Comprensive Questions

Question 1

policyowner decides to cancel an insurance policy within 90 days of the issue date. As a result of this cancellation, the producer is REQUIRED to refund a prorated portion of any fee charged within _ days of receiving the cancellation notice.
30
45
• 60
90

Answer 1

30 days

Question 2

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
• When the policy is issued
• The date of policy delivery
• When the conditions of the receipt are met
• The date the sales appointment was set

Answer 2

When the conditions of the receipt are met

Question 3

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the:
marital deduction
death benefits
• Section 1035 exchange
• capital gains tax rate

Answer 3

marital deduction

Question 4

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the:
marital deduction
death benefits
• Section 1035 exchange
• capital gains tax rate

Answer 4

marital deduction

Question 5

K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)
• Installment Refund annuity
• Joint Refund annuity
• Straight Refund annuity
• Equal Value annuity

Answer 5

correct answer is “Installment Refund annuity”. An installment Refund annuity promises that if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid.

Question 6

Which of these Nonforfeiture Options continue a build-up of cash value?
Waiver of Premium
Extended Term
• Reduced Paid-Up
• Cash Surrender

Answer 6

Reduced Paid-Up

Question 7

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
• Policy Exclusion
• Incontestable
• Entire Contract Provision
• Assignment

Answer 7

Entire Contract Provision

Question 8

SIf the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
• Primary beneficiary’s estate
• Primary beneficiary’s next of kin
• Insured’s estate
• Insured’s contingent beneficiary

Answer 8

Insured’s contingent beneficiary

Question 9

T the producer has just collected premium monies from a client. T may personally hold these funds for a MAXIMUM of days before depositing them in a Premium Fund Trust Account.

7
14
21
28

Answer 9

14

Question 10

A temporary insurance license is valid for up to _ days.
• 30
• 45
•90
180

Answer 10

90

Question 11

A producer must complete____hour(s) of ethics per continuing education reporting period.
1
• 3
4
2

Answer 11

3

Question 12

Producers must keep record of service fees charged or received for a period of year(s).
2
• 3
• 5
07

Answer 12

7

Question 13

The Director is appointed by the
Governor
• Attorney General
• State Senate
• NAIC

Answer 13

Governor

Question 14

All of these are required to be included in a life insurance illustration EXCEPT
• rating classification
• initial death benefit
• insurer’s name
• insurer’s mortality table

Answer 14

insurer’s mortality table

Question 15

Which licensee faces possible license revocation by the Director?
Licensee who is convicted of a misdemeanor
Licensee who fails meet a sales quota
• Licensee who replaces an existing policy with a new one
• Licensee who commingles monies belonging to policyholders with personal funds

Answer 15

• Licensee who commingles monies belonging to policyholders with personal funds

Question 16

A producer must forward collected premiums to the insurer within days.

• 30
•90
• 120

Answer 16

90

Question 17

What must be signed by both the producer and applicant when an existing life insurance policy is being reissued with a reduction in cash value?
•Policy Guide
• Buyer’s Summary
• Replacement receipt
• Notice Regarding Replacement

Answer 17

• Notice Regarding Replacement

Question 18

A producer completes an application with a client for a $50,000 Life Insurance policy. At what point is the LATEST a Policy Summary and Buyers Guide must be given to the applicant?
• Within 10 days after policy delivery
• Upon completion of the application
• Upon policy delivery
• Within 10 days after policy issue

Answer 18

Upon policy delivery

Question 19

Which of these accounts are producer license fees deposited into?
Insurance Guaranty Fund
Insurance Producer Administrative Fund
General Fund
• Director Administrative Fund

Answer 19

Insurance Producer Administrative Fund

Question 20

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
* Cash surrender
* Life settlement contract
* Buy-sell arrangement
* 1031 Exchange

Answer 20

Life settlement contract
A life settlement contract allows a policyholder to sell their life insurance policy to a third party for a sum that is greater than the policy’s cash surrender value, because the buyer is essentially betting on the policyholder’s shorter life expectancy, allowing them to potentially profit when the policyholder dies and they collect the full death benefit; this means the seller receives a larger payout than they would if they simply surrendered the policy to the insurance company.

Question 21

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contributions allowable?
1. No deduction allowed
2. 6000
3. 5000
4. 4000

Answer 21

6000
For 2024, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can’t be more than $7000

Question 22

what is the difference between graded premium life insurance and Modified premium life

Answer 22

While both graded premium life insurance and modified premium life insurance involve lower premiums in the early years of a policy, the key difference is that with graded premium life insurance, the death benefit also increases gradually over the initial period, whereas with modified premium life insurance, the full death benefit is available from the start, but the premium increases significantly after the introductory period

Question 23

what is the advanced of renewing feature give to a term policy?

Answer 23

Key points about the renewable feature:
1. No new medical exam required: You can renew your policy without having to prove your health status again, which is beneficial if you develop health issues during the initial policy term.
2. Flexibility in coverage duration: You can choose to renew your policy for additional terms to continue receiving life insurance protection beyond the initial policy period.
3. Higher premiums with each renewal: As you age, your premium will increase with each renewal period

Question 24

under the usa patriot act, insurers are required to report receipt of cash payments in excess of:
1. 10,000
2. 7500
3. 5000
4. 2500

Answer 24

10,000

Question 25

A Return of Premium life insurance policy is:
• a Nonforfeiture option
• Whole life and Increasing term
• interest-sensitive
• Variable life

Answer 25

The correct answer is “Whole life and Increasing term”. A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.

Question 26

Which statement about a whole life policy is true?
-Beneficiary may be changed only with the consent of the premium payor
-Death benefit can usually be adjusted
• Cash value may be borrowed against
• Premiums are flexible

Answer 26

• Cash value may be borrowed against

Question 27

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured’s death, EXCEPT:
• Fixed Period
• Interest Only
• Fixed Amount
• Life Income

Answer 27

The correct answer is “Interest Only”. The Interest Only option does NOT involve the systematic liquidation of the death proceeds.

Question 28

Which of these characteristics is consistent with a Straight Life policy?
- Owner can adjust both premium and death benefit
• Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract
• Owner has the option of converting to term insurance
- Premiums are payable for as long as there is insurance coverage in force

Answer 28

• Premiums are payable for as long as there is insurance coverage in force

Straight whole life provides permanent level protection with level premiums from the time the policy is issued until the insured’s death (or age 100).

Question 29

What type of life insurance are credit policies issued as?
• Whole
• Variable
• Term
• Universal

Answer 29

Term

Question 30

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
• Collect initial premium
• Collect initial premium along with a signed health statement
• Explain to the applicant the policy is no longer in effect due to change in health condition
• Collect initial premium and leave a binding receipt

Answer 30

• Collect initial premium along with a signed health statement

Question 31

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
• Guaranteed Insurability rider
• Aviation exclusion
• Impairment rider
• Accidental Death Benefit rider

Answer 31

Aviation exclusion

Question 32

Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT:
• cash value that will ultimately replace the death benefit
• nonforfeiture benefit options
• premiums that remain fixed for the life of the policy
• partial withdrawal features beyond a surrender charge period

Answer 32

• partial withdrawal features beyond a surrender charge period

Question 33

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT:
* Signed HIPAA disclosure
• Signed amendment
• Signed statement of Good Health
• The required premium

Answer 33

Signed HIPAA disclosure

Question 34

Insurance policies are considered aleatory contracts because
• they are “take it or leave it” contracts
• both parties consent to the contract
•performance is conditioned upon a future occurrence
• the contract is voidable upon proof of fraud

Answer 34

•performance is conditioned upon a future occurrence

Question 35

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):
• Term rider
• Accidental Death and Dismemberment rider (AD&D)
•Family rider
• Annuity

Answer 35

• Accidental Death and Dismemberment rider (AD&D)

Question 36

Jis issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy’s death benefit also remains at $100,000. Which type of Life Insurance policy is this?
• Endowment
Graded Premium Life
•Straight Life
• Modified Premium Life

Answer 36

• Modified Premium Life

Question 37

Life and health insurance policies are:
• Multi-lateral contracts
• Bilateral contracts
• Unilateral contracts
• Non-lateral contracts

Answer 37

• Unilateral contracts

Question 38

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
• Family Maintenance Policy
• Family Income Policy
• Survivor Policy
• Family Survivor Policy

Answer 38

• Family Maintenance Policy

Question 39

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
•Straight life accumulates faster than Limited-pay Life
20-Pay Life accumulates cash value faster than Straight Life
Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer’s financial rating
• 20-Pay Life and Straight Life accumulate cash value at the same rate

Answer 39

20-Pay Life accumulates cash value faster than Straight Life

Question 40

M has an insurance policy that also has an outstanding policy loan at the time of M’s death. The insurer will deduct the outstanding loan balance from the:
• cash value
* estate of the insured
• policy proceeds
•nonforfeiture value

Answer 40

• policy proceeds

Question 41

Under a Graded Premium Whole Life policy,
• the premium increases each year during the early years of the contract and remains the same after that time
• the premium decreases each year during the early years of the contract and remains the same after that time
•the premium can be adjusted by the policyowner at anytime
• the premium always remains the same while the death benefit increases during the early years

Answer 41

• the premium increases each year during the early years of the contract and remains the same after that time

Question 42

Which of the following actions is NOT possible with a Universal Life policy?
Policy’s cash value may be used to pay premiums
• Premium payments may be made at unscheduled times
• Premiums may be applied as a credit against income tax
Face amount may be adjusted

Answer 42

Premiums may be applied as a credit against income tax

Question 43

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
25
50
• 100
• 250.

Answer 43

100

Question 44

Which type of contract liquidates an estate thorugh recurrent payments?
1. 401K
2. Universal life insurance
3. Whole life insurance
4. Annuity

Answer 44

4 Annuity

An annuity is a financial product where a person pays a lump sum of money to an insurance company, which then pays them back in a series of regular installments over a set period of time, essentially “liquidating” the estate through these periodic payments

Question 45

Which of the following types of insurance may a limited lines producer sell?
• Industrial life
• Disability
• Endowment
• Whole life

Answer 45

A limited lines producer may sell industrial (home service) life insurance. Industrial life insurance is a policy priced well below its counterparts and is sold by producers who sell it door to door. It is popular among low- to middle-income buyers.

Question 46

A hearing must be held not later than Director.
days after the request for the hearing is received by the
• 14
21
• 30
10

Answer 46

10

Question 47

During the course of an insurance business transaction, who does the producer legally represent?
• Insured
• Producer
• Beneficiary
• Insurance company

Answer 47

Insurance company

Question 48

Pis a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
• A deferred annuity
A straight life annuity
• An immediate annuity
• A straight life deferred annuity

Answer 48

The correct answer is “An immediate annuity”. An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase.

Question 49

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
1. Capital gains tax
2. 10% tax penalty for early withdrawal
3. Ordinary income tax and a 10% tax penalty for early withdrawal
4. Ordinary income tax

Answer 49

The correct answer is “Ordinary income tax and a 10% tax penalty for early withdrawal”. Income tax and a penalty tax are generally assessed when a participant receives retirement savings from an IRA before reaching age 59 1/2.

Question 50

I purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company
1. has the option to continue making payments based on what has already been paid out
2. MUST make full payments to the beneficiary
3. does NOT have to make any further payments
4. MUST make half-payments to the beneficiary

Answer 50

The correct answer is “does NOT have to make any further payments”. With a Straight Life Annuity, the insurer does not have to make further payments after the annuitant dies.

Question 51

Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
The initial premium was submitted with the application
The initial premium was NOT submitted with the application
The applicant chose an annual premium mode
The applicant is suspected of making a material misrepresentation

Answer 51

The initial premium was NOT submitted with the application

Question 52

The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
Nature of the disability
Insured’s education level
• Insured’s tax bracket
• Amount of the benefits available from other sources

Answer 52

• Amount of the benefits available from other sources

Question 53

Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:
1. if applicant is a tobacco user
2. overall health of the applicant
3. driving history
4. probability of making timely premium payments

Answer 53

4. probability of making timely premium payments

Question 54

What is the underlying concept regarding level premiums?
Level premiums build cash value quicker in the early years
Level premiums can only be paid annually
The early years are charged more than what is needed
The early years are charged less than what is needed

Answer 54

The early years are charged more than what is needed

Question 55

All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:
1. The premiums can be lowered or raised, based on investment performance
2. Cash value has a minimum rate of accumulation
3. If the gain on the index goes beyond the policy’s minimum rate of return, the cash value will mirror that of the index
4. Tied to an equity index such as the S&P 500

Answer 55

The premiums can be lowered or raised, based on investment performance

Question 56

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has:
1. assigned the risk to a reinsurer
2. committed an act of fraud
3. waived one of its legal rights
4. issued a voidable policy

Answer 56

3. waived one of its legal rights

Question 57

In regards to representations or warranties, which of these statements is TRUE?
1. Warranties are statements considered to be true to the best of the applicant’s belief
2. If material to the risk, false representations will void a policy
3. Representations are statements guaranteed to be true in every respect
4. If material to the risk, false representations will NOT void a policy

Answer 57

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

Question 58

Which of these statements describe a Modified Endowment Contract (MEC)?
1. Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
2. Falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
3. The 7-pay test is used to determine the minimum death benefit of the policy
4. The 7-pay test is used to determine the maximum death benefit of the policy

Answer 58

1.
Policies that do not meet the 7-pay test are considered MEC’s and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period.

Question 59

A term life insurance policy matures:
• upon death of the insured
•upon the insured’s death during the term of the policy
•upon endowment of the contract
• when the cash value equals the death benefit

Answer 59

•upon the insured’s death during the term of the policy

Question 60

What is being delivered during a policy delivery?
• Policy summary sheet and disclosure material to the proposed insured
• A binding receipt to the proposed insured
* Insurance contract to the proposed insured
• Application and initial premium to the insurer

Answer 60

• Insurance contract to the proposed insured

Question 61

A company that owns a life insurance policy on one of its key employees may do all of the following
ЕХСЕРТ
Borrow against cash value
Change beneficiary
Cancel policy
Change the policy’s interest rate

Answer 61

Change the policy’s interest rate
Key person policy is a permanent policy

Question 62

Under a Renewable Term policy,
1. the face amount is automatically adjusted at the time of renewal
2. evidence of insurability must be provided at each renewal
3. the renewal premium is calculated on the basis of the insured’s attained age
4. a new application must be completed at each renewal

Answer 62

The correct answer is “the renewal premium is calculated on the basis of the insured’s attained age”. Under a Renewable Term policy, the renewal premium is calculated on the basis of the insured’s attained age.

Question 63

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

1.Distribution is subject to capital gains tax
2.Distribution is subject to ordinary income tax
3.Distribution is subject to a tax penalty
4.Distribution is subject to federal income tax withholding

Answer 63

A participant must complete a rollover to another qualified plan within 60 days or the distribution is considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsor must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.

Question 64

The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
1. This clause provides the payment of proceeds to the insured’s estate
2. This clause provides the payment of proceeds to the beneficiary’s estate
3. The estate taxes in the insured’s estate may be reduced
4. The estate taxes in the beneficiary’s estate may be reduced

Answer 64

The Common Disaster clause provides that in the event of simultaneous death, the beneficiary is presumed to die first and therefore the contingent beneficiary would be next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the insured’s estate.

Question 65

Which of the following Life insurance policies combine term insurance with an investment element?
1. Increasing Term Life
2. Decreasing Term Life
3. Universal Life
4. Graded Life

Answer 65

Universal Life policy combines term life insurance with an investment element.

Question 66

At what point does a Whole Life Insurance policy endow?
1.At age 65
2.When premium paid equals the death benefit
3.When the cash value equals the death benefit
4.In 30 years or age 65, whichever comes first

Answer 66

• When the cash value equals the death benefit

Question 67

Which of the following is TRUE about a qualified retirement that is “top heavy”?
1. More than 30% of plan assets are in key employee accounts
2. More than 40% of annual additions are for key employee accounts
3. More than 50% of plan assets are in key employee accounts
4. More than 60% of plan assets are in key employee accounts

Answer 67

A plan is considered to be top heavy if more than 60% of plan assets are attributable to “key employees” as of the last day of the prior plan year.