Health & Life Flashcards
Who has the right to change a revocable beneficiary?
a. Beneficiary
b. Agent
c. Insurance agency
d. Policyowner
Policyowner
Which statement about a whole life policy is true?
a. Beneficiary may be changed only with the consent of the premium payor
b. Death benefit can usually be adjusted
c. Cash value may be borrowed against
d. Premiums are flexible
Cash value may be borrowed against
A feature of whole-life policies is that the policy owner may borrow against the cash value.
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
a. The applicant chose an annual premium mode
b. The applicant is suspected of making a material misrepresentation
c. The initial premium was submitted with the application
d. The initial premium was NOT submitted with the application
The initial premium was NOT submitted with the application.
On delivery of a policy, a signed document of good health is typically requested if the application was submitted without the initial premium
When an employee is terminated, which statement about a group term life conversion is true?
a. Employee must convert group term life coverage into an individual term life policy
b. Employee must provide evidence of insurability for conversion
c. Policy proceeds will be paid if the employee dies during the conversion period
d. Policy proceeds will NOT be paid if the employee dies during the conversion period
Policy proceeds will be paid if the employee dies during the conversion period
An individual must apply for individual permanent coverage within 31 days after the date of group coverage termination and is covered under the group policy during the conversion period.
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
a. No benefits are payable under the Master contract
b. Full benefits are payable under the Master contract
c. Full benefits are payable under the converted policy
d. Benefits less required premium are payable under the converted policy
Full benefits are payable under the Master contract
An individual is covered under the group policy during the conversion period
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
a. After the Contestable period
b. When the policy proceeds are paid
c. At the time of application
d. When the insured dies
At the time of application
With life insurance, insurable interest must exist only at the policy inception
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
a. adherence
b. assimilation
c. aleatory
d. adhesion
adhesion
A contract of adhesion is a contract offered intact to one party by another under circumstances requiring the second party to accept or reject the contract in total without having the opportunity to bargain over the wording. Insurance policies are contracts of adhesion and are construed strictly against the party writing them (i.e., the insurer)
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
a. Modified Whole Life
b. 20-Pay Life
c. Decreasing Term
d. Endowment
Decreasing Term
The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term
Automatic Premium Loan provision: authorizes the insurer to automatically pay any premium in default at the end of the grace period and charge the amount so paid against the life insurance policy as a policy loan
Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan receive?
a. Master policy
b. Receipt of coverage
c. Individual policy
d. Certificate of insurance
Certificate of Insurance
A life insurance policy that ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
a. Accelerated Benefits
b. Waiver of Premium
c. Cost of Living
d. Return of Premium
Waiver of Premium
The Waiver of Premium is a rider on a life insurance policy that guarantees that the premium will be paid if the insured is disabled for a specified period of time.
An incomplete life insurance application submitted to an insurer will resume in which of these actions?
a. Application will be returned to the writing agent
b. Application will be approved with restrictions
c. Application will be pending unit a MIB report is sent to the insurer
d. Application will be automatically declined
Application will be returned to the writing agent
if the company discovers a mistake or incompletion, it usually returns the application to the producer.
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
Insured
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
a. Cash Refund
b. Installment Refund
c. Straight Life annuity
d. Life Annuity with Period Certain
Straight Life annuity
Straight Life annuity is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company
Dividends paid from a life insurance policy are
a. guaranteed
b. taxable
c. issued by the insurer
d. issued by the Department of Insurance
Issued by the insurer
A whole life insurance policy owner does not wish to continue making premium payments. Which of the following enables the policy owner to sell the policy for more than its cash value?
a. Cash surrender
b. Life settlement contract
c. Buy-sell arrangement
d. 1031 Exchange
Life settlement contract
A retirement plan that sets aside part of the company’s net income for distributions to qualified employees is called a
a. rollover plan
b. 403(b) plan
c. profit-sharing plan
d. salary reduction plan
Profit sharing plan
A sole proprietor may use this plan ONLY if the employees of this business are included.
a. SEP Plan
b. Keogh Pension Plan
c. Individual Retirement Account (IRA)
d. SIMPLE Plan
Keogh Pension Plan
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer’s obligation in the event N was killed while flying as a student pilot?
a. Misrepresentation
b. Exclusion
c. Collateral assignment
d. Concealment
Exclusion
Exclusions are specified hazards listed in a policy for which benefits will not be paid
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
a. Request will be accepted only if in writing by the insured
b. Change will be made only if premiums are paid current
c. Change will be made immediately
d. Request of the change will be refused
Request of the change will be refused
An irrevocable designation may not be changed without the consent of the beneficiary.
What does a 401(k) plan generally provide its participants?
a. Tax-free distributions
b. Salary-deferral distributions
c. Salary-deferral contributions
d. A defined retirement benefit
Salary-deferral contributions
Credit life insurance is typically issued with which of the following types of coverage?
a. Annual Renewable Term
b. Decreasing Term
c. Individual Whole Life
d. Group Term
Decreasing Term
with the term matched to the length of the loan period
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
a. 30 Pay Life
b. Term to Age 70
c. Universal Life
d. Adjustable Life
30 Pay Life
How long does an individual have to “rollover” funds from an IRA or qualified plan?
a. 60 days
b. 90 days
c. 120 days
d. No limit
60 days
At what point does an informal agreement become a binding contract?
a. When one party makes an invitation and the other makes an offer
b. When an offer is made by one party and the other party rejects the offer and makes a counteroffer
c. When one party makes an offer and the other party accepts that offer
d. When consideration is provided by one of the parties to the contract
When consideration is provided by one of the parties to the contract
Consideration must be given in order to make a contact legally binding
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that the coverage begins immediately if the application is approved. What kind of receipt was used?
a. binding
b. Initial Premium
c. Conditional
d. Contingent
Conditional
A conditional receipt indicated that certain conditions must be met in order for the insurance coverage to go into effect
All of the following statements about traditional individual retirement accounts are false EXCEPT
a. 10% penalty is applied to withdrawals after age 59 1/2
b. Withdrawals are normally tax-free to the recipient
c. 10% penalty is applied to withdrawals before age 59 1/2
d. Contributions are not tax deductible
10% penalty is applied to withdrawals before age 59 1/2
Because an IRA is a qualified plan, it has the same rules for early withdrawal
In regards to representations or warranties, which of these statements is true?
a. Warranties are statements considered to be true to the best of the applicant’s belief
b. If material to the risk, false representations will void a policy
c. Representations are statements guaranteed to be true in every respect
d. If material to the risk, false representations will NOT void a policy
If material to risk, false representations will void a policy
A policy of adhesion can only be modified by whom?
a. The agent
b. The applicant
c. The primary beneficiary
d. The insurance company
The insurance company
A policy of adhesion is best described as a policy which only the insurance company can modify
A(n) [BLANK] beneficiary may be changed by the policy owner WITHOUT the consent of the beneficiary
a. Revocable
b. Irrevocable
c. Tertiary
d. Replaceable
Revocable
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?
a. Straight life accumulates faster than Limited-pay life
b. 20-Pay Life accumulates cash value faster than Straight Life
c. Cash value accumulation of both 20-Pay Life and Straight Life depends on the insurer’s financial rating
d. 20-Pay Life and Straight Life accumulate cash value at the same rate
20-Pay Life accumulates cash value faster than Straight Life
What action can a policy owner take if an application for a bank loan requires collateral?
a. Utilize accelerated benefits provision
b. Borrow against policy cash value and use as a down payment
c. Assign policy ownership to the bank
d. Name bank as beneficiary
Assign policy ownership to the bank
Why is an applicant’s signature required on a life insurance application?
a. To attest that the statements on the application are warranties
b. To attest that the statements on the application are accurate to the best of the applicant’s knowledge
c. To give Power of Attorney to the producer if needed
d. To attest that all statements on the application are guaranteed to be true
To attest that the statements on the application are accurate to the best of the applicant’s knowledge
All of the following statements are true regarding a policy’s Grace period, EXCEPT:
a. Past due premiums are waived
b. Policy loans may still be made
c. Full coverage continues
d. Grace period terms are stated in the policy
Past due premiums are waived
Who has the option to renew a Renewable Term policy?
a. Agency
b. Agent
c. Insured
d. Beneficiary
Insured
A non-contributory plan requires [BLANK] participation of all eligible employees
a. 25%
b. 50%
c. 75%
d. 100%
100%
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26
Coverage became effective on the date the policy was delivered and the first premium was collected
What type of life insurance gives the greatest amount of coverage for a limited period of time?
a. Term life
b. Graded Premium Whole life
c. Whole life
d. Endowment policy
Term Life
Term insurance would provide the greatest amount of protection for a limited period of time
The entity whose sole purpose is sharing medical data among its member companies is called the
a. National Association of Insurance Commissioners (NAIC)
b. Medical Information Bureau (MIB)
c. State government
d. State Underwriting Association
Medical Information Bureau (MIB)
Which of the following statements is CORRECT about accelerated death benefits?
a. The full face amount is available as an accelerated benefit
b. Those on Social Security disability automatically qualify for this benefit
c. This provision is usually provided with an increase in premium
d. Must have a terminal illness to qualify
Must have a terminal illness to qualify
Accelerated death benefits provide for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury
All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT
a. Income derived from the TSA is received income tax-free
b. TSA’s are available to public school employees
c. Contributions to the TSA are tax-deductible
d. Interest earned by TSA is tax deferred
Income derived from the TSA is received income tax-free
Upon retirement, payments received by employees from the accumulated savings in tax-sheltered annuities are treated as ordinary income.
K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse live. Which type of annuity did K purchase?
a. Single Premium Deferred Annuity with Period Certain
b. Flexible Premium with Survivor Annuity
c. Flexible Premium with Period Certain
d. Single Premium Immediate Joint with Survivor Annuity
Single Premium Immediate Joint with Survivor Annuity
This annuity was purchased with one payment and begins immediately. It also covers K and her spouse for the rest of their lives.
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:
a. Cash value has a minimum rate of accumulation
b. If the gain on the index goes beyond the policy’s 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
The premiums can be lowered or raised, based on investment performance
Equity Indexed Life Insurance is permanent life insurance that allows policyholders to tie accumulation values to a stock market index.
If 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?
a. Primary beneficiary’s estate
b. Primary beneficiary’s next of kin
c. Insured’s estate
d. Insured’s contingent beneficiary
Insured’s contingent beneficiary
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?
a. Return of premiums paid
b. Cash value plus interest
c. $20,000 death benefit
d. Face amount plus interest
$20,000 death benefit
If the insured dies before the endowments maturity, the policy’s face value - also known as the “death benefit” - is paid in a limp sum to any beneficiaries.
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
a. Collect premium from M’s estate
b. Deny the claim
c. Pay face amount minus the past due premium
d. Subtract past due premium from cash value
Pay face amount minus the past due premium
-because death occurred within the grace period
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
a. Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company
b. Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company
c. Complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company
d. Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company
Complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
a. 10% tax penalty for early withdrawal
b. Capital gains tax
c. Ordinary income tax and a 10% tax penalty for early withdrawal
d. Ordinary income tax
Ordinary income tax and a 10% tax penalty for early withdrawal
A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n) [BLANK] rate loan.
a. Fluctuating
b. Fixed
c. Variable
d. Increasing
Variable
Which of these would be considered a Limited-Pay Life policy?
a. 10-year Renewable and Convertible Term
b. Life Paid-Up at Age 70
c. Straight Whole Life
d. Renewable Term to Age 100
Life Paid-Up at Age 70
