Practice Exam
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?
$50,000. It would remain the same as when it was purchased.
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?
100 Whole life insurance policies mature when the insured reaches the age of 100. The cash value at that time is scheduled to equal the face amount; therefore, when the insurance company pays the face amount, it also, in effect, pays the cash value.
Whenever the Commissioner issues an emergency cease and desist order, how will that order be delivered to the person in violation?
By certified mail
Which of the following statements is correct concerning the Commissioner's authority to revoke a license?
Cannot do so without a hearing
All of the following are duties and responsibilities of producers at the time of application EXCEPT
Change any incorrect statement on the application by personally initialing next to the corrected statement.
If the Commissioner believes a person is engaged in unfair business practices, what should the Commissioner do?
Conduct a hearing for the person to show cause
Which of the following may contribute to proof of death for the purposes of insurance benefits payment?
Death Certificate
Which of the following best describes the aleatory nature of an insurance contract?
Exchange of unequal values
What does "level" refer to in level term insurance?
Face amount
In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?
From trustee to trustee In a direct transfer, the distribution is made directly from the trustee of the first plan to the trustee or administrator/custodian of the new IRA plan
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income.
An annuity
Is the only financial product that can provide you with a guaranteed lifetime income and protect you from outliving your savings.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection
If a retirement plan or annuity is "qualified", this means
It is approved by the IRS
Which of the following riders would NOT cause the Death Benefit to increase?
Payoff Benefit Rider Payor benefit does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies.
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license.
The Governor has asked the Commissioner to examine an insurance company after a group insured(s) has filed several complaints against the company. Who will pay for this examination?
The Insurance Company
Which is true about a spouse term rider?
The rider is usually level term insurance
What is the purpose of the buyer's guide?
To allow the consumer to compare costs of different policies
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
War or military service
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent. The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Which of the following types of policies will provide permanent protection?
Whole life Whole life policies are referred to as permanent protection, as long as the premium is paid, coverage will continue for the life of the insured. Both the premiums and death benefit are guaranteed and will remain level for life.
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than
With the policy
Most term life policies are level term. "Level term" simply means that
Your premiums, or payments, and death benefit stay the same throughout the entire policy
In Accidental Death Rider, if the insured dies from an accident, Death Benefit is
a multiple of the Face Amount
A universal policy has two components:
an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
A joint life policy
covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
With Guaranteed Insurability Rider, the policy owner can increase Death Benefit at
specified ages or events, i.e. marriage or birth of a child
Cost of Living Rider increase Death Benefit to
to keep pace with inflation
In a group life insurance policy, the employer may select all of the following EXCEPT
The beneficiary. (Employees must be allowed to select a beneficiary. Review ContentNext Question)
Which of the following means "liquidity" in a life insurance contract?
The cash value available to the policyowner
Under an employer-sponsored group plan, if the insurance on a person covered under the policy ceases because of termination of employment, which of the following is true?
The certificate owner is entitled to convert coverage to an individual policy without evidence of insurability.
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
The date of medical exam
All of the following are prohibited by individuals when using senior specific designations EXCEPT
The individual has earned the designation from a for-profit organization
The Governor has asked the Commissioner to examine an insurance company after a group of insureds has filed several complaints against the company. Who will pay for this examination?
The insurance company
An insurance producer represents
The insurer
Which of the following is NOT true regarding the policy summary?
The policy summary may be part of the policy
Who is responsible for giving the Notice to the replacing insurer in a replacement life transaction?
The producer
The agent's personal observations regarding the applicant are included in
The producer's report (part 3 of the application)
Which is true of Spouse Term rider?
The rider is usually level term insurance
An absolute assignment allows a policyowner
The transfer of all rights
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
They have a guaranteed minimum interest rate.
An insurer with their home office in another state may do business in Colorado if
They obtain a Certificate of Authority in Colorado
The "annuity period" is the
Time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
If the Commissioner believes a producer has committed a violation for an insurance law, the commissioner will hold a hearing. What is the purpose of the hearing?
To allow the aggrieved party to be heard
Believing a producer has violated provisions of the Insurance Code, the Commissioner will schedule a hearing
To allow the producer to show why penalties should not be assessed
Why should the agent personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract
An absolute assignment is a
Transfer of all ownership rights in a policy It is a permanent transfer
A lender is requiring that a borrower purchases an insurance policy through a particular insurer, as a condition to the extension of credit. This is an example of which of the following?
Unfair practice of coercion
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?
Universal Life
A policyholder has a life insurance policy that will allow for a partial withdrawal or surrender of the policy's cash value. This policy is most likely a
Universal Life Policy
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%
Which of the following products requires a securities license?
Variable annuity
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of premium. Waiver of premium rider waives the premium if the insured owner has been totally disabled for a predetermined period. The payor benefit provides for an owner other than the insured and the waiver of cost of insurance is found in Universal Life.
In forming insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
A disclosure statement showing the features and benefits of a proposed policy must be given to applicants no later than
When the application is signed
When must a beneficiary have insurable interest in an insured?
When the policy is issued
A producer is subject to criminal prosecution in another jurisdiction. Within what time frame must the producer report this fact to the Commissioner?
Within 30 days after the initial pre-trial hearing
A policyowner wants to change the beneficiary designated irrevocable on a life insurance policy. What will the policyowner need?
Written consent of the current beneficiary
How often are insurance producers required to renew their license?
every 2 years
An individual with a legal interest in the continued life of the insured defines the principle known as
insurable interest
In whole life insurance, which of the following terms describes features such as cash values and loan provisions?
living benefits
A collateral assignment allows a policyowner to assign:
partial/temporary assignment of rights. Usually to Secure a Loan
Insurers must complete claims investigations
promptly
An insured covered by a life insurance policy with an accidental death rider was injured in an accident and died 120 days later. The policy had $50,000 coverage with triple indemnity. What will the beneficiary receive?
$150,000
What is the maximum civil penalty per violation if an unauthorized entity violates the Commissioner's cease and desist order?
$25,000
Companies must respond to an Examination Request/Memo Form within ____ calendar days from the date on the form
10
A whole life policy's cash value will equal the face amount when the insured reaches what age?
100
Settlement options are triggered by the insured's death, or at age?
100
How long is the free-look period for life insurance policies issued in Colorado?
15 days
What is the minimum age for producer licensing in this state?
18
A person who knowingly obtains information on a consumer from a consumer reporting agency under false pretenses may be imprisoned for up to how many years?
2 years
If an insurer receives a request for information in any format other than an Examination Request/Comment Form or Examination Request/Memo Form, it must respond within
20 calendar days
The Division of Insurance has requested information regarding an insurer's underwriting policies via e-mail. How many days does the insurer have to respond to this request?
20 days
Colorado's Insurance Continuing Education Law Requires
24 credit hours every 2 years regardless of the number of licenses held
After a client signs a disclosure statement regarding additional fees charged by a producer, the producer must keep a copy of the statement for at least
3 years from the date of completion of the services
In Colorado, the grace period in group life insurance policies is
31 days
Life insurers must keep copies of all Notices and Statements regarding replacement on file for at least how many years?
5
A consumer would like to get more information on their Investigative Consumer Report. How many days does the insurer have to comply?
5 days
The minimum number of credits required for partially insured status for Social Security disability benefits is
6 credits
In an IRA rollover, the rollover must be completed within how many days of the time the funds are taken out of the first plan?
60 days
Which of the following is NOT considered to be a legal example of an incurable interest in Colorado?
A STOLI agreement
Triple Indemnity
A benefit under which the company pays three times the face value of the policy if the insured's death results from an accident
Which of the following is NOT true regarding the Notice Regarding Replacement?
A copy must be sent to the existing insurer
Which of the following statements is NOT true concerning incurable interest as it applies to life insurance?
A debtor has an incurable interest in the life of a lender
All of the following transactions would be allowed EXCEPT
A friend buying life insurance on a friend.
All of the following could own group life insurance EXCEPT
A group formed specifically to purchase insurance
In which of the following situations has replacement occurred?
A policyowner borrows 25% of their cash value to buy a new policy
When delivering a policy to an insured, an agent collects both the premium and a document verifying that the insured has not been injured or suffered any illnesses since completing the applicant. This is called
A statement of Good Health
Of $10,000 in premiums a producer wrote over the past year, $3,000 came from sales to a business which employs the producer's spouse. This is considered
A violation of the controlled business regulations
If a term life policy is convertible, that means that at the end of the policy term, the policyowner may convert coverage to
A whole life policy
The point at which an insurer issues a policy is known as
Acceptance
During which of the following annuity period does an insured make monthly contributions to the annuity for retirement purposes?
Accumulation period
The Commissioner may revoke a producer license for all of the following reasons EXCEPT
Acting in a fiduciary capacity
If a producer's license was revoked for a violation of the Insurance Code, when can the producer apply for a new license
After 2 years
Who is considered a nonresident agent?
An agent who resides in another state, but is licensed to write insurance in this state.
Which of the following actions would be considered an offer?
An applicant submitting the application
An employer gives an employee a wage increase to finance premiums on a life insurance policy on the employee's life. This is known as
An executive bonus
The LEAST expensive first-year premium is found in which of the following policies?
Annually renewable term
When dividends are available to the owner of a participating policy, which of the following dividend options can the policyowner exercise?
Apply the dividends to reduce the next year's premiums
The Insurance Commissioner may examine admitted companies
As deemed necessary
How often must the Commissioner examine all insurers to guard against insurance company insolvency?
At least once every 5 years
When an application for an annuity contract is taken face-to-face with the consumer, the producer must give all required disclosure documents
At or before the time of application
Which of the following provisions or options protects the insured from an unintentional policy lapse due to a nonpayment of premium?
Automatic premium loan provision
Life insurance exclusions include?
Aviation, hazardous hobbies, war or military service
An insurance contract must contain all of the following to be considered legally binding EXCEPT
Beneficiary's consent
Which of the following is known as a business continuation agreement?
Buy-sell agreement
The Commissioner has issued an emergency cease and desist order. How must it be communicated to the agent?
By certified mail
Which of the following riders usually expires when the covered insured reaches a specific age?
Children's Term
An individual borrowed money at the bank to send his daughter to college. Instead of purchasing Credit Life insurance, he used an existing life insurance policy to secure the debt. This would be considered a/an
Collateral Assignment
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration
What is consideration?
Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.
Denying insurance coverage on the basis of a person's marital status is
Considered unfair discrimination
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Contracts of Adhesion
Rider addresses the inflation factor by annually increasing the amount of insurance without evidence of insurability?
Cost of Living Rider
Which of the following losses would likely be covered under the Accidental Death Rider?
Death caused by a head-on collision
Making statements that are false, maliciously critical, and designed to injure an insurance person or business is known as
Defamation
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?
Defamation
What is defamation?
Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation or pay-out period.
Under which of the following riders will the insurer both waive policy premiums and pay monthly income to the insured if the insured is disabled?
Disability Income Benefit Rider
Unused premiums are returned to policy owners tax free in the form of
Dividends
Insurers must file their audited financial statements with the Commissioner
Each year by March 1
All of the following statements are true EXCEPT:
Employer contributions are not tax deductible Tax-qualified annuities must be approved by the IRS and allow for tax deductible employer contributions. All withdrawals are taxed and earning grow tax deferred.
Which nonforfeiture option has the highest amount of insurance protection?
Extended term
Which of the following nonforfeiture options would be automatically implemented by the insurer if none of the other options has been selected by the policyowner?
Extended term
Producers who wish to sell variable life insurance in this state must be registered with what entity?
FINRA. (Producers applying for license qualification to include variable contracts must furnish evidence that they have a current registration with the Financial Industry Regulatory Authority (FINRA), and evidence that they have passed the series 6, 63, or 7 exams.)
Which policy component decreases in decreasing term insurance?
Face amount
An applicant for a life insurance policy submitted his application on January 5. The policy was issued on January 31. The agent was vacationing at the time the policy was issued, so the applicant did not receive the policy until February 10. The applicant decides that he does not want the policy. When would he need to return the policy to the insurer to receive a full refund of premium?
February 25th, or 15 days after the time the policy is delivered
Noncompliance with the regulation regarding fees charged by producers may result in which of the following penalties?
Fines and license suspension or revocation
Advertisements used to solicit life insurance and annuities must be kept on file by the insurer for how long?
Five years
Specific dollar amount in which installments are to be paid?
Fixed 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?
Fixed period Specified period and equal installments paid to recipient; payments continue for period even if recipient dies.
Which of the following are the features of a variable life insurance policy?
Fixed premium, guaranteed minimum death benefit, separate accounts
Under a universal life insurance policy, policy owners have a choice between what two types of premiums?
Flexible premium and level premium
If a policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes?
Guaranteed Insurability Rider
Rider added that will allow you to purchase additional insurance in the future without having to prove insurability is called?
Guaranteed Insurability Rider
Another name for a Keogh Plan is
HR-10
Which of the following is a producer's fiduciary duty?
Handling premiums
To offer a policy loan option, a policy must
Have cash value
In which of the following cases will the insured be able to receive the full face amount from a whole life policy?
If the insured lives to age 100
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
Illegal
An individual purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?
Immediate
If a settlement option is not selected on a life insurance policy, how will the benefits be distributed?
In a single cash payment
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
Incontestability clause
Annually renewable term policies provide a level death benefit for a premium that
Increases annually
The face amount of an indexed whole life policy
Increases annually to keep pace with inflation
An inspection report may be ordered about an applicant from an
Independent investigating firm or credit agency AND it is a general report of the applicant's finances, character, work, hobbies, and habits.
An individual with a legal interest in the continued life of the insured defines the principle of
Insurable interest
All advertisements, regardless of their source of creation, are the responsibility of the
Insurer
Dividends are not taxable, but _______ on dividends is taxable?
Interest
Which of the following best describes a misrepresentation?
Issuing sales material with exaggerated statements about policy benefits
What is the purpose of a free-look period in insurance policies?
It allows the insured to reject the policy with a full refund.
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant.
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
How does the premium in a survivorship life policy compare to the premium in a joint life policy?
It will be lower
Which statements is NOT true regarding a Straight-Life Policy?
Its premium steadily decreases over time, in response to its growing cash value.
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?
Joint Life A joint life covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
A married couple near retirement want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
Joint and survivor
Type of settlement option which pays throughout the lifetimes of two or more beneficiaries?
Joint and survivorship
In which of the following types of temporary insurance protection does the death benefit NOT change throughout the life of the policy?
Level term
Which of the following is NOT a type of whole life insurance?
Level term or increasing term
Which of the following settlement options does NOT guarantee that the entire principal will be paid out to the beneficiary?
Life Income
Due to a large inheritance, a policyowner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. This type of transaction is called a
Life settlement
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
Misrepresentation
Using a class designation for beneficiaries means
Naming beneficiaries as a group
A fixed annuity has a guaranteed interest rate of 4%. This means that the annuitant will
Never receive less than 4% interest
Regular premium payments made to purchase an individual nonqualified annuity are
Nondeductible
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all life insurance policies that will be replaced
Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates?
Occupation Discrimination in rates, premiums, policy benefits, etc., for persons within the same class or with the same life expectancy is illegal. No discrimination may be made on the basis of marital status of an individual, race, color, national origin, creed, or ancestry unless the distinction is made for a business purpose or required by law.
Which of the following is NOT considered a rebate?
Offering a prospective insured a multi-policy discount
Which of the following allows the dividend to be used to pay up policy premiums sooner than originally planned?
Paid-up insurance option
Parts of the Life Insurance Application
Part 1: General Part 2: Medical Part 3: Producer's/Agent's report
Information regarding the insured's medical history can be found in which part of the application for life insurance?
Part 2
To obtain a nonresident producer's license in this state, a prospective licensee must
Pass the Colorado licensing examination
An insurer that does not pay a death benefit in a timely manner as required by state law will be required to
Pay to the beneficiary an interest penalty from the date of the insured's death.
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?
Payor Benefit
Which of the following riders provides for a waiver of premium when the policy owner and the insured are NOT the same person?
Payor Benefit Rider
Which of the following is INCORRECT regarding whole life insurance?
Policy loans are tax deductible
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value.
Which of the following individuals must have incurable interest in the insured?
Policyowner
Which of the following individuals must have insurable interest in the insured?
Policyowner
Which of the following is responsible for paying premiums on an insurance policy?
Policyowner
All of the following practices would be prohibited EXCEPT
Projecting a dividend on a participating policy
A producer's license has been suspended for noncompliance with continuing education requirements. What is the producer's duty regarding the license?
Promptly return it to the Commissioner within 15 days
The Gramm-Leach Billey Act was passed to
Protect private customer information filed with a financial institution.
An agent who offers a cash reward to a prospect for buying a policy is guilty of
Rebating
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as
Rebating
What is rebating?
Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.
Which of the following nonforfeiture options of a life insurance policy allows a policyowner to use the cash value to purchase additional insurance of the same type?
Reduced Paid-Up
A producer wants to start using an assumed name for his business. Which of the following is required prior to the use of the name?
Register the name with the Commissioner
Statements made by an applicant for an insurance policy that are true to the best of the applicant's knowledge are referred to as
Representations
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
Required a premium increase each renewal.
Under Colorado's Unfair Claims Practices regulations, all of the following would be considered violations EXCEPT
Requiring claimants to submit proof of loss
Which of the following scenarios would be an example of coercion on the part of a lender?
Requiring the debtor to acquire a policy from a specific producer
An applicant for insurance needed more insurance than the insurer was willing to issue. The insurance producer told him that he could maximize the death benefit without increasing the face amount by adding which of the following riders?
Return of premium
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application?
Return to the applicant for completion
A variable annuity is considered to be a
Security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.
All of the following are the duties of the replacing producer where replacement is involved EXCEPT
Send a letter to the policyowner of the right to receive information regarding the existing policy
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 of 100 is called
Single premium whole life
Which type of government is primarily concerned with regulating insurance?
State
A producer who is licensed to transact several types of insurance wants to remove a line of authority from his license. What should the producer do?
Submit an appropriate form to the commissioner and return the license for amendment
Regarding investigations of insurers, the Colorado Commissioner of Insurance may
Subpoena witnesses whenever he/she deems necessary
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.
All of the following provisions must be included in an insurer's anti-fraud plan EXCEPT
Suspension of producer's licensure
Which of the following acts protects consumers against the distribution of incorrect and obsolete personal or financial information?
The Fair Credit Reporting Act
Who maintains the rights in an annuity?
The Owner
Which of the following is TRUE regarding variable annuities?
The annuitant assumes the risk of investments.
The insurer must complete an investigations within ______ days of receiving your claim.
30
Which of the following would be required to be licensed as an insurance producer?
A salaried employee who advertises and solicits insurance A person does not require an insurance proceder license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.
For variable products, underlying assets must be kept in
A separate account. Under a variable life insurance policy, assets must be placed in a separate fund, used primarily for the investment of stocks, bonds, and other security investment options.
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
All of the following would be considered rebating EXCEPT
An agent misrepresents policy benefits to convince a policyowner to replace policies.
Every insurer in this statue is required to prepare, implement and maintain an insurance anti-fraud plan. A summary of the company's anti-fraud efforts must be submitted to the Commissioner
Annually
The LEAST expensive first-year premium is found in which of the following policies?
Annually renewable term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
When an annuity is written, whose life expectancy is taken into account?
Annuitant
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
Conditional. The contract is formed on the basis that certain conditions are met.
The term "employer" with respects to group insurance policy coverage includes all of the following EXCEPT
Condominium owners in a sub-division
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.
An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called
Consideration. "Consideration" is the value offered by the insured to the insurer, and vice versa. The insured makes accurate statements in the application and remits premium payments. In exchange, the insurer provides benefits as stipulated in the contract.
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
Inspection report
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when the policy was originally purchased.
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?
Joint life Least expensive because premiums are based on average age and it only pays a death benefit at the first death
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive
Nothing; the payments will cease.
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
Paid-up additions. When this option is selected, the annual dividend acts as a single premium each year to buy additional amounts of insurance, based on the insured's currently attained age.
An insured has continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?
Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
Which type of rider would NOT cause the death benefit to increase?
Payor benefit rider Payor benefit rider does not increase the death benefit, it only pays the premium if the payor is disabled or dies
Insurers must complete claims investigations
Promptly
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
Proof of insurability is not required
What does the buyer's guide provide?
The buyer's guide provides generic information about life insurance policies and allows the consumer to compare the costs of different policies.
Which of the following is an example of liquidity in a life insurance contract?
The cash value available to the policyowner
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to
The contingent beneficiary
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability. The policyowner (insured) would need to prove insurability for the amount of the increase.
If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?
The death benefit will be smaller. If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income.
Who has the right to assign incidents of ownership under a group life insurance policy?
The individual insured. A person insured under a group life insurance policy has the right to assign all or any part of incidents of ownership under such policy, including, but not limited to, the privilege to have issued to the insured an individual life insurance policy and the right to name a beneficiary.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT
The insured's age at death The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to
The insured's estate
Which of the following best defines target premium in a universal life policy?
The recommended amount to keep the policy in force throughout its lifetime
Which of the following is NOT true of life settlements?
The seller must be terminally ill
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
They are tax deferred until withdrawn Taxation is deferred on both contributions and earning until funds are withdrawn.
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Those who have been insured under the plan for at least 5 years
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life - Option A
Which of the following is a statement that is guaranteed to be true, and if untrue, may breech an insurance contract?
Warranty A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties but representations. Representations are statements that are true to the best of the applicant 's knowledge.
All of the following benefits are available under Social Security EXCEPT
Welfare benefits Social Security is an entitlement program, not a welfare program.
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
A producer must do all of the following when delivering a new policy to the insured EXCEPT
Disclose commissions earned from the sale of the policy.
Which of the following riders would not cause the Death Benefit to increase?
Payor Benefit Rider 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.
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement provision A lapsed policy may be reinstated within 3 years by paying back premiums, with interest, and proving insurability.
Which of the following term means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
Risk Exposure
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is incorrect?
SEPs are suitable for large companies
What does the policy summary provide?
The policy summary provides specific information about the issued policy, as well as the insurer's information.
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its rights to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.