Practice Exam Insurance - 11/17/21

Which of these is considered to be a Living Benefit option in a life insurance policy?

Accelerated death benefit

Proceeds of the life settlement contract could be subject to the claims of ___.

Creditors

Craig purchased a life insurance policy for enabling his heirs to pay estate taxes. What is this called?

Estate conservation

Carol filled out a life insurance application and was given a policy illustration that showed future premiums being paid out of nonguaranteed values. This illustration MUST disclose that ___.

She may need to resume premium payments, depending on actual results

Which of these will have the highest monthly payout upon annuitization? A) Life with period certain B) Joint and survivor life C) Straight life D) Joint life

Straight life

When does a life insurance policy typically become effective?

When initial premium is collected and policy is issued

What happens when an insurance policy is backdated?

The policy's effective date is earlier than the present

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?

$10,000

An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?

1 mont

The free look period provided in a life insurance policy is usually ______.

10 days

Greg had recently been terminated from his job that covered him for a group life insurance. How long does he have to convert his coverage to an individual policy without needing to prove insurability?

31 days

All agents shall maintain full and correct transaction records of the business done by them for a period of AT LEAST

6 years

Within how many days must a Traditional IRA be rolled over to another IRA in order to avoid. tax aconsequences?

60

Which of the following is considered to be an alternative to a life settlement? A) Accelerated death benefit rider B) Waiver of premium rider C) Extended term option D) Decreasing term insurance

Accelerated death benefit rider

Which of the following is required for an insurer to conduct business in this state?

Certificate of authority

Which of the following is NOT part of an insurance contract? A) Policy B) Application C) Riders D) Certificates of Authority

Certificates of Authority

The entire contract provision includes all of the following EXCEPT the ___. A) Application B) Policy C) Changes made by the agent D) Riders

Changes made by the agent

Time is covered under a group plan and would like to change his group coverage to an individual policy with the same insurer because of employment termination. Which of these describes the change that will take place?

Conversion

__________ is NOT an element of a valid contract.

Countersignature

In what part of an insurance policy are policy benefits found?

Declarations

Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period?

Decreasing term insurance

Rob has a benefit at work which enables him to defer his current receipt of income and have it paid at a later date, when he will probably be in a lower tax bracket. Which benefit fits this description?

Deferred compensation option

All of these are standard exclusions found in a life insurance policy EXCEPT A) hazardous occupations B) aviation C) disability D) war

Disability

Which of these would limit a company's liability to provide insurance coverage?

Exclusion

In New York, an agent may have his/her license revoked for which of the following acts? Loss of insurer appointment Producing an inadequate amount of new premium Sharing commissions with another licensed agent Failure to pay state income taxes

Failure to pay state income taxes

Which of the following is considered to be an act of misrepresentation?

Falsifying the terms, benefits, advantages, or conditions of an insurance policy

Violations of US Code Title 18 section 1033, may result in

Fine or imprisonment

Which of these is a method of determining the level of funds required for ongoing support in the event of the breadwinner's death? Financial loss value Human life vale Assessment value Replacement value

Human life value

All of the following are characteristics of a Group Life Insurance Plan EXCPET Group underwriting Master contract Individual underwriting Probationary Period

Individual underwriting

Which of the following signatures is not required on an individual insurance application? Producer Applicant Insured Insurer

Insurer

Which of the following would disqualify a company's retirement plan form receiving favorable tax treatment? A) Contains a vesting schedule B) Contributions are applied with no regard to income C) Formed for the sole benefit of employees and their beneficiaries D) It is temporary

It is temporary

The authority granted to a licensed producer is provided via the _____.

Law of agency

Insurance companies determine risk exposure by which of the following? A) Insurable interest B) Insurance exchanges C) Law of large numbers and risk pooling D) Population table data

Law of large numbers and risk pooling

All of the following are examples of pure risk EXCEPT A) Losing money at a casino B) Injured while playing football C) Falling at a casino and breaking a hip D) Jewelry stolen during a home robbery

Losing money at a casino

Life settlement brokers are permitted to do all of the following EXCEPT A) Charge a fee for their services B) Advertise the availability of life settlements C) Introduce policyowners to settlement providers D) Make the first transaction up to 30 days before approved for a license

Make the first transaction up to 30 days before approved for a license

Shirley has a $500,000 10-year-non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive?

Nothing

An interest-sensitive life insurance policy-owner may be able to withdraw the policy's cash value interest free. The provision that allows this is called ____.

Partial surrender

What is an insurer required to do when faced with an error made under the Misstatement of Age provision?

Pay corrected benefits

An agent who sells an individual policy in New York MUST deliver to the policyowner a(n) _______.

Policy Summary and Buyer's Guide

Which of these is considered to be a document that describes the critical segments of a life insurance policy?

Policy summary

All of the following are considered appropriate uses of life insurance for business purposes EXCEPT A) Attracting quality employees by offering a group life plan B) Funding an entity buy-sell agreement C) Protecting the business by covering entry level employees with life insurance D) Protecting the business by covering key employees with life insurance

Protecting the business by covering entry level employees with life insurance

Which of these is NOT an Unfair Claims Settlement Practice? A) Refusing to pay claims without conducting a reasonable investigation B) Compelling insureds to initiate a lawsuit by offering less on insurance claims C) Failing to acknowledge and act promptly with respect to insurance claims D) Providing claim payments to insureds under the guidelines of the insurance contract

Providing claim payments to insureds under the guidelines of the insurance contract

Insurance agent Kelly offers a prospect a $1,000 shopping card if an insurance policy is purchased through her. What illegal activity is this an example of?

Rebating

Which of these is NOT a characteristic of the Accelerated Death Benefit option? A) The face amount and policy premium are not affected by the payment B) Before payment of the benefit is made, specific conditions must exsist, such as suffering from a terminal illness C) There may be a dollar limit on the maximum benefit D) The benefit can be offered as a rider at a specific extra cost or may be at no extra cost

The benefit can be offered as a rider at a specific extra cost or may be at no cost

When calculating the amount of life insurance needed for an income earner, what has to be determined when using the Needs Approach?

The family's financial objectives if the income earner were to die or become disabled

Which type of policy combines the flexibility of a universal life policy with investment choices?

Variable universal life policy

All of the following riders can increase the death benefit amount EXCEPT A) Cost of Living B) Waiver of Premium C) Accidental Death Rider D) Guaranteed Insurability

Waiver of premium

An example of rebating is

a producer who shares commissions with a client

Life insurance replacement can be best defined as

a transaction in which new life insurance policy is purchased and an existing life insurance policy is surrendered

An insurance consultant is BEST defined as a(n) _____.

agent who charges fees for advice

Maria would like an annuity that provides a gauranteed accumulation or payout. The type of annuity she is seeking is called ___.

annuity certain

Which of these factors is NOT taken into account when determining an applicant's life insurance needs?

automobile

A domestic insurance company in New York MUST

be formed under the laws of New York

Preferred risk policies with reduced premiums are issued by insurance companies because the insured has ____.

better than average mortality or morbidity experience

An employee under a group insurance policy has the right to name a beneficiary and the right to

convert to an individual policy in the event of employment termination

John the agent made public statements that falsely portrayed an insurer as insolvent. John would be likely found guilty of ____.

defamation

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount of the policy

Purchasing a life insurance policy in order to avoid the forced sale of assets upon death is called

estate conservation

Under a non-qualified annuity, interest is taxed after the ___.

exclusion ratio has been calculated

Underwriters can acquire information from all of the following sources EXCEPT A) Medical Information Bureau (MIB) B) consumer reports C) Attending physician's statement D) Genetic testing

genetic testing

Janice forgot to make her insurance premium payment by the due date. The specified period after the due date where she can still make payment and avoid discontinuance of her coverage is called the

grace period

Index whole life insurance contains a securities component that acts as a(n)

hedge against inflation

Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?

interest only

An insurance company may only pay commissions to a(n) ___.

licensed agent appointed by the insurer

John the policy owner sells his life insurance policy to help pay for the cost of his terminal illness. This transaction is called a

life settlement

When an agent is determining the suitability of an annuity for a client, which of these is NOT usually taken into consideration? A) financial experience B) Annual income C) Age D) Number of dependents

number of dependents

A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n)

partial surrender

Which annuity payout option allows the policyowner to choose a predetermined number of benefit payments?

period certain

Replacement regulation is designed to protect the interests of

policy owners

Replacement regulation is designed to protect

policyowners from misrepresentation and loss of benefits

The two major actions required for a policyholder to comply with the Reinstatement Clause are ___.

provide evidence of insurability & pay past due premiums

An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if ___.

the insured outlived the beneficiary

Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires, ______.

the protection ends

The free-look provision gives the policyowner ______.

the right to return the policy for a full refund within a specified number of days

An individual insurance policy becomes incontestable after it has been in force for

2 years

Upon meeting company requirements, a lapsed life insurance policy may be reinstated within ____ year(s).

3

Every agent licensed in New York must notify the Superintendent within ___ days of any change of address.

30

A Modified Endowment Contract (MEC) is best described as

A life insurance contract which accumulates cash values higher than the IRS will allow.

Which of the following is NOT considered advertising?

A rating from a rating service company, such as A.M. Best

All of these are common exclusions to a life insurance policy EXCEPT Accidental death Military service Aviation Hazardous Occupations

Accidental death

Kathy's annuity is currently experiencing deferred growth until she retires. Which phase is this annuity in?

Accumulation period

Which scenario would most life insurance policies exclude coverage for? A) a tourist traveling abroad on a major airline carrier B) an individual who has a hobby racing cars once a month C) an airline pilot who flies for a commercial carrier D) A soldier on leave at home

An individual who has a hobby racing cars once a month

Which of these is NOT considered to be a purpose of an annuity? A) Annuities are intended to create an estate B) Annuities are intended to liquidate an estate C) Annuities are intended for the tax-free growth of principal D) Annuities are intended to distribute accumulated principal

Annuities are intended to create an estate

Which of the following is considered to be the period when the accumulated value in an annuity is paid out?

Annuitization phase

Why are dividends from a mutual insurer not subject to taxation?

Because dividends are considered a return of premium

What happens if the insurer discovers that the insureds age was accidentally misstated on an application for an individual life insurance policy?

Benefits will be calculated according to how much coverage the premium paid would have purchased for the correct age

What enables applicants to compare different life insurance policies and helps them choose which policy is best for their needs? A) Policy summary B) Buyer's summary C) Buyer's guide D) Policy guide

Buyer's guide

What happens to the coverage under a children's term rider when that child reaches a certain specified age?

Coverage is eliminated

An example of risk sharing would be

Doctors pooling their money to cover malpractice exposures

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?

Endowment policy

Which of these riders will pay a death benefit if the insured's spouse dies?

Family Term insurance rider

Which of these annuities require premium payments that vary from year to year? Flexible premium immediate annuity Flexible premium deferred annuity Fixed premium deferred annuity Fixed premium immediate annuity

Flexible premium deferred annuity

How are annuities given favorable tax treatment?

Gains are taxed at distribution

In regards to a life insurance contract, which of the following statements is NOT true regarding the concept of insurable interest? A) Individuals are assumed to have insurable interest in themselves B) Insurable interest is established by a court of law C) Insurable interest can be established sufficiently by sentimental attachment alone D) Insurable interest must exist at the time of the application

Insurable interest can be established by sentimental attachment alone (incorrect/false)

Sharon is the policyowner of a $50,000 life insurance policy. Her son, Mike is the beneficiary. If Sharon MUST obtain Mike's signature in order to change the beneficiary, what kind of beneficiary designation is this?

Irrevocable

All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT A) extended term insurance B) cash surrender C) reduction of premium D) reduced paid-up insurance

Reduction of Premium

Kurt is an active duty service man who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?

Results (results clause)

What is a corridor in relation to a Universal Life Insurance policy?

The gap between the total death benefit and the policy's cash value.

An example of replacement is ___.

canceling a term life policy to buy a whole life policy

Ownership of a life insurance policy may be temporarily transferred with a(n)

collateral assignment

Life insurance policies will normally pay for losses arising from

commercial aviation

A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT A) fare-paying passenger B) pilot of personal airplane C) suicide D) war

fare-paying passenger

A client told an intentional lie to an insurer in order to receive a favorable premium. This is an example of ___.

fraud

A tax-free Section 1035 Exchange of a life insurance policy to a different policy is permitted if it occurs

from insurer to insurer and no cash is received by the policyowner"

John the policyowner sells his life insurance policy to help pay for the cost of his terminal illness. This transaction is called a(n)

life settlement

A policy owner and a life settlement provider can have a life settlement negotiated through a(n)

life settlement broker

A life insurance policy that has premiums fully paid up within a state time period is called

limited payment insurance

The suicide clause of a life insurance policy states that if an insured commits suicide within a state period from the policy's inception, the insurer will only be liable for a return of premiums paid

minus indebtedness and without interest

If an agent is advertising a life insurance policy, the agent MUST disclose the ____.

name of the actual insurer

According to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and it's _____.

promises made

An insurance agent agrees to pay the first monthly premium for an insurance applicant. This is called a(n)

rebate

An agent license is NOT required when

referring insurance

An endorsement found in an insurance plan which modifies the provisions of the policy is called a(n)

rider

An individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging in _____.

risk avoidance

A(n) _______ company is owned by its shareholders.

stock

The type of policy which pays on the death of the last person is called ____.

survivorship life

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because

the MEC tends to be an investment vehicle

Signatures for an insurance application MUST be obtained by the producer from all of the following sources EXCEPT A) the producer B) the insured C) the policyowner D) the beneficiary

the beneficiary

A field underwriter's main task is ________.

to ensure an applicant's medical information is accurate and complete

Tom the agent replaced a client's insurance policy when it was not in the client's best interest. Tom could be found guilty of ___.

twisting

In an insurance contract, the insurer is the only party legally obligated to perform. Because of this, an insurance contract is considered ____.

unilateral

A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called

universal life

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this? A) Adjustable life B) Credit life C) Modified life D) Universal life

universal life

Under a Traditional IRA, interest earned is taxed

upon distribution

A renewable Term Life insurance policy allows the policyowner the right to renew the policy

without producing proof of insurability