Simulate Your Exam

Which of the following is the basic source of information used by the company in the risk selection process? - Warranty - Consumer Report - Application - Agent's report

- Application The application is the basic source of information an insurer uses in the risk selection process.

All of the following are Nonforfeiture options EXCEPT: - Reduced paid-up - Interest only - Cash surrender - Extended term

- Interest only Nonforfeiture values include cash surrender, extended term and reduced paid-up. Interest only is a settlement option.

All of the following are examples of risk retention EXCEPT: - Premiums. - Deductibles. - Copayments. - Self-insurance.

- Premiums. Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.

A producer didn't realize that he had committed an act in violation of the Insurance Code. How much would he probably be penalized? - $0 - $500 -$1,000 - $25,000

- $1,000 Statutes limit the fine to 'up to $1,000', unless the person knew the act was in violation, in which case it may be increased to as much as $25,000.

What is the fine for using an unapproved assumed name by a producer? - $250 - $500 - $1,000 - $5,000

- $250 An insurance producer using a name that has not been approved will be subject to a fine up to $250.

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? - $0 - $200 - $9,800 - $10,000

- $9,800 In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan? - 5 years - 12 months - 63 days - 18 months

- 18 months Under HIPAA regulations, to be eligible to convert health insurance coverage from a group plan to an individual policy, the insured must have 18 months of continuous creditable health coverage.

How long must an insurer keep the receipt of policy delivery to the policyowner if the delivery was by mail? - 5 years - 1 year - 2 years - 4 years

- 2 years When an individual policy is delivered by mail, the receipts and the certificate of mailing must be kept by the insurer for 2 years.

COBRA applies to employers with at least: - 20 employees. - 80 employees. - 60 employees. - 50 employees.

- 20 employees Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), any employer with 20 or more employees must extend group health coverage to terminated employees and their families.

What is the maximum age for qualifying for a catastrophic plan? - 26 - 30 - 45 - 62

- 30 Young adults under age 30 and individuals who cannot obtain affordable coverage (have a hardship exemption) may be able to purchase individual catastrophic plans that cover essential benefits.

Employer health plans must provide primary coverage for individuals with end-stage renal disease before Medicare becomes primary for how many months? - 12 months - 24 months - 30 months - 36 months

- 30 months The Omnibus Budget Reconciliation Act of 1990 as amended by the Balanced Budget Act of 1997 requires the employer health plan to provide primary coverage for 30 months for individuals with end-stage renal (kidney) disease before Medicare becomes primary.

How long is an open enrollment period for Medicare supplement policies? - 6 months - 1 year - 30 days - 90 days

- 6 months An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigap once they first sign up for Medicare Part B.

Which term describes a situation in which people who are the most likely to have claims are also the most likely to seek insurance? - Insurable interest - Double indemnity - Law of large numbers - Adverse selection

- Adverse selection The concept of adverse selection means that the people who are most likely to have claims are also the most likely to seek insurance. This concept is used primarily in the process of underwriting, when insurers decide which applicants to cover; insurers try to minimize adverse selection as much as possible.

A producer's license has been revoked a second time for violating the Insurance Code. When can the producer apply for a new license? - After the revocation period - Never: once a license is revoked the second time, producers cannot get licensed again. - Within 5 years of the revocation - Within 1 year of the revocation

- After the revocation period If a producer commits another violation after the license has been reissued following a revocation, the producer's licensed will be revoked for up to 5 years. If the license is revoked a second time, the producer cannot apply for a new license during the revocation period.

How can a new physician be added to the PPO's approved list? - Fill out the appropriate paperwork and wait the 12 month pre-certification period. - Pay an annual fee for being on the PPO list. - New physicians are only added once a year, and are selected by the PPO's Board of Directors. - Agree to follow the PPO standards and charge the appropriate fees.

- Agree to follow the PPO standards and charge the appropriate fees. Any physician or hospital that qualifies for and agrees to follow the PPO's standards and charges the established fees can be added to the PPO's approved list at any time. The providers may withdraw their name from the list at any time, as well.

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered: - A required disclosure. - A legal representation of the Association. - An unfair trade practice. - A misrepresentation.

- An unfair trade practice. It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is illegal to advertise, the statement is still true and would not be considered a misrepresentation.

The death protection component of Universal Life Insurance is always: - Decreasing Term - Annually Renewable Term - Whole Life - Adjustable Life

- Annually Renewable Term A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Which of the following types of agent authority is also called "perceived authority"? - Express - Implied - Fiduciary - Apparent

- Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? - As of the application date - As of the policy delivery date - As of the first of the month after the policy issue - As of the policy issue date

- As of the application date If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.

Which of the following is not true of Disability Buy-Sell coverage? - Benefits are considered taxable income to the business. - It is typically written to cover partners or corporate officers of a closely held business. - Premium payments are not deductible to the business. - The policies provide funds for the business organization to purchase the business interest of a disabled partner.

- Benefits are considered taxable income to the business. The buy-sell coverage benefits are tax free.

Which of the following statements regarding Business Overhead Expense policies is NOT true? - Any benefits received are taxable to the business. - Leased equipment expenses are covered by the plan. - Benefits are usually limited to six months. - Premiums paid for BOE are tax-deductible.

- Benefits are usually limited to six months. Business Overhead Expense (BOE) insurance is sold to small business owners for the purpose of reimbursing the policyholder for business overhead expenses during a period of total disability. Premiums are tax-deductible for a business, but any benefits received are taxable as income. Overhead expenses, including equipment and employee salaries, are covered by the plan. Salaries and profits of the employer are not protected.

Which of the following would NOT be considered an exception to the National Do Not Call List? - Calls by or on behalf of tax-exempt nonprofit organizations - Calls based from outside of the United States - Calls for which the consumer has given prior written permission - Calls which are not commercial or do not include unsolicited advertisements Calls from outside the United States are not an exception to the National Do Not Call List.

- Calls based from outside of the United States Calls from outside the United States are not an exception to the National Do Not Call List.

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? - Value Adjustment Rider - Return of Premium Rider - Inflation Rider - Cost of Living Rider

- Cost of Living Rider The Cost of Living rider annually adjusts the policy's face value in accordance with the national rate of inflation or deflation. This rider adjusts the face amount of the policy to correspond with the rate of inflation, in order to keep the initial value of the policy constant over time.

All of the following are true about group disability Income insurance EXCEPT: - Benefits are usually short term. - The waiting period starts at the onset of the injury or sickness. - The longer the waiting period, the lower the premium. - Coverage applies both on and off the job.

- Coverage applies both on and off the job. Employees who are injured on the job are covered by Workers Compensation insurance. Group Disability Income insurance is designed to cover employees only while they are off the job, so the coverage is considered to be nonoccupational in nature.

What would be considered a disadvantage of owning a fixed annuity? - Decrease in purchasing power of the benefit in times of inflation - Investment risks being carried by the annuity owners - Interest rate dependence on stock performance - Guaranteed minimum interest rate

- Decrease in purchasing power of the benefit in times of inflation A fixed annuity is characterized by a level benefit payment. This means that in times of inflation, benefits have less purchasing power. Since costs increase as a result of inflation, more money is required to purchase something that had previously cost less.

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? - Decreasing term - Variable life - Universal life - Whole life

- Decreasing term A decreasing term policy's face amount decreases as the amount of debt is reduced.

What type of premium do both Universal Life and Variable Universal Life policies have? - Decreasing - Increasing - Flexible - Level fixed

- Flexible Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, as long as there is enough value in the policy to fund the death benefit.

Which of the following health care plans would most likely provide the insured/subscriber with comprehensive health care coverage? - Basic medical expense plan - Health Maintenance Organization plan - Group dental insurance plan - Medical-surgical expense plan

- Health Maintenance Organization plan HMOs provide a package of comprehensive health care services that include routine physicals, immunizations, well baby care, family planning, etc., as well as the treatment of sickness and injury.

What type of annuity can be purchased with a single premium and provides benefit payments immediately? - Fixed - Immediate - Single premium - Deferred

- Immediate With an immediate annuity, distribution starts within 1 year of purchase

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? - Assumed - Express - Implied - Apparent

- Implied Implied authority is not written in the agent's contract but is required in order for the agent to conduct business. Implied authority exists because not every single detail of an agent's authority can be written in a contract.

Guarantee of insurability option in long-term care policies allows the insured to: - Replace the existing LTC policy based on the original underwriting - Secure the policy's nonforfeiture values regardless of the insured's age or health status - Increase benefit levels without providing proof of insurability - Add dependents to the plan without providing proof of their insurability

- Increase benefit levels without providing proof of insurability Guarantee of insurability option allows the insured to periodically increase benefit levels without providing evidence of insurability.

All advertisements are the responsibility of the: - Soliciting agent - Advertising agency - Department of Insurance - Insurer

- Insurer The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented or distributed them.

What is the main purpose of the Seven-pay Test? - It ensures that the policy benefits are paid out in 7 years. - It guarantees the minimum interest. - It determines if the insurance policy is a MEC. - It requires level premium payments for 7 years.

- It determines if the insurance policy is a MEC. The Seven-pay Test determines whether an insurance policy is "over-funded" or if it's a Modified Endowment Contract. In other words, the cumulative premiums paid during the first seven years of a policy must not exceed the total amount of net level premiums that would be required to pay the policy up using guaranteed mortality costs and interest.

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT: - The insurer determines the amount for each payment. - It is a life contingency option. - It will pay the benefit only for a designated period of time. - The payments are not guaranteed for life.

- It is a life contingency option. Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.

Which of the following best describes the MIB? - It is a member organization that protects insured against insolvent insurers. - It is a rating organization for health insurance. - It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. - It is a government agency that collects medical information on the insured from the insurance companies.

- It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. The Medical Information Bureau (MIB) is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals

Concerning Medicare Part B, which statement is INCORRECT? - It provides partial coverage for medical expenses not fully covered by Part A. - It is fully funded by Social Security taxes (FICA). - It is known as medical insurance. - It offers limited prescription drug coverage.

- It is fully funded by Social Security taxes (FICA). Part B is funded by monthly premiums and from the general revenues of the federal government.

What is the purpose of a conditional receipt? - It is given only to applicants who fully prepay the premium. - It is intended to provide coverage on a date prior to the policy issue. - It guarantees that a policy will be issued in the amount applied for. - It serves as proof that the applicant has been determined insurable.

- It is intended to provide coverage on a date prior to the policy issue. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

Which of the following is true regarding a term health policy? - It is noncancelable - It is nonrenewable - It is conditionally renewable - It is guaranteed renewable

- It is nonrenewable. In term health policies, the owner has no rights of renewal.

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? - It is increased when extra premiums are paid. - It decreases over the term of the policy. - It remains the same as the original policy, regardless of any differences in value. - It is reduced to the amount of what the cash value would buy as a single premium.

- It is reduced to the amount of what the cash value would buy as a single premium. In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.

Which of the following is NOT true regarding a nonqualified retirement plan? - It needs IRS approval - Contributions are not currently tax deductible - It can discriminate in benefits and selecting participants - Earnings grow tax deferred

- It needs IRS approval Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be approved by IRS.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? - Joint Life Policy - Survivorship Life Policy - Second-to-Die - Family Income Policy

- Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? - Limited pay whole life policy - Single premium policy - Modified life insurance policy - Jumping juvenile policy

- Jumping juvenile policy While many policies provide a level death benefit, Jumping Juvenile policies provide a low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21).

The provision which prevents the insured from bringing any legal action against the company for at least 60 days after proof of loss is known as: - Proof of loss. - Legal actions. - Time limit on certain defenses. - Payment of claims.

- Legal actions. This mandatory provision requires that no legal action to collect benefits may be started sooner than 60 days after the proof of loss is filed with the insurer. This gives the insurer time to evaluate the claim.

A policyowner is reading a statement on the first page of his health insurance policy, which says "this is a limited policy." What is the name of this statement? - Limited Benefit Statement - Policy Limitation Notice - Statute of Limitations - Limited Benefit Statement

- Limited Benefit Statement It is required by law that a Limited Policy Notice must be printed on the first page of insurance policies. The statement reads "this is a limited policy," which means that the benefits offered by the policy are limited.

The premium of a survivorship life policy compared with that of a joint life policy would be: - Lower - Higher. - As high - Half the amount

- Lower. Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

All of the following statements describe a MEWA EXCEPT: - MEWAs can be sponsored by insurance companies. - MEWA employers retain full responsibility for any unpaid claims. - MEWAs can be self-insured. - MEWAs are groups of at least 3 employers.

- MEWAs are groups of at least 3 employers. MEWAs are groups of at least 2 employers who pool their risks to self-insure. MEWAs can be sponsored by an insurance company, an independent administrator, or another group established to provide group benefits for participants.

Under an individual disability policy, the MINIMUM schedule of time in which claim payments must be made to an insured is: - Within 45 days. - Weekly. - Biweekly. - Monthly.

- Monthly. If a claim involves disability income benefits, the policy must pay those benefits not less frequently than monthly. In all other cases, the company may specify the time period of 45 or 60 days for payment of claims.

Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? - Coverage is based on the predicted needs of that family. - The death of an insured must be premature. - It must be assumed that the death of the insured will occur immediately. - Need is predicted using the number of years until the insured's retirement.

- Need is predicted using the number of years until the insured's retirement. In the needs approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.

Attempting to determine how much insurance a family would require based upon their financial objectives is known as: - Human life value approach. - Estate planning. - Viatical approach. - Needs approach.

- Needs approach. Needs method determines how much benefit would be necessary to replace the loss income and increased expense should the insured die prematurely.

An insured is involved in a car accident. In addition to general, less serious injuries, he permanently loses the use of his leg and is rendered completely blind. The blindness improves a month later. To what extent will he receive Presumptive Disability benefits? - Full benefits until the blindness lifts - No benefits - Full benefits - Partial benefits

- No benefits Presumptive Disability plans offer full benefits for specified conditions. These policies typically require the loss of use of at least two limbs, total and permanent blindness, or loss of speech or hearing. Benefits are paid, even if the insured is able to work. Because the insured's blindness was only temporary and the loss of use in only 1 leg, he does not qualify for presumptive disability benefits.

An insured neglected to pay his premiums, so his policy lapsed. He filed a reinstatement application and another premium and was reinstated shortly thereafter. Five days after the reinstatement, he had a consultation with a general physician. Which part of the consultation costs will be covered? - None - There is not enough information to answer this question. - The fullest amount allowed by the policy - The fullest amount allowed by the policy, after his new deductible is met.

- None Accidents are covered immediately following reinstatement; however, sickness is covered only after ten days. This helps to protect the insurer from adverse selection.

During replacement of life insurance, a replacing insurer must do which of the following? - Send a copy of the Notice Regarding Replacement to the Department of Insurance - Obtain a list of all life insurance policies that will be replaced - Guarantee a replacement for each existing policy - Designate a new producer for a replaced policy

- Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.

Which renewability provision allows an insurer to terminate a policy for any reason, and to increase the premiums for any class of insureds? - Guaranteed renewable - Optionally renewable - Conditionally renewable - Cancellable

- Optionally renewable The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy for any reason on the date specified in the contract (usually a renewal date). Furthermore, this provision allows the insurer to increase the premium for any class of optionally renewable insureds.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? - Pay nothing; there was a misrepresentation on the application - Pay the full death benefit and refund excess premium - Pay a reduced death benefit - Pay the full death benefit

- Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.

Which of the following applies to partial disability benefits? - Benefits are reduced once an insured is no longer under a doctor's care. - Payment is limited to a certain period of time. - An insured is entitled to a principal sum benefit for the partial loss of a limb. - Payment is based on termination of employment.

- Payment is limited to a certain period of time. The partial disability benefit is typically 50% of the total disability benefit, and is limited to a certain period of time.

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? - Payor Benefit - Jumping Juvenile - Juvenile Premium Provision - Waiver of Premium

- Payor Benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

Which of the following riders would NOT cause the Death Benefit to increase? - Guaranteed Insurability Rider - Cost of Living Rider - Accidental Death Rider - Payor Benefits Rider

- Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.

A man's physician submits claim information to his insurer before she actually performs a medical procedure on him. She is doing this to see if the procedure is covered under the patient's insurance plan and for how much. This is an example of: - Prospective review - Concurrent review - Claims-delayed treatment - Suspended treatment

- Prospective review. Under the prospective review or precertification provision, the physician can submit claim information prior to providing treatment to know in advance if the procedure is covered under the insured's plan and at what rate it will be paid.

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy: - Built cash values. - Required proof of insurability every year. - Decreased death benefit at each renewal. - Required a premium increase each renewal.

- Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.

Annuities can be used to fund which of the following? - Variable life insurance - Group life insurance - Estate creation - Retirement plans

- Retirement plans Since annuities are a popular means to provide retirement income, they are often used to fund qualified retirement plans.

Which of the following is NOT covered under Part B of a Medicare policy? - Lab services - Physician expense - Routine dental care - Home health care

- Routine dental care Medicare Part B covers dental expense resulting from an accident only.

A domestic insurer issuing variable contracts must establish one or more: - General accounts - Separate accounts - liability accounts - Annuity accounts

- Separate accounts Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.

Which settlement option provides a single beneficiary with income for the rest of his/her life? - Fixed Amount - Lump Sum - Retained Assets - Single Life

- Single Life The Single Life Option provides a single beneficiary with income for the rest of his/her life.

All of the following are beneficiary designations EXCEPT: - Contingent - Primary - Specified - Tertiary

- Specified Beneficiary designations determine the order in which benefits will be paid: primary or contingent, which includes secondary and tertiary.

Which of the following is TRUE regarding variable annuities? - The funds are invested in the company's general account. - The company guarantees a minimum interest rate. - A person selling variable annuities is required to have only a life agent's license. - The annuitant assumes the risks on investment.

- The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

Annuities can be used to fund which of the following? - The benefit period may be to age 65. - The benefit can be up to 66 and 2/3% of one's monthly income. - The benefit can be up to 50% of one's yearly income. - The elimination period is the same as in the short-term plan's benefit period.

- The benefit can be up to 50% of one's yearly income. The maximum benefit is based upon monthly income.

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? - They provide information about a customer's character and reputation. - The customer has no knowledge of this action. - The customer's associates, friends, and neighbors provide the report's data. - They provide additional information from an outside source about a particular risk.

- The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed? - The insurance company's general account - Forwarded to an investor - Each contract's separate account - The annuity owner's account

- The insurance company's general account Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? - The premiums will become tax deductible until the insured's 18th birthday. - Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. - The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. - The insured's premiums will be waived until she is 21.

- The insured's premiums will be waived until she is 21. If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

When an applicant applies for Medicare supplement insurance, whose responsibility is it to confirm whether the applicant has an accident or sickness insurance policy in force? - The insurer's - The applicant's - A primary care physician's - The soliciting agent's

- The insurer's It is ultimately the insurer's responsibility to determine if an applicant already has an accident or sickness policy in force.

What is the difference between a single premium and a flexible premium payment options in a deferred annuity? - The amount of benefit - The purpose of the annuity - The number of payments that purchase the annuity - The time of income payouts

- The number of payments that purchase the annuity The only difference between a single premium deferred annuity and a flexible premium deferred annuity payment options is the number of payments that purchase the annuity. SPDAs are purchased with a single payment; FPDAs are purchased with multiple payments.

A policy with a 31-day grace period implies: - The policy remains in force without penalty for 31 days even though the premium due has not been paid. - The policyholder has a 31-day free look. - The policy lapses if premium is not paid 31 days before it is due. - If something happens within 31 days the insurer does not pay

- The policy remains in force without penalty for 31 days even though the premium due has not been paid. A mandatory provision of life insurance policies requires that a grace period be provided. The length of the grace period may vary because of premium mode and type of policy.

All of the following are true about variable products EXCEPT: - The cash value is not guaranteed. - Policyowners bear the investment risk. - The premiums are invested in the insurer's general account. - The minimum death benefit is guaranteed.

- The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

Which is true about a spouse term rider? - Coverage is allowed for an unlimited time - The ride is decreasing term insurance - Coverage is allowed up to age 75 - The rider is usually level term insurance

- The rider is usually level term insurance. The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.

Which of the following is NOT true regarding Equity Indexed Annuities? - The insurance company keeps a percentage of the returns. - They have guaranteed minimum interest rates. - They are less risky than variable annuities. - They earn lower interest rates than fixed annuities.

- They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

Which of the following is NOT true regarding Equity Indexed Annuities? - They have guaranteed minimum interest rates. - They are less risky than variable annuities. - They earn lower interest rates than fixed annuities. - The insurance company keeps a percentage of the returns.

- They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

Which of the following is NOT true regarding partial disability? - An insured would qualify if he couldn't perform some of his normal job duties. - This is a form of insurance that covers part-time workers. - The insured can still report to work and receive benefits. - Benefit payments are typically 50% of the total disability benefit.

- This is a form of insurance that covers part-time workers. Partial disability covers full-time-working insureds who are unable to perform some, but not all, of their regular job duties or can no longer work full-time, which ultimately results in a loss of income. Payment from partial disability is typically 50% of the total disability benefit.

The Waiver of Cost of Insurance rider is found in what type of insurance? - Juvenile Life - Universal Life - Whole Life - Joint and Survivor

- Universal Life The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have? - Variable - Term - Securities - Stock

- Variable Variable life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. If a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.