Study
Another name for a substandard risk classification is a)Declined. b)Elevated. c)Rated. d)Controlled.
c)Rated.
Are insurance company underwriters allowed to discriminate? a)No, higher risks pay higher premium b)No, discrimination is an unfair practice c)Yes, but only for gender d)Yes, but not unfairly
d)Yes, but not unfairly
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits? a)$50,000 b)$62,500 c)$75,000 d)Nothing
a)$50,000
When replacing a policy, an insurer must maintain a file containing copies of all statements for a)5 years. b)10 years. c)As long as the insurer remains in business. d)3 years.
a)5 years.
Who can make a fully deductible contribution to a traditional IRA? a)A person whose contributions are funded by a return on investment b)An individual not covered by an employer-sponsored plan who has earned income c)Anybody; all IRA contributions are fully deductible regardless of income level d)Someone making contributions to an educational IRA
b)An individual not covered by an employer-sponsored plan who has earned income
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a)One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. b)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. c)The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. d)The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.
b)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
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? a)$20,000 b)$25,000 c)$50,000 d)The face amount will be determined by the insurer.
c)$50,000
When do full Social Security retirement benefits begin? a)When the worker reaches 59 1/2. b)When the worker has earned the required credits. c)When the worker reaches age 65 and has earned the required amount of work credits. d)When the worker reaches 65.
c)When the worker reaches age 65 and has earned the required amount of work credits.
Which of the following statements is TRUE concerning the Accidental Death Rider? a)It is also known as a triple indemnity rider. b)This rider is only available to insureds over the age of 65. c)It is only available in group insurance. d)It will pay double or triple the face amount.
d)It will pay double or triple the face amount.
The Commissioner obtains a restraining order against a person who has violated an insurance law. The person continues the violation for 10 days. The person will have to pay a fine of a)$0. b)$5,000. c)$10,000. d)$50,000.
a)$0.
Which of the following produces evaluations of insurers' financial status often used by state departments of insurance? a)AM Best b)NAIC c)Consumer's guide d)SEC
a)AM Best
A Return of Premium term life policy is written as what type of term coverage? a)Increasing b)Decreasing c)Renewable d)Level
a)Increasing
Which of the following best describes annually renewable term insurance? a)It is level term insurance. b)It requires proof of insurability at each renewal. c)Neither the premium nor the death benefit is affected by the insured's age. d)It provides an annually increasing death benefit.
a)It is level term insurance.
Which of the following is true about the premium on the children's rider in a life insurance policy? a)It remains the same no matter how many children are added to the policy. b)It decreases when the oldest child reaches the age of 21. c)It increases when a newborn baby is added to the policy. d)It decreases when an adopted child is added to the policy.
a)It remains the same no matter how many children are added to the policy.
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? a)Mutual b)Reciprocal c)Nonprofit service organization d)Stock
a)Mutual
Which of the following is a person, other than an officer or employee of the ceding insurer, who solicits, negotiates, or places reinsurance cessions on behalf of a ceding insurer? a)Reinsurance broker b)Managing general agent c)Ceding agent d)Reinsurance agent
a)Reinsurance broker
The Ownership provision entitles the policyowner to do all of the following EXCEPT a)Set premium rates. b)Receive a policy loan. c)Assign the policy. d)Designate a beneficiary.
a)Set premium rates.
Which of the following may NOT be included in an insurance company's advertisement? a)That its policies are covered by a state Insurance Security Fund b)The policies' limitations or exclusions c)The name of a specific agent d)An identification of a limited policy as a limited policy
a)That its policies are covered by a state Insurance Security Fund
All of the following statements about equity index annuities are correct EXCEPT a)The annuitant receives a fixed amount of return. b)They have a guaranteed minimum interest rate. c)The interest rate is tied to an index such as the Standard & Poor's 500. d)They invest on a more aggressive basis aiming for higher returns.
a)The annuitant receives a fixed amount of return.
What determines the penalty for surrendering a market value adjusted annuity prematurely? a)The current interest rate at the time of surrender b)The flat fee determined by an index of interest gains and the amount of time the annuity would take to mature c)There are no penalties imposed for surrendering annuities prematurely. d)The guaranteed minimum interest rate provided in the contract
a)The current interest rate at the time of surrender
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? a)The insured's premiums will be waived until she is 21. b)The premiums will become tax deductible until the insured's 18th birthday. c)Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. d)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.
a)The insured's premiums will be waived until she is 21.
An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur? a)The interest will continue to accumulate tax deferred. b)The interest will become immediately taxable. c)The premiums will increase. d)The premiums will decrease.
a)The interest will continue to accumulate tax deferred.
What is the purpose of the Wisconsin State Life Insurance Fund? a)To offer low-cost life insurance to the state residents b)To protect insured against insolvent insurers c)To advertise different types of life insurance policies available in the state d)To provide life insurance through licensed intermediaries
a)To offer low-cost life insurance to the state residents
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called a)Waiver of premium. b)Guaranteed insurability. c)Waiver of cost of insurance. d)Payor benefit.
a)Waiver of premium.
What is the latest point that a Buyer's Guide can be issued? a)When the applicant turns in the application b)Up until the day before policy delivery c)On the day of policy delivery d)30 days after policy delivery
a)When the applicant turns in the application
Which of the following is INCORRECT regarding a $100,000 20-year level term policy? a)The policy will expire at the end of the 20-year period. b)At the end of 20 years, the policy's cash value will equal $100,000. c)The policy premiums will remain level for 20 years. d)If the insured dies before the policy expired, the beneficiary will receive $100,000.
b)At the end of 20 years, the policy's cash value will equal $100,000.
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a)Assignment b)Automatic premium loan c)Waiver of premium d)Incontestability period
b)Automatic premium loan
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? a)Inflation Rider b)Cost of Living Rider c)Value Adjustment Rider d)Return of Premium Rider
b)Cost of Living Rider
In life insurance policies, cash value increases a)Are only taxed when the owner reaches age 65. b)Grow tax deferred. c)Are income taxable immediately. d)Are taxed annually.
b)Grow tax deferred.
All of the following are Nonforfeiture options EXCEPT a)Reduced paid-up b)Interest only c)Cash surrender d)Extended term
b)Interest only
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a)Fixed amount option b)Interest only option c)Life income with period certain d)Joint and survivor
b)Interest only option
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? a)Payments can be made in installments and as a single cash refund. b)It does not guarantee that the entire principal amount will be paid out. c)It is a life contingency option. d)The beneficiary receives the remainder of the principal amount upon the annuitant's death.
b)It does not guarantee that the entire principal amount will be paid out.
What is the purpose of a conditional receipt? a)It is given only to applicants who fully prepay the premium. b)It is intended to provide coverage on a date prior to the policy issue. c)It guarantees that a policy will be issued in the amount applied for. d)It serves as proof that the applicant has been determined insurable.
b)It is intended to provide coverage on a date prior to the policy issue.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the a)Paid-up additions. b)One-year term option. c)Paid-up option. d)Accelerated endowment.
b)One-year term option.
A participating insurance policy may do which of the following? a)Require 80% participation b)Pay dividends to the policyowner c)Provide group coverage d)Pay dividends to the stockholder
b)Pay dividends to the policyowner
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a)Premiums are taxable to the employee. b)Premiums are not tax deductible as a business expense. c)Premiums are tax deductible by the key employee. d)Premiums are tax deductible as a business expense.
b)Premiums are not tax deductible as a business expense.
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a)HR 10 plan b)Profit sharing plan c)401(k) plan d)Tax-sheltered account plan
b)Profit sharing plan
Which of the following insurance options would be considered a risk-sharing arrangement? a)Surplus lines b)Reciprocal c)Stock d)Mutual
b)Reciprocal
All of the following would be different between qualified and nonqualified retirement plans EXCEPT a)IRS approval requirements b)Taxation on accumulation c)Taxation of withdrawals d)Taxation of contributions
b)Taxation on accumulation
Which of the following would provide an underwriter with information concerning an applicant's health history? a)The inspection report b)The Medical Information Bureau c)A medical examination d)The agent's report
b)The Medical Information Bureau
Which of the following is NOT true regarding the annuitant? a)The annuitant must be a natural person. b)The annuitant cannot be the same person as the annuity owner. c)The annuitant's life expectancy is taken into consideration for the annuity. d)The annuitant receives the annuity benefits.
b)The annuitant cannot be the same person as the annuity owner.
In a defined contribution plan, a)The contribution and the benefit are known. b)The contribution is known and the benefit is unknown. c)The benefit is known and the contribution is unknown. d)The contribution and the benefit are unknown.
b)The contribution is known and the benefit is unknown.
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?a)The death benefit can be increased only by exchanging the existing policy for a new one. b)The death benefit can be increased by providing evidence of insurability. c)The death benefit cannot be increased. d)The death benefit can be increased only when the policy has developed a cash value.
b)The death benefit can be increased by providing evidence of insurability.
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a)The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. b)The insurer will pay the full death benefit from the group policy to the beneficiary. c)The insurer will pay a reduced death benefit to the beneficiary. d)The insurer will pay the death benefit minus one month's premium.
b)The insurer will pay the full death benefit from the group policy to the beneficiary.
Under an extended term nonforfeiture option, the policy cash value is converted to a)A higher face amount than the whole life policy. b)The same face amount as in the whole life policy. c)The face amount equal to the cash value. d)A lower face amount than the whole life policy.
b)The same face amount as in the whole life policy.
A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called a)Premature distribution. b)Rollover. c)1035 exchange. d)Qualified distribution.
c)1035 exchange.
For how long is an insurance company allowed to defer policy loan requests?a)30 days b)60 days c)6 months d)1 year
c)6 months
The two types of assignments are a)Complete and partial. b)Complete and proportionate. c)Absolute and collateral. d)Absolute and partial.
c)Absolute and collateral.
Which of the following is a feature of a variable annuity? a)Interest rate is guaranteed. b)Securities license is not required. c)Benefit payment amounts are not guaranteed. d)Payments into the annuity are kept in the company's general account.
c)Benefit payment amounts are not guaranteed.
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? a)Policy Summary b)Illustrations c)Buyer's Guide d)Insurance Index
c)Buyer's Guide
Which of the following includes information regarding a person's credit, character, reputation, and habits? a)Insurability report b)Agent's report c)Consumer report d)Consumer history
c)Consumer report
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a)Aleatory contracts. b)Binding contracts. c)Contracts of adhesion. d)Unilateral contracts.
c)Contracts of adhesion.
According to the entire contract provision, what document must be made part of the insurance policy? a)Agent's report b)Outline of coverage c)Copy of the original application d)Buyer's Guide
c)Copy of the original application
An agent selling variable annuities must be registered with a)The Guaranty Association. b)SEC. c)FINRA. d)Department of Insurance.
c)FINRA.
What type of insurance would be used for a Return of Premium rider?a)Decreasing Term b)Annually Renewable Term c)Increasing Term d)Level Term
c)Increasing Term
Which statement regarding insurable risks is NOT correct? a)The insurable risk needs to be statistically predictable. b)An insurable risk must involve a loss that is definite as to cause, time, place and amount. c)Insureds cannot be randomly selected. d)Insurance cannot be mandatory.
c)Insureds cannot be randomly selected.
Who makes up the Medical Information Bureau? a)Former insured b)Physicians and paramedics c)Insurers d)Hospitals
c)Insurers
What is the main purpose of the Seven-pay Test? a)It ensures that the policy benefits are paid out in 7 years. b)It guarantees the minimum interest. c)It determines if the insurance policy is a MEC. d)It requires level premium payments for 7 years.
c)It determines if the insurance policy is a MEC.
Which of the following is true regarding a single life settlement option?a)Proceeds are paid out in a lump sum. b)It provides income for a specified period of time. c)It provides income the beneficiary cannot outlive. d)Payments continue until the entire principal is exhausted.
c)It provides income the beneficiary cannot outlive.
An agent who includes a statement or omits a statement which, when taken in context of the whole presentation, may tend to mislead or deceive the persons addressed has committed a)Twisting. b)Coercion. c)Misrepresentation. d)Defamation.
c)Misrepresentation.
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an a)Endowment. b)Non-qualified annuity. c)Modified endowment contract. d)Accelerated benefit policy.
c)Modified endowment contract.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report a)Must be advised that a copy of the report is available to anyone who requests it. b)May sue the reporting agency in order to get inaccurate data corrected. c)Must be informed of the source of the report. d)Are entitled to obtain a copy of the report from the party who ordered it.
c)Must be informed of the source of the report.
Using a class designation for beneficiaries means a)Naming an estate as the beneficiary. b)Naming each beneficiary by his or her name. c)Naming beneficiaries as a group. d)Not naming beneficiaries.
c)Naming beneficiaries as a group.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a)Pay back all premiums owed plus interest. b)Receive payments for a fixed amount. c)Purchase a single premium policy for a reduced face amount. d)Purchase a term rider to attach to the policy.
c)Purchase a single premium policy for a reduced face amount.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT a)A securities license. b)A life insurance license. c)SEC registration. d)FINRA registration.
c)SEC registration
The interest earned on policy dividends is a)Tax deductible. b)40% taxable, similar to a capital gain c)Taxable. d)Nontaxable.
c)Taxable.
All of the following statements about equity index annuities are correct EXCEPT a)The interest rate is tied to an index such as the Standard & Poor's 500. b)They invest on a more aggressive basis aiming for higher returns. c)The annuitant receives a fixed amount of return. d)They have a guaranteed minimum interest rate.
c)The annuitant receives a fixed amount of return.
Which of the following statements is correct regarding a whole life policy?a)The policy premium is based on the attained age. b)The death benefit may increase or decrease during the policy period. c)The policyowner is entitled to policy loans. d)Cash values are not guaranteed.
c)The policyowner is entitled to policy loans.
What must happen when an individual policy or annuity has been personally delivered to the policyowner? a)The producer must go over the policy with the policyowner. b)A notary public must witness the exchange. c)The policyowner must sign a delivery receipt. d)The policyowner must pay the annual premium in full.
c)The policyowner must sign a delivery receipt.
How must a replacing producer respond to an applicant wishing to replace existing life insurance? a)The producer must request the permission of the existing insurer. b)The producer has no specific duties. c)The producer must provide the applicant with a Notice Regarding Replacement. d)The producer must collect the existing policies and turn them over to the replacing insurer.
c)The producer must provide the applicant with a Notice Regarding Replacement.
Which of the following is NOT true regarding Equity Indexed Annuities? a)They have guaranteed minimum interest rates. b)They are less risky than variable annuities. c)They earn lower interest rates than fixed annuities. d)The insurance company keeps a percentage of the returns.
c)They earn lower interest rates than fixed annuities.
When would a 20-pay whole life policy endow? a)After 20 payments b)In 20 years c)When the insured reaches age 100 d)At the insured's age 65
c)When the insured reaches age 100
The LEAST expensive first-year premium is found in which of the following policies? a)Increasing Term b)Decreasing Term c)Level Term d)Annually Renewable Term
d)Annually Renewable Term
An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require? a)A complete medical record b)Sworn health affidavit from the applicant c)Statement of Continued Good Health d)Attending Physician Statement
d)Attending Physician Statement
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a)In lesser amounts for the remaining policy term of age 100. b)Equal to the cash value surrendered from the policy c)The same as the original policy minus the cash value d)Equal to the original policy for as long as the cash values will purchase.
d)Equal to the original policy for as long as the cash values will purchase.
ABC insurance company receives an incomplete application and issues the policy anyway. Six months later ABC realizes the missing information. What term is used that prevents ABC from forcing the policyowner to answer further questions? a)Adhesion b)Unilateral c)Consideration d)Estoppel
d)Estoppel
Which of the following is true about a defined benefit plan? a)Low-salaried employees are excluded from the plan. b)All participating employees are vested immediately following a contribution to the plan. c)Contributions are made in regular fixed amounts. d)High-salaried employees with only a few years until retirement receive the highest contribution.
d)High-salaried employees with only a few years until retirement receive the highest contribution.
Which of the following is a person who receives a fee or commission to attempt to negotiate settlements between a life insurance policyholder or certificate holder and one or more life settlement providers? a)Surplus lines broker b)Reinsurance agent c)Life intermediary d)Life settlement broker
d)Life settlement broker
What is the other term for the cash payment settlement option? a)Principal amount b)Face amount c)Proceeds d)Lump sum
d)Lump sum
All of the following are required in a life insurance illustration EXCEPT a)Name and age of proposed insured. b)Underwriting classification upon which the illustration is based. c)Name of insurer. d)Name and home address of agent.
d)Name and home address of agent.
Which Universal Life option has a gradually increasing cash value and a level death benefit? a)Juvenile life b)Term insurance c)Option B d)Option A
d)Option A
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Corridor option b)Variable option c)Option A d)Option B
d)Option B
Which nonforfeiture option provides coverage for the longest period of time?a)Extended term b)Paid-up option c)Accumulated at interest d)Reduced paid-up
d)Reduced paid-up
Which of the following is FALSE regarding the life insurance replacement rules? a)Replacement policies must have a 30-day free look. b)The existing insurer must be notified of the proposed replacement transaction within 5 business days of receipt of the application. c)The replacing insurer must verify that all required forms are completed and received with the application. d)Replacement forms must be kept on file for 7 years.
d)Replacement forms must be kept on file for 7 years.
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a)No taxes are due since the plan participant is over age 59 1/2. b)There is a 10% early withdrawal penalty. c)The amount distributed is subject to ordinary income tax. d)The amount of the distribution is reduced by the amount of a 20% withholding tax.
d)The amount of the distribution is reduced by the amount of a 20% withholding tax.
Which of the following would qualify as a competent party in an insurance contract? a)The applicant is intoxicated at the time of application. b)The applicant is a 12-year-old student. c)The applicant is under the influence of a mind-impairing medication at the time of application. d)The applicant has a prior felony conviction.
d)The applicant has a prior felony conviction.
Which of the following is a characteristic of a Reciprocal Insurance Exchange?a)Normally write all lines of insurance b)Stock holders share in any profits c)Issues nonassessable policies d)The chief administrator of the insurer is called an "attorney-in-fact".
d)The chief administrator of the insurer is called an "attorney-in-fact".
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? a)It is impossible to transfer a policy. b)The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it. c)The insured can transfer the policy to his friend and then notify the insurer of the change. d)The insured will need a written consent of the insurer.
d)The insured will need a written consent of the insurer.
All of the following are general requirements of a qualified plan EXCEPT a)The plan must be communicated to all employees. b)The plan must be for the exclusive benefits of the employees and their beneficiaries. c)The plan must be permanent, written and legally binding. d)The plan must provide an offset for social security benefits.
d)The plan must provide an offset for social security benefits.
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a)Those who have worked in the company for at least 3 years b)Those who have dependents c)Those who have no history of claims d)Those who have been insured under the plan for at least 5 years
d)Those who have been insured under the plan for at least 5 years
In addition to any other forfeiture imposed, any person who violates an effective order may be required to pay a)Triple the amount of any profit gained from the violation. b)Half the amount of any profit gained from the violation. c)The full amount of any profit gained from the violation. d)Twice the amount of any profit gained from the violation.
d)Twice the amount of any profit gained from the violation.
