Practice Exam

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?

$3,000

Each person licensed as an agent or solicitor is required to complete how many hours of approved continuing education?

24 hours.

A Straight Life policy has what type of premium?

A level annual premium for the life of the insured.

The term "illustration" in a life insurance policy refers to?

A presentation of non guaranteed elements of a policy.

Insurance policies are not drawn up though negotiations, and an insured has little to say about its provision. What contract characteristic does this describe?

Adhesion.

Level term insurance provides a level death benefit and a level premium during the policy term. if the policy renews at the end of a specified period of time, the policy premium will be?

Adjusted to the insured's age at the time of renewal.

what documentation grants express authority to an agent?

Agents contract with the principal.

In Ohio, a temporary license may be issued for any of the following reasons EXCEPT?

Agents retirement.

When transacting business in this state an insurer formed under the laws of another country is known as a/an?

Alien insurer.

All of the following individuals may be exempt from the licensing education requirement for agents EXCEPT?

An applicant for a resident license who was previously licensed in another state and whose license lapsed 2 years ago.

A Universal Life Insurance policy is best described as a/an?

Annually Renewable Term policy with a cash value account.

When must insurable interest exist in a life insurance policy?

At the time of application.

An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require?

Attending Physician Statement.

All of the following information about customers must be used in determining annuity suitability EXCEPT?

Beneficiary's age.

In terms of Social Security, what is the name for the time period after the youngest child of a family turns 16 before the surviving spouse may start retirement benefits?

Blackout period.

By what date in each licensing period are agents required to renew their license?

By the last day of their birth month.

Which of the following will NOT be an appropriate use of deferred annuity?

Creating an estate.

A producing agent must do all the following when delivering a new policy to the insured EXCEPT?

Disclose commissions earned from the sale of the policy.

Which nonforfeiture option has the highest amount of insurance protection?

Extended term.

What provision in an insurance policy extends coverage beyond the premium due date?

Grace period.

What required provision protects against unintentional lapse of the policy?

Grace period.

What insurance concept is associated with the names Weiss and Fitch?

Guides describing company financial integrity.

What type of insurance would be used for a Return of Premium rider?

Increasing Term.

Which of the following entities protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to perform contractual obligations due to financial impairment?

Insurance Guaranty association.

When Y applied for insurance and paid the initial premium on August 14th, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject or classify it other than as standard. Y was killed in an automobile accident on August 22nd, before the policy was issued, in this case, the insurance company will?

Issue the policy anyway and pay the face value to the beneficiary.

Which of the following best describes a bail-out provision?

It allows the owner to surrender the annuity without charge.

Using a class designation for beneficiaries means?

Naming beneficiaries as a group.

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A.

Traditional IRA contributions are tax deductible based on which of the following?

Owners income.

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 option.

The initial amount of credit life insurance may NOT exceed?

The amount to be repaid under the contract.

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

The beneficiary.

Which of the following statements would best describe the difference between viatical settlements and accelerated death benefits?

Viaticals are funded by a third party; accelerated death benefits are provided by the insurer that issued the original policy.

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

Withdrawn amounts are taxed on a last in, first out basis.

Under what circumstance may an agent appointed with the issuing insurance company pay commission to another agent?

when the agent receiving the commission is license for the same line of business.

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000.

An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downsizing, the investment only drew 2%. what interest rate will the insurer pay to its policyholders?

2.5%.

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days.

When an agent's appointment has been terminated, the insurer must notify the Director within how many days?

30 day.

What is the waiting period for rate filing before each rate may become effective?

30 days.

To avoid violating the state Insurance Code regarding unfair claims settlement practices. insurers must pay a claim within how many days of the final agreement to the settlement?

5 days.

If a cybersecurity event has occurred, licensees must maintain records of the incident for no less than?

5 years.

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distribution. what kind of penalty would the IRA owner pay?

50% tax on the amount not distribution as required.

Which is the penalty for IRA distributions that are below the required minimum for the year?

50%.

What is the maximum amount of time that an application for life insurance may be backdated?

6 months.

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of?

A STOLI policy.

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

Application.

What does "liquidity" refer to in a life insurance policy?

Cash value can be borrowed at any time.

What term best describes the act withholding material information that would be crucial to an underwriting decision?

Concealment.

Which of the following is true regarding taxation of dividends in participating polices?

Dividends are not taxable.

which of the following term's is used to name the nontaxed return of unused premiums?

Dividends.

The provision which states that the both the policy and a copy of the application form the contract between the policyowner and the insurer is called the?

Entire contract.

What type of tax is associated with death proceeds from a life insurance policy?

Federal estate tax.

When an employee terminates coverage under a group insurance policy, coverage continues in force?

For 60 days.

An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?

He will have to pay a penalty if he is younger than 59 1/2.

Units with the same or similar exposure to loss are referred to as?

Homogeneous.

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased.

What is the purpose of a conditional receipt?

It is intended to provied coverage on a date prior to the policy issue.

Which of the following best describes annually renewable term insurance?

It is level term insurance.

In which of the following situations is it legal to limit coverage based on martial status?

It is never legal to limit coverage based on marital status.

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium.

which of the following is true regarding a single life settlement option?

It provides income the beneficiary cannot outlive.

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount.

A married couple owns a permanent policy which covers both of their lives and paused the death benefit only upon the death of the first insured. which policy is that?

Joint Life policy.

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a?

Joint life annuity.

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

Joint life.

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as?

Loss.

If a settlement option is not chosen by the policyowner or the beneficiary which option will be used?

Lump sum.

Regarding the free-look provision, the insurance company?

Must allow the policyowner to return the policy for a full return.

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider.

An applicant wants to buy a policy that has a cash value element. which type should she buy?

Permanent.

All of the following are characteristics of group life insurance EXCEPT?

Premiums are determined by the age, sex and occupation of each individual certificate holder.

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense.

Pertaining to insurance, which of the following is an example of a producer's fiduciary responsibility?

Promptly forwarding premiums to the insurance company.

A situation in which a person can only lose or have no charge represents?

Pure risk.

An insured owns a term policy with a guaranteed renewable option. when the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifiers for a discounted premium rate. Which option best describes this scenario?

Re-entry.

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?

Rebating.

An insured committed suicide 6 months after his life insurance policy was issued. The insurer will?

Refund the premiums paid.

Statements made by an applicant for a life insurance policy which are true to the best of one's knowledge are referred to as?

Representations.

What part of the internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?

Section 1035 Policy Exchange.

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments.

Which of the following insurers are owned by stockholders?

Stock

The interest earned on policy dividends is?

Taxable.

Which of the following would provide an underwriter with information concerning an applicant's healthy history?

The Medical Information Bureau.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements are true?

The annuitant must be a natural person.

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate.

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will not receive payments of the interest earned on the death benefit.

Peril is most easily defined as?

The cause of loss insured against.

What determines the penalty for surrendering a market value adjusted annuity prematurely?

The current interest rate at the time of surrender.

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.

An employee is insured under her employer's group life plan. if she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage.

What happens if a deferred annuity is surrendered before the annuitization period?

The owner will receive the surrender value of the annuity.

the owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance prodcuer say?

The policy owner can specify the way proceeds are split in the policy.

In insurance policies, contract ambiguities are automatically ruled in favor of the insured. What privilege does the insurer have in order to balance this?

The right to determine the wording-of a policy.

Which of the following is NOT true about joint and survivor annuity benefit options?

The surviving annuitant may receive reduced payments.

An applicant for insurance has been asked to submit to an HIV test. This is legal if?

The test is only conjunction with test for other conditions.

For the purpose of insurance, risk is defined as?

The uncertainty or chance of loss.

In insurance policies, the insured is not legally bound to any particular action in the insurance contract but the insurer is legally obligated to pay losses covered by the policy. What contract elements does this describe?

Unilateral.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal value - Option A.

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%.