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Insurance 2-15 Test > Cram Course Questions > Flashcards

Cram Course Questions Flashcards

1
Q

When a policy pays dividends to its policy holders it is said to be ___________

A. Profitable
B. Mutual
C. Non-participating
D. Participating

A

D. Participating

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2
Q

What year was the McCarron Ferguson act enacted?

A

1945

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3
Q

At what point must a life insurance applicant be informed of their rights that fall under the fair credit reporting act?

A. Before the appointment is scheduled
B. Upon completion of the application
C. At the policy’s delivery
D. And then sure receives the MIB report

A

B. Upon completion of the application

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4
Q

Dividends payable to a policyowner are ______

A. Guaranteed
B. Declared by the state
C. Declared by the insurance company
D. Strictly regulated

A

C. Declared by the insurance company

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5
Q

What type of reinsurance contract involves two companies automatically sharing their risk exposure?

A. Arbitrage
B. Facilitative
C. Excess
D. Treaty

A

D. Treaty

Under treaty reinsurance, each party automatically accepts specific percentages of the insurer’s business.

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6
Q

A group owned insurance company that is formed to assume and spread the liability risks of its members is known as a:

A. Treaty insurer
B. Risk retention group
C. Risk assumption group
D. Captive insurer

A

B. Risk retention group

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7
Q

The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyOwners is called:

A. Credits
B. Reserves
C. Surplus
D. Retention

A

B. Reserves

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8
Q

A policy of adhesion can only be modified by whom?

A. The agent
B. The applicant
C. The primary beneficiary
D. The insurance company

A

D. The insurance company

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9
Q

A life insurance policy would be considered a wagering contract without:

A. Insurable interest
B. Premium payment
C. Agent solicitation
D. Constructive delivery

A

A. Insurable interest

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10
Q

All of the following are considered to be typical characteristics describing the nature of an insurance contract, except:

A. Bilateral
B. Unilateral
C. Aleatory
D. Adhesion

A

A. Bilateral

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11
Q

When must insurable interest be present in order for a life insurance policy to be valid?

A. When the insured dies
B. Within the incontestable period
C. When the application is made
D. Before the insured dies

A

C. When the application is made

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12
Q

L purchases a $500,000 life insurance policy and pays $900 in premiums over the first 6 months. L dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

A. Aleatory
B. Adhesion
C. Unilateral
D. Consideration

A

A. Aleatory

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13
Q

A Life insurance arrangement which circumvents insurable interest statutes is called:

A. A contract of adhesion
B. An indemnity contract
C. Key person insurance
D. Investor originated life insurance

A

D. Investor originated life insurance

Investor originated life insurance is used to circumvent state insurable interest statutes. This is done when an investor or stranger persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums then collects the death benefit when the insured dies.

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14
Q

Life and health insurance policies are:

A. Multilateral contracts
B. Bilateral contracts
C. Unilateral contracts
D. Non-lateral contracts

A

C. Unilateral contracts

This is because one party makes a promise and the other party can only accept by performance.

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15
Q

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

A. Insurer
B. Beneficiary
C. Reinsurer
D. Insured

A

D. Insured

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16
Q

At what point does an informal agreement become a binding contract?

A. When one party makes invitation and the other makes an offer
B. When the offer is made by one party and the other party rejects the offer and makes a counter offer
C. When one party makes an offer and the other party accepts that offer
D. One consideration is provided by one of the parties to the contract

A

D. One consideration is provided by one of the parties to the contract

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17
Q

Insurance policies are offered on a “ take it or leave it” basis, which make them:

A. Conditional contracts
B. Aleatory contracts
C. Unilateral contracts
D. Contracts of adhesion

A

D. Contracts of adhesion

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18
Q

Effie needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

A. Level term policy
B. Whole life policy
C. Limited pay policy
D. Decreasing term policy

A

D. Decreasing term policy

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19
Q

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

A. Modified whole life
B. 20 year paid up policy
C. Endowment
D. Decreasing term

A

D. Decreasing term

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20
Q

Which of the following actions require a policy owner to provide proof of insurability in an adjustment life policy?

A. Increase face amount
B. Decrease face amount
C. Increased premium paying period
D. Decrease premium payment

A

A. Increase face amount

21
Q

Which of these is an element of a variable life policy?

A. A fixed level premium
B. Insurer assumes the investment risk
C. No investment risk to the policy owner
D. Rate of terms are guaranteed

A

A. A fixed, level premium

22
Q

All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, except for:

A. Variable life
B. Modified whole life
C. Universal variable life
D. Variable life

A

B. Modified whole life

23
Q

All of these statements about equity index life insurance are correct, except:

A. Cash value has a minimum rate of accumulation
B. If the gain on the index goes beyond the policies, minimum rate of return, the cash value will mirror that of the index
C. The premiums can be lowered or raised based on investment performance
D. Tied to an equity index such as the S&P 500

A

C. The premiums can be lowered or raised based on investment performance

24
Q

What type of life insurance incorporates flexible premiums and adjustable death benefit?

A. Endowment policy
B. Modified whole life
C. Decrease term
D. Universal life

A

D. Universal life

25
Q

Variable life products requiring producer to:

A. Guarantee no more than 12% return per annum
B. Hold a life and health insurance license
C. Hold a life insurance license and a securities license
D. Be regulated solely by state law

A

C. Hold a life insurance license and a securities license

26
Q

What life policy combines investment choices with a form of term coverage?

A. Straight whole
B. Variable universal
C. Variable term
D. Adjustable universal

A

B. Variable universal

27
Q

What kind of life insurance product covers children under their parent’s policy?

A. Family maintenance Rider
B. Term rider
C. Family income rider
D. Payor benefit

A

B. Term Rider

28
Q

Whole life insurance policies are contractually guaranteed to provide each of the following, except:

A. Cash value that will ultimately replace the death benefit
B. Non forfeiture benefit options
C. Premiums that remain fixed for the life of the policy
D. Partial withdrawal features beyond a surrender charge period

A

D. Partial withdrawal features beyond a surrender charge period

29
Q

What type of life policy covers two lives and pays the face amount after the first one dies?

A. Group life
B. Joint life policy
C. Family income policy
D. Last survivor policy

A

B. Joint life policy

30
Q

A company that owns a life insurance policy on one of its key employees may do all of the following except:

A. Borrow against cash value
B. Change beneficiary
C. Cancel policy
D. Change the policy’s interest rate

A

D. Change the policy’s interest rate

31
Q

A life insurance policy that provides a policy owner with cash value along with a level face amount is called:

A. Whole life
B. Level term
C. Credit life
D. Ordinary life

A

A. Whole life

32
Q

Kate purchased a life insurance policy in 1986 which paid 10% interest in the early years of the policy. 20 years after the purchase she received a notice from it. The insurer stating that the policy will soon terminate unless a much higher premium is paid because of falling interest rates. This type of policy is known as a(n) ______ life policy.

A. Whole
B. Universal
C. Graded
D. Increasing

A

B. Universal

Universal Life insurance popular in The 1980s, worked as advertised for years when insurance rates were in the high single digits and above. Interest rates have since taking a dramatic fall which negatively affected the performance of universal life policies issued in the 1980s. This ultimately resulted in the policy owner paying a much higher premium due to the increasing cost of the underlying term life policy and having no cash value to offset the premiums.

33
Q

At what point does a whole life insurance policy endow ?

A. At age 65
B. When premium paid, equals the death benefit
C. When the cash value equals the death benefit
D. In 30 years or age 65, whichever comes first

A

C. When cash value equals the death benefit?

34
Q

Kate is looking to purchase renewable term insurance. Which of these types of term insurance may be renewable?

A. Increasing
B. Decreasing
C. Adjustable
D. Level

A

D. Level

A level term policy pays the same benefit amount if death occurs at any point during the term. Level term policies may be renewable

35
Q

Greg purchased a family income policy at age 40. The policy has a 20-year rider period. If Greg were to die at age 50, How long would Greg’s family receive an income?

A. 5 years
B. 10 years
C. 15 years
D. 20 years

A

B. 10 years

In this situation, the family would receive an income from the policy for 10 years. Family income policies pay in income beginning of the insurance death and continues for a period specified from the date of the policy issue.

36
Q

Which statement is correct regarding the premium payment schedule for whole life policies?

A. Premiums are payable throughout the insurance. Lifetime/ coverage lasts until death of insured
B. Premiums are payable for a set./ Coverage expires at that point
C. Premiums are payable until age 65/ coverage last a lifetime
D. A single premium is paid at time of application/ coverage last until retirement

A

A. Premiums are payable throughout the insurance. Lifetime/ coverage lasts until death of insured

37
Q

Sam is close to retiring and would like to purchase a policy that will yield greater gains than bonds but will still protect the principal with a minimum level or risk. Which product would Sam be advised to purchase?

A. Equity index insurance
B. Endowment
C. Graded life policy
D. Return of premium policy

A

A. Equity index insurance

38
Q

What type of life insurance are credit policies issued as?

A. Whole
B. Variable
C. Term
D. Universal

A

C. Term

The type of insurance used is decreasing term with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance.

39
Q

Which of the following actions is not possible with a universal life policy?

A. Policy’s Cash value may be used to pay premiums
B. Premium payments may be made at unscheduled times
C. Premiums may be applied as a credit against income tax
D. Face amount maybe adjusted?

A

C. Premiums may be applied as a credit against income tax

40
Q

The amount of coverage on a group credit life policy is limited to:

A. Half of the insured’s total loan value
B. The insured’s total loan value
C. 75% of the insured’s total loan value
D. $25,000

A

B. The insured’s total loan value

41
Q

What type of life policy covers two people and pays upon the death of the last insured?

A. Shared
B. Survivorship
C. Adjustable
D. Joint

A

B. Survivorship

42
Q

Under a graded premium policy, the premiums__________

A. Are higher during the policy’s early years
B. Are lower during the policy’s early years
C. Are constant throughout the length of the policy
D. Can be adjusted by the insured

A

B. Are lower during the early years

A graded premium life policy provides for annual increases and premiums for a constant face amount of insurance during a refined preliminary. With the purpose of making initial payments more affordable, the premium increases each year during the early years of the contract (usually 5 years) and remains the same after that time

43
Q

A policy that becomes a modified endowment contract (MEC):

A. Will no longer allow for policy loans
B. Must be placed in an irrevocable trust
C. Can never be reinstated after a lapse
D. Will lose many of its tax advantages

A

D. Lose many of his tax advantages

44
Q

How long does the coverage normally remain on a limited pay life policy?

A. Age 65
B. Age 100
C. When premium payments stop
D. At the discretion of the insurer

A

B. Age 100

45
Q

A producer is required to register with the financial industry regulatory authority (FINRA) in order to sell what type of life policy?

A. Variable
B. Adjustable
C. Straight
D. Term

A

A. Variable

46
Q

Which statement is true regarding a variable whole life policy?

A. A minimum guaranteed death benefit is provided
B. It is a combination of endowment and a increasing term policy
C. Premiums and benefits are variable
D. It has guaranteed dividends

A

A. a minimum guaranteed death benefit is provided

47
Q

When does a term life insurance policy mature?

A

Upon the insured’s death during the term of the policy

48
Q

Life insurance immediately creates an estate upon the death of the insured. Which of the following policies is characterized by a guaranteed minimum death benefit?

A. Universal life
B. Variable life
C. Fixed annuity
D. Modified endowment contract

A

B. Variable life

The variable nature of a variable whole life insurance is its death benefit. However, if investment performance is poor, the death benefit will not go lower than the policy is guaranteed minimum.

49
Q

Kate pays on a $20,000 20 year endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

A. Return of premiums paid
B. Cash value plus interest
C. $20,000 death benefit
D. Face amount plus interest

A

C. $20,000 death benefit

If the insured dies before the endowment’s maturity, The policy is face value- also known as the death benefit- is paid in a lump sum to any beneficiaries

Insurance 2-15 Test (21 decks)

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