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Primerica > CA Life Insurance Agent > Flashcards

CA Life Insurance Agent Flashcards

Life Insurance Agent's License test

1
Q

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

$50,000

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2
Q

The act of revoking or terminating an insurance policy is called

A

Cancellation

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3
Q

In a survivorship life policy, when does the insurer pay the death benefit?

A

Upon the last death

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4
Q

Attempting to determine how much insurance an individual would require based upon their financial objectives is known as

A

Needs approach

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5
Q

For the purpose of a contract, which of the following could be considered a “person”?

a) An association
b) A business trust
c) A limited liability corporation
d) Any of these would qualify as a person

A

Any of these would qualify as a person

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6
Q

In a group life insurance policy, the employer may select all of the following EXCEPT

a) The type of insurance.
b) The amount of insurance.
c) The premium payor.
d) The beneficiary.

A

The beneficiary.

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7
Q

Insurance is the transfer of

A

Risk

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8
Q

What is a major problem with naming a trust as the beneficiary of a life insurance policy?

A

They are expensive to administer.

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9
Q

What type of insurance policy would perform the function of cash accumulation?

A

Whole life

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10
Q

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

A

Cash option

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11
Q

Profitable distribution of exposures serves the purpose of

a) Preventing the insurer from being stopped.
b) Helping the insurer determine payable benefits
c) Protecting the insurer against adverse selection
d) Helping the insurer select only the ideal insurable risks

A

Protecting the insurer against adverse selection

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12
Q

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?

A

Business overhead expense policy

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13
Q

During the free-look period, the premium for a variable annuity may be invested in all of the following EXCEPT

a) Money-market funds.
b) Mutual funds (only upon the investor’s request).
c) Value funds.
d) Fixed-income investments.

A

Value funds

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14
Q

Which of the following insureds has a right to cancel an individual life policy within 30 days?

a) All insureds
b) Insureds who have dependents only
c) Insureds age 55 1/2 or older
d) Insureds 60 years of age of older

A

Insureds 60 years of age of older

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15
Q

The title page of the policy provides a summary of the benefits and coverages provided by the policy. All of the following information is included in the title page EXCEPT

a) Type of policy, amount of coverage provided.
b) The premium amount and modal.
c) The effective date and the termination date of the policy.
d) The insured’s beneficiaries

A

The insured’s beneficiaries

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16
Q

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

A

$100,000

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17
Q

Every individual life insurance policy must provide for a free-look provision that lasts for at least

A

10 days

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18
Q

All of the following are requirements for life insurance illustrations EXCEPT

a) They may only be used as approved.
b) They must identify nonguaranteed values.
c) They must differentiate between guaranteed and projected amounts.
d) They must be part of the contract.

A

They must be part of the contract

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19
Q

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

A

Lump sum

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20
Q

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

A

One-year term option

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21
Q

Which of the following does NOT need to be identified in an insurance policy?

a) A statement of insurable interest
b) The first named insured
c) The insurer’s financial rating
d) The stated periodic premium

A

The insurer’s financial rating

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22
Q

What describes the specific information about a policy?

A

Policy summary

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23
Q

What does “liquidity” refer to in a life insurance policy?

a) The death benefit replaces the assets that would have accumulated if the insured had not died.
b) The policyowner receives dividend checks each year.
c) The insured receives payments each month in retirement.
d) Cash values can be borrowed at any time.

A

Cash values can be borrowed at any time

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24
Q

If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT

a) Utilities.
b) Employee payroll.
c) Loss of the owner’s income.
d) Rent.

A

Loss of the owner’s income

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25
Q

All of the following entities regulate variable life policies EXCEPT

a) The SEC.
b) The Insurance Department.
c) The Guaranty Association.
d) Federal government.

A

The Guaranty Association

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26
Q

Which of the following are generally NOT considered when underwriting group insurance?

a) The size of the group
b) The insureds’ medical history
c) The nature of the group
d) The group’s past claim experience

A

The insureds’ medical history

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27
Q

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

A

Cost of Living Rider

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28
Q

In insurance, an offer is usually made when

a) The completed application is submitted.
b) The insurer approves the application and receives the initial premium.
c) The agent hands the policy to the policyholder.
d) An agent explains a policy to a potential applicant.

A

The completed application is submitted

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29
Q

A tornado that destroys property would be an example of

A

a peril

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30
Q

An agent with an active license CANNOT act as a broker unless

a) He is designated by his company as an appointed broker.
b) He is on the Commissioner’s list of appointed brokers.
c) He does not have an appointment with the company that he is brokering.
d) He has satisfied the mandatory licensing requirements for “broker” status.

A

He does not have an appointment with the company that he is brokering

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31
Q

The policy owner 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 when the policy has developed a cash value.
b) The death benefit can be increased only by exchanging the existing policy for a new one.
c) The death benefit can be increased by providing the evidence of insurability.
d) The death benefit cannot be increased.

A

The death benefit can be increased by providing the evidence of insurability.

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32
Q

All of the following topics may be included in the continuing education requirement for long-term care insurance EXCEPT

a) Alternatives to the purpose of private long-term care insurance.
b) The effect of inflation in eroding the value of benefits and the importance of inflation protection.
c) Sales techniques and overcoming client objectives in the purchase of long-term care insurance.
d) Available long-term care services and facilities.

A

Sales techniques and overcoming client objectives in the purchase of long-term care insurance.

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33
Q

All of the following are true about variable products EXCEPT

a) Policyowners bear the investment risk
b) The premiums are invested in the insurer’s general account
c) The minimum death benefit is guaranteed
d) The cash value is not guaranteed

A

The premiums are invested in the insurer’s general account

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34
Q

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

a) The surrender charge is a percentage of the cash value and decreases over time.
b) The surrender charge is always 7% of the cash value.
c) The surrender charge is a flat fee determined by the annuity owner when the annuity is purchased.
d) The surrender charge will increase as the accumulation increases.

A

The surrender charge is a percentage of the cash value and decreases over time.

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35
Q

Which of the following ultimately determines the interest rates paid to te owner of a fixed annuity?

a) Investment performance of the company
b) Investment performance of the insured
c) Statewide predetermined annual interest rate
d) Insurer’s guaranteed minimum rate of interest

A

Insurer’s guaranteed minimum rate of interest

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36
Q

Which of the following is the best reason to purchase life insurance rather than annuities?

a) To liquidate a sum of money over a period of years.
b) To create regular income payments
c) To liquidate a sum of money over a lifetime
d) To create an estate

A

To create an estate

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37
Q

One of the advantages of a family life insurance policy that provides coverage for children is that it

a) Allows the spouse extra coverage for every child coverage
b) Allows any income the children make to be included in coverage
c) May be converted to permanent insurance for the children without requiring evidence of insurability
d) Covers children for free

A

May be converted to permanent insurance for the children without requiring evidence of insurability

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38
Q

In which of the following examples would a contract between an insurer and prospective insured be legal?

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 influene of a mind-impairing medication at the time of application
d) The applicant has a prior felony conviction

A

The applicant has a prior felony conviction

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39
Q

Using a class designation for beneficiaries means

a) Naming the estate as the beneficiary
b) Naming each beneficiary by his/her name
c) Naming beneficiaries as a group
d) Not naming beneficiaries

A

Naming beneficiaries as a group

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40
Q

During the accumulation period ina nonqualified annuity, what are the tax consequences of a withdrawal?

a) Nontaxable principal may be withdrawn first, but the 10% penalty will be imposed if under the age 59 1/2
b) Both interest and principal are taxed; no other penalties are imposed
c) Neither interest nor principal is taxed, but penalties may be imposed
d) Taxable interest will be withdrawn first and the 10% penalty will be imposed if under the age 59 1/2

A

Taxable interest will be withdrawn first and the 10% penalty will be imposed if under the age 59 1/2

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41
Q

Which of the following is TRUE about credit life insurance?

a) Debtor is the olicy beneficiaty
b) Creditor is the policyowner
c) Debtor is the annuitant
d) Creditor is the insured

A

Creditor is the policyowner

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42
Q

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

A

$2,500

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43
Q

Which of the following best defines earned surplus?

a) Dividends paid to policyholders
b) Insurer’s unassigned funds
c) Insurer’s expenses and liabilities
d) None of the above

A

Insurer’s unassigned funds

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44
Q

What allows the insurer to relieve a minor insured from premium payments if the minor’s parents have died or become disabled?

A

Payor Benefit

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45
Q

The wrongful act or the violation of someone’s rights that leads to legal liability

A

Tort

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46
Q

If a life insurance policy has an irrevokable beneficiary designation,

a) The owner can always change the beneficiary at will
b) The beneficiary cannot be changed
c) The beneficiary can only be changed with a written permission of the beneficiary
d) The beneficiary cannot be chnged for at least 2 years

A

The beneficiary can only be changed with a written permission of the beneficiary

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47
Q

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?

a) When the agent submits the application and the company issues a conditional receipt
b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statemtent of Good Health
c) On the designated effective date
d) On the appliction date

A

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statemtent of Good Health

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48
Q

Which of the following is NOT a characteristic of pure risk?

a) The loss must be masurable in dollars
b) The loss exposure must be large
c) The loss must be catastrophic
d) The loss must be due to chance

A

The loss must be catastrophic

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49
Q

All of the following are true regarding a decreasing term policy EXCEPT

a) The payable premium amount steadily declines throughout the duration of the contract.
b) The death benefit is $0 at the end of the policy term
c) The contract pays only in the event of death during the term and there is no cash value
d) The face amount steadily declines throughout the duration of the contract

A

The payable premium amount steadily declines throughout the duration of the contract.

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50
Q

What insured has a right to cancel an individual life policy within 30 days?

A

Insureds 60 years of age or older

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51
Q

Why should the producer personally deliver the policy when the first premium has already been paid?

A

To help the insured understand all aspects of the contract

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52
Q

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term for the policy’s cash value, which is currently $20,000. What would be the face amount on the new term policy?

A

$50,000

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53
Q

Harry has just recieved his life insurance policy. In reviewing the title page, Harry was ascertain the following information EXCEPT

a) His total annual premium amount
b) His spouse had been assigned the primary beneficiary
c) His children have been covered by a child rider
d) He had purchased a 20 year renewable term insurance policy in the face amount of $150,000

A

His spouse had been assigned the primary beneficiary

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54
Q

If the applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

A

whether the insurable interest exists between the individuals

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55
Q

Concerning AIDS and HIV risks, all of the following acts may be subject an insurer to liability claims or fines EXCEPT

a) Declining applicant for a positive HIV test result
b) Not providing counseling contacts and educational information about HIV and AIDS
c) Disclosing test results to third party without applicant’s consent
d) Requiring applicant to pay for HIV test in order to be underwritten

A

Declining applicant for a positive HIV test result

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56
Q

Which of the following is TRUE regarding the accumulation period of an annuity?

a) It is a period of time during which the beneficiary recieves income
b) It is limited to 10 years
c) It is a period during which the payments into the annuity grow tax deferred
d) It is also referred to as the annuity period

A

It is a period during which the payments into the annuity grow tax deferred

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57
Q

An applicant wants to buy a life-insurance policy in which he can count on recieving the same benefits as stated in the contract. Which type should he buy?

A

Fixed

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58
Q

When a beneficiary recieves payments consisting of both principal and interest portions, which parts are taxable as income?

A

Interest only

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59
Q

Which of the following is true regarding a single life settlement option?

a) Payments continue until the entire principal is exhausted
b) Proceeds are paid out in a lump sum
c) It provides income for a specified period of time
d) It provides income the beneficiary cannot outlive

A

It provides income the beneficiary cannot outlive

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60
Q

Which of the following statements regarding Business Overhead Expense policies is NOT true?

a) Benefits are usually limited to six months
b) Premiums paid for BOE are tax-deductible
c) Any benefits recieved are taxable to the business
d) Leased equipment expenses are covered by the plan

A

Benefits are usually limited to six months

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61
Q

According to the Code, how many separate requirements should an insurance policy have?

A

6

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62
Q

What determines the cash value of a variable life policy?

A

The performance of the policy portfolio

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63
Q

A policy which pays monthly income upon a death of the breadwinner for a predetermined number of years after death, plus a lump sum at death, and combines level term at whole life is

A

Family maintenance

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64
Q

What is another term for the accumulation period of an annuity?

A

Pay-in period

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65
Q

What kind of policy issues certificates of insurance to insureds?

A

Group insurance

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66
Q

Which of the following is true regarding a policy with a face value less than $10,000?

a) The policy can be cancelled with full refund of premium at any time
b) If it is returned during the free-look period, the agreement will be void
c) An insured cannot return the policy
d) If it is returned during the free-look period, the contract will be cancelled, but the insurer will retain the premium paid

A

If it is returned during the free-look period, the agreement will be void

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67
Q

During the free-look period, the premium for a variable annuity may be invested in all of the following EXCEPT

a) Mutual funds (only upon the investor’s request)
b) Value funds
c) Fixed-income investments
d) Money-market funds

A

Value funds

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68
Q

Stranger-originated life insurance policies are in direct opposition to the principle of

A

Insurable interest

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69
Q

What insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only recieve benefits for the amount lost?

A

Indemnity

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70
Q

A situation in which a person can only lose or have no change represents

A

Pure risk

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71
Q

A corporation is the owner and beneficiary of the key person life insurance policy. If the corporation collects the policy benefit, then

a) IRS has no jurisdiction
b) The benefit is received as taxable income
c) The benefit is received tax free
d) The benefit is subject to the exclusionary rule

A

the benefit is received tax free

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72
Q

All of the following are true regarding installments for a fixed period annuity settlement option EXCEPT

a) The insurer determines the amount for each payment
b) It is a life contingency option
c) It will pay the benefit only for a designated period of time
d) The payments are not guaranteed for life

A

It is a life contingency option

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73
Q

Which of the following best describes the policy nonrenewal?

a) Voiding of a policy due to a misrepresentation on the application
b) Revocation of one’s insurance policy by the insurer
c) Discontinuance of an insurance policy by the insured on the policy anniversary date
d) Return of the policy after a 10-day free look

A

Discontinuance of an insurance policy by the insured on the policy anniversary date

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74
Q

The failure to disclose known facts

A

Concealment

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75
Q

All of the following are true regarding a qualified annuity EXCEPT

a) Funds accumulate on a tax-deferred basis
b) Employer contributions are not counted as income to the employee while the plan is in force
c) At distribution, all amounts recieved by the employee are tax free
d) Employer conttributions are tax deductible as ordinary business expense

A

At distribution, all amounts recieved by the employee are tax free

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76
Q

Which of the following is NOT true regarding the annuitant?

a) The annuitant’s life expectancy is taken into consideration for the annuity
b) The annuitant recieves the annuity benefits
c) The annuitant must be a natural person
d) The annuitant cannot be the same person as the annuity owner

A

The annuitant cannot be the same person as the annuity owner

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77
Q

What document delivered to the policyowner includes information about premium amounts, cash values, surrender values, and death benefits for specific policy years?

A

A policy summary

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78
Q

When a life insurance policy was issued, the policyowner designated a primary and a contigent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it wa impossible to determine who died first. Which of the following would recieve the death benefit?

a) The insured’s contingent beneficiary
b) The insirance company
c) The insured’s estate
d) The primary beneficiary’s estate

A

The insured’s contingent beneficiary

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79
Q

Which authority is NOT stated in an agent’s contract but is required for the agent to conduct business?

a) Apparent
b) Assumed
c) Express
d) Implied

A

Implied

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80
Q

The annuity owner dies while the annuity is still in te accumulation stage. Which of the following is TRUE?

a) Because the annuization period has not started, the owner’s estate will recieve the money paid into the annuity
b) The insurance company will retain the cash value and pay back the premiums to the owner’s estate
c) The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary
d) The beneficiary will recieve the greater of the money paid into the annuity or the cash value

A

The beneficiary will recieve the greater of the money paid into the annuity or the cash value

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81
Q

What type of insurance would be used for a Return of Premium rider?

A

Increasing Term

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82
Q

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries

A

Joint and survivor

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83
Q

What distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer?

A

Direct response system

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84
Q

What does “liquidity” refer to in a life insurance policy?

A

Cash values can be borrowed at any time

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85
Q

What is the benefit of choosing extended term as a nonforfeiture option?

A

It has the highest amount of insurance protection

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86
Q

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?

A

The employer is the owner and beneficiary

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87
Q

Which of the following is NOT typically excluded from life policies?

a) Death due to a plane crash for a fare-paying passenger
b) Self-inflicted death
c) Death that occurs while a person is committing a felony
d) Death due to war or military service

A

Death due to a plane crash for a fare-paying passenger

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88
Q

Every individual life insurance policy must provide for a free-look provision that lasts for at least

A

10 days

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89
Q

When an individual purchases insurance, what risk management technique is he/she practicing?

A

Transfer

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90
Q

What is the term for a sales campaign conducted through the mail?

A

Direct-response

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91
Q

All of the following are the responsibilities of every long-term care insurer in California EXCEPT

a) Provide enough business to solicit long-term care insurance
b) Establish marketing procedures to assure that any comparison of policies will be fair and accurate
c) Establish marketing procedures to assure excessive insurance is not sold or issued
d) Submit to the Commissioner a list of all agents authorized to solicit individual consumers for the sale of long-term care insurance

A

Provide enough business to solicit long-term care insurance

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92
Q

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which insurance principle has the insurer violated?

A

Consideration

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93
Q

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before annuitization period. The agent most likely explained which of the following?

a) It is not possible to surrender an annuity before the annuitization period
b) Nonforfeiture option guarantees that the owner will recieve a surrender value of the contract
c) The owner will recieve some of the money back will depend on the surrender value established by the insurer at the time that the contract is terminated
d) The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned

A

Nonforfeiture option guarantees that the owner will recieve a surrender value of the contract

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94
Q

A contract which one party undertakes to indemnify another against loss

A

Insurance

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95
Q

Which of the following is true regarding taxation of dividends in participating policies?

a) Dividends are not taxable
b) Dividends are taxable only after a certain amount is accumulated annually
c) Dividends are taxable in some life insurance policies and nontaxable in others
d) Dividends are considered income for tax purposes

A

Dividends are not taxable

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96
Q

In case of a loss, the indemnity provision in insurance policies

a) allows the insured to collect 20% more than the actual loss
b) pays the insured a percentage of the loss above and beyond the loss
c) pays the insured as much as 95% of the loss
d) restores an insured person for the same financial state as before the loss

A

restores an insured person for the same financial state as before the loss

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97
Q

What happens when a policy is suurendered for it’s cash value?

a) the policy can be converted to term insurance
b) coverage ends and the policy cannot be reinstated
c) coverage ends but the policy can be reinstated at any time
d) the policy can be reinstated by paying back all policy loans and premiums

A

coverage ends and the policy cannot be reinstated

98
Q

The Federal Fair Credit Reporting Act

a) Regulates telemarketing
b) Prevents money laundering
c) Regulates consumer reports
d) Protects customer privacy

A

Regulates consumer reports

99
Q

Number of credits required for fully insured status for Social Security disability benefits

A

40

100
Q

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

A

Any form of life insurance

101
Q

If the owner prematurely surrenders hid deferred annuity before the annuitization period begins, which of the following is more likely to occur?

a) a surrender charge will not be imposed because the account has been open for at least one year.
b) the owner will forfeit any premiums he has paid into the account, but will recieve any interest earned on the account
c) the owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge
d) a surrender charge will be imposed that is equal to 3 of the owner’s monthly annuity payments

A

the owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge

102
Q

An insurer has made all of the decisions regarding the provisions included in the insured’s policy. The insured finds an objectable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?

A

Adhesion

103
Q

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an

a) endowment
b) nonqualified annuity
c) modified endowment contract
d) accelerated benefit policy

A

modified endowment contract

104
Q

What is the purpose of key person insurance?

a) to maintain an account that insures the owner of a company remains solvent
b) to lessen the risk of financial loss because of the death of a key employee
c) to provide health insurance to the families of key employees
d) to insure retirement benefits are available to all key employees

A

to lessen the risk of financial loss because of the death of a key employee

105
Q

What is an unilateral contract?

a) two or more parties go into a contract understanding there may be an unequal exchange of value
b) one author: the company wrote the contract; the insured must accept it as written
c) if one party makes a condition, the other party can counteroffer
d) one-sided: only one party makes an enforceable promise

A

one-sided: only one party makes an enforceable promise

106
Q

Credit Life Insurance

a) insures the life of a creditor
b) has a maximum term for insurance of 20 years
c) insures the life of a debtor
d) is purchased on an installment basis

A

insures the life of a debtor

107
Q

What qualifies an individual to contribute to an IRA?

A

earned income

108
Q

Every long-term care insurer in California must submit to the Commissioner a list of agents or other inurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least

A

semiannually

109
Q

A licensee is NOT required to comply with continuing education requirements in the state of California if which conditions are met?

a) The licensee has been good standing for 30 continuous years, and is at least 70 years old
b) The licensee has been good standing for 30 continuous years, and is at least 65 years old
c) The licensee has been good standing for 20 continuous years, and is at least 70 years old
d) The licensee has been good standing for 20 continuous years, and is at least 55 years old

A

The licensee has been good standing for 30 continuous years, and is at least 70 years ol

110
Q

In forming an insurance contract, when does acceptance usually occur?

a) when an insured submits an application
b) when an insurer’s underwriter approves coverage
c) when an insurer delivers the policy
d) when an insurer receives an application

A

when an insurer’s underwriter approves coverage

111
Q

What type of beneficiary designation allows the benefit to pass from a deceased primary beneficiary to the beneficiary’s heirs, instead of splitting the benefit among surviving primary benefits?

a) by the head
b) per capita
c) per stirpes
d) by class

A

per stirpes

112
Q

What is the most common way to transfer risk?

A

Purchase insurance

113
Q

Wendy owns a policy in which she is covered as the bread winner with permanent insurace and with decreasing term insurance in the form of a rider. What type of policy is this?

a) Family Rider
b) Family Maintenance Policy
c) Family Protection Policy
d) Family Income Policy

A

Family Income Policy

114
Q

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

a) signed waiver of premium
b) statement of good health
c) payment of premium
d) delivery receipt

A

signed waiver of premium

115
Q

During the grace period, the policyowner can

a) return the policy to the insurer for a full refund
b) add riders to the existing policy
c) renew the policy without proof of insurability
d) pay a late premium without penalty

A

pay a late premium without penalty

116
Q

Which of the following statements is INCORRECT regarding IRA’s?

a) Accumulated contributions grow tax deferred
b) Married couples are required to purchase a jointly owned IRA
c) A nonworking spouse is eligible to contribute to a separate IRA account
d) Anyone with earned income under the age of 70 1/2 may open a traditional IRA

A

Married couples are required to purchase a jointly owned IRA

117
Q

The paid-up addition option uses the dividend

a) to purchase a one-year term insurance in the amount of the cash value
b) to reduce the next year’s premium
c) to accumulate additional savings for retirement
d) to purchase a smaller amount of the same tyep of insurance as the original policy

A

to purchase a smaller amount of the same type of insurance as the original policy

118
Q

Life income joint and survivor settlement option guarantes

a) income for 2 or more recipients until they die
b) payment of interest on death proceeds
c) payment of the entire death benefit
d) equal payments to all recipients

A

income for 2 or more recipients until they die

119
Q

The insured provides proof of claim to the

A

Insurer

120
Q

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?

a) insured’s annual expenses
b) effect of inflation on income over time
c) predicted needs of the family after the insured’s death
d) insured’s current and future income

A

predicted needs of the family after the insured’s death

121
Q

An individual wants to transact business as a life agent in this state. In addition to obtaining a life agent license, what else must the applicant have?

A

Appointment

122
Q

Which of the following best describes fixed-period settlement option?

a) both the principal and interest will be liquidated over a selected period of time
b) only the principal amount will be paid out within specified period of time
c) the death benefit must be paid out in a lump sum within a certain time period
d) income is guaranteed for the life of the beneficiary

A

both the principal and interest will be liquidated over a selected period of time

123
Q

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

a) the policy is owned by the company
b) any type of insurance policy may be used
c) the employer pays a bonus to a selected employee to fund the policy
d) it is considered a nonqualified employee benefit

A

the policy is owned by the company

124
Q

An individual’s tendency to be dishonest would be indicative of a

A

moral hazard

125
Q

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?

a) Universal Life
b) Whole life
c) Decreasing term
d) Variable Life

A

Decreasing term

126
Q

What is the term used when a person sells his assets as a way to gain money?

A

Liquidation

127
Q

The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as

A

Legal hazard

128
Q

An agent may continue operating under an expired license for a period of 60 days provided that the agent has

a) Notified the insurer of his plans to renew the license
b) filed an application for renewal and paid the renewal fee on or before the expiration date
c) Notified the Commissioner of his plans to renew the license

A

filed an application for renewal and paid the renewal fee on or before the expiration date

129
Q

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on everything on every family member?

A

Family term rider

130
Q

An independent agent may have contracts with which of the following?

a) The Department of Insurance
b) The Commissioner
c) Brokers
d) More than one insurer

A

More than one insurer

131
Q

Which of the following would NOT be considered a form of direct response marketing?

a) a sign in an insurer’s office
b) an ad in the newspaper
c) a circular mailed to a city’s residents
d) an insurance company’s TV commercial

A

a sign in an insurer’s office

132
Q

Which of the following is NOT a goal of risk retention

a) to fund losses that cannot be insured
b) to minimize the insured’s level of liability in the event of loss
c) to reduce expenses and improve cash flow
d) to increase control of claim and improve cash flow

A

to minimize the insured’s level of liability in the event of loss

133
Q

When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy?

a) They can convert their coverage to permanent life insurance without evidence of insurability
b) They can convert their coverage to permanent life insurance with evidence of insurability
c) Family members are not provided any rights

A

They can convert their coverage to permanent life insurance without evidence of insurability

134
Q

What kind of policy does NOT typically require proof of insurability?

A

Group insurance

135
Q

How long will the beneficiary recieve payments under the single life settlement option?

A

Until the beneficiary’s death

136
Q

What is the penalty for IRA distributions that are below the required minimum for the year?

a) 10%
b) 25%
c) 50%
d) 60%

A

50%

137
Q

A person that DOES NOT work on the behalf of the company for which he/she does business, but rather represents the prospect, insured, or client is called

a) An insurance solicitor
b) an insurer’s agent
c) a fiduciary trustee
d) an insurance broker

A

an insurance broker

138
Q

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) contracts of adhesion
b) unilateral contracts
c) aleatory contracts
d) binding contracts

A

contracts of adhesion

139
Q

The following are features of the Indexed Universal Life EXCEPT

a) policy’s cash value is dependent on the performance of the equity index
b) sale of this product requires a securities license
c) flexible premium
d) adjustable death benefit

A

sale of this product requires a securities license

140
Q

The key factor of representation that allows the injured party to rescind the contract is

a) that any misrepresentation is considered fraud
b) Representations are statements believed to be true and hold no legal consequences
c) the promise or assurance of the representation
d) if the representation is false in a material point

A

if the representation is false in a material point

141
Q

An insurance agent explains to his client the difference bewtween two disability income policies and then offers to fill out an application with the client’s personal information and history. Upon completion of the application, the agent informsthe client that he will “shop around” to find the company with the most favorable rates. If the agent presents the client’s application to an insurer, he will be acting in which of the following capacities?

a) an insurance agent
b) an insurance broker
c) a life agent
d) an insurance solicitor

A

an insurance broker

142
Q

All of the following statements are correct regarding Credit Life Insurance EXCEPT

a) Benefits are paid to the borrower’s beneficiary
b) The amount of insurance permissible is limited per borrower
c) Premiums are usually paid by the borrower
d) Benefits are paid to the creditor

A

Benefits are paid to the borrower’s beneficiary

143
Q

Which of the following is an example of a limited-pay life policy?

a) Level Term Life
b) Straight Life
c) Life Paid-up at Age 65
d) Renewable Term to Age 70

A

Life Paid-up at Age 65

144
Q

In an annuity, the accumulated money is converted into a stream of income during which time period?

A

Annuization period

145
Q

In dertermining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following?

a) Amount of information that has been previously disclosed through the inquiry process
b) Truthfulness of such statements being made
c) Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
d) Interpretation that the seller places on such information in the agreement

A

Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract

146
Q

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

A

Settlement option

147
Q

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) Incontestability period
b) Assignment
c) Automatic premium loan
d) Waiver of premium

A

Automatic premium loan

148
Q

Which of the following will be included in a policy summary?

a) copies of illustrations and application
b) comparisons with similar policies
c) primary and secondary beneficiary designations
d) premium amounts and surrender values

A

premium amounts and surrender values

149
Q

Which of the fllowing is INCORRECT concerning a noncontributory group plan?

a) they help to reduce adverse selection against the insurer
b) They require 100% employee participation
c) The employer pays 100% of the premiums
d) The employees receive individual policies

A

The employees receive individual policies

150
Q

Which provision of a life insurance policy states that the insurer’s duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

a) Beneficiary clause
b) Consideration clause
c) Insuring clause
d) Entire contract clause

A

Insuring clause

151
Q

The interest earned on policy dividends is

A

Taxable

152
Q

All of the following are personal uses of life insurane EXCEPT

a) Cash accumulation
b) Buy-sell agreement
c) Survivor protection
d) Estate creation

A

Buy-sell agreement

153
Q

According to the Entire Contract provision, a policy must contain

a) Buyer’s guide to life insurance
b) Listing of the insured’s former insurer(s) for incontestability provisions
c) A copy of the original application for insurance
d) A declaration’s page with a summary of insureds

A

A copy of the original application for insurance

154
Q

How does an insured typically decide which settlement option to choose for his/her beneficiary?

a) He/she decides based on the amount of the death benefit
b) He/she typically decides by determining if the beneficiary will need one payment or a “steady stream” of income
c) He/she usually decides based on how many beneficiaries he/she has chosen to receive benefits
d) He/she typically decides based on the advice of the insurer

A

He/she typically decides by determining if the beneficiary will need one payment or a “steady stream” of income

155
Q

An agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the insured’s family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?

a) the policy will remain in force as long as there are no material representations on the application
b) the policy is legal since the applicant was able to give all required information
c) the policy is not legal; agents cannot sell insurance over the phone
d) the policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application

A

the policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application

156
Q

Which of the following is TRUE of a qualified plan?

a) it may allow unlimited contributions
b) it has a tax benefit for both employer and employees
c) it does not need to have a vesting schedule
d) it may discriminate in favor of highly paid employees

A

it has a tax benefit for both employer and employees

157
Q

An insured has the right to return the new insurance policy for a full refund during the

A

free-look period

158
Q

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds wil go to

a) the insurance company
b) the insured’s estate
c) the insured’s firstborn child
d) both children who share equally on a per-capita basis

A

the insured’s estate

159
Q

Which of the following is NOT true regarding Equity Indexed Annuities?

a) The insurance company keeps a percentage of the returns
b) They have guaranteed minimum interest rates
c) They are less risky than variable annuities
d) They earn lower interest rates than fixed annuities

A

They earn lower interest rates than fixed annuities

160
Q

Selection of coverage in employee benefits plans refers to

a) employee choosing benefits
b) employer choosing benefits
c) employer choosing the benefits for the employees
d) None of the above

A

employee choosing benefits

161
Q

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

a) The contract can be issued without an annuitant
b) The annuitant must be a natural person
c) A corporation can be an annuitant as long as it is also the owner
d) A corporation can be an annuitant as long as the beneficiary is a natural person

A

The annuitant must be a natural person

162
Q

If an insurer’s legal reserve funds are found to be less than the minimum required by law, the insurer is

a) Unauthroized
b) Fraudulent
c) Insolvent
d) Solvent

A

Insolvent

163
Q

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

a) Subrogation
b) Warranty
c) Aleatory
d) Adhesion

A

Aleatory

164
Q

An absolute assignment is

a) Change of insurer
b) Transfer of all ownership rights in a policy
c) Transfer of some ownership rights in a policy
d) Change of beneficiary

A

Transfer of all ownership rights in a policy

165
Q

Which statement regarding insurable risks is NOT correct?

a) Insurance cannot be mandatory
b) The insurable risk needs to be statistically predictable
c) An insurable risk must involve a loss that is definite as to cause, time, place, and amount
d) Insureds cannot be randomly selected

A

Insureds cannot be randomly selected

166
Q

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

a) $0
b) $100,000
c) $200,000
d) $100,000, plus the total of paid premiums

A

$200,000

167
Q

Which of the following policies would be classified as a traditional level premium contract?

a) Variable Universal Life
b) Straight Life
c) Adjustable Life
d) Universal Life

A

Straight Life

168
Q

Which nonforfeiture option has the highest amount of insurance protection?

A

Extended Term

169
Q

An insured becomes disabled at age 22 and can no longer work. She meets the definition of total disability under Social Security. What other requirement must the insured have met to receive Social Security disability benefits?

a) Have accumulated 20 work credits in the past 10 years
b) Have accumulated 40 work credits
c) Have reached the age of 25.
d) Have accumulated 6 work credits in the past 3 years

A

Have accumulated 6 work credits in the past 3 years

170
Q

Which of the following is true regarding a modified guaranteed annuity?

a) The insurer bears all the market risk of changing interest rates.
b) There are no penalties for a premature surrender of the annuity.
c) It provides a level benefit payment.
d) The owner is guaranteed a fixed interest rate for a specific period of time.

A

The owner is guaranteed a fixed interest rate for a specific period of time.

171
Q

Every policy of individual life insurance must include a notice of right to cancel the policy, stating the specific time frame for the free-look period. Once the insured has cancelled the policy, within how many days must the insurer refund all premiums and policy fees?

A

30 days

172
Q

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract’s interest NOT be taxable?

a) Dependents
b) Annuitant
c) Spouse
d) Charitable Organization

A

Spouse

173
Q

Who is protected by a Temporary Insuring Agreement?

a) Only the applicant
b) The applicant and the insurer
c) The policy beneficiary
d) Only the insurer

A

The applicant and the insurer

174
Q

What percentage of a company’s employees must take part in a noncontributory group life plan?

a) 0%
b) 25%
c) 75%
d) 100%

A

100%

175
Q

In which of the following instances would the premium be tax deductible?

a) Premiums paid by an employer on the life of a key person
b) Premiums paid by an employer on a $30,000 group term life insurance plan for employees
c) Premiums paid by an individual on his/her own life insurance
d) Premiums paid by a mother on her son’s policy

A

Premiums paid by an employer on a $30,000 group term life insurance plan for employees

176
Q

Which of the following does NOT apply to Errors and Omissions liability contracts?

a) They are written for the clients of the producer covered by the policy.
b) They are renewable annually.
c) They are written with per-claim deductibles of at least $500.
d) Benefits are usually limited per claim or by the policy period.

A

They are written for the clients of the producer covered by the policy.

177
Q

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant’s

a) Habits.
b) Prior insurance.
c) Ancestry.
d) Credit history.

A

Ancestry.

178
Q

In order for an insurer to legally transact insurance, it must obtain which of the following?

a) Certificate of Insurance
b) Certificate of Authority
c) Power of Attorney
d) Director’s Decree

A

Certificate of Authority

179
Q

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

A

Reduced paid-up

180
Q

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

a) Nonforfeiture options
b) Guaranteed insurability option
c) Dividend options
d) Guaranteed renewable option

A

Guaranteed insurability option

181
Q

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

a) The insured’s contingent beneficiary
b) The insurance company
c) The insured’s estate
d) The primary beneficiary’s estate

A

The insured’s contingent beneficiary

182
Q

Which of the following would qualify as an implied warranty in an insurance contract?

a) The applicant’s signature
b) Contract’s legal purpose
c) Statements in the policy
d) An oral representation by the applicant

A

An oral representation by the applicant

183
Q

An intentional or unintentional concealment entitles the affected party to which of the following?

a) Rescission of a contract.
b) Estoppel.
c) Waiver of concealed conditions.
d) Subrogation of a contract.

A

Rescission of a contract.

184
Q

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?

a) Business overhead expense policy
b) Key person insurance
c) Disability buy-sell agreement
d) Business disability policy

A

Business overhead expense policy

185
Q

What is the waiting period on a Waiver of Premium rider in life insurance policies?

A

6 months

186
Q

Applicants for insurance who are blind may be rated substandard for life insurance

a) Only on the basis of information unrelated to their blindness.
b) Only if they have been blind from birth.
c) Only if their blindness resulted from an injury.
d) Always, because they cannot avoid the risk of injury or death.

A

Only on the basis of information unrelated to their blindness.

187
Q

When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?

a) Distributions are taxable.
b) Distributions are nontaxable.
c) Distributions cannot begin prior to age 70½.
d) There are no distributions.

A

Distributions are taxable.

188
Q

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

a) It is reduced to the amount of what the cash value would buy as a single premium.
b) It is increased when extra premiums are paid.
c) It decreases over the term of the policy.
d) It remains the same as the original policy, regardless of any differences in value.

A

It is reduced to the amount of what the cash value would buy as a single premium.

189
Q

In the event of a loss, business overhead insurance will pay for

a) Salary of the business owner.
b) Medical bills of the business owner.
c) Rent.
d) Loss of profits.

A

Rent.

190
Q

After a cease and desist order is final, if the Commissioner finds that the person has continued to willfully violate the insurance code, what penalty may be applicable in addition to initial penalties?

a) Minimum $10,000
b) Maximum $5,000
c) Minimum $25,000
d) Maximum $55,000

A

Maximum $55,000

191
Q

Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary?

a) It will not affect the benefits paid to the beneficiary.
b) It will reduce the benefits by 70%.
c) It will increase the benefits paid to the beneficiary.
d) It will decrease the benefits paid to the beneficiary.

A

It will decrease the benefits paid to the beneficiary.

192
Q

If a retirement plan or annuity is “qualified,” this means

a) It has a penalty for early withdrawal.
b) It accepts after-tax contributions.
c) It is noncancellable.
d) It is approved by the IRS.

A

It is approved by the IRS.

193
Q

A set of legal or regulatory conditions that affect an insurer’s ability to collect premiums commensurate with the level of risk incurred would be considered a(n):

a) Legal hazard.
b) Underwriting gamble.
c) Legal peril.
d) Fiduciary risk.

A

Legal hazard

194
Q

Both Universal Life and Variable Universal Life have what kind of premium?

A

Flexible premium

195
Q

Which type of life insurance policy generates immediate cash value?

a) Decreasing Term
b) Continuous Premium
c) Single Premium
d) Level Term

A

Single Premium

196
Q

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?

a) The cost of coverage is a deductible expense by the employer.
b) The value of insurance will be deducted from the employees’ compensation.
c) The cost of coverage paid by the employer is taxed to the employees.
d) The cost of coverage paid by the employer is tax deductible by the employees.

A

The cost of coverage is a deductible expense by the employer.

197
Q

Which of the following is TRUE about a class designation?

a) Beneficiaries are not identified by name.
b) Beneficiaries must be part of the insured’s immediate family.
c) It is not allowed.
d) It determines the succession of beneficiaries.

A

Beneficiaries are not identified by name.

198
Q

Which of the following insurance options would be considered a risk-sharing arrangement?

a) Stock
b) Mutual
c) Surplus lines
d) Reciprocal

A

Reciprocal

199
Q

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

a) Fixed-amount
b) Life income with period certain
c) Joint and survivor
d) Single life

A

Life income with period certain

200
Q

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

a) Securities license is not required.
b) Benefit payment amounts are not guaranteed.
c) Payments into the annuity are kept in the company’s general account.
d) Interest rate is guaranteed.

A

Benefit payment amounts are not guaranteed.

201
Q

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?

a) No penalties, since the owner is older than 59 ½
b) 10% for early withdrawal
c) 15% for early withdrawal
d) 50% tax on the amount not distributed as required

A

50% tax on the amount not distributed as required

202
Q

Which of the following methods to designate a beneficiary literally means “by the head?”

a) Contingent
b) Per capita
c) Per stirpes
d) Tertiary

A

Per capita

203
Q

If a policy includes a free-look period of at least 10 days, the Buyer’s Guide may be delivered to the applicant

a) With the policy.
b) Upon issuance of the policy.
c) Within 30 days after the first premium payment was collected.
d) Prior to filling out an application for insurance.

A

With the policy.

204
Q

Any insurer who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation

a) Be fined a sum of $10,000.
b) Be fined a sum no less than $30,000 and no more than $300,000.
c) Have his/her license suspended.
d) Be fined a sum of $1,000.

A

Be fined a sum of $10,000.

205
Q

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?

a) As of the first of the month after the policy issue
b) As of the policy issue date
c) As of the application date
d) As of the policy delivery date

A

As of the application date

206
Q

Who would be eligible to contribute to an IRA?

a) An 18-year old non-working student
b) A 50-year old school teacher
c) A 75-year old professional earning income
d) A 35-year old receiving monthly unemployment checks

A

A 50-year old school teacher

207
Q

An insurer has been found guilty of a Code violation regarding replacement. The insurer then repeats the violation. What will be the minimum penalty?

a) $10,000
b) $25,000
c) $30,000
d) $100,000

A

$30,000

208
Q

All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT

a) An intentional omission in determining if a warranty is false.
b) The amount of paid claims exceeds the premiums paid.
c) The violation of a material warranty.
d) When concealment is unintentional.

A

The amount of paid claims exceeds the premiums paid.

209
Q

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) Contracts of adhesion.
b) Unilateral contracts.
c) Aleatory contracts.
d) Binding contracts.

A

Contracts of adhesion.

210
Q

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?

a) Insured’s annual expenses.
b) Effect of inflation on income over time.
c) Predicted needs of the family after the insured’s death.
d) Insured’s current and future income.

A

Predicted needs of the family after the insured’s death.

211
Q

When must insurable interest exist in a life insurance policy?

a) At the time of loss
b) At the time of application
c) At the time of policy delivery
d) When there is a change of the beneficiary

A

At the time of application

212
Q

The set of regulations issued by the California Insurance Commissioner that identifies the standards for the insurance code and how it is to be administered is

a) California Advisory Administrative Code.
b) California Advisory Code.
c) California Administrative Code of Regulations.
d) California Regulatory Code of Conduct.

A

California Administrative Code of Regulations.

213
Q

Which of the following is NOT true about a joint and survivor annuity benefit option?

a) The surviving annuitant may receive reduced payments.
b) Payments stop after the first death among the annuitants.
c) A period certain option may be included.
d) This option guarantees income for two or more recipients.

A

Payments stop after the first death among the annuitants.

214
Q

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

a) The beneficiary will receive the lump sum, plus interest.
b) The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments.
c) The beneficiary will only receive payments of the interest earned on the death benefit.
d) The beneficiary must pay interest to the insurer.

A

c

215
Q

All of the following statements are true regarding policy dividends EXCEPT

a) They are generated by mutual insurers.
b) They are guaranteed.
c) They are paid to the policyholders.
d) They are refunds of unused premiums.

A

b

216
Q

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) Interest only option
b) Life income with period certain
c) Joint and survivor
d) Fixed amount option

A

a

217
Q

Which of the following are NOT fundable by annuities?

a) A person’s retirement
b) Estate liquidation
c) Death benefits
d) Cash accumulation for any reason

A

c

218
Q

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)

a) Executive bonus.
b) Key person policy.
c) Fraternal association.
d) Aleatory contract.

A

a

219
Q

What happens when a policy is surrendered for its cash value?

a) The policy can be reinstated by paying back all policy loans and premiums.
b) The policy can be converted to term coverage.
c) Coverage ends and the policy cannot be reinstated.
d) Coverage ends but the policy can be reinstated at any time.

A

c

220
Q

Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older?

a) Life insurance policy illustrations
b) Insurance monetary value index
c) Life insurance surrender cost index
d) MIB report

A

b

221
Q

An insured committed suicide one year after his life insurance policy was issued. The insurer will

a) Refund the premiums paid.
b) Pay the policy’s cash value.
c) Pay the full death benefit to the beneficiary.
d) Pay nothing.

A

a

222
Q

What is the penalty for excessive contributions to an IRA?

a) 4%
b) 6%
c) 10%
d) 15%

A

b

223
Q

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?

a) There is a 10% penalty for early distribution of the death benefit.
b) They are tax free to terminally ill insured.
c) They are always taxable to chronically ill insured.
d) They are always taxed.

A

b

224
Q

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

a) A husband or wife has an insurable interest in their spouse.
b) An individual has an insurable interest in his or her own life.
c) A debtor has an insurable interest in the life of a lender.
d) Business partners have an insurable interest in each other.

A

c

225
Q

All of the following are true regarding the guaranteed insurability rider EXCEPT

a) The insured may purchase additional insurance up to the amount specified in the base policy.
b) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events.
c) This rider is available to all insureds with no additional premium.
d) The insured may purchase additional coverage at the attained age.

A

c

226
Q

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

a) Pay the policy proceeds only if it would have issued the policy.
b) Pay the policy proceeds up to an established limit.
c) Not pay the policy proceeds under any circumstances.
d) Automatically pay the policy proceeds.

A

a

227
Q

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

a) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.
b) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies.
c) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
d) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.

A

c

228
Q

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

a) Variable period
b) Variable amount
c) Fixed period
d) Fixed amount

A

d

229
Q

According to the California Insurance Code, all of the following are general powers and duties of the Commissioner of insurance EXCEPT

a) To establish a program to investigate consumer complaints against insurers.
b) To make public service announcements to inform consumers of toll free access to make inquiries.
c) To prepare a written report detailing consumer complaints regarding insurers.
d) To delegate the power to approve a settlement.

A

d

230
Q

Any person who knowingly and willfully obtains information about an individual from an insurance company, agent or organization supporting insurance under false pretenses shall be fined

a) Not more than $10,000, imprisonment not to exceed one year or both.
b) Not more than $20,000, imprisonment not to exceed one year or both.
c) Not more than $10,000, imprisonment not to exceed two years or both.
d) Not more than $20,000, imprisonment not to exceed two years or both.

A

a

231
Q

Every insurer is required to provide all records requested by the Commissioner within

a) A period of 60 days following a written request.
b) 5 business days of notification by the Commissioner’s office.
c) 10 business days of notification by the Commissioner’s office.
d) A period of 30 days following a written request.

A

d

232
Q

In order to be paid for his or her services, a Life and Disability Insurance Analyst must do which of the following?

a) Disclose the fee in writing to, and have it approved by, the client in advance
b) Have a signed notice of appointment with the insurance company
c) Send an invoice for reimbursement to the insurance company
d) Have a signed notice of appointment with the insurance company and send an invoice for reimbursement to the insurance company

A

a

233
Q

Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation

a) Be fined a sum of $1,000.
b) Be fined a sum of $10,000.
c) Be administratively suspended from licensing for a period of 180 days.
d) Be fined a sum of $5,000.

A

a

234
Q

Social security benefits are available for a surviving spouse until the youngest child reaches age 16. Benefits are again available for the spouse after reaching age 60. What is the time period called during which the surviving spouse does not receive benefits?

a) Waiver of premium
b) Annuitization period
c) Cancellation
d) Blackout period

A

d

235
Q

The type of policy that can be changed from one that does not accumulate cash value to the one that does is a

a) Convertible Term Policy.
b) Renewable Term Policy.
c) Decreasing Term Policy.
d) Whole Life Policy.

A

a

236
Q

All of the following are true regarding representations EXCEPT

a) They may be made before or at the time of policy issue.
b) They may be oral or written.
c) They may be altered or withdrawn after the issuance of the policy.
d) They are statements believed to be true.

A

c

237
Q

Which is TRUE about the cash surrender nonforfeiture option?

a) After the cash surrender, the insured is covered for a grace period of 1 month.
b) The policy remains active for some time after the policyholder opts for cash surrender.
c) The policyholder receives the original cash value of the policy.
d) Funds exceeding the premium paid are taxable as ordinary income.

A

d

238
Q

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

a) Has a constitution and by-laws.
b) Holds annual meetings.
c) Is contributory.
d) Has at least 50 members.

A

d

239
Q

What is the main purpose of the Seven-pay Test?

a) It requires level premium payments for 7 years.
b) It ensures that the policy benefits are paid out in 7 years.
c) It guarantees interest minimum.
d) It determines if the insurance policy is an MEC.

A

d

240
Q

Each of the following factors are used in determining insurance rates EXCEPT

a) Mortality
b) Expenses
c) Dividends
d) Interest

A

c

Primerica (5 decks)

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