Pearson Vue Life Insurance Practice Exam Flashcards
A contract that has as its basic function the systematic liquidation of accumulated assets through periodic payments is called an:
annuity
P wants to name her husband as the beneficiary of her life policy. However, she wishes to retain all of the rights of ownership. P should have her husband named as the:
revocable beneficiary
An insurance producer takes an application for a life insurance policy but does not collect the initial premium. On delivery of the policy to the proposed insured, the producer must collect the initial premium and which of the following?
The insured’s signed statement of continued good health
A producer takes applications from identical twins who want to buy the same type of policy in the same amount. The insurer issues the policies as applied for, but charges a 25 percent higher premium for one of the policies. The difference in premiums is probably due to which of the following factors?
Risk classification
An employer can deduct premium payments as an ordinary business expense for which of the following life coverages?
Group
In the event of an insured’s death, which of the following provides an income for the family during a designated period of time followed by a lump sum death benefit?
Family Income rider
Which of the following statements is CORRECT about Group Life conversion privileges?
Death during the conversion period is covered even if the departing employee chose not to convert the policy.
Which of the following policies is an interest-sensitive form of permanent protection?
Universal Life
Reinstatement of a life insurance policy requires an insured to take all of the following actions EXCEPT:
make collateral assignment to the insurer
Which of the following statements about a Renewable Term policy is CORRECT?
It is renewable at the option of the insured.
If an insured commits suicide after the Suicide clause in the insured’s life insurance policy has expired, the insurer will take which of the following actions?
Pay the Death benefit
Which of the following policy provisions provides for continuation of coverage despite nonpayment of premiums?
Nonforfeiture Option
An applicant for life insurance may question the validity and source of any consumer information developed under the
Fair Credit Reporting Act (Insurance Information and Privacy Protection Act)
The PRIMARY reason for selecting a Variable Whole Life policy instead of a traditional Whole Life policy is that the Variable Whole Life policy:
has the potential to earn a higher rate of return on the cash value
A policyowner names his wife as the primary beneficiary of his Universal Life policy on a revocable basis. He also names his three children as his secondary beneficiaries and his estate as his tertiary beneficiary. If the policyowner’s wife predeceases him, and then he dies, who will receive the policy proceeds?
The children
If a policy contains a Guaranteed Insurability rider, the insured has the right to purchase:
additional coverage at specified ages
The Waiver of Premium provision of a life policy allows the insurer to take which of the following actions?
Waive an insured’s premiums if the insured becomes totally disabled before a certain age
Under the Social Security Retirement Benefits, all of the following factors will influence how much a retiring individual will receive as a monthly income benefit EXCEPT the individual’s:
sex
The PRIMARY purpose of an inspection report is to assess an applicant’s:
personal characteristics
Which of the following statements is NOT correct about representations?
They are true in every respect.
If an Adjustable Life policyowner makes an additional premium payment, the policy may be affected in all of the following ways EXCEPT the:
value of the Nonforfeiture Options may decrease
Which of the following retirement plans is tax-qualified?
Defined contribution
An insured owns a $10,000 policy with a $4,000 cash value and a 6 percent interest rate. On January 1, the insured borrows $500 and pays one year’s interest in advance. During the year, the insured does not repay any part of the loan or interest. If the insured dies on December 31, the beneficiary will be entitled to a MAXIMUM of:
$9,500
A life insurance application is incomplete if it is missing the signature of which of the following?
The proposed adult insured
The right to change a beneficiary designation is reserved for the:
policyowner
A payor benefit rider provides which of the following benefits
A temporary waiver of premium should the payor die, until the insured reaches a predetermined age
All of the following policies may be examples of third party ownership EXCEPT:
Modified Life
In life insurance, insurable interest must exist at the time the
producer writes an application on a proposed insured
If life insurance policy applicant is classified as a substandard risk, the insurance company will MOST likely:
charge an extra premium
Two business partners own life insurance on each other. If one partner dies, which of the following contracts will allow the other partner to buy 100 percent of the business interest?
Buy and Sell Agreement
When a producer submits an insurance application to the company, the producer must take all of the following actions EXCEPT:
submit a completed medical information report
In life insurance, the Free Look provision begins on the:
policy delivery date
A life policy is usually contestable due to material misrepresentation on the application for a period of:
2 years
A client needs a substantial amount of protection but has limited financial resources. Which of the following insurance policies would BEST meet the client’s needs?
Term Life
Which of the following statements is CORRECT about the Paid-Up Additions in a participating Whole Life policy?
They are purchased on an attained age basis.
In which of the following contracts is the Death benefit called the principal sum?
Accidental Death and Dismemberment (AD&D)
At which of the following times MUST a life insurance applicant be informed of their rights under the Fair Credit Reporting Act?
When the policy is delivery
R has just graduated from law school. R knows that R’s future earnings will be much higher than they are now, but wants to purchase a permanent policy now to cover future needs. Which of the following policies would BEST suit R’s needs?
Modified Whole Life
Federal income tax laws generally treat proceeds of life insurance policies as:
A.graduated taxes
nontaxable
Which of the following policy provisions states that the application is part of the policy?
Entire contract
A type of annuity in which the cash values are invested in securities is called:
Variable
If an applicant for life insurance submits a completed application to a producer without paying the first premium, coverage becomes effective when the:
Receives the policy (policy delivery),
Pays the first premium, and
Continues to meet the insurability standards (meaning no significant change in health or risk factors)
Which of the following features allows an insurance policy to remain in force for a specified number of days beyond the premium due date?
Grace Period provision
Which of the following provisions in a life policy specifies the manner in which proceeds will be paid to a beneficiary on the death of the insured?
Settlement Options
An applicant’s statements on an application are considered to be legal:
representations
Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?
Assignment
A contract that promises to pay an income to an insured until his/her death is called:
Life Annuity
Which of the following group life plans requires at least 75 percent of the eligible members to participate?
Contributory
An insured intentionally understates her age on her application for a life policy. At death, the insurer will take which of the following actions?
Pay a reduced Death benefit based on the insured’s actual age
Which of the following annuities would BEST suit the needs of a 35-year-old factory worker who is concerned about inflation and wants to establish a retirement plan?
A Flexible Premium Variable Annuity
