Life Insurance deck 2 Flashcards
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Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting At, what is the maximum penalty that may be imposed on Ken.
1000
3000
5000
7000
5000
Fraternal Benefit Society has each of the following characteristics EXCEPT:
Incorporated
Without capital stock
Exist for profit
Exist for the benefit of its
members
Exist for profit
An insurers claim settlement practices are regulated by the:
Securities and Exchange Commission (SEC)
National Association of Claims Adjusters (NACA)
National Association of Insurance Commissioners (NAIC)
State Insurance Departments
State Insurance Departments
A plan in which an employer pays insurance benefits from a fund derived from the employer’s current revenues are called?
A self-derived plan
A multiple employer plan
A blanket plan
A self funded plan
A self-funded plan
Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?
0
5000
10000
15000
10000
What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?
Nonparticipating life insurance policy
Participating life insurance policy
Divisible surplus life insurance policy
Straight life insurance policy
Participating life insurance policy
A nonparticipating company is sometimes called an:
Alien insurer
Mutual insurer
Reinsurer
Stock insurer
Stock Insurer
Why are dividends from a mutual insurer not subject to taxation?
Because insurance premiums are tax deductible
Because dividends are already subject to capital gains
Because dividends are payable directly to the policy holder
Because dividends are considered to be a return of premium
Because dividends are considered to be a return or premium
Which of the following is considered to be an event or condition that increases the probability of an insured’s loss?
Risk
Hazard
Indemnity
Peril
Hazard
In an insurance contract, the applicant’s consideration is:
Offer and acceptance
Premium only
Statements made in the application and the premium
Statements made in the application only
Statements made in the application and the premium
A professional liability for which producers can be sued for mistakes of putting a policy into effect is called:
Fiduciary bond
Errors and omissions
Fiduciary trust
Errors and oversights
Errors and omissions
Who is responsible for assembling the policy forms for insureds?
State Insurance Departments
NAIC
Insurance carriers
Insurance producers
Insurance carriers
Which of the following BEST describes a conditional insurance contract?
A contract that requires certain conditions or acts by the insured individual
A contract that has the potential for the unequal exchange of consideration for both parties
A contract where one party adheres to the terms of the contract
A contract where only one party makes any kind of enforceable contract
A contract that requires certain conditions or acts by the insured individual
The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as:
Apparent
Estoppel
Aleatory
Unilateral
Aleatory
The authority granted to a licensed producer is provided via the:
Producer’s apparent authority Written contract Law of agency Principal capacity
Law of agency
All of the following are elements of an insurance policy EXCEPT:
Definitions
Other insurance
Claim forms
Conditions
Claim forms
Which of these describes the result of a modified endowment contract that failed to meet with the seven-pay test?
Policy loans are disallowed
The premium payments will be tax deductible
Pre-death distributions are typically taxable
Withdrawals will be prohibited
Pre-death distributions are typically taxable
Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance?
Policyowner may increase or decrease the premium payments
Policyowner may increase or decrease the face amount
Policyowner can contribute large sums of money
Policyowner has the right to select the investment which will provide the greatest return
Policyowner has the right to select the investment which will provide the greatest return
A modified endowment contract (MEC) is best described as:
A life insurance contract which accumulates cash values higher than the IRS will allow
An annuity contract which was converted from a life insurance contract
A modified life contract which enjoys all the tax advantages of whole life insurance
A life insurance contract where all withdrawals prior to age 65 are subject to a 10% penalty
A life insurance contract which accumulates cash values higher than the IRS will allow
Jonas is a whole life insurance policy owner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this?
Child term rider
Payor rider
Family maintenance rider
Family income rider
Child term rider
Shawn, Mike, and Dave are brothers who have a 100000 first to die joint life policy covering all 3 of their lives. If Mike dies first, the policy proceeds:
Will no longer provide insurance protection
Will go to mike’s estate
Will be divided by probate
Will not be paid until the last brother dies
Will no longer provide insurance protection
Which type of life insurance is normally associated with a Payor benefit rider?
Juvenile insurance
Family income insurance
Spouse insurance
Term rider
Juvenile insurance
The premium for a modified whole life policy is:
Higher than the typical whole life policy during the first 5 years and then lower than typical for the remainder
Lower than the typical whole life policy during the first few years and then higher than typical for the remainder
Normally graded over a period of 20 years
Level for the first 5 years then the decreasing for the remainder of the policy
Lower than the typical whole life policy during the first few years and then higher than typical for the remainder
Rob purchased a standard whole life policy with a 500000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals 250000. Rob recently died at age 60. The death benefit would be:
250000
750000
375000
500000
500000
Which of the following are the premium payments for a universal life policy NOT used for?
Death benefits
Cash value
Loading costs
Separate account investments
Separate account investments
A renewable term life insurance policy can be renewed:
At a predetermined date or age, regardless of the insured’s health
Only if the insured provides evidence of insurability
Anytime at the policy owner’s request
Typically with no change in premium
At a predetermined date or age, regardless of the insured’s health
Which is a corridor in relation to a universal life insurance policy?
The gap between the total death benefit and the policy’s cash value
The gap between when a claim is filed and when the death benefit is received
The amount of interest that has accumulated in the policy’s cash value
The point in time when the policy’s cash value reaches 0
The gap between the total death benefit and the policy’s cash value
All of these statements concerning whole life insurance are false EXCEPT:
Policyowner can take out a policy loan up to the face amount
When a whole life policy is surrendered, income taxes may be owed
Coverage is normally temporary
The death benefit is not affected by outstanding loans
When a whole life policy is surrendered, income taxes may be owed
An interest-sensitive life insurance policyowner may be able to withdraw the policy’s cash value interest free. The provision that allows this is called:
Partial surrender
Subrogation
Automatic premium loan
Accelerated death benefit
Partial surrender
Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?
Adjustable life policy
Modified life policy
Endowment policy
Universal life policy
Endowment policy
Which policy feature makes a universal life policy different from a whole life policy?
A fixed cash value
A flexible premium schedule
A fixed death benefit
The ability to take out a policy loan
A flexible premium schedule
When a decreasing term policy is purchased, it contains a decreasing death benefit and:
Increasing premiums
Level premiums
Decreasing premiums
Variable premiums
Level premiums
How are survivorship life insurance policies helpful in estate planning?
Provide funds to help fund retirement
Provide funds to help pay taxes
Provide funds for funeral expenses
Provide tax deductions for premium payments
Provide funds to help pay taxes
What does the word level in level term describe?
The period of coverage
The face amount
The premium payments
The cash value
The face amount
A life insurance policy written on one contract for two people in which it is payable upon the first death is called:
Split
Shared
Joint
Survivorship
Joint
Which of these describe the result of a modified endowment contract that failed to meet the 7 pay test?
Policy loans are disallowed
The premium payments will be tax deductible
Pre-death distributions are typically taxable
Withdrawals will be prohibited
Pre-death distributions are typically taxable
Which dividend option would an insurer invest the policy owner’s money and add any interest earnings as the dividends accrue?
Accumulation at interest option
Cash dividend option
Paid-up additions option
One-year term dividend option
Accumulation at interest option
All of the following riders can increase the death benefit amount EXCEPT:
Cost of living
Waiver of premium
Accidental death rider
Guaranteed insurability
Waiver of premium
A whole life insurance policy accumulates cash value that becomes:
The policy loan value which the insured may borrow against
The death benefit
The source of funding for administration fees
A source of funding a term rider to the policy
The policy loan value which the insured may borrow against
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy’s inception, the insurer will only be liable for a return of premiums paid:
Minus indebtedness and with interest
During the last 12 months
Minus indebtedness and without interest
During the last 6 months
Minus indebtedness and without interest
What is the purpose for having an accelerated death benefit on a life insurance policy?
It allows for a spouse to be added as a rider to a life insurance policy
It allows for policy loans to be advanced to the insured in the event of unemployment
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
It allows for a third party to purchase a life insurance policy at a discounted rate and immediately advance a portion of the death benefit
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
The automatic premium loan provision authorizes an insurer to withdraw from a policy’s cash value the amount of:
Any interest payable from an outstanding policy loan balance
Past due premiums that have not been paid by the end of the grace period
The outstanding policy loan balance
Any surrender charges owed by the policyowner
Past due premiums that have not been paid by the end of the grace period
Which of these is NOT a characteristic of the Accelerated Death Benefit option?
The face amount and policy premium are not affected by the payment
Before payment of the benefit is made, specific conditions must exist, such as suffering from terminal illness
There may be a dollar limit on the maximum benefit
The benefit can be offered as a rider at a specific extra cost or may be at no cost
The benefit can be offered as a rider at a specific extra cost or may be at no cost
Which type of rider will waive the premium on a child’s life insurance policy if the parent paying the premium dies?
Waiver of premium
Juvenile waiver
Guaranteed insurability
Payor benefit
Payor benefit
A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?
Reduction of premium dividend option
Extended term option
Paid up option
Cash dividend option
Reduction of premium dividend option
Which situation accurately describes a reduced paid-up nonforfeiture option?
Policy has a decreased face amount
Face amount of the new policy equals that of the original policy
Cash value is surrendered to policyowner
Premiums must continue to be paid
Policy has a decreased face amount
Which of these is NOT considered to be a common life insurance nonforfeiture option?
Cash surrender
Extended term insurance
Reduced paid-up insurance
Life income annuity
Life income annuity
A guaranteed issue insurance policy has no:
Initial premium requirement
Incontestable period
Waiting period
Medical underwriting
Medical underwriting
What would be an expense factor in an insurance program?
Premiums collected
Mortality costs
Opportunity costs
Investment interest
Mortality costs
A life insurance claim which involves a per capita distribution of policy proceeds would be payable to the
Estate of the insured only
Estate of the deceased beneficiaries only
Named contingent beneficiaries only
Named living primary beneficiaries
Named living primary beneficiaries
Proceeds from a life insurance policy are protected from the beneficiary’s creditors by which clause?
Protection clause
Creditor clause
Spendthrift trust clause
Beneficiary trust clause
Spendthrift trust clause
Which type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?
Individual
Group
Class
Estate
Individual
Insurance premium is determined by each of the following factors EXCEPT:
Mortality
Interest
Expenses
Liquidity
Liquidity
What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured?
Policy dividend
Specified amount of money
Policy’s cash value
Funeral expense fund
Specified amount of money
Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?
A waiver of premium
A replacement form
A good health statement
An exclusion
A good health statement
Signatures for an insurance application MUST be obtained by the producer from all of the following sources EXCEPT:
The producer
The insured
The policy owner
The beneficiary
The beneficiary
What guarantees that the statements supplied by an insurance applicant are true?
Assurance
Promise
Representation
Warranty
Warranty
A field underwriter’s main task is:
Assign a risk classification to the insured
Report medical information to the Medical Information Bureau (MIB)
To ensure an applicant’s medical information is accurate and complete
To approve or decline an applicant
To ensure an applicant’s medical information is accurate and complete
Which of the following does a life insurance policy summary normally include?
The policy’s cash value
Agent’s report
Policy owner’s MIB report
Stated Beneficiary
The policy’s cash value
In regards to a life insurance contract, which of the following statements is NOT true regarding the concept of insurable interest?
Individuals are assumed to have insurable interest in themselves
Insurable interest is established by a court of law
Insurable interest can be established sufficiently by sentimental attatchment alone
Insurable interest must exist at the time of the application
Insurable interest can be established sufficiently by sentimental attachment alone
Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
Life only
Life with period certain
Cash refund
Installment refund
Life only
Which of these statements regarding the annuitant is CORRECT?
The contract can only be assigned by the annuitant
The annuitant is the only individual who can surrender the contract
The annuitant must also be the beneficiary
The annuitant’s life expectancy determines the annuity payments
The annuitant’s life expectancy determines the annuity payments.
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Fixed period
Interest only
Installment refund
Life income
Life income
Who assumes the investment risk with a fixed annuity contract?
The owner
The annuitant
The insurer
The beneficiary
The insurer
An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made.
Variable annuity
Refund annuity
Rebate annuity
Return annuity
Refund annuity
An insured’s status under Social Security can be describes as:
Partially insured
Actively insured
Fully insured
Completely insured
Fully Insured
Which of the following employers is required to follow ERISA REGULATIONS?
A local government with 150 employees
A church with 30 employees
A locals electrical supply company with 12 employees
A Canadian company with 300 employees working in the United States
Local electrical supply company with just 12 employees.
The acceptance of a credit life application requires the submission of a certificate of insurance to the insured within __________ days
10
20
30
40
30
A foreign insurance company doing business in Idaho:
Is a company domiciled under the laws of another state
Is not subject to Idaho insurance laws
Is a company that was formed under the laws of another country
Is only authorized to write business outside the United States
Is a company domiciled under the laws of another state
Which of the following is required for an insurer to conduct business in this state?
Certificate of admission
Certificate of domestication
Certificate of authenticity
Certificate of authority
Certificate of authority
In Idaho, a producer may have his/her license revoked for which of the following acts?
Loss of insurer appointment
Producing an inadequate amount of new premium
Sharing commission with another licensed agent
Failure to pay state income tax
Failure to pay state income tax
An example of misrepresentation is:
Making a public statement that contains false or malicious information about an insurance company
Charging a different rate for someone in the same actuarial class
Offering premium rebate or a special advantage of any kind to a consumer as an inducement to purchase a contract of insurance
Providing incorrect, misleading, incomplete or materially untrue information in the license application
Providing incorrect, misleading, incomplete, or materially untrue information in the license application
A temporary license is valid for a maximum of _____ days:
30
60
90
180
180
Which of the following is NOT a circumstance to which a temporary producer’s license can be issued?
Representation of a producer called to active military duty
Prospective producer who is waiting to take the state licensing examination
A widow of a deceased producer
Any circumstance deemed by the Commissioner to be in the public’s best interest
Prospective producer who is waiting to take the state licensing exam
Terminally ill life insurance policy owners may sell their policy at a discount to a third party. This type of agreement is called an?
Annuitized settlement
Life settlement
Accelerated benefit
Nonforfeiture value
Life settlement
A false written oral statement made by a producer for the purpose of replacing an existing policy to the detriment of the insured is:
Twisting
Illegal inducement
Discrimination
Defamation
Twisting
Violations of US Code title 18 section 1033, may result in
Fine and/or imprisonment
Cease and desist order
Suspension of producer’s license
Loss of company appointment
Fine and/or imprisonment
When credit life is written, evidence of coverage (a policy or certificate of insurance) must be delivered to the debtor when the debt is incurred or within how many days?
10
20
30
60
30
When must a claim on a life insurance policy be paid after proof of loss has been received by the insurer?
1 month
2 months
3 months
4 months
2 months
Twisting is
Sharing commissions with other producers
Offering employment as an incentive to purchase insurance
Replacing an insurance policy from one insurer to another based on misrepresentation
Making malicious public statements regarding an insurer’s financial condition
Replacing an insurance policy from one insurer to another based on misrepresentation
The Idaho Life and Health Insurance Guaranty Association protects life insurance death benefit claims up to:
500000
400000
300000
200000
300000
A producer has allowed his/her license to lapse by failing to complete the required continuing education credits. The license may be reinstated by completing the requirement within____ months of the renewal date.
6
8
12
18
12
A producer is required to maintain insurance transaction records for ______ years?
3
7
5
9
5
Replacement can be BEST described as
Exchanging a new policy for one already in force
Converting term insurance to a permanent policy
An illegal transaction performed by a producer
An existing policy being renewed by the application on the renewal date
Exchanging a new policy for one already in force
A producer may be disciplined by the director for which of the following actions?
Being accused of a felony
Misappropriation of premium funds
Sharing commissions with other licensed producers
Failing to meet insurer production requirements
Misappropriation of premium funds
What is a nonprofit entity, operating under a lodge system?
Fraternal
Paternal
Maternal
Reciprocal
Fraternal
A life settlement broker may NOT:
Advertise their services
Recommend a settlement provider to a viator
Charge fees
Make any transactions before being approved for a license
May any transactions before being approved for a license
Within ________days after policy delivery, an individual life insurance policy can be returned for a 100% premium fund.
10
20
30
40
20
Idaho requires a licensee to complete _____ hours of continuing education hours each licensing period.
12
24
36
48
24
___________ is the authority given to a producer to sell solicit, or negotiate policies on behalf of the insurer.
Admission
Appointment
Adjustment
Authorization
Appointment
The Director is appointed by which of the following?
Legislature
Senate
Secretary of State
Governor
Governor
A producer is hired to sell insurance for an insurer. Upon submission of the agency contract application, the producer MUST be appointed by the insurer within _________ days.
7
15
21
30
15
If the director determines that in individual has engaged in an act violating state insurance laws, the Commissioner may issue an order requiring the violator to:
Report to prison
Stop engaging in those acts
Appear before a jury of his/her peers
Perform community service
Stop engaging in those acts
An example of life insurance replacement is
Canceling disability policy to buy a term life policy
Canceling a term life policy to buy a whole life policy
Canceling a long term care policy to buy a whole life policy
Canceling a whole life policy to buy a major medical policy
Canceling a term life policy to buy a whole life policy
Tim’s individual life insurance policy has recently lapsed. His policy may be reinstated at any time within __________ years?
1
2
3
4
3
An example of misrepresentation is:
Offering a premium rebate or special advantage of any kind to a consumer as an inducement to purchase a contract of insurance
Making a public statement that contains false or malicious information about an insurance company
Charging a different rate for someone in the same actuarial class
Convincing a prospective insured to purchase a policy by exaggerating the benefits of the policy
Convincing a prospective insured to purchase a policy by exaggerating the benefits of the policy
Every producer licensed in Idaho must notify the Director within _______ days of any change of address.
15
20
25
30
30
A valid contract:
Does not include consideration
Must be bonded
Is not binding
Must include offer and acceptance
Must include offer and acceptance
If a producer is found to have violated an Idaho insurance statute, a fine can be given up to_____________ for each violation.
500
1000
1500
2000
1000
A fraternal benefit society has each of the following characteristics EXCEPT:
Incorporated
Without capital stock
Exists for profit
Exists for the benefit of its members
Exists for profit
The Director serves a term of _______ years
2
3
4
5
4
Which of the following unfair trade practices involves a producer who makes public, malicious statements about an insurer’s financial condition?
Boycotting
Defamation
Unfair discrimination
Misrepresentation
Defamation
Producer appointments are filed with the Director by the:
Producer
Insurer
Director
Governor
Insurer
All of the following activities require an insurance producer’s license EXCEPT:
Underwriting
Negotiating
Selling
Soliciting
Underwriting
An insurance company that has qualified and received a Certificate of Authority from the Director to sell insurance in this state is called an:
Fraternal organization
Nonadmitted insurer
Unauthorized insurer
Authorized insurer
Authorized insurer
An insurer would be committing Unfair Discrimination if coverage was denied based upon:
HIV positive result
Marital status
Diabetes
A mental disorder
Marital status
A non-authorized (nonadmitted) insurance company:
Is protected by the Guaranty Fund Is not protected by the Guaranty Fund May only appoint non-admitted producers May be granted a temporary certificate of authority until they are admitted
Is not protected by the Guaranty Fund
A producer must report to the Director any administration action or criminal charges taken against the producer within ____________days of the final disposition of the matter.
5
10
20
30
30
A producer who is licensed in Idaho but resident in another state is called a:
Nonresident producer
Foreign producer
Reciprocal producer
Limited lines producer
Nonresident producer
If an insurer terminates a producer’s appointment, it must notify the Director within________ days of the termination.
20
25
30
35
30
Idaho requires that a licensee completes ________ hours of continuing education on the subject of ethics every reporting period.
1
2
3
4
3
