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Life Insurance > Life Insurance deck 2 > Flashcards

Life Insurance deck 2 Flashcards

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1
Q

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

A

5000

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2
Q

Fraternal Benefit Society has each of the following characteristics EXCEPT:
Incorporated
Without capital stock
Exist for profit
Exist for the benefit of its
members

A

Exist for profit

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3
Q

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

A

State Insurance Departments

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4
Q

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

A self-funded plan

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5
Q

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

A

10000

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6
Q

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

A

Participating life insurance policy

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7
Q

A nonparticipating company is sometimes called an:
Alien insurer
Mutual insurer
Reinsurer
Stock insurer

A

Stock Insurer

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8
Q

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

A

Because dividends are considered to be a return or premium

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9
Q

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

A

Hazard

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10
Q

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

A

Statements made in the application and the premium

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11
Q

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

A

Errors and omissions

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12
Q

Who is responsible for assembling the policy forms for insureds?
State Insurance Departments
NAIC
Insurance carriers
Insurance producers

A

Insurance carriers

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13
Q

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

A contract that requires certain conditions or acts by the insured individual

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14
Q

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

A

Aleatory

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15
Q

The authority granted to a licensed producer is provided via the:

 Producer’s apparent authority
 Written contract
 Law of agency
 Principal capacity
A

Law of agency

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16
Q

All of the following are elements of an insurance policy EXCEPT:
Definitions
Other insurance
Claim forms
Conditions

A

Claim forms

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17
Q

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

A

Pre-death distributions are typically taxable

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18
Q

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

A

Policyowner has the right to select the investment which will provide the greatest return

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19
Q

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

A life insurance contract which accumulates cash values higher than the IRS will allow

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20
Q

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

A

Child term rider

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21
Q

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

A

Will no longer provide insurance protection

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22
Q

Which type of life insurance is normally associated with a Payor benefit rider?
Juvenile insurance
Family income insurance
Spouse insurance
Term rider

A

Juvenile insurance

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23
Q

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

A

Lower than the typical whole life policy during the first few years and then higher than typical for the remainder

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24
Q

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

A

500000

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25
Q

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

A

Separate account investments

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26
Q

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

A

At a predetermined date or age, regardless of the insured’s health

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27
Q

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

A

The gap between the total death benefit and the policy’s cash value

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28
Q

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

A

When a whole life policy is surrendered, income taxes may be owed

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29
Q

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

A

Partial surrender

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30
Q

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

A

Endowment policy

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31
Q

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

A flexible premium schedule

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32
Q

When a decreasing term policy is purchased, it contains a decreasing death benefit and:
Increasing premiums
Level premiums
Decreasing premiums
Variable premiums

A

Level premiums

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33
Q

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

A

Provide funds to help pay taxes

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34
Q

What does the word level in level term describe?
The period of coverage
The face amount
The premium payments
The cash value

A

The face amount

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35
Q

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

A

Joint

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36
Q

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

A

Pre-death distributions are typically taxable

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37
Q

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

A

Accumulation at interest option

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38
Q

All of the following riders can increase the death benefit amount EXCEPT:
Cost of living
Waiver of premium
Accidental death rider
Guaranteed insurability

A

Waiver of premium

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39
Q

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

A

The policy loan value which the insured may borrow against

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40
Q

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

A

Minus indebtedness and without interest

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41
Q

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

A

It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill

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42
Q

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

A

Past due premiums that have not been paid by the end of the grace period

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43
Q

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

A

The benefit can be offered as a rider at a specific extra cost or may be at no cost

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44
Q

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

A

Payor benefit

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45
Q

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

A

Reduction of premium dividend option

46
Q

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

A

Policy has a decreased face amount

47
Q

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

A

Life income annuity

48
Q

A guaranteed issue insurance policy has no:
Initial premium requirement
Incontestable period
Waiting period
Medical underwriting

A

Medical underwriting

49
Q

What would be an expense factor in an insurance program?
Premiums collected
Mortality costs
Opportunity costs
Investment interest

A

Mortality costs

50
Q

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

A

Named living primary beneficiaries

51
Q

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

A

Spendthrift trust clause

52
Q

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

A

Individual

53
Q

Insurance premium is determined by each of the following factors EXCEPT:
Mortality
Interest
Expenses
Liquidity

A

Liquidity

54
Q

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

A

Specified amount of money

55
Q

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

A good health statement

56
Q

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

A

The beneficiary

57
Q

What guarantees that the statements supplied by an insurance applicant are true?
Assurance
Promise
Representation
Warranty

A

Warranty

58
Q

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

A

To ensure an applicant’s medical information is accurate and complete

59
Q

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

A

The policy’s cash value

60
Q

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

A

Insurable interest can be established sufficiently by sentimental attachment alone

61
Q

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

A

Life only

62
Q

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

A

The annuitant’s life expectancy determines the annuity payments.

63
Q

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

A

Life income

64
Q

Who assumes the investment risk with a fixed annuity contract?
The owner
The annuitant
The insurer
The beneficiary

A

The insurer

65
Q

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

A

Refund annuity

66
Q

An insured’s status under Social Security can be describes as:
Partially insured
Actively insured
Fully insured
Completely insured

A

Fully Insured

67
Q

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

A

Local electrical supply company with just 12 employees.

68
Q

The acceptance of a credit life application requires the submission of a certificate of insurance to the insured within __________ days
10
20
30
40

A

30

69
Q

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

A

Is a company domiciled under the laws of another state

70
Q

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

A

Certificate of authority

71
Q

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

A

Failure to pay state income tax

72
Q

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

A

Providing incorrect, misleading, incomplete, or materially untrue information in the license application

73
Q

A temporary license is valid for a maximum of _____ days:
30
60
90
180

A

180

74
Q

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

A

Prospective producer who is waiting to take the state licensing exam

75
Q

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

A

Life settlement

76
Q

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

A

Twisting

77
Q

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

A

Fine and/or imprisonment

78
Q

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

A

30

79
Q

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

A

2 months

80
Q

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

A

Replacing an insurance policy from one insurer to another based on misrepresentation

81
Q

The Idaho Life and Health Insurance Guaranty Association protects life insurance death benefit claims up to:
500000
400000
300000
200000

A

300000

82
Q

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

A

12

83
Q

A producer is required to maintain insurance transaction records for ______ years?
3
7
5
9

A

5

84
Q

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

A

Exchanging a new policy for one already in force

85
Q

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

A

Misappropriation of premium funds

86
Q

What is a nonprofit entity, operating under a lodge system?
Fraternal
Paternal
Maternal
Reciprocal

A

Fraternal

87
Q

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

A

May any transactions before being approved for a license

88
Q

Within ________days after policy delivery, an individual life insurance policy can be returned for a 100% premium fund.
10
20
30
40

A

20

89
Q

Idaho requires a licensee to complete _____ hours of continuing education hours each licensing period.
12
24
36
48

A

24

90
Q

___________ is the authority given to a producer to sell solicit, or negotiate policies on behalf of the insurer.
Admission
Appointment
Adjustment
Authorization

A

Appointment

91
Q

The Director is appointed by which of the following?
Legislature
Senate
Secretary of State
Governor

A

Governor

92
Q

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

A

15

93
Q

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

A

Stop engaging in those acts

94
Q

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

A

Canceling a term life policy to buy a whole life policy

95
Q

Tim’s individual life insurance policy has recently lapsed. His policy may be reinstated at any time within __________ years?
1
2
3
4

A

3

96
Q

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

A

Convincing a prospective insured to purchase a policy by exaggerating the benefits of the policy

97
Q

Every producer licensed in Idaho must notify the Director within _______ days of any change of address.
15
20
25
30

A

30

98
Q

A valid contract:
Does not include consideration
Must be bonded
Is not binding
Must include offer and acceptance

A

Must include offer and acceptance

99
Q

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

A

1000

100
Q

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

A

Exists for profit

101
Q

The Director serves a term of _______ years
2
3
4
5

A

4

102
Q

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

A

Defamation

103
Q

Producer appointments are filed with the Director by the:
Producer
Insurer
Director
Governor

A

Insurer

104
Q

All of the following activities require an insurance producer’s license EXCEPT:
Underwriting
Negotiating
Selling
Soliciting

A

Underwriting

105
Q

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

A

Authorized insurer

106
Q

An insurer would be committing Unfair Discrimination if coverage was denied based upon:
HIV positive result
Marital status
Diabetes
A mental disorder

A

Marital status

107
Q

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
A

Is not protected by the Guaranty Fund

108
Q

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

A

30

109
Q

A producer who is licensed in Idaho but resident in another state is called a:
Nonresident producer
Foreign producer
Reciprocal producer
Limited lines producer

A

Nonresident producer

110
Q

If an insurer terminates a producer’s appointment, it must notify the Director within________ days of the termination.
20
25
30
35

A

30

111
Q

Idaho requires that a licensee completes ________ hours of continuing education on the subject of ethics every reporting period.
1
2
3
4

A

3

112
Q
A

Life Insurance (2 decks)

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