Georgia Insurance Exam Flashcards
Georgia Life, Health and Accident Insurance Exam
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a:
Risk Retention Group
Dividends payable to a policyowner are
Declared by the insurance company
When a policy pays dividends to its policyholders, it is said to be
Participating
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as:
A fraternal benefit society
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act
Upon completion of the application
What year was the McCarran-Ferguson Act enacted
1945
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
Which of these describes a participating insurance policy?
Policyowners are entitled to receive dividends.
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called
Reserves
Who elects the governing body of a mutual insurance company?
Policyholders
Which of the following requires insurers to disclose when an applicant’s consumer or credit history is being investigated
Fair Credit Reporting Act
When must insurable interest be present in order for a life insurance policy to b valid?
When the application is made.
Life and health insurance policies are
Unilateral contracts.
Insurance contracts are known as _____ because certain future conditions or acts must occur before any claims can be paid
Conditional
Which of these require an offer, acceptance, and consideration?
A Contract
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance company
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
The Insured
In regards to representations or warranties, which of these statements is true?
If material to the risk, false representations will void a policy.
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Which of these is NOT a type of agent authority?
Principal
Which of these is NOT considered to be an element of an insurance contract?
Negotiating
Taking receipt of premiums and holding them for the insurance company is an example of:
Fiduciary responsibility
A life insurance arrangement which circumvents insurable interest statutes is called:
Investor-originated life insurance
Which of these is considered a statement that is assured to be true in every respect?
Warranty
A policy of adhesion can only be modified by whom?
The insurance company/insurer
A life insurance policy would be considered a wagering contract without
Insurable Interest
Statements made on an insurance application that are believed to be true to the best of the applicant’s knowledge are called:
Representations
When must insurable interest exist for a life insurance contract to be valid
Inception of the contract
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
What is the consideration given by an insurer in the Consideration clause of a life policy
Promise to pay a death benefit to a named beneficiary
Insurance policies are offered on a “take it or leave it” basis, which makes them
Contracts of Adhesion
Stranger Originated Life Insurance has been found to be in violation of which of the following contractual elements
Legal Purpose (Insurable Interest)
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:
Insurable interest in the proposed insured
The part of a life insurance policy guaranteed to be true is called a
Warranty
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
Adhesion
The Consideration clause of an insurance contract includes
the schedule and amount of premium payments
At what point does an informal agreement become a binding contract?
When consideration is provided by one of the parties to the contract.
Insurance policies are considered aleatory contracts because
Performance is conditioned upon a future occurrence
The exchange of unequal values (small premiums in exchange for a large payout) reflects which of the insurance contract features
Aleatory
A company that owns a life insurance policy on one of its key employees may:
Borrow against the cash value.
Change the beneficiary
Cancel the policy
What does the word “Straight” mean in reference to “Straight Life” or Whole Life insurance?
The duration of premium payments - usually for the rest of the owner’s life.
Who has the option to renew a Renewable Term policy?
The Insured
Which provision allows the policy owner to change a term life policy to a permanent one without providing proof of good health?
Conversion
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches the age of 100?
Whole Life
What type of policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
Variable Whole Life Insurance can be described as
Both an insurance and securities product.
Which need is satisfied by Adjustable Life Insurance
Insured’s need for flexible premiums.
Which product yield’s greater gains than bonds, but still protect the principle with a minimum level or risk?
Equity Index Insurance
What type of life insurance incorporates flexible premiums and an adjustable death benefit
Universal Life
The investment gains from a Universal Life Policy usually go toward
The Cash value
When a life insurance policy exceeds certain IRS table values, the result would create:
A Modified Endowment Contract (MEC)
When is the face amount paid under a Joint Life and Survivor policy?
Upon the death of the LAST insured
A term life insurance policy matures
upon the insured’s death during the term of the policy
What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?
The face amount plus the policy’s cash value
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of the insurance and:
Expense charges
Which policy pays a benefit if the insured goes blind.
AD&D
What type of term coverage allows you to continue the coverage after expiration of the initial policy period?
Renewable
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
Which type of Term Life policies most likely contain a Renewability feature?
Variable Term
Which information is NOT required to be included in a Whole Life Policy?
Policy’s guaranteed dividend table
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which policy best fits her needs?
Straight Life insurance policies provide the greatest amount of permanent protection per dollar of annual premium
Which types of permanent life insurance policies offer the highest initial cash value?
Single premium
Which of these is an element of a Variable Life policy?
A fixed level premium
Which of these would be considered a Limited-Pay Life policy?
An example of a Limited-Pay life policy is a Life Paid-Up at Age 70
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
Variable Life products require a producer to
Hold a Life Insurance license and a Securities License
How does a typical Variable Life Policy investment account grow
Through mutual funds, stocks, bonds
What advantage does the renewability feature give to a term policy?
The insured may extend the coverage period
Which statement is true regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at age 70
At what point does a Whole Life Insurance policy endow?
When the cash value equals the death benefit
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Which of the following Life Insurance policies combine term insurance with an investment element?
Universal Life
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay Life
Type of term life policy normally used when covering an insured’s mortgage balance
Decreasing
What type of policy provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule?
Decreasing term policy
A life insurance policy that will allow for increases or decreases in coverage as needs change
Universal Life
Type of life insurance that allows the policy owner to have level premiums and to also choose from a selection of investment options
Variable Life
How long does the coverage normally remain on a limited-pay life policy?
Age 100
All of these are characteristics of an Adjustable Life policy, EXCEPT:
Face amount can be adjusted using policy dividends
Term insurance has which of the following characteristics?
Expires at the end of the policy period
The amount of coverage on a group credit life policy is limited to
The insured’s total loan value
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable universal life
If a 10-year term life policy contains a Renewability provision, the policy will renew
Without evidence of insurability
Which feature of a group term life policy enables an individual to leave the group and continue their insurance without providing evidence of insurability?
Conversion privilege
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured’s lifetime/coverage lasts until death of the insured
K 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?
$20k - If the insured dies before the endowment’s maturity the policy will pay the face value or “death benefit” to any beneficiarys
Under a graded Premium policy, the premiums
are lower during the policy’s early years
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
Under a renewable term policy
the renewal premium is calculated on the basis of the insured’s attained age
A life insurance policy that provides a policyowner with cash value along with a level face amount is called
Whole life
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole life
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
A Limited-Pay Life policy has:
premium payments limited to a specified number of years
The most important factor to consider when determining whether to convert term insurance at the insured’s attained age or the insured’s original age is:
the cost
Which is true concerning a Variable Universal Life policy?
Policy owner controls where the investment will go and selects the amount of premium payment
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
Credit Life insurance is:
Issued in an amount not to exceed the amount of the loan
A life policy that contains a monthly mortality charge as well as a self-directed investment choices is called a
Variable Universal Life policy
Which of these statements describes a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
A father who dies within 3 years of purchasing a life insurance policy on his infant daughter can have the policy premiums waved under which provision?
Payor provision
A life insurance policy that will provide the greatest amount of protection for a temporary time period:
Term life
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
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
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from 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 Universal life policy
A(n) _____ Life policy offers the owner investment in products such as money-market funds, long-term bonds, and equities
Variable
Modified Premium Life
whole life policies that are distinguished by premiums that are lower than typical whole life premiums during the first few (usually five) years and then higher
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
The Universal Life Policy is called an unbundled Life Policy because the policy holder an see the expense charges, the interest earned, and the:
cost of insurance
What type of life insurance are credit policies issued as?
Term
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment
Level Term insurance
Life insurance written to cover a need for a specified period of time at the lowest possible premium
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 statement made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which policy did Y purchase?
Whole Life policy with Other Insured Rider
Which statement about a whole life policy is true?
Cash value may be borrowed against
An architecture firm stands to lose a lot of money if its project manager dies. Which type of insurance should the firm purchase on its project manager?
Key Person Insurance
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum of death benefit?
Variable Life
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
Increase face amount
What type of life policy covers two lives and pays the face amount after the first one dies?
Joint Life
What kind of life insurance product covers children under their parent’s policy?
Term rider
A Variable Universal Life Policy
Combines investment choices with a form of Term Coverage
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
Which type of Term insurance may be renewable?
Level
Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT:
partial withdrawal features beyond a surrender charge period
Term Life policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
Varies according to the contract
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life
G purchased a Family Income policy at age 40. The policy has a 20 year rider period. If G were to die at age 50, how long would G’s family receive an income?
10 years
Which of these types of policies may not have the automatic premium loan provision attached to it?
Decreasing Term
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract (MEC)
A Family Income Policy
the combination of Whole Life and Decreasing Term insurance
What kind of premium does a Whole Life policy have?
Level
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT
The premiums can be lowered or raised, based on investment performance
A variable insurance policy
does not guarantee a return on its investment accounts
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance Policy
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
The policyowner
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole Life
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy’s maturity date, whichever comes first
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
The cash value in a(n)_____Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest and expense factors
Universal
Under an Interest Sensitive Whole Life Policy,
cash values are determined by interest rates
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a
third-party with no insurable interest
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D’s beneficiary’s receive?
The full face amount
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S. dies 1 year later of natural causes. How much will the insurer pay the beneficiary
$50,000
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured’s death, EXCEPT:
Interest Only
Additional coverage can be added to a Whole Life policy by adding a
Decreasing Term rider
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations P made during the application process. Which of these actions will the insurer take
Beneficiary will be paid the death benefit. The incontestable clause prevents the insurer from canceling the contract even for a material misprepresentation.
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL’s)
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:
Policy proceeds
A Term Life rider offers the insured
Additional life coverage
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner’s Rights
Automatic Policy Loan provision
Keeps a Whole Life policy in force if a required premium is not made and there is sufficient cash value.
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional Whole Life coverage at specified times
