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AIL Pre-Licensing > Chapter 1-4 and Law > Flashcards

Chapter 1-4 and Law Flashcards

0
Q

<p>All of the Following are true about a stock insurance Company EXCEPT:
A. It is a publicly owned, private organization with shareholders
B. Their policy holders vote for the members of the board of directors
C. Stockholders may or may not be policyholders
D. When declared, stock dividends are paid to stockholders</p>

A

<p>B. Their policy holders vote for the members of the board of directors</p>

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1
Q

<p>Which of the following statements regarding mutual insurance companies is CORRECT?
A. The policyholders are the owners and share in any company earnings
B. They have stockholders, but it is the policy owners who vote for the board of directors
C. Each Policyholder assumes a share of the risk brought to the company by others
D. Shares of company stock are publicly traded</p>

A

<p>A. The policyholders are the owners and share in any company earnings</p>

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2
Q

<p>An insurance company that transfers a risk to another company is called</p>

A

<p>The Ceding company</p>

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3
Q

<p>An applicant submitted an application to an insurer without an initial premium. This is considered</p>

A

<p>An invitation to make an offer</p>

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4
Q

<p>If an insurer wants to obtain an HIV test from an applicant:</p>

A

<p>They must obtain the applicant's written consent</p>

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5
Q

<p>All of the following are true statements regarding representations EXCEPT:</p>

A

<p>A statement that is guaranteed to be true</p>

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6
Q

<p>If one party in a contract gives a legally enforceable promise, but not the other, it is called a </p>

A

<p>Unilateral Contract</p>

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7
Q

<p>An insurance company incorporated in Indiana, with its home office in Texas, is licensed to concur business in all states except PA. In Texas, this company would be best described as which of the following type of insurers?</p>

A

<p>Foreign Insurer</p>

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8
Q

<p>Which of the following parties are not required to sign an application for life insurance?</p>

A

<p>The Beneficiary

| </p>

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9
Q

<p>An insurance company doing business in the same state it was incorporated in is a </p>

A

<p>Domestic Insurer</p>

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10
Q

<p>Statements made by an applicant for insurance in the application are considered to be</p>

A

<p>Representations</p>

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11
Q

<p>John applies for a life insurance policy, gives his agent the first months' premium and receives a conditional receipt. Before John receives his policy, he dies in a car accident. Which of the following scenarios best describes the insurance company's course of action?</p>

A

<p>They will pay the claim as long as he would have been approved for the plan, coverage, and premium rate he applied for.</p>

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12
Q

<p>All of the following are sources of insurability information EXCEPT</p>

A

<p>The application</p>

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13
Q

<p>The type of contract where one party creates the contract terms and the other party must accept the terms unconditionally is a </p>

A

<p>Contract of Adhesion</p>

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14
Q

<p>All of the following are responsibilities of the agent, EXCEPT</p>

A

<p>Changing Answers on the application and initialing them</p>

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15
Q

<p>All of the following are true statements regarding a Statement of Good Health EXCEPT</p>

A

<p>It is obtained when a policy is delivered where a conditional receipt was issued.</p>

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16
Q

<p>Which of the following statements regarding the doctrine of insurable interest are CORRECT</p>

A

<p>It must exist at the time of application</p>

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17
Q

<p>With an insurance contract, what is the insured's consideration</p>

A

<p>The premium paid</p>

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18
Q

<p>Which of the following cannot call a person whose name is registered with the National Do Not Call Registry</p>

A

<p>Telemarketers selling home safety Equipment</p>

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19
Q

<p>A change in premium due to a rate-up would normally be discussed with a client</p>

A

<p>At the time of policy delivery</p>

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20
Q

<p>John has a 20 yr. renewable and convertible level term life insurance policy that he purchased when he was 35. All of the following are correct EXCEPT</p>

A

<p>John will need to take another physical exam if he wishes to renew it.</p>

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21
Q

<p>A life insurance policy that fails to meet the seven-pay test is called a </p>

A

<p>Modified Endowment Contract(MEC)</p>

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22
Q

<p>After 20 years of working at AIL, John retires and sells one of his vacation homes. He takes the proceeds of the sale and buys an annuity. He begins receiving payments the following month. John purchased </p>

A

<p>An immediate annuity</p>

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23
Q

<p>All of the following statements are correct regarding a 20 yr. Period Certain Annuity EXCEPT</p>

A

<p>Payments to the Annuitant stop after 20 years.</p>

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24
Q

<p>John is married and has 2 children. He wants to buy a life insurance policy but his budget is tight. Which would be the best policy for him to buy right now?</p>

A

<p>Level Term policy</p>

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25
Q

<p>Which type of policy will pay the owner the face amount of the policy if the insured is alive at the end of the specified period</p>

A

<p>Endowment</p>

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26
Q

<p>Which are the two death benefit options offered in a Universal Life policy?</p>

A

<p>Level or Increasing</p>

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27
Q

<p>What type of policy was designed to combine the protection and savings features of life insurance with growth potential of common stock</p>

A

<p>Variable Life</p>

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28
Q

<p>Which of the following Term life policies would be the lowest premium?</p>

A

<p>Non-Renewable, Non-Convertible Term</p>

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29
Q

<p>A 40 yr old purchased a 20 pay policy. When will the policy mature?</p>

A

<p>At age 100</p>

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30
Q

<p>Which of the following statements is false regarding a Modified Endowment Contract</p>

A

<p>A distribution prior to age 59 1/2 is subject to a 10% penalty</p>

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31
Q

<p>In a Universal Life policy, what is deducted from the policy's cash value account to pay for the cost of the insurance protection?</p>

A

<p>Interest</p>

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32
Q

<p>John, age 55, wants to purchase an annuity, but he does not want to receive payments until he retires at age 65. He should buy a </p>

A

<p>Deferred Annuity</p>

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33
Q

<p>All of the following statements regarding annuities are true EXCEPT</p>

A

<p>An annuity guarantees the beneficiary a stated sum of money upon the death of the annuitant</p>

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34
Q

<p>Which of the following would not be a reason for purchasing life insurance?</p>

A

<p>Provide income for family if insured is unemployed</p>

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35
Q

<p>Which of the following policies would best be used for estate planning purposes?</p>

A

<p>Survivorship Life</p>

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36
Q

<p>Which of the following contracts can be used to create an estate</p>

A

<p>Flexible Premium Adjustable Life</p>

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37
Q

<p>John and Mary just bought a house, have two small children, only John is working and have a tight budget. They are interested in purchasing life insurance on John so in case he dies Mary can pay the household expenses and have money for the children's college tuition. Which policy would you recommend?</p>

A

<p>Level Term</p>

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38
Q

<p>All of the following policies have a cash value accumulation EXCEPT</p>

A

<p>Increasing Term</p>

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39
Q

What benefit does an insured have when buying a Convertible term life insurance policy?

A

It allows them to exchange it for a whole life policy without evidence of insurability

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40
Q 
The Waiver of Premium rider waives the premium on a life policy in the event of disability of the
A. Policyowner
B. Applicant
C. Payor
D. Insured
A

Insured

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41
Q 
Bill has an Accidental Death and Dismemberment rider on his life policy. He lost the sight in one eye in a hunting accident. He will receive:
A. Nothing
B. The Principal Sum
C. The Capital Sum
D. Waiver of Premium
A

Capital Sum

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42
Q

John took out a life insurance policy on himself in May 2000 for $100,000. In June 2007 he died of cancer. It turns out that he had a cancerous skin lesion removed in 1999 that he failed to mention in his application. Which course of action will the insurance company take regarding his claim payment?
A. They will pay $100,000 to his beneficiary
B. They will deny the claim
C. They will make an adjustment of benefits
D. They will deny the claim and refund all premiums

A

They will pay 100,000 to his beneficiary

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43
Q 
John took out a life insurance policy on himself for $100,000 with his only daughter as his beneficiary. He designated that upon his death, Mary will receive $2000 each month until all the funds are depleted. Which settlement option did he select?
A. Life income option
B. Fixed amount option
C. Fixed period option
D. fixed income option
A

Fixed amount option

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44
Q 
All of the following are provisions found in life insurance contracts EXCEPT
A. Beneficiary's Rights
B. Reinstatement
C. Automatic premium loan
D. Incontestability
A

Beneficiary’s Rights

45
Q

Any misstatement of age or sex on an insurance policy will result in
A. An adjustment of benefits when a claim arises
B. Denial of a claim within the first two years
C, A Refund of premium paid whenever a claim arises
D. Full payment of the face amount after two years

A

An adjustment of benefits

46
Q

All of the following are non-forfeiture options EXCEPT

A

Settlement option

47
Q

All of the following statements regarding reinstating a policy are true EXCEPT

A

A policy surrendered for its cash value can be reinstated

48
Q

Oscar has a $100,000 whole life policy with a monthly premium of $100 and an outstanding loan of $5,500. He died on March 15, 2008 and was also due for his March 1, 2008 premium at the time of his death. How much will his beneficiary receive?

A

$94,900

49
Q

John took out a $100,000 term life policy with his fiancé as the primary beneficiary and his daughter as the contingent. His daughter passed away two years ago and he never added another contingent. John and his fiancee are in a car accident where she died immediately and he died on the way to the hospital. Who will receive the benefits of his policy?

A

His estate

50
Q

the provision that states that the policy and a copy of the application constitute the entire contract between the insurer and the insured is the

A

Entire Contract

51
Q

The free look period begins when

A

The policy owner receives the policy

52
Q

Which of the following is always required to place an insurance policy in effect?

A

A premium payment

53
Q

Policy owner’s rights include all of the following except

A

Changing an irrevocable beneficiary without their consent

54
Q

Which of the following statements regarding dividends paid on a life insurance policy is correct?

A

They are paid on participating policies

55
Q

In order for the proceeds from an Accidental Death rider to be paid, the insured must die from their injuries within how many days?

A

90 Days

56
Q

Which of the following prevents the producer from unilaterally amending the policy

A

Entire Contract

57
Q

Whenever an insured’s age is misstated on a policy which of the following actions does the insurer usually take?

A

It will pay the claim with an adjustment of benefits

58
Q

John takes a policy out on his wife Linda. Which of the following can he name as a beneficiary

A

Any of the above

59
Q

Interest paid on policy loans is

A

Not tax deductible

60
Q

How misstatements made by the applicant on the application will be handled by the insurance company when a claim arises is addressed in the

A

Incontestability Clause

61
Q

Dave applies for life insurance on June 1st. His application is approved June 25th. His agent delivers the policy to him on July 5th. The policy contains a 10 day free look period. when will it expire

A

July 15th

62
Q

Dave wishes to discontinue making payments on his whole life policy. Which of the following will give him the ability to still have coverage?

A

Non-forfeiture options

63
Q

Which of the following states the insurer’s promise to provide life insurance protection for the named insured?

A

Insuring clause

64
Q

Dave wishes to discontinue making premium payments on his policy, but wishes to maintain permanent coverage on himself. He should choose

A

Reduced Paid up insurance

65
Q

Which of the following describes a retirement plan?

A

Qualified plan

66
Q

Which of the following policies would be used to cover a person who is financing a new car purchase with a bank and wanted their car loan paid off in the event of their death?

A

Group credit life

67
Q

Which of the following statements about coverage during the conversion period of a group life insurance policy is TRUE

A

Coverage is available for 31 days

68
Q

Which of the following describes an employer paid life insurance policy?

A

Non-contributory

69
Q

A contributory group life policy must cover what percent of eligible employees?

A

75%

70
Q

Peter was covered under a group life insurance policy for $100,000. He was laid off on October 1. After seeing how much he’d have to pay to keep his health benefits through COBRA, he had a heart attack and died on Oct. 11 How much if any would his family receive from the policy?

A

$100,000

71
Q

Which of the following describes an agreement between two business partners to sell their share of the business in the event of their death.

A

Buy-Sell agreement

72
Q

After what age must withdrawals be made from IRS tax-qualified retirement plans to avoid paying a 10% penalty

A

59 1/2

73
Q

Which is an example of a non-qualified plan?

A

Split-Dollar Life

74
Q

With regards to SS Benefits, a person is considered fully insured if

A

They have 40 quarters of coverage

75
Q

The amount equal to the workers full retirement benefit at their normal retirement age is called

A

PIA

76
Q

In which of the following would insurance premiums be tax deductible?

A

Employers paying non-contributory group life premiums

77
Q

Generally, life insurance policy death benefits are

A

Not Taxable

78
Q

The primary purpose of Key Employee Life insurance

A

To idemnify a business for financial losses caused by the death of a valuable employee

79
Q

SS retirement benefits are determined by all of the following EXCEPT

A

sex

80
Q

Which of the following proves an employees’ participation in a group life policy?

A

A certificate of coverage

81
Q

Which of the following retirement plans would allow a person the highest contribution amount per year

A

Tax deferred annuity

82
Q

A tax free exchange of one annuity for another is

A

1035 exchange

83
Q

Premiums paid by employers on key employee life insurance policies

A

Are usually not tax-deductible

84
Q

all of the following are examples of third party ownership EXCEPT

A

Ordinary Life

85
Q

Which of the following determined that federal antitrust laws would apply to insurance but only to the extent that state regulation was not effective?

A

Public Law 15

86
Q

Which policy determines that insurance isn’t interstate commerce and that the Feds have no authority to regulate it

A

Paul vs. Virginia

87
Q

Which case determined that insurance is interstate commerce and is subject to antitrust laws

A

U.S. v. South-Eastern Underwriters Association

88
Q

The commissioner of the department of banking and insurance(DOBI) is appointed by

A

Governor

89
Q 
The commissioner has power to do all of the following EXCEPT
A. Conduct investigations
B. Issue subpoenas
C. Issue search warrants
D. Interrogate licensees
A

Issue search warrants

90
Q

Whenever the commissioner requests a public hearing, how many days after notice must it be scheduled?

A

At least 10 days

91
Q

How many days within the Commissioner’s final order does an intervenor have to appeal a decision

A

30 days

92
Q 
As a penalty, the commissioner may do all of the following EXCEPT
A. Revoke a producers license
B. Issue a cease and desist
C. Execute a prosecutor 
D. Impose a fine
A

Execute a producer

93
Q

A person failing to comply with a subpoena from the commissioner may be charged with

A

Contempt

94
Q

The governing body of a mutual insurer is elected by

A

Policyholders

95
Q

What is issued to an insurer by the commissioner demonstrating it’s authority to transact insurance business in the state

A

Certificate of authority

96
Q

In order for an insurer to execute an extended reinsurance transaction, what is required?

A

Written permission from the commissioner

97
Q

Which of the following lines of authority has to fulfill CE requirements in order to renew their license?

A

Life, Health, and Casualty

98
Q 
Which of the following persons could be an insurance consultant
Former salesman
Bank trust officer
Attorney
CPA
A

Former salesman

99
Q

A producer wishing to appeal the final order of the commissioner would appeal to the

A

Superior Court

100
Q

Which of the following producers does not need to satisfy CE requirements

A

Nonresident

101
Q

Which professional designation qualifies an applicant for exemption for pre-licensing education requirements for a life producer license

A

CLU

102
Q

In order to obtain a NJ resident insurance producer license, the commissioner must confirm that the individual meets all but THIS requirement

A

At least 19 years of age

103
Q

A commissioner does not need to do THIS in order to issue a nonresident license:

A

applicant must pass a state exam in their line of authority

104
Q

When applying for a producer’s license, an applicant must have passed the state licensing exam within how long of their application date

A

12 months

105
Q

When applying for a producers license, how long can an applicant wait to complete a prelicensing course in the application period?

A

24 months

106
Q

After an applicant successfully passes the state exam and is given the certificate of authority, how long do they have before the certificate expires?

A

60 days

107
Q

Upon cancellation of an agency contract with a producer, the insurer must give written notice to the commissioner within how many days?

A

15 days

108
Q

What is the maximum time a temporary insurance license may be issued for by the commissioner in a special circumstance case, such as the death of a producer and he spies being granted a temporary license?

A

180 days

109
Q

If a producer terminates his license, how long before he has to meet all standard pre-licensing requirements again?

A

12 months

AIL Pre-Licensing (2 decks)

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