exam a

Question 1

in disability insurance, the period of time between when the disability started and the commencement of the benefits is the:

Answer 1

• LTC and disability income polices don’t begin to pay out benefits until a certain number of days of illness have elapsed

Question 2

which of the following characteristics would not stop an insurance company from accepting an insurance risk?

Answer 2

• insurance companies prefer insureds that are part of a larger group with similar risk so they can understand the scope of the risk, and charger the appropriate premium.

Question 3

all of the following statements about mutual insurance companies are correct except:

Answer 3

• insurance policy dividends are not guaranteed and are not taxable

Question 4

in a seven year vesting schedule, what percentage of employer contribution is vested after seven years?

Answer 4

if employment terminates the employee owns 100% of the employer’s contributions after 7 years. they earn 20% each year for years 3 through 7. employee contributions are immediately vested.

Question 5

which is a false statement? the California insurance commissioner is:

Answer 5

the commissioner is no longer appointed by the governor. he or she has various duties and authorities.

Question 6

which statement about life insurance code and ethics is not true?

Answer 6

acts of fair discrimination such as charging older clients a higher premium are legal.

Question 7

which of the following statements about a resident life-only agent licensing is incorrect?

Answer 7

changes of address must be filed immediately.

Question 8

tommy Greene has a CLU certification. which of the following names would be automatically approved for use as his agency’s name?

Answer 8

no name is ever automatically approved for licensee use. there are always procedures and background checks to administer.

Question 9

an agent follows the rules and terms of his agent contract. he is exercising his______ authority.

Answer 9

express authority is legitimate authority written into a contract.

Question 10

any person who misappropriates fiduciary funds for personal use is guilty of:

Answer 10

a “person” with fiduciary responsibilities is an agent. if an agent steals their clients’ money, the agent is guilty of theft.

Question 11

according to the code, any person legally capable of making an insurance policy is considere:

Answer 11

legally, a corporation is a “person”. the insurer makes/produces the insurance policies the agents and brokers sell.

Question 12

Mrs. Anderson needs to invest the proceeds from her late husband’s life insurance. she invests a portion of the money into an annuity. since she is 62, and is still working, she decides to purchase a single premium deferred annuity. she won’t need an income for a few more years. what should the agent make sure Mrs. Anderson understands?

Answer 12

as someone who is 60+, she gets the 30-day free-look period, and should invest cautiously.

Question 13

in a non-contributory group policy:

Answer 13

in a non-contributory plan, the employer pays all of the premium, so they must cover all eligible employees.

Question 14

an employee has lost access to their group term life insurance plan, but they are allowed to convert to a new plan. which best describes this new plan?

Answer 14

conversion from group to individual can be any insurance except term. the insured who lost their coverage is now paying the entire premium.

Question 15

bob and Neal are partners in a law firm together. if one of them were to pass away, they want to make sure that their surviving family will receive fair value for their stake in the business. what life insurance arrangement would be most suited for transitioning the business during the time of loss?

Answer 15

buy-sell agreements allow surviving partners to buy out the family of the decreased partner so the business may continue past the death of the insured.

Question 16

rank from lowest to highest, the amount of monthly income that would result from the following annuity settlement options:

Answer 16

the larger the guarantee of the payments, or returned monies, the lower the guaranteed income. the more risk the annuitant takes during the annuity period, the higher the monthly income.

Question 17

all of the following are dividend options, except:

Answer 17

“interest only” is a settlement option, not a dividend option.

Question 18

which best describes industrial insurance?

Answer 18

by law, industrial insurance must be paid in person. since it invovles high risk insureds, very low amounts are purchased.

Question 19

a client’s flexible premium is invested into a separate account. what type of insurance product did he purchase?

Answer 19

any universal policy is characterized by a flexible premium. any variable product is characterized by the use of separate accounts.

Question 20

which rider pays a multiple of the original face amount?

Answer 20

also known as “double indemnity,” accident riders pay a larger death benifit if death is due to accidental means.

Question 21

a life only agent issues a binding receipt to his client since the client did include a check for the initial premium with his complete application. which is true?

Answer 21

binding receipt gives immediate coverage in the field of property insurance. issuing a binding receipt to a life client could result in license suspension for jeopardizing and misleading the client. life only agents do not have authority to issue binding receipts.

Question 22

which of the following would not be considered a speculative risk?

Answer 22

any situation that could result in harm, but no chance for financial gain, is a pure risk, not a speculative risk.

Question 23

according to the California insurance code, what information is the agent required to include on their business card?

Answer 23

there are many rules related to business cards focused on full disclosure, clear communications, and proper identification of agent and insurer.

Question 24

how does the IRS classify the two different types of retirement accounts?

Answer 24

“qualified” means a plan meets certain IRS guidelines so it receives beneficial tax treatment, such as tax deferral. “non-qualified” means it does not meet those guidelines, and therefore does not receive beneficial tax treatment.

Question 25

an insured has a terminal illness and needs access to 1/3 of his death benefit to pay mounting medical expenses. which rider would meet the insured's current needs?

Answer 25

the accelerated death benefit, or living needs rider, pays a portion of the death benefit before death if the insured has a terminal illness.

Question 26

a beneficiary decides to take the option that will pay the largest amount per payment, knowing after no monies will be paid out to any descendants. the settlement option is:

Answer 26

the life income settlement option pays the beneficiary an income until they die. since no further payments will be made to their survivors, the insurer can afford to pay them a larger income versus the other options given.

Question 27

after 12 years, the policyowner decides she no longer needs the large death benefit on her whole life policy. she calls you, her agent, and you tell her she can use the reduced paid up non forfeiture option. which of the following is not true about the new policy?

Answer 27

With the reduced paid-up non-forfeiture option, the policy will still be a whole life policy. Therefore it will mature at age 100 like the original policy. It will have a lower death benefit than the original.

Question 28

Which qualified plan is characterized by having a non-deductible contribution and tax-free distributions?

Answer 28

Contributions to a Roth IRA are not tax deductible. To encourage investing for retirement, Roth IRAs allow for tax-free withdrawals after 5 years and at least age 59 ½.

Question 29

Which of the following statements about the process of replacement is incorrect?

Answer 29

To protect the client, disclosures need to be signed and left with the client, as well as submitted to all insurers involved. Anything used to make the sale should also be submitted.

Question 30

Members of the MIB are required to report

Answer 30

Made up of member insurance companies, the MIB only reports medical impairments found during underwriting; not policy information nor medical record information.

Question 31

All of the following statements about survivorship life are true, except:

Answer 31

Survivorship life, sometimes referred to as “second-to-die” joint life, insures two people on the same policy, but pays the death benefit only after the second insured dies

Question 32

In contrasting stock insurers with mutual insurers, which statement is not false?

Answer 32

Stock insurers are owned by their shareholders/stockholders. Their policies are labeled non-participating since the clients do not share in the divisible surplus (dividends)

Question 33

An applicant for an insurance license has had a previous application for a professional license denied for cause within the last five years. The insurance commissioner will:

Answer 33

The loss of a professional license, or the previous denial of an application for a license, within five years of the submission of the current application will result in the application being denied without a hearing.

Question 34

In order to be financially solvent, an insurer must accomplish all of the following, except:

Answer 34

Reserves are retained by the insurer to pay future claims; they are not paid to the state

Question 35

Pete, who is 35 years old, has a life insurance policy with a death benefit of $150,000. At the age of 65 the cash values of his policy will be $150,000. What type of policy does he have?

Answer 35

policy that matures at any age earlier than 100 is an endowment.

Question 36

Roger, who is 35 years old, has a whole life insurance policy with a death benefit of $150,000. At the age of 65 he will no longer make premium payments. When will the cash values of his policy be $150,000?

Answer 36

Whole life, even if a limited payment plan, still matures at age 100.

Question 37

Agent Darren offers life insurance for no cost to people buying property in a local development. When the Commissioner investigates his actions, which of the following is not a likely consequence?

Answer 37

Violations of the Unfair Practices Act customarily result in a hearing, a fine, and a cease and desist order.

Question 38

A life settlement broker

Answer 38

This is the definition of life settlement broker.

Question 39

E&O coverage

Answer 39

One of the main purposes of errors and omissions (E & O) coverage is to protect the agent in the case of unintentional negligence.