State Exam Insurance

Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?

6

How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?

6 months

How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeture Law?

6 months

how long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?

6 months

how long does an individual have to rollover funds from an ira or qualified plan?

60 days

a temporary agent's license issued by the commissioner of insurance is valid for up to ___ days.

90

Which of the following statements about noncontributory employee group life insurance is FALSE?

A minimum number of employees is required to participate.

Which provision is NOT a requirement in a group life policy?

Accidental

Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?

Activate insurance companies' financial reserves.

Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?

All proceeds are income tax free in the year they are received

in texas, which of these statements regarding the suicide clause is TRUE?

An insurer may not use suicide as a defense against payment after the second year.

What does the insuring agreement in a Life Insurance contract establish?

An insurer's basic promise

Any changes made on an insurance application requires the initials of whom?

Applicant

What action can a policyowner take if an application for a bank loan requires collateral?

Assign policy ownership to the bank.

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation exclusion

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:

Bilateral

A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT:

Change the policy's interest rate

Which of the following is not included in a policy summary for life insurance ?

Company's mortality table

K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?

Conditional

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional receipt

Insurance policies are offered on a "take it or leave it" basis, which make them:

Contracts of Adhesion

What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?

Conversion

Which of the following features of a group Term Life policy enables an individual to leave to group and continue his or her insurance without providing evidence of insurability?

Conversion privilege.

What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?

Convertible Term

how are surrender charges deducted in a life policy with a rear end loaded provision?

Deducted when the policy is discontinued

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distribution is subject to federal income tax withholding.

Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE?

Each partner owns a $500,000 policy on their partner's life

An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?

Key Person Life Policy

Which of these would be considered a Limited Pay Life policy?

Life Paid Up at Age 70

Which of these is an element of a Single Premium annuity?

Lump sum payment

All of these insurance products require an agent to have proper FINRA securities registration in order to sell them. EXCEPT for:

Modified Whole Life

which of these is NOT considered to be a right given to a policyowner?

Modify a provision in the insurance contract.

Which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in the Beneficiary clause of the contract.

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

P will still receive declared dividends.

which statement is true in regards to a policy loan?

Past-due interest on a policy loan is added to the total debt..

Which action will a life insurance company most likely take if an insured dies and it is discovered that the insured's age was misstated on the application?

Pay an amount the premiums would have purchased at the insured's actual age

Which of the following information is NOT required to be included in a Whole Life Policy?

Policy's guaranteed dividend table

Which is true concerning a Variable Universal Life policy?

Policyowner controls where the investment will go and selects the amount of the premium payment.

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

Renewable

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S died 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

Return of premium rider

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

Revocable

which of the following is NOT a required provision in group life policies?

Right to Loan

Post tax dollar contributions are found in:

Roth IRA investments

which of these is not an example of doing insurance business?

Selling shares of stock.

Which of the following types of permanent life insurance policies offers the highest initial cash value?

Single premium

Why must an insurance applicant answer all questions on the application?

Statements and representations on the application are part of the consideration for issuing a policy.

The annuity that represents the largest possible monthly payment to an individual annultant is a(n):

Straight Life annuity

T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?

Ten Year Endowment

which of the following statements is correct about an agent who is taking an insurance application?

The agent should have the applicant initial any changes made on the application.

Which statement regarding a Key Employee Life policy is NOT true?

The beneficiary is named by the key employee

under an interest sensitive whole life policy,

cash values are determined by interest rates

A life insurance policyowner does NOT have the right to:

change the grace period

which rider provides coverage for a child under a parent's life insurance policy?

child term rider

how do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

claims are denied under the Suicide clause of the policy.

as a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. what is the bank guilty of?

coercion

b the insurance agent tell his clients that their rights may be impaired if they fail to complete a release form within a given period of time. b may be found guilty of:

coercion

An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be:

converted to an individual permanent policy at an individual rate.

which policy may not have the automatic premium loan provision attached to it

decreasing term

A variable insurance policy:

does not guarantee a return on investment accounts.

company z has a cross purchase buy sell agreement in place among its three founding partners. if the agreement is funded with individual life insurance, what would it require?

each partner must own a policy on the other partners.

how often must an insurance producers license be renewed?

every two years

which of these provisions is not required in life insurance policies?

extended term

which federal law allows an insurer to obtain an inspection report?

fair credit reporting act

what is an organization that solicits insurance only to its members?

fraternal benefit society

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT:

free-look period has expired

variable life products require a producer to:

hold a Life Insurance license and a Securities license

which of the following groups may not be insured by a group life insurance policy?

individuals who are related by blood

In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and.

initial premium

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:

insurable interest in the proposed insured

When third party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:

insurable interest in the proposed insured.

credit life insurance is __

insurance issued on a debtor to cover outstanding loan balances.

In a Key Employee life insurance policy, the third-party owner can be all of these EXCEPT

insured

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

insurer

variable annuities may invest premiums in each of the following except:

insurer's corporate business account

How are policyowner dividends treated in regards to income tax?

interest on accumulated is taxed

b receives yearly dividends and interest from a participating life insurance policy. which should B include as gross income for federal income tax purporses?

interest only

The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:

is blinded in an accident.

A domestic insurance company in Texas is considered a company that:

is incorporated and formed in Texas.

Credit Life Insurance is

issued in an amount not to exceed the amount of the loan

when advertising, an insurance company must use its:

legal corporate name

which of the following may NOT charge fees for insurance advice?

legal reserve agents

D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?

level term

which settlement option pays a stated amount to an annuitant?

life income

under a graded premium policy, the premiums are:

lower during the policy's early years

during a sales presentation for a participating life insurance policy, an agent must:

make a prospect understand that dividends are NOT guaranteed.

when funds are shifted straight from one ira to another ira what percentage of the tax is withheld?

none

an insurance agent has a fiduciary responsibility to all of the following except:

other agents

Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT:

partial withdrawal features beyond a surrender charge period.

who has the right to change a revocable beneficiary?

policyowner

statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called:

representations

an example of rebating would be

returning a portion of a premium as inducement to purchase insurance.

Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?

split dollar

who owns a stock insurance company?

stockholders

Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?

taxed as ordinary income

which of these life insurance riders allows the applicant to have excess coverage?

term rider

who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in texas?

the agent and the company

c is trying to determine whether to convert her convertible term life policy to whole life policy using her original age or attained age. what factor would affect her decision the most?

the cost

a noncontributory group term life plan is characterized by:

the entire cost of the plan is paid for by the employer.

The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and

the initial premium.

A policy of adhesion can only be modified by whom?

the insurance company

an employee is covered under a company group life plan with a $50,000 death benefit. what is the maximum amount a spouse may be insured for under this program?

$25,000

P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 minus any outstanding policy loans.

___ of personal life insurance premiums is usually deductible for federal income tax purposes.

0%

an insured may assign up to ___ of policy ownership under an individual life insurance policy

100%

a 15 year mortgage is best protected by what kind of life policy?

15 year decreasing term

in texas how long must a policy be in force before an insurance company must pay death benefits for suicide?

2 years

J is 35 years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20 Pay Life

a new agent must complete at least __ hours of continuing education within 24 months of initial licensure.

24

the insurance commissioner must give how many days' notice prior to holding a hearing regarding an agent's unfair or deceptive practice?

30

in texas an individual life insurance policy is required to have a grace period of:

31 days

___ of continuing education must be completed in the classroom or classroom equivalent.

50%

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

59 1/2

Under a trustee group life policy, who would be eligible for a certificate of coverage?

Employee

Which of these statements is incorrect regarding the federal income tax treatment of life insurance?

Entire cash surrender value is taxable.

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

Evidence of Insurability is required when the option is exercised.

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

Ex-wife

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

Extended Term

Which of these is NOT a source of funding for Social Security benefits?

Federal Government

The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?

Flexible Installment Deferred.

What action should a producer take if the initial premium is NOT submitted with the application?

Forward the application to the insurer without the initial premium.

In life insurance, the needs approach is used mostly to establish:

How much life insurance a client should apply for?

which of these retirement plans can be started by an employee, even if another plan is in existance?

IRA - Individual Retirement Account

In regards to representations or warranties, which of these statements is TRUE?

If material to the risk, false representations will void a policy.

When must insurable interest exist for a life insurance contract to be valid?

Inception of the contract.

A 55 years old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000

How does an indexed annuity differ from a fixed annuity?

Indexed annuaity owners may receive credited interest tied to the fluctuations of the linked index.

All of these statements about the Waiver of Premium provision are correct, EXCEPT:

Insured must be eligible for Social Security disability for claim to be accepted.

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n):

Insuring agreement

A policy owner's rights are limited under which beneficiary designation?

Irrevocable

A policyowner's rights are limited under which beneficiary designation?

Irrevocable

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attemped by the policyowner?

Irrevocable beneficiary.

On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?

January 26

K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT:

K's wife dies at age 66.

Whole Life Insurance is sometimes referred to as "Straight Life". What does the word "Straighht" indicate when using this phrase?

The duration of premium payments.

J chooses a month premium payment mode on his Whole Life Insurance policy. Which of these statements is correct?

The gross premium is higher on a monthly payment mode as compared to being paid annually.

Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?

The initial premium was NOT submitted with the application.

Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?

USA Patriot Act

Which of the following is a characteristic of a variable annuity?

Underlying equity investments

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal Life

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

Variable Life

When does a life insurance contract become effective if the initial premium is not collected during the application process?

When producer delivers policy and collects initial premium.

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 conditions of the receipt are met.

A life insurance policy that provides a policyowner with cash value along with a level face amount is called:

Whole life

which of these is an element of a variable life policy?

a fixed, level premium

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of:

additional Whole Life coverage at specified times

a cost of living rider gives the insured:

additional death benefits

a term life rider offers the insured:

additional life coverage

q purchases a $500 000 life insurance policy and pays $900 in premiums over the first six months. q dies suddenly and the beneficiary is paid $500,000. this exchange of unequal values reflects which of the following insurance contract features?

aleatory

if an insured's age was misstated on a life insurance contract, the Misstatement of Age provision requires that any death benefit payable would be:

an amount that the premiums paid would have purchased at the current age.

an insurer is not required to provide information on fraudulent claims if requested by:

an insured

an example of false advertising would be:

an insurer exaggerating its dividends in a magazine advertisement.

Group life insurance policies are generally written as:

annually renewable term

with whom may an agent legally share commissions?

another agent with the same line of insurance.

To be eligible for Social Security disability benefits, an employee must be unable to perform:

any occupation

when can a policyowner change a revocable beneficiary?

anytime

In a qualified retirement, the yearly contributions to an employee's account:

are restricted to maximum levels set by the IRS.

a certificate of ______ permits an insurance company to transact business in Texas.

authority

which of the following is a requirement for obtaining a texas insurance agents license?

be honest, trustworthy, and reliable.

Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until feb 7. Q is dissatisfied and returns the policy feb 13. How will the insurer handle this situation

the policy will be returned within the free-look period, premium will be fully refunded.

A level premium indicates:

the premium is fixed for the entire duration of the contract.

Stranger Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):

third party with no insurable interest.

why would the insurance commissioner examine the records of an insurance company?

to determine the solvency of the company.

an example of an unfair claims settlement practice is:

turning down a claim without providing the basis of denial.

which is considered an alement of a variable life policy?

underlying equity investment

All of these are considered to be a benefit under Social Security, EXCEPT for:

unemployment

when is the face amount paid under a joint life and survivor policy?

upon the death of the last insured

what type of annuity has a cash value that is based upon the performance of it's underfying investment funds?

variable

term life policies that have the ability to be converted to permanent coverage may do so during a specific time period. this conversion period:

varies according to the contract.

what is required for an agent whose license has been revoked?

wait at least five years before applying for a new license.

a foreign insurance company conducting insurance business in texas:

was formed under the laws of another state.

at what point does an informal contract become binding contract?

when consideration is provided by one of the parties to the contract.

A $20,000 life insurance policy application is completed. However, the producer does not collect the initial premium. At what point does the coverage go into effect?

when the applicant receives the policy and pays the initial premium.

when is the face amount of a whole policy paid?

when the insured dies or at the policy's maturity date, whichever happens first

If a 10-year Term Life policy contains a Renewability provision, the policy will renew:

without evidence of insurability.

a domestic insurance company in Texas is considered a company that:

write insurance on risks located only in Texas