employee is a beneficiary b. The key employee is the owner and beneficiary c. The key employee is the owner and the employer is the beneficiary d. The employer is the owner and beneficiary

Why should the producer personally deliver the policy when the first premium has already been paid? a. To ensure the producer gets paid commission. b. To find out how the family has been doing since the initial presentation. c. To make sure the policy is not stolen or lost. d. To help the insured understand all aspects of the contract.

Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend? a. A term policy b. An annuity c. A whole life policy d. An endowment policy

The buyer's guide and policy summary can be delivered with the policy or earlier if the policy contains an unconditional refund provision of at least A. 15 days B. 30 days C. 7 days D. 10 days

d. 10 days

The commissioner believes that an insurance rule or regulation has been violated, and decides to call a disciplinary hearing. How many days before a hearing must the Commissioner issue a notice to the person charged with a violation. a. 20 days b. 30 days c. 7 days d. 10 days

d. 10 days

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount? a. 65 b. 70 1/2 c. 90 d. 100

d. 100

What percentage of a company's employees must take part in a noncontributory group life plan? a. 0% b. 25% c. 75% d. 100%

d. 100%

Licensees must file with the Department a branch office registration form within how many days before business is first conducted there? a. 10 b. 15 c. 20 d. 30

d. 30

After its issuance, the temporary work authority expires after how many days a. 10 days b. 30 days c. 45 days d. 60 days

d. 60 days

According to the telemarketing sales rules, what are the permissible calling hours for telemarketing calls? a. 10 am until 10 pm b. 7 am until 7 pm c. 7 am until 9 pm d. 8 am until 9 pm

d. 8 am until 9 pm

Which of the following products provides income for a specified period of years or for life, and protects a person against outliving his or her money? a. A survivorship life policy b. A universal life policy c. A group policy d. An annuity

d. An annuity

Which of the following is the basic source of information used by the company in the risk selection process? a. Agent's report b. Warranty c. Consumer report d. Application

d. Application

When a producer was reviewing a potential customer's insurance coverage that is written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of a. Misrepresentation b. Discrimination c. Nothing, unless the remarks were in writing d. Defamation

d. Defamation

Which of the following is NOT a term for the period of time during which the annuitant or beneficiary receive income? a. Annuitization Period b. Pay-out period c. Liquidation period d. Depreciation period

d. Depreciation Period

An agent selling variable annuities must be registered with a. Department of Insurance b. The Guaranty Association c. SEC d. FINRA

d. FINRA

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? a. Unfair claims b. Twisting c. Defamation d. False Advertising

d. False advertising

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? a. Life with period certain b. Fixed amount c. Interest only d. Fixed Period

d. Fixed Period

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? a. Alien b. Domestic c. Unauthorized d. Foreign

d. Foreign

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? a. Domestic b. Alien c. Non-admitted d. Foreign

d. Foreign

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? a. Waiver b. Utmost Good Faith c. Estoppel d. Material misrepresentation

d. Material misrepresentation

Which of the following information about the applicant is NOT included in the General information section of the application for insurance? a. Gender b. Occupation c. Marital Status d. Medical Background

d. Medical Background

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? a. Inspection Report b. Agent's Report c. General Information d. Medical Information

d. Medical Information

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? a. Reciprocal b. Nonprofit service organization c. Stock d. Mutual

d. Mutual

What is the major difference between a stock company and a mutual company? a. Amount of death benefit b. Number of producers c. Types of whole life policies d. Ownership

d. Ownership

What describes the specific information about a policy? a. Illustrations b. Buyer's Guide c. Producer's Report d. Policy Summary

d. Policy Summary

Who might receive dividends from a mutual insurer? a. Subscribers b. Stockholders c. Agents d. Policyholders

d. Policyholders

Which of the following has the right to convert the existing term coverage to permanent insurance? a. Insurer b. Beneficiary c. Producer d. Policyowner

d. Policyowner

Which of the following individuals must have insurable interest in the insured? a. Beneficiary b. Underwriter c. Producer d. Policyowner

d. Policyowner

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of a. Coercion b. Twisting c. Controlled business d. Rebating

d. Rebating

What method do insurers use to protect themselves against catastrophic losses? a. Indemnity b. Pro rata liability c. Risk Management d. Reinsurance

d. Reinsurance

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? a. Reinstatement rule b. Conversion rule c. Disclosure rule d. Replacement rule

d. Replacement rule

Insurance is the transfer of a. Loss b. Hazard c. Peril d. Risk

d. Risk

Which of the following is a risk classification used by underwriters for life insurance? a. Poor b. Normal c. Excellent d. Standard

d. Standard

Which of the following policies would be classified as a traditional level premium contract? a. Adjustable life b. Universal life c. Variable Universal Life d. Straight life

d. Straight life

Which of the following is a "second to die" policy? a. Family income b. Juvenile life c. Joint life d. Survivorship life

d. Survivorship life

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a. Adjustable life b. Term life c. Limited Pay d. Universal Life

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