Primerica Life Insurance Test
Which of the following is not a type of hazard
Exposure
Which of the following best describes pure life annuity
It provides the highest monthly benefits
Which of the following is the best definition of "indemnification"?
The act of one person who agrees to restore an injured person to the condition he/she enjoyed prior to the loss
Which of the following is true regarding premium in a 10-year level premium policy
The premium will maintain for 10 years
An insured recently had a new home built and insisted on having smoke detectors installed in multiple places in the house. Wha method of handling risks is the insured using?
Reduction
The commissioner may disapprove the use of any name for a licensee for any of the following reasons EXCEPT
The licensee already has an approved name
All of the following are true of the Survivorship Life Policy EXCEPT
The premium is based on the age of each insured
All of the following are true of credit life EXCEPT
The insured names the beneficiary
A 25-year old full-time student is living off a trust fund. Why would he NOT qualify for an IRA?
He does not have earned income
Which of the following is true regarding the surrender charge in a market value adjusted annuity?
If the current rate at the time of surrender is the same as the contract rate, there is no adjustment
When assessing needs for life insurance, an individual may use retention, which means
Maintaining assets at death
Any intentional and fraudulent omission on the part of one insured entitles the insurer to
Rescind the policy
Which of the following would NOT be eligible for coverage under key person
The owner of a shop
What are the continuing education requirements for agents who market long term care insurance policies?
8 hours of long term care specific education included in the regular CE requirements
How long is the grace period for an individual life insurance policy in California
60 days
Individual members covered by group life insurance receive
A certificate of insurance
A life insurance policy that provides coverage to every family member in a single policy, with permanent insurance on the breadwinner
A family policy
There is a 10% penalty on he taxable portion of a deferred annuity when it is surrendered prior to what age?
59 1/2
A retail shop owner is insured under a business overhead expense policy that pays a maximum monthly benefit of $2,500
$2,500
What is the minimum number of member required for group life insurance in this state
10
How many days is the free-look period in most life insurance policies
10 days
In a group life insurance plan, children of the employee may be covered as eligible dependents until they reach the age of
26
Credit Life Insurance who is responsible for paying the policy premiums
Borrower only
When an insurer tries to discourage a policyholder from replacing an existing policy, this is called
Conservation effort
The term "limit of liability" refers to
Death benefit payable to the beneficiary
Which of the following is a correct statement about annuities
Fixed annuities do not provide protection against inflation
All of the following information needs to be included on an application for life insurance EXCEPT
Health insurance policies in force
To purchase insurance, The policy owner must face the possibility of losing money or something of value in the event of loss. What is this concept called?
Insurable interest
A college student will graduate next year. His studies have limited his ability to work, so he has borrowed funds to pay for his education
Modified whole life
Which statements best describe agreement as it relates to insurance contracts
One party accepts the exact terms of the other party's offer
An equity indexed annuity will grow based upon
Performance of a recognized index
What does the application of contract of adhesion mean?
Since the insured does not participate in preparing the contract, any ambiguities would be resolved in favor of the insured
A whole life policy that will generate immediate cash value is a
Single premium policy
If an applicants health is poorer than that of an average applicant, the policy may be issued
Substandard
In a deferred annuity, the difference between the accumulation value and the surrender value is the
Surrender charge
The Insurance Commissioner may deny an applicant an insurance license for any of the following reasons EXCEPT
The applicant does not have a California business address
All of the following statements about indexed whole life insurance are correct EXCEPT
The death benefit is not guaranteed
All of the following are true about key person insurance EXCEPT
The death benefit is taxable to the business.
If the annuitant dies before the annuity start date, which of the following are true
The interest is taxable
Which method of dealing with risk is applied when insurance is purchased
Transfer
Which of the following is NOT an example of the company's location of incorporation
authorized
A whole life policy is surrendered for a reduced-paid up policy. The cash value in the new policy will
continue to increase
An employee dies having 6 quarters of coverage during the previous 13-quarter period. What status of coverage does the employee have under Social Security?
currently insured
cash value guarantees in a whole life policy are called
nonforfeiture values
A married couple wants to include the entire family in their whole life policy under one rider. Which of
Family term
Which of the following NOT be eligible for coverage under key person
The owner of the shop
The entire contract includes all of the following EXCEPT
A buyers guide
If an individual willfully violates provisions of the Fair Credit reporting act, what is the maximum civil penalty
$2,500
According to the life insurance replacement regulations, which of the following would be an example of policy replacement
A policy is reissued with a reduction in cash value
An annuity's contract holder dies before the annuitization date. Taxes on the contracts interest will continue to be deferred if the beneficiary
A spouse
Concerning the Family Protection Policy, all of the following statements are true EXCEPT
Children, upon reaching the age of majority, are permitted to convert to an individual policy with proof of insurability
What type of an interest rate is guaranteed in universal life policies?
Contract interest rate
Decreasing Term insurance is often used to
Cover a mortgage
A stock insurer is defined as an insurer
Owned by its stockholders
Which of the following is the cause of loss
Peril
If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising
Retention
An individual purchases a life insurance policy and lists his parents as the beneficiaries. He is able to change beneficiaries at any time. What type of beneficiary designation does the policy have?
Revocable
An insured intentionally did not disclose a material fact on an application for insurance. This would be considered
concealment
Slippery floors, reckless driving, or providing false information are examples of..
hazards
Partners in a business want to make sure that if
Buy-Sell Agreement
Which of the following is the primary source of information that an insurer uses to evaluate an insureds risk for life insurance
Insurance application
The provision that sets forth the basic agreement between the insurer and the insured
Insuring clause.
An insurance company that is owned by the policyholders is called
Mutual insurer
The reduction of premium option uses the dividend to reduce
Next year's premium
When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured had not had any injuries or illness since the application date. What is this document called?
Statement of Good Health
All of the following are required for HIV testing EXCEPT
If HIV is present, the person may be rated, but they cannot be declined *A person with the HIV can be declined
Which of the following is NOT true regarding a deferred annuity
Income payments begin within 1 year from the date of the purchase.
A fraternal benefit society
Is operated for the benefit of its members
Which of the following statements describes one of the reasons individuals purchase life insurance?
It creates an immediate estate.
Which of the following is true regarding pure life annuity settlement option?
It provides the highest monthly benefit
The human life value approach to determining life insurance needs is based upon which of the following ideas
Loss of the breadwinners income
Guaranteeing future dividends is considered to be unfair or deceptive act known as
Misrepresentation
In order to reinstate a life insurance policy the insured must do all of the following EXCEPT
Pay next year's premium in advance
In a life insurance application, all of the following signatures will be required EXCEPT
The home office underwriter
All of the following are advantages of a qualified retirement plan EXCEPT
The income at retirement is tax free
Which of the following is true regarding taxation of accelerated paid under a life insurance policy
They are received tax free
Which of the following actions does NOT constitute false advertising?
Requiring applications more quickly than is reasonable
Which of the following is true regarding a joint life annuity
The payments stop at the first death
Which of the following has the right to change a settlement option in a life insurance policy
The policy owner at any time during the life of the insured
What is the purpose of the Agents Report in the application process
To provide additional information about the applicant to the underwriters
Which of the following types of insurance is investment based, has a level fixed premium, and a non guaranteed cash value?
Variable whole life
Which of the following statements is INCORRECT concerning Modified Endowment Contracts (MECs)
An MEC must always pass the 7-pay test
Wagering on a sporting event is known as what type of risk?
Speculative risk
An insurer who transacts insurance in this state but whose articles of incorporation are registered in Canada is considered what type of insurer
Alien
Life settlement contracts are out into effect by which of the following
An absolute assignment
A loss recruiting from which of the following would qualify for the accidental death rider coverage?
An automobile accident
Which of the following is NOT a personal use of life insurance
An individual buys insurance to fund a buy-sell agreement.
Which of the following is NOT an indicator of a competent party?
Business profession
A representation in an insurance contract qualifies as a
Implied warranty
Restoring an insured financially after a claim is know as
Indemnity.
An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request?
3 days
Some deferred annuities include an adjustment that subjects the owner of the annuity to share in a loss or gain due to a premature
A Market Value Adjusted Annuity
Group members that are covered by group life insurance policies will be issued which of the following?
A certificate of insurance
According to the California Insurance Code any person legally capable of making an insurance policy is considered
An insurer
The owner of a whole life policy with an accidental death rider intentionally kills himself after having the policy for 18 months. What is the insurance company's course of action?
Deny any payments
Which of the following is NOT a standard exclusion in life insurance policies
Disability
For an insurance contract, utmost good faith means:
Each party relies upon the truthfulness of the other
An adjustable life policy can assume the form of
Either term insurance or permanent insurance
All of the following are ways to handle risk EXCEPT
Elimination
Which of the following activities of an agent would NOT be interpreted as transacting insurance?
Establishing a list of clients
When life insurance proceeds are used to pay inheritance taxes and federal estate taxes, it is known as
Estate conservation
Which of the following employee benefits essentially provides the employee with a wage
Executive Bonus
Under which of the following conditions would life insurance proceeds be taxable by the federal government
If there is a transfer for value
Hazards are conditions or situations that
Increase the likelihood of a loss occurring
A jumping Juvenile Policy is unique in that the death benefit automatically
Increases as a predetermined age
Which of the following statements is TRUE regarding an Agents Report during the policy application process?
It provides the agents personal observations concerning the proposed insured
What is the most common name for a single policy that is designed to insure two or more lives with a standard premium
Joint Life
Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life.
Joint and Survivor
When comparing a Joint Life Policy to two individual life policies of the same amount on the same insureds which condition is true
Joint life has a lower premium that the total of the two individual policies
For a contract to be enforceable by law, the purpose of the contract must be
Legal and not against public policy
The policy owner chooses the annual mode for the no payment of the life insurance premium. For the year the owner will pay
Less as compared to the other payment modes.
Insurance contracts are unilateral in nature. What does this mean?
Only one party make a promise
In a group life policy with a death benefit of more than $50,000
Premium cost above $50,000 is taxable as income to the employee
The family term rider incorporates
Spouse term and children's term
Who does the spendthrift clause in a life insurance policy protect.
The beneficiary
Which is a FALSE statement about the California Insurance Commissioner?
The commissioner is selected by the Governor as an appointee.
What is the written document called in which insurance coverage is set forth
The contract
Which of the following best depicts the law of large numbers?
The larger the pool of risks under study, the more accurate the predictions will be
According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined, who died first
The primary beneficiary died before the insured
Which of the following entities conducts a post-selection process?
Underwriters
An aleatory contract is based on what kind of exchange
Unequal exchanges of values
Which of the following policies can be described as a flexible premium adjustable life policy
Universal life
A life insurance policy illustration may NOT include
Vanishing premiums if the policy becomes paid up with non guaranteed elements paying future premiums.
Because of an injury, an insured has been unable to work for 7 months. when his life insurance premium came due, he was unable to pay, yet the policy remained in force. the policy includes
Waiver of premium rider.
If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the policyowner
When the policy is delivered
A graded premium life insurance policy is modified for of
Whole life
When an insured terminates membership in the insured group, the insured can convert to
Whole life without proof of insurability
An insured has a life insurance policy in the amount of $250,000 naming his wife as beneficiary. Upon his death, his beneficiary decides
Yes, proceeds in excess of face amount are taxable as interest
Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates?
Occupation
A warranty may relate to which of the following
The past the present and the future will
An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium
Grace period
Statistical probabilities of loss for a particular class of insureds is best predicted when the insured group is
Larger
When the owner of a participating whole life policy uses the dividend to provide more life insurance coverage, which of the following dividend options is being used?
Paid up additions
In a non contributory group policy
100% of eligible employees must participate
An agent tells an insured that if he replaces his current insurance policy with a newer one, his dividens will be higher and his premiums will be slightly lower
Twisting
When may a representation be withdrawn by the applicant?
Only before the insurance is in effect
Considering the California Insurance Code's definition of an insurable event, which of the following statements is true?
The more predictable a loss the more insurable it is
What type of insurance would a person select as the most efficient method of paying the outstanding debt on their home in the event of death
Mortgage redemption
the purpose of the Fair Credit Reporting Act is to
Protect consumers against the circulation of inaccurate or obsolete personal or financial information
Which dividend option increases the death benefit?
Paid-up additions
Per the California Insurance Code, the best definitions of "shall" and "may" are
Mandatory and permissive
Which of the following policies would NOT offer a policy loan option?
Term life
All other factors being equal, which of the following premium modes would result in the lowest overall premium
Annual
An applicant may challenge information discovered as a result of an investigative consumer report under which of the following Acts?
Fair Credit Reporting Act
An annuity owner receives the same guaranteed payment every month. What type of annuity is it?
Fixed
California Insurance Code requires all insurers to have a department the sole purpose of which is to investigate possible
Fraudulent claims from insureds
A policy owner 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
All of the following statements about mutual insurance companies are correct EXCEPT
Policy dividends issued by mutual companies are guaranteed and not taxable.
Policies written on a third-party ownership basis are usually written to cover which of the following
Policy owners minor children or business associates
What is the difference between a straight life policy and a 20-pay whole life policy
Premium payment period
In reinsurance, the insurance company that transfers its loss exposure to another insurer is the
Primary insurer
If an agent currently has an inactive license, this means
The agent cannot transact any insurance business for which a valid license is required
In life insurance, which of the following is NOT required to have an insurable interest in the insured
The beneficiary
The purpose of the california insurance guarantee association is to protect the interests of policyholders and claimants against losses recruiting from the inability
The insurers within the last 10 years held a license in the states in which the persons reside
What is the purpose of the surrender charge in a deferred annuity
To compensate the company for loss of investment value
The notice about policy cancellation delivered to senior consumers must include all of the following information EXCEPT
Explanation of where the premiums have been invested
The owner of a deferred annuity pays $100 in premium one month, and $130 the next month. Which of the following terms best describes this premium payment arrangement?
Flexible premium
The needs approach to calculating the amount of life insurance needed is based on
Predicted needs of a family after the premature death of the insured
Which of the following is NOT true regarding life analysts?
They receive commissions from the insurer
An insurer incorporated under the laws of another state but doing business in this state is considered
Foreign
A married couple purchase a life insurance policy on their newborn baby
Payor benefit
Annuities Certain limit the amount paid by the annuity to a certain fixed
Period or fixed amount.
Variable insurance and variable annuities are regulated by
SEC, FINRA and Departments of Insurance is
If an annuity has a guaranteed minimum interest rate, this means
The interest rate will never drop below the guaranteed minimum
Which of the following would be considered peril
Fire
A policyholder returns the policy to the insurer a week after it is delivered. How much of the premium will be returned to the applicant
100%
Joe, age 63, was disabled and can no longer work. He meets the Social Security definition of total disability. How many work credits
40
A life insurance policy qualifies a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid up insurance in how many years
7 years
What type of insurer uses a formal sharing agreement
Reciprocal Insurers
All of the following are true regarding the Fair Credit Reporting Act EXCEPT
Reports may be sent to anyone who requests one
Which statement about Life Insurance Code and Ethics is NOT true?
Acts of fair and unfair discrimination are prohibited
Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount of the insureds death was cause by an accident as defined in the policy?
An Accidental Death Rider
When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity
As a fiduciary
A statement made by an applicant for insurance that must be true in every respect is considered to be a
Representation
In a replacement situation all of the following are prohibited practices EXCEPT
Borrowing 50% of a policy's cash value to fund a new life insurance contract
Which of the following would be TRUE of both the fixed-period and fixed amount settlement options?
Both guarantee that the principal interest will be fully paid out
A dentist is off work for 4 months due to a disability. His dental assistants salary would be covered by
Business Overhead Insurance
In a variable life insurance policy, all of the following assets are held in the insurance company's general account EXCEPT
Cash surrender values
Which of the following is true of the taxation of cash values in a business life insurance policy
Cash values grow tax deferred.
Which of the following is an example of a physical hazard?
Diabetes
Which of the following is NOT true of the agents implied authority
It is specifically stated in the contract
An insured falls down a flight of stairs and sustains a neck injury that renders him severely disabled. The insured owns a Whole Life policy. Is it possible for the policy to include a Waiver of Const of Insurance rider, and if so, what insurance costs would be waived?
No; it is not possible for this waiver to be included in a whole life policy *The Waiver of Cost of Insurance rider is found in Universal Life policies
Dividends received on participating life insurance policies are
Not taxable because they are a return of unused premiums
Which of the following is NOT a component of an insurance policy premium
Number of beneficiaries
Which of the following is consideration on the part of an insurer
Paying a claim
In contrasting stocks insurers with mutual insurers, which statement is true?
Stock insurers are owned by the shareholders and issue nonparticipating policies
Which of the following is true regarding the selection of a Commissioner of Insurance in California
The Commissioner is elected by the people for a 4 year term
Which of the following statements concerning the Medical Information Bureau is correct ?
The Medical Information Bureau assists underwriters in evaluating and classifying risks
At age 72 individuals is considering applying for MediCal so she can afford her medical bills
The agent cannot allow the applicant to purchase an annuity if after the purchase an annuity if after the purchase, she wouldn't qualify for Medical
The renewable provision allows the policy-owner to renew the coverage at the expiration date
Without evidence of insurability
Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce
Without receiving written consent from an insurance regulatory authority.
Which of the following best describes the difference between joint life and joint and Survivor annuity payment options
In joint life option, the benefits stop after the first death.
The frequency and the amount of the premium payment are known as what?
Premium mode
In order to calculate how much premium an insurance policy owner will pay, the insurer multiplies the rate by which of the following?
The number of exposure units
Which of the following will be eligible for a tax sheltered annuity
Public school teachers
Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT
Purchase of a new home
Js' retirement plan meets all federal requirements and entitles him to certain tax benefits as the owner of the plan. What term best describes J's retirement plan?
Qualified
If a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure
Prior to performance of the test
An applicant for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a
Representation
The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the insured made a material misstatement on
Rescind the policy
Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value
Automatic Premium Loan Option
Which of the following losses would likely be covered under the Accidental Death rider
Death caused by a head-on collision
Which of the following best describes life annuity with period certain option
It guarantees benefit payments for life of the annuitant for a specified period for the beneficiary
Your client wants to provide a retirement income for his elderly parents
Joint and Survivor
Which of the following will NOT be included in the buyers guide?
Specific information about the policy
Which of the following is a permissible reason for an insurance company to contest payment of a claim based on statements in the application
The application contains material misstatements
Life insurance creates an immediate estate. Which of the following best explains this statement
The face value of the policy is payable to the beneficiary upon the death of the insured
If a retirement plan or annuity is "qualified", this means
It satisfies all requirements of the Internal Revenue Service for favorable tax treatment.
A person has a history of DUIs. To his insurer this presents what type of hazard
Morale
A person has a history of DUIs. To his insurer, this presents what type of hazard
Morale
Underwriters use all of these methods to protect the insurer against adverse selection EXCEPT
Only accepting a small percentage of applicants
Which of the following riders provides for the payment of part of the policy death benefit if the insured is diagnosed with terminal illness that will result
Living needs rider
Which of the following would be TRUE of both the fixed-period and fixed-amount settlement options?
Both guarantee the principal and interest will be fully paid out *Neither the fixed-period nor fixed-amount settlement options guarantee income for the life of the beneficiary; however, they both guarantee that the entire principle and interest will be fully paid out
During the accumulation phase of a fixed annuity, the annuitants interest rate is based on a minimum rate as specified in the contract, or the current interest rate, whichever is
Higher
According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT
If an applicant is declined for an insurance policy, he or she has no right to know what was in the report.
Which statement is an accurate description of life insurance policy dividends
They are not taxable and are not guaranteed
An individual has a $200,000 convertible term life insurance policy. If he chooses he can
Convert to a whole life policy for the same face amount without proof of insurability
An example of an alien insurer doing business in this state is one formed under the laws of
Mexico
Upon the surrender of a life insurance policy any cash value accumulated in excess of the premium payment is
Taxes as ordinary income
Ten years ago an insured purchased a life insurance policy designed to pay his family $500
Family income policy
An agent delivers a policy to an applicant who pays the initial premium but refuses to submit
Consideration
Under what circumstances will the contingent beneficiary receive the death benefit
If the primary beneficiary dies before the insured
When a whole life policy is surrendered for it's non forfeiture value, what is the automatic option
Extended term
Where are premiums from fixed annuities invested?
general account
A life insurance policy that provides coverage to every family member in a single policy, with permanent insurance on the breadwinner and convertible term on other family members is called
A family policy
If an insured dies and it is discovered that the insured misstates his/her age or gender, the life insurance company will
Adjust the death benefit to what the premium would have purchased at the actual age or gender.
A life settlement broker
Negotiates life settlement contracts between an owner and providers
