SC Life Insurance Exam
Insurable interest and consent
A life insurance policy has a legal purpose if both of which of the following elements exist?
Cost of Living Rider
A long stretch of national economic hardship causes a 7% rate of inflation. A policy owner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?
Morale
A person who does not lock the doors to his or hers house shows an indifferent attitude. This person presents what type of hazard?
6 months
A producer failed to complete the required continuing education credit hours for this compliance period. Within what time period after the deadline may the license be reinstated
Pay the policy proceeds only if it would have issued the policy.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
Pure Risk
A situation in which a person can only experience a loss and no gain presents what type of risk?
Agent or Producer
According to the Law of Agency, a principal is represented by whom?
Premiums are determined by the age, sex and occupation of each individual certificate holder.
All of the following are characteristics of group life insurance EXCEPT
The payable premium amount steadily declines throughout the duration of the contract.
All of the following are true regarding a decreasing term policy EXCEPT
Rebates are allowed if it's in the best interest of the client
All of the following are true regarding rebates Except
Suggesting negotiations in settling the claim
All of the following are unfair claims settlement practices EXCEPT
It is a life contingency option
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
FINRA
An agent selling variable annuities must be registered with
Moral
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
The insured may choose to convert to term or permanent individual coverage.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT
Decreasing Term
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation
Foreign
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?
Foreign
An insurance company that is formed under the laws of another state is known as what type of insurer?
Mutual
An insurance policy paid a nontaxable dividend to the insured one year and nothing the next. From what type of insurer did the insured purchase the policy?
The Client
An insurance producer has not been appointed to an insurance company. Who is the producer considered to represent?
Paid-Up Additions
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 benefits. The dividend option that the insured has chosen is called
$50,000
An insured owns a $50,000 whole life policy. At age 47 the insured decides to cancel his policy and exercise the extended term option for the policy's cash value. Which is currently $20,000. What would be the face amount of the new term policy?
Universal Life
An insured owns a life insurance policy. To able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What of type of policy does this insured most likely have
Inspection Report
An insurer receives a report regarding potential insured that includes financial status, hobbies, and habits. What type of report is that?
Term
Children's riders attached to whole life policies are usually issued as what type of insurance?
Hazards
Conditions that increase the chance of a loss are known as what?
Regulates consumer reports
Federal Fair Credit Reporting Act
Without receiving written consent from an insurance regulatory authority
Federal law makes it illegal for any individual convicted of a crime involving dishonesty to breach of trust to work in the business of insurance affecting interstate commerce
uncertainty of loss
For the purpose of insurance, what is risk?
24 total hours, including 8 hours approved for the line of licensing that the producer holds
How many hours of CE must be completed every 2 years?
3
How many hours of continuing education in Ethics are required each compliance period
The balance of the loan will be taken out of the death benefit
If a policy has a automatic loan provision, what happens if the insured dies before the loan is paid back?
Send the application back to the applicant for signature
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
The agent
If an applicant does not receive his or her insurance policy, who would be held responsible?
Authorized or Admitted
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
The beneficiary
In a group life insurance policy, the employer may select all of the following EXCEPT
When the insurer approves a prepaid application
In forming an insurance contract, when does an acceptance usually occur?
When the insurance application is submitted
In insurance, when is the offer usually made on a contract?
The owner
In life settlement contract, who does the life settlement broker represent?
Insurer
In the agent/insurer relationship, who is considered the principal?
Reinsure policies of the insolvent insurer through other companies
In the event of an insurer's insolvency, the South Carolina Life and Health Guaranty Association will
The Broker
In the transaction of insurance, which of the following is considered to be representing the client?
Loss
Insurance is a contract that protects the insured from what?
Domestic, foreign, and alien
Insurers are classified according to their domicile. What are the 3 types of insurers?
Yes, it is possible as long as both are licensed for that line of business
Is it ever possible for more than one producer to split the commissions on an insurance transaction in this state?
Yes, but not unfairly
Is the insurance company underwriters allowed to discriminate?
within 30 days
Once the Director issues a cease and desist order, how soon must an insurer comply with the order?
Any form of life insurance
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement
Express Authority
The authority granted to an agent through the agent's contract is referred to as
Spendthrift Clause
The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as
Annually Renewable Term
The death protection component of Universal Life Insurance is always
Lower
The premium of a survivorship life policy compared with that of a joint life policy would be
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Fiduciary
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Mutual Company
The type of insurance company organized to return to any surplus of money to its policyholders is known as what
SEC Registration
To sell variable life insurance policies, an agent must receive all of the following Except
tax deductible
Traditional IRA contributions are
Signed waiver of premium
Upon policy delivery, the producer may be required to obtain any of the following Except
Speculative
Wagering on a sporting event is known as what type of risk?
Loss must 1) due to chance 2) definite and measure 3) statistically predictable 4) not catastrophic 5) Coverage cannot be mandatory
What are the 5 characteristics of an ideally insurable risk?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
What are the four elements of an insurance contract?
Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate
What are the strategies used by underwriters to prevent adverse selection?
Express, Implied and apparent
What are the three types of agent authority?
Policy Summary
What describes the specific information about a policy
Insurance
What do individuals use to transfer their risk of loss to a larger group?
Certificate Authority
What document is required for an insurance company to transact insurance?
Insurers
What entities make up the Medical Information Bureau?
An agreement between a ceding insurer an assuming insurer
What is reinsurance
Return the application to the applicant for completion
What is the best way to handle incomplete insurance applications?
Peril
What is the term for the causes of loss insured against in an insurance policy?
The policyowner must sign a delivery receipt
What must happen when an individual policy or annuity has been personally delivered to the policyowner?
Insurable interest and consent
What two elements are necessary for a life insurance contract to have a legal purpose?
Alien
What type of insurer is formed under the laws of another country?
Inspection Report
What type of report provides information about the applicant's hobbies, habits, and financial status?
Pure
What type of risk is insurable?
Complete a new application or ask the applicant to initial the correction on the original application
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
It is reduced to the amount of what the cash value would buy as a single premium
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
Insurer
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
When the policy is delivered and the premium is paid
When does an insurance policy go into effect?
At the time of application
When must insurable interest exist in a life insurance policy
Adverse Selection
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
When it is intentional and material
When would a misrepresentation on an insurance application be considered fraud?
Universal Life
Which of the following Life Insurance policies would be considered interest-sensitive?
Money borrowed from the cash value is taxable
Which of the following are NOT true regarding policy loans
is a period during which the payments into the annuity grow tax-deferred
Which of the following are TRUE regarding the accumulation period of an annuity
Size of each installment
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?
Those who have been insured under the plan for at least 5 years
Which of the following employees insurance under a group of life plan would be allowed to covert to individual insurance of the same coverage once the is plan is terminated
reciprocal
Which of the following insurance options would be considered a risk-sharing arrangement
Creditor requiring that a debtor buys insurance from a certain insurer
Which of the following is NOT allowed in credit life insurance
It begins when the policy is delivered.
Which of the following is TRUE about the 10- day-free=look period in a Life Insurance policy?
The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days
Which of the following is true regarding a waiver of a surrender charge on an annuity contract
Variable Annuity
Which of the following products requires a securities license
Bail-out
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?
The creditors have rights to the proceeds if they can show evidence of valid assignment
Which of the following statements is true concerning the creditors of the deceased insured?
Its premium steadily decreases over time, in response to its growing cash value.
Which statement is not true regarding a Straight Life policy
Single Premium
Which type of life insurance policy generates immediate cash value
Any person licensed to sell, solicit or negotiate insurance
Who is an insurance producer
Stockholders
Who owns stock companies?
Insurance Company
Whom does an insurance agent represent?
The agent's
Whose responsibility is it to determine that all the questions on an insurance application are answered?
