Practive Test
A life policys spendthrift clause would have no effect if the beneficiary is paid the proceeds as a
lump-sum payment
An employer that offers a qualified retirement plan to its employees is eligible to
make tax-deductible contributions to the plan
An insurer must keep advertising materials and records for at least how many years?
3 years
how long must a producer maintain customer records for an insurance transaction
3 years
Which of these individuals may NOT obtain a temporary producer license?
An employee of a retired licensed producer
Which type of policy can group term life insurance normally be converted to?
An individual permanent life insurance policy
Which is an accurate description of the premium in a graded premium life insurance policy?
Annual increases in premium for a stated number of years then levels off for the remainder of the contract
Traditional Individual Retirement Account (IRA) must start by
April 1st of the year following the year the participant attains age 70 1/2
How may an insurance company classify an accidental death benefit on a life policy?
As an optional policy rider
which of these is not considered to be a cost connected with an individuals death?
Business expenses
Which of the following is NOT a condition that must be met for an accidental death benefit to be paid?
Cause of death must be from a job-related injury
which would be described designation by class?
Children of the insured
Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners?
Cross-purchase agreement
In what way is a life insurance policy affected by an accelerated benefit payment?
Decreases the death benefit
Arizona Law requires the Human Immunodeficiency Virus (HIV) consent form to?
Disclose the types of individuals or organizations that may receive a copy of the test results.
Which of the following is NOT guaranteed in a whole life policy?
Dividend scale
A consumer who has been recently denied insurance, credit, or employment based on an unfavorable consumer report MUST be advised as such. Which of the following does this statue originate from?
Fair Credit Reporting Act
Which benefit supplement added to a life insurance policy insures an entire family?
Family term rider
Which tax cost is normally associated with death?
Federal estate tax
When the disclosure of an insured nonpublic information is involved, what is the insurer obligated to do?
Give notice, explain, and allow opting out.
John has a criminal record in which he was convicted of a felony that involved dishonesty. Under Federal law, how would John be able to engage in insurance transaction?
Given Written consent by the state insurance regulatory agency
For insurance purposes, similar objects which are exposed to the same group of perils are referred to as
Homogeneous Exposure Units.
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
The Medical information Bureau consists of members from which group?
Insurance companies
which statement is incorrect about the interest-only settlement option in a life insurance policy?
Interest on proceeds must be paid by the beneficiary
A life insurance beneficiary died after receiving only six payments under the policys life income settlement option. What happens with the remaining balance of the death proceeds?
Kept by the insurance company
What is another term used for "pure" life annuity?
Life Income
what is considered a valid reason for an insurer refusal to pay policy proceeds directly to a minor
Minors are normally not capable of handling money in a reasonable manner
Which of these actions is considered to be an Unfair Claims Settlement Practice?
Misrepresenting pertinent policy provisions relation to coverage after a loss
which of the following is not a valid reason for an insurer to contest a life insurance policy during the first two years of existence
Misstatement of Age
if a producer surrenders their license, how long must they wait to re-apply for the same license?
One year
All of these statements correctly describe an aleatory contract EXCEPT
Only one party makes any kind of legally enforceable promise
Who typically makes the purchase payments in an individual annuity?
Owner
Which of these statements accurately portrays an adjustable life insurance policy?
Policy can alternate between forms of term and whole life insurance
Which action will trigger a penalty tax on premature distributions from modified endowment contract(MEC)?
Policy loans
Straight whole life insurance can be accurately described in all of these statements EXCEPT
Policy protection normally expires at age 65.
Dividends from a mutual insurance company are paid to whom?
Policyholders
Which benefit can be found in an equity indexed annuity, but not found in a fixed annuity?
Protection against long-term inflation
What kind of arrangement gives the policyowner the right to change the beneficiary?
Revocable designation
Which of the following describes the act of insuring a risk against possible loss?
Risk transfer
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
which statement concerning adjustable life insurance is accurate?
The face amount and premiums can be simultaneously by the policyowner
Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?
Treaty reinsurance
when does the producer give a premium receipt for a life insurance application?
when the initial premium has been paid with the application
A licensee or applicant who is ordered into active military service may request that the license or application be placed on inactive status by sending the department a:
written statement
Which statement concerning a decreasing term life policy is accurate?
Face amount decreases over time
Which of these is NOT a true statement of the war exclusion?
Civil insurrections apply
Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective?
Date of issuance of the conditional receipt
What kind of life policy typically offers mortgage protection?
Decreasing
Which of the following is generally a form of group credit life insurance?
Decreasing term insurance
Which of these is NOT an underwriting responsibility of a life insurance agent?
Determining the final rate classification
an insurer markets its products by soliciting customers by mass media advertising and mail WITHOUT using services of a producer. Which of these marketing systems does the insurer utilize?
Direct Response
An employer has a group life coverage for his employees. How would an employee in poor health be treated in this situation?
Eligible for the same type of coverage as the other employees
Which of these is not considered a type of limited payment
Endowment at age 70
The application is part of the annuity contract according to
Entire Contract Clause
Which statement best defines what a Policy Title means on an insurance policy?
Every policy must have a title on the face and on the back of the policy, briefly describing the policy
The powers directly given to a producer in an agency contract are called.
Express
When an applicant applies for a large amount of life insurance coverage, which of the following would likely NOT be an underwriting requirement?
Eye examination
When an annuity contract has been surrendered, how will the surrender charges affect the final contract settlement?
Final contract settlement will be reduced
Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted?
Fixed amount
What are premiums for group credit life insurance based on?
Flat rate unrelated to the borrower's age.
How long does one premium payment cover in a single premium whole life policy?
Full life of the policy
What is considered a valid reason for small corporations to insure the lives of its major stockholders?
Fund a buy-sell agreement
A life insurance company just paid a $100,000 death benefit to a beneficiary. When the insured died, the cash value was $15,000 and the total premiums-paid equaled $10,000. How much of the proceeds will be added to the beneficiary's gross income for federal income tax purposes?
0 or Nothing
A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of
10%
which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured death?
30 year decreasing term
Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?
31 days
Arizona allows a maximum of how many attempts in a 12-month period, before having to wait one year before attempting the exam again?
4 attempts
Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited?
Accelerated (living) benefit
A producer working for an insurance company may be personally liable for
Acts performed which are prohibited in the agency contract
Which statement regarding a single premium life insurance policy is NOT correct
Additional premiums may be required under certain conditions
A(n) insurer operations in the US but is headquartered outside the U.S.
Alien
Which of the following actions would be considered a felony in the state of Arizona?
Attempting to Defraud an insurer
a reciprocal insurer typically has an administrator who manages the premiums collected from the groups members. This administrator is called a(n)
Attorney-in-fact
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
Investment risk is assumed by the purchaser
All of these are duties may be required to perform when delivering an insurance policy EXCEPT
Leave a conditional receipt with client
All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT
Leave a conditional receipt with client
According to the Federal Fraud and False Statements Act, which of these is considered to be an intentional violation?
Making false entries in a company's books
Which of the following would NOT be a reason for purchasing life insurance on a Childs life?
Provide benefits for the child if the parent dies
Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy?
Provide supplemental income in 35 years
A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen?
Reduction of premium payment
How do benefit payments fluctuate over time in a variable life annuity?
Reflects changes in the market value of assists in a separate account
After an applicant reads and signs an insurance application, he/she should be conscious of the fact that
a false statement could lead to loss of coverage
A(n) company is licensed by the department of insurance to conduct insurance business in Arizona
authorized
What is the tax treatment of benefit payments for a non-qualified annuity?
benefit payments are always taxable
The refusal of doing business with an induvial or business is called a(N)3
boycott
Voluntarily terminating an insurance policy is also known as
cancellation
A(n) _____ insurer restricts the exposures it writes to those of its owners.
captive
A source of supplemental income for a life insurance policyowner can be derived from the
cash value
an employee welfare plan exempt from ERISA regulations would be
church plans
if dividend option choices are offered on a whole life insurance policy, the policy MUST
contain a statement that dividends are NOT guaranteed
The policy provision that permits an employee to change from group life coverage to an individual life policy is called the
conversion provision
AI surrenders his life insurance policy for its cash value. The total of premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the
cost basis
To protect information systems, producers, brokers, and insurance companies must implement and maintain a(n):
cybersecurity policy
If a life insurance applicant is shown future premiums are to be paid out of non-guaranteed values, the illustration used in the sales presentation MUST
disclose that premium payments may need to be resumed depending on actual results
Scott has a life insurance policy in which the dividends are left with the insurance company. This particular policy may be paid up when the cash value plus accumulated dividends
equal the net single premium for the same face amount at the insured's attained age
insurable interest in one's life is legally considered as
generally unlimited
with life insurance, the needs approach is used primarily in determining
how much life insurance a client should apply for
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
identifies the needs of an individuals dependents
When is it acceptable to charge or receive a fee or service charge in addition to the premium in connection with the transaction of insurance?
if the amount of the fee or service charge is reasonably related to the cost off the service
When premiums are determined, one factor would be the expenses of the
insurer
Which of the following would most likely purchase an immediate annuity?
Retiree having a lump sum to invest
XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?
Split-dollar
When does interest income for a flexible premium deferred annuity get reported for federal income taxes?
Upon receiving distributions from the contract
A terminally ill policy owner decides to sell his life insurance policy at a discount to help support his family. This sale is called a(n)
Viatical Settlement
which of the following may be considered an act of misrepresentation?
misleading or failing to adequately disclose the title and true nature of a policy offered to a client
which of the following can be defined as a cause of a loss
peril
The Genetic Information Nondiscrimination Act of 2008 bars discrimination based on individuals' genetic info
prohibits the use genetic information in health insurance, unless the applicant signs a waiver
A life insurance policy can usually be contested by the insurer only during the first ___ years if the contract
two
When a lapsed policy's premium has been paid current, it has the potential of being
reinstated
Which life insurance policy provision prohibits a beneficiary from "commuting, encumbering, withdrawing, or assigning" any portion of the proceeds prior to actual receipt from the company?
spend thrift clause
Contributions made by an employee to a qualified retirement plan are required to be
subject to a vesting schedule
If an employer pays for accidental death and dismemberment insurance for its employees, the amount paid by the employer is generally
tax deductible to the business
The premiums paid by an employer for his employees group life insurance are usually considered to be
tax-deductible to the employer
The exclusion ration determines
the amount of an annuity payment subject to income tax
A life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insureds death?
total premiums paid plus the policy face amount
A licensee whose name or address changes must notify the department of insurance within __ days
30
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policyowner on receipt of the cash value?
$16,000 was received tax-free and $4,000 as ordinary income
An individual working part-time has a gross income of $5,000 for the year. If this individual has an IRA what is the maximum deductible IRA contribution allowable?
$5,000
John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?
100%
What premium percentage of all employees must participate in a group life insurance plan if the premiums are completely paid for by the employer?
100%
what minimum percentage of all eligible employees must participate in a group life insurance plan if the premiums are completely paid for by the employer?
100%
The maximum prison sentence given under federal law for unfair and deceptive insurance practices is
15 years
After an annuity has been in force for __ years, it becomes incontestable
2
A survivorship life insurance policy usually covers how many lives?
2 lives
a policyowner decides to surrender the cash value of a whole life insurance policy, The insurer has up to to delay this payment
6 months
how long can an insurer legally defer paying the cash value of a surrendered life insurance policy?
6 months
Telemarketing calls may only be received between the hours of
8:00 AM and 9:00 PM
According to the Telemarketing Sales Rule, what is the earliest time of the day that telemarketing calls may be received?
8:00 am
The telemarketing sales rule states that is the latest time of day that telemarketing calls may be received.
9:00 PM
Which of the following combinations best describe a universal life insurance policy?
A flexible premium deposit fund and a monthly renewable term insurance policy
what is a juvenile life insurance policy?
A life policy that covers the life of a minor
Which of the following would NOT be appropriate for an immediate annuity?
A parent saving for a child's college
which situation would not require the insured's consent when a life insurance policy is issued?
A policy is purchased by a parent for a minor child
which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy?
A portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy
Which statement is incorrect concerning a tax-sheltered annuity (TSA)
Annual investment gains are included in participant's gross income
A description of a qualified plan's insurance contract may be found in which ERISA reporting form?
Annual return/report (Form 5500)
An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?
Applicant has a right to receive a copy of the report
Kevin has an existing life insurance policy and assigns it to another insurer for a new contract. How would this transaction be treated for tax purposes?
As a section 1035 exchange
Which of these statements regarding insurance is false
As the number of insured units increases, the number of losses decreases
what must be given to a life insurance applicant when the agent receives an application and the initial premium?
Conditional receipt
Which of the following is NOT subject to the promise to pay in an insuring clause?
How the premium is calculated
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct?
If the interest rate falls below a certain level, the surrender charge waived
Which of the following outlines the authority given to the producer on behalf of the insurer?
Producer contract
When a producer submits an application that discloses personal info regarding the applicant, who supplies the privacy notice?
Producer
Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy?
It allows a policy a policy loan to cover premium payments if the policyowner becomes totally disabled
The initial premium for a life insurance policy is typically paid in what way?
It is typically obtained by the producer and forwarded to the insurer
What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured?
Joint Life Insurance
which life insurance settlement option pays lifetime benefits to two or more people
Joint and survivor
A retired couple would like to maximize the income derived from their combined life savings and have it payable until they both die. Which annuity would be their best choice
Joint and survivor annuity
a A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens with the remaining balance of the death proceeds?
Kept by the insurance company
How much normally is paid to a policyowner in a life (viatical) settlement?
Less than the face amount
What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?
Less than the policy's face amount
What types of premiums are associated with individual mortgage protection life insurance policies?
Level premiums
what type of premiums are associated with individual mortgage protection life insurance policies?
Level premiums
Which of the following financial products creates an instant estate, no matter when the date of death?
Life Insurance
which of the following is a syndicate established by a group of insurers to share underwriting duties?
Lloyds organization
Joe is a life insurance policyowner who has failed to pay interest on his policy loan. What will result from this nonpayment?
Loan amount is increased to reflect the amount of interest due
Tim is confined to a nursing home but doesn't have a terminal illness. Which life insurance rider is designed to help pay for this type of expense?
Long-term care benefit rider
Life insurance premiums are computed on what three factors?
Mortality, interest, expenses
Which of these is not used as selection criteria in the underwriting process of a life insurance application?
National origin
Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?
Net payment cost index
The beneficiary of a life insurance policy is normally selected by whom?
Policyowner
What typically changes at the re-entry option date found in some term life policies?
Premium
When must a producer provide disclosure about information practices to an applicant?
Prior to or at the time of signing the application
assets that back the non-guaranteed values of variable life insurance products are held in which account?
Separate account set up by the insured
Which of the following entities does not establish regulations for variable insurance products?
State attorney general
How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?
Taxed as ordinary income in the year received
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtains a good health statement from the insured
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
Which of the following is true regarding a person receiving a waiver of premium benefit?
The insured must be disabled for a period of time
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The participating employee
Which of these must be disclosed in a universal life policy
The policy's surrender charges
which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate?
The premium to purchase the coverage comes from the policy's cash value
How does a continuous premium whole life policy differ from a limited payment whole life policy?
The time period in which premiums will be paid
When does the owner's contractual rights begin under an individual annuity contract?
Time of purchase
which of these is not a reason to buy a term life policy?
To accumulate savings
What is the effect of the market value adjustment in a market value adjustment annuity?
Transfers some of the investment risk to the policyowner
Which of the following statements about universal life insurance is NOT true?
Universal life insurance normally has a minimum guaranteed cash value for duration of the policy
How long does protection normally extend to under a limited pay whole life policy?
Until age 100
If a producer replaces a clients existing life insurance policy with a new one, which of these actions is advisable?
Wait until the new policy is issued and delivered before surrendering existing policy
a contract is considered void in all of the following situations except
When consideration is unequal
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the condition of the receipts are met
Under which circumstances is the interest rate guaranteed within a market value adjusted annuity?
When the contract has been in force for a stated time period.
A policyowner is permitted to take out a policy loan on a whole life policy at what point?
When the policy has a cash value
The absolute assignment of a life insurance policy results in
all incidents of ownership transferred to the assignee
an individual who purchases a modified life insurance policy expects
an improvement in future income
Which of these may NOT be deducted from premium payments or the cash value of a variable life insurance policy?
federal premium taxes
An annuity contract may be returned for a full refund during the
free look period
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
Field underwriting by a producer
may result in the disclosure of hazardous activities of the applicant
An agent whose actions exceed the authority granted by contract is
not backed by the insurer
An insurance producer must keep usual and customary records that pertain to transactions under the producers license, at their
principal place of business
A statement MUST be signed by the __ for any illustrations used in the sale of a life insurance
producer
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
A material change in a modified endowment contract (MEC) results in
the seven pay test, adjusted for cash value, applies again
At what point are death proceeds paid in a joint life insurance policy?
when first dies
The surrender charge on many deferred annuity contracts are waived when the
when the annuitant dies or becomes disabled