EXAM CRAM - Bonus Questions (p. 9- 12)

Question 1

84. Which policy is a saving instrument designed to first accumulate funds and then systematically to liquidate the funds?

Answer 1

Deferred annuity.

Question 2

85. Individual life insurance policies sold to seniors in the State of California must include a prominently placed statement that divulges all of the following information EXCEPT:

Answer 2

proof of surrender must be notarized at the agent’s principal office.

Question 3

People commonly purchase an annuity to protect against the risk of:

Answer 3

outliving their financial resources.

Question 4

What is one difference between Group life and Individual life underwriting?

Answer 4

Individual life insurance requires the applicant to answer medical questions.

Question 5

A $50,000 whole life policy with a cash value of $10,000 has been in force for eleven years. The policyowner is unable to continue the premium payments. Which of the following describes the reduced paidup nonforfeiture option?

Answer 5

The cash value is used to select a $20,000 paid-up policy.

Question 6

What is characteristic of nonqualified annuities?

Answer 6

Tax-deferred earnings.

Question 7

A 10-year certain annuity with an installment refund is purchased.
The annuitant dies after receiving monthly payments for 5 years. How many remaining payments will the insurer make?

Answer 7

60 payments.

Question 8

The Payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified in the policy that:

Answer 8

the Insurer will make the payments until the insured juvenile reaches a specified age (usually twenty-one or twenty-five).

Question 9

Name a contract that provides benefits that fluctuate automatically with investment results?

Answer 9

Variable life insurance.

Question 10

The theory of probability is applied to life insurance through the use of:

Answer 10

Mortality Tables.

Question 11

What is the difference between Deferred annuities and Immediate annuities?

Answer 11

Deferred annuities have longer accumulation periods.

> NOTE <
* A Deferred annuity begins payments on a future date set by the buyer.
* An Immediate annuity begins paying out as soon as the buyer makes a lump-sum payment to the insurer.

REFERENCE:
https://www.investopedia.com/ask/answers/093015/what-are-main-kinds-annuities.asp

Question 12

What is NOT an option for the use of the policy dividends?

Answer 12

Fund the distribution of monthly income payments.

Question 13

The insured is totally and permanently disabled. The insured’s policy continues in force without payment of further premiums because the policy contains a:

Answer 13

Waiver of Premium provision.

Question 14

Your client has just bought a new home which he has financed with a $150,000, 7.5% interest, 30–year bank loan. He would like to be sure that if he dies that the unpaid balance of the mortgage would be paid.

He wants a policy that will cover the mortgage balance, (no more, no less), anytime during the life of the mortgage. Which policy is designed to meet this need?

Answer 14

Decreasing term policy.

Question 15

Death benefits that are received by a beneficiary are generally:

Answer 15

exempt from federal income tax.

Question 16

An insured replaces an existing annuity with a new one and must pay a surrender charge for cancelling the existing annuity.

The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of:

Answer 16

an unnecessary replacement.

Question 17

100. NAME the process whereby insurers decide which customers to insure and what coverage to offer?

Answer 17

Underwriting.

Question 18

101. What is used to determine the amount of an annuity distribution that is exempt from taxation?

Answer 18

The exclusion ratio.

Question 19

102. The number of deaths during a year compared with the total number of persons exposed in the class is known as the:

Answer 19

Mortality rate.

Question 20

The insured bought an annuity ten years ago. He will retire in five years. To determine the value of his annuity, he must multiply the value of the “accumulation units” he owns, times the value of the “separate account”. This type of annuity is known as a:

Answer 20

Variable annuity.

Question 21

Several facts are true about Term life insurance policies EXCEPT that the:

Answer 21

face amount is paid if the insured survives to the end of the policy period.

> NOTE <
#104 - Bonus Exam Questions Exam Cram.

Question 22

A life insurance policy dividend:

Answer 22

is legally defined as a return of
excess premium and not taxable.

Question 23

Life insurance policies written without a physical examination are called:

Answer 23

Non-medical.

> NOTE <
* No-exam life insurance - such as guaranteed issue life insurance and simplified issue life insurance—are usually more expensive and have a lower face value than insurance that requires a medical exam.

Question 24

Why is the delivery of a life insurance policy important?

Answer 24

The “free-look” period begins on the policy delivery date.

Question 25

What is an ESOP?

Answer 25

Employee Stock Ownership Plan.

Question 26

Which policy provision protects the Insurer against possible adverse selection?

Answer 26

Suicide clause.

Question 27

An insured replaces an existing annuity with a new one and must pay a surrender charge for cancelling the existing annuity. The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of:

Answer 27

an unnecessary replacement

Question 28

A Group life policy is issued on a Contributory basis. This means that:

Answer 28

the insured employees will pay part of the premium.

Question 29

112. What is the penalty tax imposed on amounts received from a modified endowment contract?

Answer 29

10%.

Question 30

113. A PARTICIPATING life insurance policy is defined as a contract:

Answer 30

that allows the policyowner to receive a share of surplus in the form of policy dividends.

Question 31

All of the following are contained in a mortality table EXCEPT:

• insureds can avoid answering medical questions on the application.
• the number living at the end of designated year.
• The applicant and the agent.

Answer 31

the number living at the end of designated year.

Question 32

Which policy pays the face amount IF the insured survives to the end of a certain period?

Answer 32

*Endowment insurance.

There are two types of endowment life insurance that you should know.

1. Pure Endowment Life Insurance (Not Sold In The United States)
   This type of policy pays the face value if the insured survives the endowment period.
2. Regular Endowment Life Insurance
   This policy pays the face value as a death benefit if the insured dies within the endowment period. If the insured survives beyond the endowment period, the face value is paid. Regular endowment policies combine the death benefit of a term insurance component with a savings component.

REFERENCES:

https://blog.myrawealth.com/insights/types-of-life-insurance#:~:text=Regular%20Endowment%20Life%20Insurance,the%20face%20value%20is%20paid.

Question 33

A husband and wife have a disabled child who is financially dependent upon them. The death of one parent would not result in financial disaster for the disabled child, but the death of both parents would. Which policy should they purchase?

Answer 33

Second-to-die policy.

Question 34

How can partners guarantee a market for their share of the business in the event of death?

Answer 34

Buy-sell agreements.

Question 35

Which policy covering two or more individuals terminates after paying benefits on the first to die?

Answer 35

Joint life policy.

> NOTE <
Joint life comes in two varieties:
* First-to-die, which pays out to the surviving spouse after the first dies.
* Second-to-die, or Survivorship, which pays a death benefit to the beneficiary after both spouses pass away.

https://www.bankrate.com/insurance/life-insurance/joint-life-insurance-policies/#what

Question 36

The Accidental Death benefit rider is also known as:

Answer 36

Double indemnity, or AD&D.

> NOTE <
Accidental death and dismemberment (AD&D) insurance is insurance—usually added as a rider to a health insurance or life insurance policy—that covers the unintentional death or dismemberment of the insured. Dismemberment includes the loss, or the loss of use, of body parts or functions (e.g., limbs, speech, eyesight, and hearing).

Question 37

The use of non-medical life insurance accomplishes all of the following EXCEPT:

Answer 37

Insureds can avoid answering medical questions on the application.

> NOTE <
Buying life insurance from the application process to the underwriting process will typically involve filling out some paperwork, submitting to a paramedical exam, and providing you and your immediate family’s health histories.
* No-Exam life insurance—such as guaranteed issue life insurance and simplified issue life insurance—are usually more expensive and have a lower face value than insurance that requires a medical exam.

https://www.investopedia.com/articles/pf/08/what-to-expect-insurance-application.asp

Question 38

Who MUST sign a statement acknowledging that a life insurance policy illustration was given to an applicant?

Answer 38

The applicant and the agent.

Question 39

In financial planning, the human life value concept is based on:

Answer 39

an individual’s income.

Question 40

123. When does an individual have an insurable interest in the life of another person?

Answer 40

When that individual depends on the other person for financial support.

Question 41

124. The cost of employer-provided group life insurance above $50,000 is:

Answer 41

Taxable as income to the employee.