Practice Exam: Exam Mode
Extended Term vs Reduced Paid-Up
-Extended term is the AUTOMATIC nonforfeiture option: same ace amount, shorter term of coverage -Policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a reduced face amount from that of the former policy. The new reduced policy bulds its own cash value and will remain in force until death or maturity
Interdeterminate Premium Whole Life
-Premium rate that may vary from year to year -Specify 2 premium rates: Guaranteed and nonguaranteed -After 2-3 yrs, the insurer establishes a new rate which could be increased, kept the same, or lowered based on the company's expected mortality, expense and investments BUT the premium can never be higher than the guaranteed max.
Graded premium whole life
-Similar to modified life, in that premiums start out relatively low and then level off at a point in the future. -They typically start with a premium that is approx. 50% or lower than the premium of a straight life policy -The premium gradually increases each year for a period of normally 5-10 years, and then remains level thereafter
What types of premiums does universal life offer?
1. Target 2. Minimum
An agent has completed a total of 30 hours of continuing education (CE) during a licensee renewal period. How many of the hours may the agents apply toward during the next CE compliance period?
6 hours
Material misrepresentation
A statement, that if discovered, would alter the underwriting decision of the insurance company If misrepresentations are intentional, they are considered fraud
What do Modified Life and Straight Life policies have in common?
Accumulation of cash value
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion A contract of adhesion is prepared only by the insurer. The insured's only option is to accept or reject the policy as written
Warranty
An absolutely true statement
Class H Felony
Any person who assists or conspires with another person to knowingly defraud or deceive an insurer
When must insurable interest exist?
At the time of application
Because an insurance policy is a legal contract, it must conform to the state law governing contracts which require all of the following elements EXCEPT
Conditions -Conditions are part of the policy structure -Consideration is an essential part of a contract
What is interest sensitive whole life also known as?
Current Assumption
What is another term for interest-sensitive whole life insurance?
Current Assumption Life
In which of the following methods of changing a beneficiary does the policyowner send the contract to the home office of the insurer for approval and change?
Endorsement method
All of the following are dividend options EXCEPT
Fixed-period installments
How long must an insurer or it's agent keep a complaint record?
For at least 5 years to have a list of all of the written complaints
Life insurance death proceeds are what?
Generally not taxed as income
Which of the following is an eligibility requirement for all Social Security Disability Income benefits?
Have attained fully insured status Although social security offers many benefits, such as retirement, survivors, and Medicare, only those who have trained full insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status
The Commissioner has the power to examine and investigate the affairs of every insurance institution or agent doing business in North Caroline to determine which of the following?
If the insurer remains solvent and conducts business in compliance with state laws and regulations
A return of premium term life policy is written as what type of coverage?
Increasing
What are the two components of a universal policy?
Insurance and cash account
Concealmet
Legal term for the intentional withholding of information of a material fact that is crucial in making a decision. -Withholding of information by the applicant that will result in an imprecise underwriting decision May void a policy
A policy will pay the death benefit if the insured dies during the 20-year premium and nothing if death occurs after the 20 year period. What type of policy is this?
Level term
NAIC
National Association of Insurance Commissioners -Formed to resolve insurance regulatory issues
An agent is completing an insurance application or a client. The agent is required to provide the client with a "notice of information practices" at all of the following times EXCEPT
No notice is ever required at the initial completion of the application
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
Unilateral contract
Only one of the parties in the contract is legally bound to do anything The insured makes no legally binding promises, but an insurer is legally bound to pay losses covered by a policy in force
In term policies, what happens to the premium throughout the term of the policy?
Premium always remains level
Indemnity (AKA reimbursement)
Provision in an insurance policy stating that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract -It means that insureds cannot recover more than their loss
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
Representations
Statements believed to be true to the best of one's knowledge, but are not guaranteed to be true
Impersonation (AKA false pretense)
The act of assuming the name and/or identity of another person for the purpose of committing a fraud Impersonation is illegal
If the Commissioner of Insurance is unable to complete their term, what happens?
The governor appoints a replacement
What will an equity indexed annuity be credited with at the end of the contract term?
The greater of the guaranteed minimum value or the current (indexed) value -The current interest rate that is actually credited is often tired to a familiar index, like the Standard and Poor's 500
An insured has submitted a fraudulent claim on a heath insurance policy 1 year after the policy issue. The insurer paid the claim, but a year later they discover that the claim was fraudulent. The insured was convicted of a felony. Witch of the following statements is true regarding the payment of the claim?
The insured may be ordered to pay restitution (i.e.,) payback what was paid out based on a fradulent claim
Under which of the following circumstances would a pretext interview be permissible?
The insurer suspects criminal activity and fraud
All of the following are true statements regarding the accumulation of interest option EXCEPT
The interest is not taxable since it remains inside the insurance policy
The Commissioner is empowered to examine the records of any person transacting insurance in the State as an agency, an agent, or broker of record. If the Commissioner does examine a person, the expense of that examination will be paid by who?
The person examined
Who must have insurable interest?
The policyowner must have insurable interest in the life of the insured
Which of the following is TRUE about an indeterminate premium whole life policy?
The premium can be raised up to a guaranteed maximum rate
All of the following would be eligible to establish a Keogh retirement plan EXCEPT
The president and employee of a family corporation (Keogh plans are for self-employed individuals and their employees)
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities
Misrepresentations
Untrue statements on the application that can void a contract
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
