Life ins exam Flashcards
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
Passed in 1945; the act was designed to, under certain conditions, ensure the preeminence (reign/supremacy) of state regulation not to free insurers from federal antitrust laws
McCarren-Ferguson Act
When third-party ownership is involved, applicants who also happen to be stated primary beneficiary are required to have
insurable interest in the proposed insured
How long does the coverage normally remain on a limited-pay life policy?
Age 100
The phrase “This policy will only pay for a semi-private room” is an example of a(n)
Internal limit
Which plan is intended to be used by a sole proprietor and the employees of that business?
Keogh Plan
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
An employer that offers a qualified retirement plan to its employees is eligible to
Make tax-deductible contributions to the plan
Tom has a qualified retirement plan with his employer that is currently considered to be 80% “vested”. How can this be interpreted?
It Tom’s employment is terminated, 20% of the funds would be forfeited”
Which tax would an IRA participant be subjected to on distributions received prior to age 59 ½?
Ordinary income tax and a 10% tax penalty for early withdrawal
Post-tax dollar contributions are found in
Roth IRA investments
How long does an indiv have to “rollover” funds from and IRA or qualified plan?
60 days
What is the excise tax rate the IRS imposes on indiv aged 70 ½ or older who do not take the required minimum distributions from their qualified retirement plan?
50%
In a qualified retirement plan, the yearly contributions to an employee’s account
Are restricted to maximum levels set by the IRS
What is considered a valid reason for small businesses to insure the lives of its major SH?
Fund a buy-sell agreement
When an indiv is planning to protect his family with life ins, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the indiv and his dependents
An engineer firm that would suffer financially from the death of a project manager should purchase a
Key Person life policy
Comp Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with indiv life ins, what would it require?
Each partner must own a policy on the other partners
G is an accountant who has ten employees and is concerned about how the business would survive financially if G became disabled. The type of policy which BEST addresses this concern is
Business Overhead Expense
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Utilities and office rent
The health ins program which is administered by each state and funded by both the federal and state governments is called
Medicaid
Which of the following reimburses its insureds for covered medical expenses?
Commercial insurers
Which of the following Dividend options results in taxable income to the policyowner?
Accumulation of Interest
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
The incontestable clause allows an insurer to
Contest a claim during the contestable period
Which type of policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
Which of the following best describes a contingent beneficiary?
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
Quarterly premium pmts increase the annual cost of ins because
Interest to the insurer is decreased while the administrative costs are decreased
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
Which premium schedule results in the lowest cost to the PO?
Annual
A level premium indicates
The premium is fixed for the entire duration of the contract
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
This clause provides the pmt of proceeds to the insured’s estate
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?
Insured’s contingent beneficiary
A PO is able to choose the frequency of premium pmts through what policy feature?
Premium mode
When can a PO change a revocable beneficiary?
Anytime
All of these are considered sources of underwriting information about an applicant, EXCEPT
Rating svcs
Which of the following statements is CORRECT about an agent who is taking an insurance app?
The agent should have the applicant initial any changes made on the app
The USA Patriot Act was enacted in
2001
What is being delivered during a policy delivery?
Insurance contract to the proposed insured
An agent gives a conditional receipt to a client for an ins policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
According to the Time Payment of Claims provision, the insurer must pay DIe benefits no less frequently than which of the following options?
Monthly
An insured pays premiums on an annual basis for an indiv health ins policy. What is the MINIMUM number of days for the Grace Period provision.
31
What type of renewability guarantees premium rates and renewability?
Noncancellable
Health ins benefits NOT covered due to an act of war are
Excluded by the insurer in the contract provisions
Periodic health claim pmts MUST be made at least
Monthly
Which of the following policy provisions prohibits an ins comp from incorporating external documents into an ins policy?
Entire contract
The clause in an Accident and Health policy which defines the benefit amounts the insurer will pay is called the
Insuring clause
An ins comp receives E’s app for an indiv health policy. E did not complete all of the medical history questions bc she could not remember the exact dates. E signed the policy and submitted it to the ins comp anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet?
Consideration clause
With Optionally Renewable Health policies, the insurer may
Review the policy annually and determine whether or not to renew it
An insured must notify an insurer of a medical claim within how many days after an accident
20 days
When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates?
Change of occupation provision
The Notice of Claims provision requires a PO to
Notify an insurer of a claim within a specified time
A DI PO recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the app was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of app. How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
The insuring clause:
States the scope and limits of the coverage
The sections of an ins contract which limit coverage are called
Exclusions
When an ins comp sends a policy to the insured with an attached app, the element that makes the app part of the contract between the insured and the insurer is called the:
Entire contract provision
According to the Time Limit of Certain Defenses provision in an Indiv Health Ins Policy, nonfraudulent misstatements first become incontestable
Two years from the date of the policy was issued
Which health policy clause stipulates that an ins comp must attach a copy of the app to the policy to ensure that it is part of the contract?
Entire contract
The Legal Actions provision of an ins contract is designed to do all of the following, EXCEPT
Protect the producer
What must the PO provide to the insurer for validation that a loss has occurred?
Proof of loss
P is self-employed and owns an Indiv DI policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?
$0
A prepaid application for indiv DI ins was recently submitted to an insurer. When the insurer received the MIA (Medical Information Bureau) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the ins comp NOT take?
Send a notice to the MIB that the applicant was declined
Pre-hospitalization authorization is considered an example of
Managed care
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the ins company. The ins comp returns the check back to J bc the check is made out to J instead of the ins comp. What action should J take?
Return to the customer, collect a new check made out to the ins comp, and send the new check out to the ins company
T is receiving $3,000/month from a DIe policy in which T’s employer had paid the premiums. How are the $3,000 benefit pmts taxable?
Benefits are taxable to T
An agent takes an indiv DI app, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the ins comp will take is to:
Determine if the applicant is an acceptable risk by completing standard underwriting procedures
Which of the following correctly explains the action an agent should take if a customer wants to apply for an ins policy?
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 Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Inspection report
An ins applicant MUST be informed of investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
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
At what point must a life ins applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Fair Credit Reporting Act
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
Fair Credit Reporting Act
MIB
Medical Information Report
DI
Disability income
FRCA
Fair Credit Reporting Act
A Medical Information Report (MIB) may disclose which of the following
Prior use of marijuana
Which of the following actions will an ins comp most likely NOT take if an applicant, who has diabetes, applies for a DI policy?
Issue the policy with an altered Time of Payment of Claims provision
Which of the following statements about the classification of applicants is INCORRECT?
Substandard [Medicaid, medicare] applicants are never declined by underwriters
An annuity promises that, if the annuitant dies before receiving pmts equal to the correct value, the pmts will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called
An installment Refund annuity
P is a 40 year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity
W is a 39 year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n)
Immediate annuity
The type of annuity that can be purchased with one monetary deposit is called a(n)
Immediate annuity
P, age 50, purchased an annuity that P will fund with $500/month for 15 years. The annuity will then pay P retirement pmts after the 15 years. Which type of annuity did P purchase?
Deferred
