Illinois Laws and Rules Pertinent to Insurance

Question 1

Q the producer knowingly misappropriated fiduciary money in the amount of $150. This is his second offense. Q will likely be charged with a 
<> Class A misdemeanor
<> Class 3 felony 
<> Class 4 felony
<> Class B misdemeanor

Answer 1

Class 4 felony
~ If an insurance producer known kingly misappropriates or converts fiduciary moneys in the amount of $150 or less, he or she is guilty of a Class A misdemeanor. Repeated occurrences of such actions are subsequently rated a Class 4 felony

Question 2

The Director is appointed by the \_\_\_\_.
<> Governor
<> Attorney General 
<> State Senate 
<> NAIC

Answer 2

Governor

Question 3

An Illinois producer must do which of the following to continue as a residential license?
<> Take a new licensing exam
<> Meet a sales quota
<> Meet continuing education requirements
<> Attain managerial status

Answer 3

Meet continuing education requirements
~ To renew a product license, a producer must complete 24 hours of continuing education courses every 2 years, with 3 of those being on the subject of ethics.

Question 4

A hearing must be held before a producer’s license can be suspended or revoked. Prior to the hearing, the director is required to
<> give oral notice to the producer
<> give written notice to the producer
<> give notice to the producer’s insurance company
<> give notice to the NAIC

Answer 4

give written notice to the producer
~ Before holding a hearing that may lead to suspension or revocation of a producer’s license, the director MUST give written notice to the producer

Question 5

The Illinois Life and Health Insurance Guaranty Association has regulations that apply ONLY to
<> Life and Health policies issued by companies authorized outside of Illinois
<> self-funded plans that are sold in Illinois
<> Life and Health policies issued by companies authorized in Illinois
<> variable products sold in Illinois

Answer 5

Life and Health policies issued by companies authorized in Illinois
~ The rules and regulations of the Life and Health Insurance Guaranty Association in Illinois apply to Life and Health policies issued by companies authorized in Illinois

Question 6

The act of replacing an existing inurance policy with another is called
<> renewal
<> regulation
<> replacement
<> reinstatemnt

Answer 6

replacement

~ The act of replacing an existing insurance policy with another is called replacement

Question 7

All of these are required to be included in a life insurance illustration EXCEPT
<> rating classification
<> initial death benefit 
<> insurer's name
<> insurer's mortality table

Answer 7

insurer’s mortality table

~ A life insurance illustration is NOT required to include the insurer’s mortality table

Question 8

The Guaranty Fund
<> ensures that claims filed against insolvent insurance companies will be paid
<> enforces Illinois insurance regulations
<> approves policy forms
<> underwrites high-risk applicants

Answer 8

ensures that claims filed against insolvent insurance companies will be paid
~The sole purpose of the Guaranty Fund is to ensure that claims filed against insolvent insurance companies will be paid

Question 9

Replacement can be defined as
<> converting term coverage to an individual whole life policy
<> cash surrounding an existing policy
<> accepting a reduced paid-up policy
<> exchanging an exisiting policy for a new policy

Answer 9

exchanging an existing policy for a new policy

~ Replacement regulation defines replacement as exchanging (or altering) an existing policy for a new policy

Question 10

Who signs a "Notice Regarding Replacement" form when an application is taken for a new life insurance policy that replaces an existing one?
<> Producer only
<> Applicant only
<> Producer and applicant
<> Beneficiary

Answer 10

Producer and applicant
~ A producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer at the time of application. A copy must be left with the applicant

Question 11

According to Illinois insurance law, life insurance claim payments made after \_\_\_\_ days from receipt of satisfactory proof of loss must receive the insurer's current interest rate.
<> 10
<> 15
<> 20
<> 31

Answer 11

31
~ If settlement of a claim is not reached within 31 days of receipt of satisfactory proof of death, the insurer shall pay interest on the claim at a rate no less than that paid on proceeds left on deposit with the insurer, computed from the date of death

Question 12

Which of these is a REQUIREMENT for obtaining a nonresident insurance producer license?
<> A similar license must be held by the producer in his/her state of residence
<> Producer must be 21 years of age
<> Producer must have written a minimum amount of insurance business in his/her state of residence
<> A surety bond of $500,000 must be obtained by the producer

Answer 12

A similar license must be held by the producer in his/her state of residence

Question 13

A lapsed producer's license may be reinstated without having to pass a written exam if the license lapses within \_\_\_ months after the renewal fee due date.
<> 12
<> 10
<> 8
<> 6

Answer 13

12
~ An individual insurance producer who allows his or her license to lapse may, within 12 months after the due date of the renewal fee, be issued a license without having to pass a written examination. However, a penalty in the amount of double the unpaid renewal fee shall be required after the due date

Question 14

Stating that dividends are guaranteed is considered to be
<> defamation
<> misrepresention 
<> rebating
<> discrimination

Answer 14

misrepresentation

~ stating that dividends are guaranteed is considered an act of misrepresentation

Question 15

T the producer has just collected premium monies from a client. T may personally hold these funds for a MAXIMUM of \_\_\_\_\_ days before depositing them in a Premium Fund Trust Account.
<> 7
<> 14
<> 21
<> 28

Answer 15

14
~ Any funds from applicants or policy owners that will be held for 15 days or longer by the producer must be deposited in a Premium Fund Trust Account (PFTA)

Question 16

A(n) \_\_\_\_ lines producer may sell Travel Accident insurance in Illinois.
<> accidental
<> limited
<> travel
<> restricted

Answer 16

limited

~ A limited lines producer may sell Travel Accident insurance

Question 17

In Illinois, which of the following MUST be delivered to a policy owner upon the sale of an individual life insurance policy?
<> Insurer's AM Best rating
<> The written proposal
<> Policy Summary and Buyer's Guide 
<> Buyer's Guide only

Answer 17

Policy Summary and Buyer’s Guide
~ A producer who sells an individual life insurance policy in Illinois MUST deliver to the policy owner a Policy Summary and Buyer’s Guide

Question 18

Q the producer gave his client a rebate as an enticement to purchase insurance. Q may be found guilty of a 
<> felony
<> Class A misdemeanor
<> Class B misdemeanor
<> moral transgression

Answer 18

Class B misdemeanor

~ Any company or person convicted of a rebating violation will be guilty of a Class B misdemeanor

Question 19

T purchased a life insurance policy. T is entiled to review the policy and return it for a full refund
<> within 10 days of the sales presentation
<> within 10 days after delivery of this policy
<> within 10 days after policy issue
<> within 20 days after delivery of the policy

Answer 19

within 10 days after delivery of this policy
~ After the policy has been received and read, the policyholder has 10 days to exercise the provison for an unconditional refund

Question 20

It is acceptable to discriminate the amount of benefits for life and health policies between individuals of
<> the same country of origin
<> different classes
<> different religious faiths 
<> the same racial category

Answer 20

different classes

~ It is fair to discriminate in the amount of benefits for life and health policies

Question 21

A temporary insurance license is valid for up to \_\_\_\_ days.
<> 30
<> 45 
<> 90
<> 180

Answer 21

90
~ The Director may grant a temporary insurance producer license to an applicant for an insurance producer license, without requiring an examination, for a period of 90 days

Question 22

In a viatical settlement, how much does the policy owner receive for a life insurance policy?
<> Amount equal to the sum of all premiums paid
<> Amount equal to the death benefit
<> Amount greater than the death benefit
<> Amount less than the death benefit

Answer 22

Amount less than the death benefit

~ The amount received for a life insurance policy in a viatical settlement is less than the death benefit

Question 23

A policy owner decides to cancel an insurance policy within 90 days of the issue date. As a result of this cancellation, the producer is REQUIRED to refund a prorated portion of any fee charged within \_\_\_ days of receiving the cancellations notice.
<> 30 
<> 45
<> 60
<> 90

Answer 23

30
~ When a policy is canceled within 90 days of the inception date, the producer MUST refund to the consumer a prorated portion of any fee charged within 30 days of receiving notifcations of cancellation

Question 24

Which of these is NOT an unfair method of competiton?
<> Publish misleading information about insurance coverage
<> Replace coverage written by another producer
<> Monopolize the business of insurance
<> Misrepresent any fact about an insurance policy

Answer 24

Replace coverage written by another producer

~ All of these are unfair methods of competition except for “Replace coverage written by another producer”.

Question 25

Which of the following is NOT a valid reason for the Director to suspend or revoke a producer’s license?
<> Producer returns part of a commission to a client in exchange for a sale
<> Producer represents more than one insurance company
<> Producer engages in false advertising
<> Producer commingles premiums collected with a personal account

Answer 25

Producer represents more than one insurance company

~ Representing more than one insurance company will NOT result in a suspension or revocation of a producer’s licence

Question 26

Before applying for an Illinois resident producer license, an applicant MUST
<> register with the NAIC
<> be 21 years old
<> have attained a high school diploma
<> complete a prelicensing course

Answer 26

complete a prelicensing course

~ An applicant must complete a pre-licensing course of study before applying for a resident insurance producer license

Question 27

The Life and Health Insurance Guaranty Association
<> assumes the financial obligations of the insolvent insurance companies
<> is regulated by the National Association of Insurance and Finacial Advisors (NAIFA)
<> assists in underwriting large policies
<> sets rates for the insurer

Answer 27

assumes the financial obligations of the insolvent insurance companies
~ The Life and Health Insurance Guaranty Association may assume the financial obligations of an insolvent insurance company

Question 28

Which of the following triggers an accelerated (living) benefit?
<> Becoming unemployed
<> Broken arm 
<> Qualifying event
<> Filing bankruptcy

Answer 28

Qualifying event

~ Accelerated (living) benefits are triggered by qualifying events such as a terminal illness or needing long-term care

Question 29

Which of the following types of insurance may a limited lines producer sell?
<> Whole life
<> Disability 
<> Industrial life
<> Endowment

Answer 29

Industrial life
~ A limited lines producer may sell industrial (home service) life insurance. industrial life insurance is a policy priced well below its counterparts and is sold by producers who sell it door to door. It is popular among low- to middle-income buyers

Question 30

A producer has influenced an existing policy owner to convert an existing whole life policy to Reduced Paid-up insurance. The producer then sells the policy owner a new universal life policy. This transaction is called a(n):
<> misrepresentation
<> conversion
<> replacement
<> asset roller

Answer 30

replacement