Comprehensive Exam pt. 1 Flashcards
Which of the following is not a fixed annuity?
A. Guaranteed
B. Variable
C. Indexed
D. Fixed
B. Variable
A variable annuity is not a fixed type of annuity since it is supported by the separate account and not the general account.
M’s policy was issued with an incorrect age. M was actually older than what was listed in the policy. Which of the following will the insurer most likely do? If M had died 5 years after the policy issue, but prior to this discovery?
A. The insurer would pay out a reduced benefit in proportion to the underpayment of premiums
B. The insurer would bill the beneficiary for the underpayment in premiums
C. The insurer would have to pay out the full face amount since the policy is now beyond the contestable period
A. The insurer would pay out a reduced benefit in proportion to the underpayment of premiums
The misstatement of age or gender provision allows the insurer to pay out the benefit that the correct premiums would have purchased. This means that the death benefit could be reduced if the age was understated. In the case that this provision applied, the Incontestability clause does not apply. There is no time limit to discover a misstatement of age or gender, and that discover will not cancel or void the policy.
A partnership involving four equal partners is valued at $1,800,000. Under a Cross Purchase Plan, the amount of the policy on the life of each partner would be:
A. $150,000
B. $450,000
C.$900,000
D.$1,800,000
A. $150,000
Each partner’s ownership share equals $450,000, thus each partner would own a %150,000 policy on the life of each of the other three partners under a Cross Purchase Plan (3 X $$150,000= $450,000) There would be a total of 12 (4 X 3) policies (12 X $150,000 each +$1,800,000)
Cash values within an ordinary straight whole life insurance policy_________ over time.
A. Vary
B. Remain consistent
C. Decrease
D. Increase
D. Increase
Cash values increase over time as premium is paid in and intrest is reflected in the cash values shown in the policy;s non forfeiture table.
A generic brochure was developed by the _________ To assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs.
A. NAIC
B. FIO
C. SEC
D. FINRA
A. NICA
A buyer’s guide is a generic brochure developed bu the NAIC to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance, as well ad comparative costs of each type of plan.
An insurer NOT authorized to do business within a state is considered what type of insurer?
A. Foreign
B. Alien
C. Domestic
D. Non-admitted
D. Non-admitted
An insurer not authorized to do business in a state is referred to as a non-admitted insurer. Foreign, domestic, and alien refer to where an insurer is domiciled. Domicile is not the same as admittance.
To have Currently Insured Status under Social Security, a worker mist have at least_______ quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reached retirement age.
A. 12
B. 3
C. 20
D. 6
D. 6
To have Currently Insured status under Social Security, a worker mist have at least 6 quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disables, or reaches retirement age.
All of the following are dividend options, except:
A. One-year term
B. Paid up additions
C. Extended Term
D. Cash
C. Extended term,
Extended term is a non forfeiture option, not a dividend option.
Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?
A. Reinstatement
B. Automatic Premium Loan
C. Spendthrift
D. Partial Withdrawal
B. Automatic Premium Loan
The automatic premium loan provision enables the insurer to borrow automatically from the policy’s cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.
To be qualified accelerated death benefit it must meet all of the following criteria, except:
A. The benefit amount cannot exceed the lesser of $50,000 or 7.5% of AGI
B. A physician must give a prognosis of 24 months or less life expectancy for the named insured.
C. The insured provides a monthly report to the insured showing the amount paid and the amount of benefit remaining in the life insurance policy
D. The amount of the benefit must at least be equal to the present value of the reduced death benefit remaining after payment of the accelerated benefit.
A. The benefit amount cannot exceed the lesser of $50,000 or 7.5% of AGI
To be qualified accelerated death benefit the benefit must meet the following conditions: B, C, & D
The __________ Branch is responsible for interpreting and determining the constitutionality of the statutes.
A. Executive
B. Electoral
C. Legislative
D. Judicial
D. Judicial
If a copy of the application, which led to a life insurance policy being issued, is attached to the policy:
A. It is considered a part of the entire contract
All of the following annuities can be sold without a securities registration/license, except:
A. Variable
B. Fixed
C. Guaranteed
D. Indexed
B. Fixed
Only a life insurance license is required in order to sell fixed annuities in most states.
Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which non forfeiture option provides this protection?
A. Reduced Paid-Up
B. Extended Term
C. Fixed Amount
D. Paid-Up option
B. Extended term
extended term would allow the present cash value of the policy to buy a single premium term policy of the same face amount for the time period stated in the policy’s non forfeiture table. Fixed Amount is a Settlement Option, and Paid- Up Option is a dividend.
Within how many days must an insurer notify a claimant it is either accepting or denying the claim?
A. 21
B. 10
C. 30
D. 15
D. 15
Withing 15 working days of receiving necessary documentation that establishes the nature and extent of a claim, insurers must notify the claimant whether the claim is accepted or denied.
When it comes to life insurance insurable interest on one’s own life is?
Unlimited
If a beneficiary is designated as irrevocable, then all of the following require the irrevocable beneficiary’s approval except:
A. Reducing the coverage
B. Policy assignment
C. Changing the mode of premium
D. Taking a policy loan
C. Changing the mode pf premium
Irrevocable means it cannot be changed
If a policy owner has a whole life insurance policy with a disability waiver of premium rider, when does the rider benefit start if a qualifying disability should occur?
A. Typically 6 months after the disability occurs
B. Immediately
C. One year after the claim forms are received by the insurer
D. After the doctor certifies the disability
A. Typically 6 months after the disability occurs
During the 6 month time period premiums are expected to be paid in order to keep the policy in force.
The net amount at risk in an Ordinary Whole Life Insurance Policy ________ over the life of the policy?
A. Decreases
B. Increases
C. Varies
D. Remains the same
A. Decreases
As cash values build, the net amount at risk for the insurer declines since the face amount is the benefit paid out upon death of the insured. it is a way to keep the premiums affordable as the insured ages and the risk of death increases.
All of the following regarding employer group life insurance are true, except:
A. Employer-paid premiums do not constitute taxable income to the employee unless the death benefit exceeds $50,000
B. Death benefit proceeded paid to an employee’s named beneficiary are received income tax free
C. Employee-paid premiums are tax-deductible to the employee
D. Premiums paid by an employer are tax-deductible to the business as an ordinary and necessary business expense
C. Employee-paid premiums are tax-deductible
Which of the following is the proper sequence of beneficiaries?
A. Primary, contingent, tertiary
B. Primary, estate, tertiary
C. Primary, tertiary, contingent
D. Estate, contingent, primary
A. Primary, contingent, tertiary
At what age does the cash value equal the face amount of the traditional whole life policy issued 25 years ago?
A. 115
B. 95
C. 100
D. 85
C. 100
C has a $100,000 traditional whole life insurance with $30,000 cash surrender value. He applies for and receives a $10,000 policy loan from the insurer. All of the following about this transaction are true except:
A. If C were disabled, his beneficiaries would receive $70,000, less any outstanding interest charges.
B. If the policy is surrendered, C would receive $20,000 less any outstanding interest charges.
C. If C died, his beneficiaries would receive $90,000, less any outstanding interest charges.
D. The loan carries a fixed or variable interest rate.
D. The loan carries a fixed or variable interest rate.
Policy loans carry a fixed or variable loan interest rate. If the policy is surrendered or a death claim is paid, the proceeds are reduced by the outstanding policy loan and policy loan intrest.
If the Department of Insurance denies a producer license application , the applicant may request a hearing within how many days of the denial?
30
An insurer can pay commissions to any agent, except which of the following?
A. Agent who assumes less than 5% of the insurance risk.
B. Licensed producer who negotiates an insurance contract.
C. Agent receiving varied commissions based on loss experience.
D. Agent who has written agreement with the insured to be paid a certain commission.
A. Agent who assumes less than 5% of the insurance risk.
An insurer may not use a compensation arrangement that transfers any portion of the insurance risk to the producer, but it may vary commissions based on the loss ecperience of the policies the producer has written.
How is the funding for Social Security provided?
A. Through FICA taxes that are paid by employees
B. Through FICA taxes that are paid by employers
C. Through FICA taxes that are paid by both employees and employers
D. Through PIA
C. Through taxes paid by employees and employers.
Self-employed persons pay entire amount
Increases in insurance protection to keep a Current Assumption policy from endowing is provided:
A. With full underwriting
B. With simply part 1 of the application process.
C. With limited underwriting.
D. Without evidence of insurability
D. Without evidence of insurability.
It is possible that the cash value will increase too quickly and could cause the policy to mature prior to age 100. To prevent this from happening, the insurer will add a corridor of insurance protection without requiring evidence of insurability to keep the policy from endowing.
Making a false statement about the benefits or the nature of the policy is known as which of the following?
A. Twisting
B. Defamation
C. Misrepresentation
D. Unfair discrimination
C. Misrepresentation
_______ Options allow for the distribution of the life insurance death benefit, to the named beneficiary or contract owner, as the situation warrants.
A. Settlement
B. Dividend
C. Non-Forfeiture
D. Accumulation
A. Settlement
A settlement option dictates a mode of payment to a beneficiary. The owner may choose Settlement Option for a beneficiary that may not be changed by the beneficiary.
Annually renewable term life insurance’s premiums increase every:
A. 5 years
B. 10 years
C. Year
D. 15 years
C. Year
To reflect increased risk to the company.
All of the following regarding revocable beneficiaries is true, except:
A. The policy owner can change a revocable beneficiary at any time.
B. Most beneficiaries are designated as revocable
C. The have no vested interest in the policy.
D. They have rights in the policy just like any other party to the contract.
D. They have rights in the policy just like any other party to the contract.
With a Life Income Payment Option, what happens at the annuitant’s death?
All payments cease
Which of the following is not a way to access the money accumulated in a traditional ordinary permanent life insurance policy?
A. Partial surrender
B. Cash surrender
C. Policy loan
D. Endowment
A. Partial surrender
Partial surrenders are typically available only on universal life insurance types and policies.
Variable Whole Life has all of the following features except:
A. The owner may select which separate account they want their premium to be invested in
B. The premium is determined by the insurer and remains fixed and level throughout the contract.
C. Partial surrenders are allowed
D. The policy provides for both a general account and a separate account
C. Partial surrender is allowed
The following criteria are taken into account by the insurer when underwriting individual life insurance, except:
A. Education level completed
B. Physical condition
C. Gender
D. Medical history
A. Education level completed
A small business owner used her life insurance policy as collateral for a bank loan. The face amount of the whole life policy was $100,000 and the original amount of the loan was $20,000. If the outstanding loan balance at the time the small business owner dies was $10,000, how much will the policy’s names beneficiary receive?
A $100,000
B. $80,000
C. $70,000
D. $90,000
D. $90,000
The collateral assignee, the bank, will take a priority claim on the policy’s death benefit limited to the amount of the loan outstanding at the time of death, the named beneficiary will receive the balance. In this case $90,000 ($100,000-$10,000)
Missouri law requires what standard of fiscal care and conduct of producers?
A. Care of a trustee
B. Fiduciary responsibility
C. Legal capacity
D. Financial duty
B. Fiduciary responsibility
Which of the following individuals is not required to be licensed as a producer in Missouri?
A. Business entity
B. Limited lines agent
C. Health agent
D. Underwiter
D. Underwriter
A person whose duties are underwriting, loss control, or claims inspection is not required to be licensed as a producer.
Life insurance policies in Missouri may contain a suicide exclusion for up to?
1 year after the policy’s issue date
If the insured outlives all of the beneficiaries named in the policy and then dies, by default who receives the death benefit?
The insured’s estate
What is a way to provide additional life insurance protection for a temporary period of time without having to acquire an additional life policy?
Add a term rider to new or existing policy
Which of the following is inaccurate about Missouri’s required provisions for a group life policy?
A. 2-year incontestable provision
B. Individual policy conversion after 5 years
C. 31- day grace period
D. Funeral benefit up to $1,000 if there is no designated beneficiary
D.
In the absence of a designated beneficiary, the insurer may meet its policy liability under the policy by paying any family member specifies in the policy a funeral expense benefit up to $2,000.
A client purchases a life insurance policy and receives the policy from the insurer 45 days after the application. Upon receipt if the policy, the client typically has _____ days to review and return the policy to receive a full refund for any reason
10
The standard Free Look or Right to Examination allows the insures to return the policy for any reason within 10 days after policy delivery
What is an insurer permitted to do during the underwriting process when a proposed insured tests positive for HIV?
Insurers may refuse to issue a policy to individuals that have tested positive for HIV
Which of the following is included in Part 1 of a Life Insurance Application?
A. Present health
B. Name and occupation
C. Hospitalizations and surgeries
D. Family health history
B. name and occuption
Which of the following beneficiary designations prevents a policy owner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent?
A. incontestable
B. Class
C. Named
D. Irrevocable
B irrevocable
Each insurer must maintain a register of all producers it has appointed and notify the Director within how many days of the appointment?
A 30
B never
C 15
D 60
A. 30 days
What can the insurer legally do if it discovers unanswered questions on the application after a policy has been issued and delivered?
Nothing, the insurer has waived it’s rights
interpreted as if the question has not been asked
Which of the following is NOT a dividend option?
A. Paid-up Additions
B. Accumulate at interest
C. Reduced paid up
D. Paid in cash
C. Reduced paid up.
Reduced paid up is a non fortifier options
How many working days after receiving all necessary documentation does an insurer have to advise the claimant that the claim has been accepted or denied?
A. 30
B. 10
C. 15
D. 45
15
When does a Missouri resident producer license renew?
Every 2 years on their birthday
The non forfeiture option that provides equal to the policy’s face amount for a specified number of year and days is?
Extended term
An insured has a $25,000 annual renewable term life policy, originally purchased on her birthday April 1st of last year. She forgot to pay the $250 renewable premium, and dies in an accident on April 15. The beneficiary will receive?
A. $24,750
B. $25,000 less the premium due
C. Nothing
D. $25,250
$25,00 less the premium due.
In a whole life policy, cash value must be made available to borrow against after _____ years.
A. 5
B. 3
C. 2
D. 4
B. 3
The directory may conduct an examination of any insurer whenever it is necessary or at least every ______ years.
5
A producer’s license will not be revoked for which of the following?
A. Convicted of a crime of moral turpitude
B. Licenses suspended in another state
C. Unknowingly accepting business from an unlicensed individual
C
In Missouri how often are Variable death benefits determined
A. 2 years
B. 3 years
C. once every year
c
If an underwriter obtains Medical Information Bureau (MIB) codes inconsistent with the information provided on the application, the underwriter must:
Conduct further investigation to obtain more information prior to making a decision
Part 1 of a life insurance application consists of all of the following information, except:
A. occupation
B. Gender
C. Place of residence
D. Medical status of immediate family members
D
Which of the following personal uses of life insurance is specifically designed to benefit the policy owner while the insured is still alive?
A. Estate conservation
B. Cash accumulation
C. Estate creation
D. Charitable bequests
B Cash accumulation
Which of the following is Not a qualification for obtaining an insurance producer license?
A. Not committing a prohibited act
B. Passing a licensing exam
C. Paying at least $200
D. Being at least 18 years old
C. paying at least $200
the license fee is $100
How is Universal Life insurance policy different from other types of life insurance?
A. It provides a death benefit
B. It does not provide a death benefit
C. It includes interest and mortality charges in the basic policy
D. It separately identifies interest credits and mortality charges
D
If disciplinary action against a producer resulted in monetary relief of $200 or less, the producer’s record will be expunged after_____ years.
5
Which of the following is defined as an unfair practice and could be considered fraudulent?
A. Policy replacement
B. Cancellation
C. Defamation
C
Which of the following statements about producer licenses is true?
A. And individual initiating sales over the telephone is exempt from licensing
B. Resident and non resident producer licenses renew every 3 years.
C. Resident producer licenses are issued for 2 years
c
Within how many working days must the insurer advise the claimant that the claim is accepted or denied
15
Define a Surplus lines broker
A broker who places risks with authorized but non admitted carriers
What must a producer provide when replacing a life insurance policy?
A. A premium invoice
B. A list of all insurance policies purchased by the applicant
C. A notice Regarding Replacement signed by the producer and applicant.
C
How often is the financial examination of every licensed insurer in Missouri required to be conducted?
A. Annually
B. Biennially
C. At least once every 5 years
C
Which of the following is not an unfair property and casualty claim settlement practice?
A. Failure to complete a claim investigation within 15 days if reasonable to do so
B. Deny a claim because the insured would not give access to the claim adjuster
C. Require the first-party claimant to sign a release extending beyond the claim
A.
It is an unfair property and casualty claim settlement practice to fail to complete a claim investigation within 30 days when it is reasonable to do so
In Missouri, the insurer must keep a copy of all replacement documents for what period of time?
A. 5 years
B. 90 days
C. 2 years
D. 7 years
A. 5 years
Group life insurance contracts must contain a grace period provision of how many days?
A. 14
B. 60
C. 31
D. 90
C. 31 days
In personal insurance transactions, producers must do all of the following EXCEPT:
A. Inform the insured if the insurer needs information before renewal or policy change
B. Use professional designations to instill confidence about advising senior clients
C. Inform the applicant if coverage cannot be secured within 30 days of application
B.
It is an unethical and dishonest business practice to use a professional designation implying special certification in advising senior clients as a sales tactic
In Missouri, a life insurance policy loan interest rate can be up to________ APR?
A. 11%
B. 3%
C. 8%
D. 5%
C. 8%
A policy loan’s interest rate must be either an 8% APR or an adjustable maximum interest rate determines once every 3 to 12 months
Which of the following is not true about a nonresident producer?
A. The department may check the NAIC Producer Database
B. A letter from the homes state’s regulatory authority is valid if received within 6 months of approval of a nonresident license
C. A nonresident producer must be licensed for the same line of insurance in the home state.
D. The home state is not obligated to insure nonresident producers licensed in Missouri
D.
The home state must award nonresident producer licenses to Missouri residents on the same basis
An order to refrain from engaging in unlawful conduct or activity defines which of the following?
A. Unlawful discrimination
B. Unfair trade practice
C. Defamation
D. Cease and desist
D.
If a person receives a cease and desist order, they must refrain from all activity in the insurance business
The purpose of the Missouri Life and Health Insurance Guaranty Association Act is to:
A. Issue policies that have at least $100,000 in benefits
B. Protect policy owners in the event an insurer becomes insolvent
C. Remain solvent
D. Pay no more than $1,000,000 for any one life
B. Protect policy owners in the event an insurer becomes insolvent
Insolvent- unable to pay debts owed
The third-party claimant is which of the following?
A. The insured making the claim against their own policy
B. A family member submitting a claim on behalf of the claimant
C. The legal representation of any claimant involved
D. Anyone making a claim against the insured
D. Anyone making a claim against the insured
The third-party claimant is anyone making a claim against the insured. This would occur in a liability claim, such as when the insured is the cause of an automobile accident.
In Missouri, an insurer must conduct investigations after receiving notice of a claim within:
A. 45 days
B. 5 days
C. 60 days
D. 30 days
D. 30 days
If a producer offers any special favor in dividends or other benefits to an insured, the producer is guilty of which of the following marketing practices?
A. Defamation
B. Twisting
C. Intimidation
D. Rebating
D. Rebating
Rebating is giving the insured a rebate of premium, special favors in benefits, or other inducement not otherwise specified in the policy.
Which of the following would not be required to qualify a person as an insurance producer?
A. Successfully pass the insurance exam
B. Pay the $200 licensing fee
C. 18 years old
D. Have not committed any act causing license suspension
B. Pay the $200 licensing fee
The licensing fee is $100
Making a false statement about the benefits or the nature of an insurance policy is what unfair trade practice?
A. Twisting
B. Misrepresentation
C. Defamation
D. Unfair discrimination
B. Misrepresentation
Making any false statement about the benefits or true nature of an insurance policy is misrepresentation
What type of insurer is placed under an order of liquidation by the court?
A. An insolvent insurer
B. An impaired insurer
C. A member insurer
D. An admitted insurer
A. An insolvent insurer
All of the following persons would be exempt from taking the Missouri licensing exam, EXCEPT:
A. An individual currently licensed in Kansas
B. An individual applying for a limited lines producer license
C. An individual who fails to appear for an exam as schedules
D. An individual with Nebraska license that expired 60 days ago
C. An individual who fails to appear to an exam
An example of _______ is charging a lower rate to one individual who lives in a certain geographical location in which others are charged the correct higher rate.
A. Unfair discrimination
B. Rebating
C. Boycott
D. Twisting
A Unfair discrimination
Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies and Alice names Dale as the new primary beneficiary. Alice dies, so who receives the policy proceeds?
A. Claire
B. Alice’s estate
C. Dale
D. Bill’s estate
C. Dale
Dale is now the primary
Which of the following organizations’ members include state and territorial insurance commissioners or regulators?
A. National Association of Insurance Commissioners (NAIC)
B. Financial Industry Regulatory Authority (FINRA)
C. Securities and Exchange Commission (SEC)
D. Federal Insurance Office (FIO)
A.
In a legal sense, premium functions as the insured’s ________.
A. Tender
B. Consideration
C. Credit
D. Fee
B. Consideration
The premium paid by the insured represents their consideration– a required element of a legal contract
According to Missouri’s suicide exclusion, under what circumstances would the insurer be required to refund the premiums
The insurer must refund all premiums if the insured dies by suicide within 1 year of the policy issue date
