Practice Exam Flashcards

1
Q

A producer must do all of the following when delivering a new policy to the insured except…

A

Disclose commissions earned from the sale of the policy.

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2
Q

Which of the following types of policies will provide permanent protection?

A

Whole Life

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3
Q

The insurer may suspect that a moral hazard exists if the policyholder…

A

Is not honest about his health on an application for insurance

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4
Q

Which of the following policy components contains the companies’s promised to pay?

A

Insuring clause

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5
Q

What is not an option for Nonforfeiture?

A

Interest only

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6
Q

What is not typically excluded from life policies?

A

Death due to plane crash for a fare paying passenger

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7
Q

Events in which a person has both a chance of winning or losing our classified as what?

A

Speculative risk; speculative risk involves the chance of gain or loss and is not insurable.

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8
Q

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner fails to change the beneficiary before the insured’s death, the proceeds of the policy will go to?

A

The insured’s estate; in the absence of a viable beneficiary proceeds will be paid to the estate of the insured.

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9
Q

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?

A

It will likely be higher because the applicant is a substandard risk;
applicants are considered substandard risks because of the physical condition, personal or family history of disease occupation or dangerous habits substandard risks are usually issued a higher premium than standard risks

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10
Q

Which of the following types of policies allows for a flexible, premium, and a variable investment component?

A

Variable universal life insurance;
A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.

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11
Q

The growing tendency of individuals to file lawsuits and a claim tremendous amounts of alleged damages is known as?

A

Legal risk;
Legal hazards arise from court actions, which increase the likelihood or size of a loss

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12
Q

What types of policy allows the policy owner to skip premium payments provided that there is enough cash value in the policy to cover the premium amount?

A

Universal life;
With universal life policies the policy owner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policy owner may even skip paying a premium, and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of the premium.

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13
Q

The medical information bureau (MIB) was created to protect…

A

Insurance companies from adverse selection by high risk persons;
The MIB makes information available to underwriters to assist them in the underwriting process. It is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

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14
Q

Who can make a fully deductible contribution to a traditional IRA?

A

An individual who has earned income;

Individuals who are not covered by an employer, sponsored plan may deduct the full amount of their IRA contributions, regardless of their income level.

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15
Q

What is not true regarding the convertibility option under a term life insurance policy?

A

Upon conversion, the death benefit of the permanent policy will be reduced by 50%;

Convertible term insurance is convertible without proof of insurability up to the full term death benefit, however, upon conversion, the premium for the permanent policy will be based on the insured attained age.

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16
Q

When must insurable interest exist in a life insurance policy?

A

At the time of application;

In life insurance, insurable interest must exist at the time of application.

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17
Q

During the free look. The premium for a variable annuity may be invested in all of the following, except….

A

Value funds;

During the 30 day cancellation free look. The premium for a variable annuity may only be invested in fixed income and investments, and money market funds unless the investor specifically request that the premiums be invested in the mutual funds.

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18
Q

The waiver of cost of insurance writer is found in what type of insurance?

A

Universal life;

The waiver of cost of insurance writer is found in universal life policies. If the insured becomes disabled, the rider allows the cost of insurance be waived, with the exception of premium cost required to accumulate cash value.

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19
Q

Which of the following is true of a qualified plan?

A

It has a tax benefit for both employer and employee;

A qualified plan is approved by the IRS, which then gives both employer and employee, benefits and deductibility of contributions and tax deferral of growth.

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20
Q

Peril is most easily defined as…

A

The cause of loss insured against;

Perils are the causes of loss insured against in an insurance policy.

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21
Q

What best defines target premium in a universal life policy?

A

The recommended amount to keep the policy enforced throughout its lifetime;

The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy enforced throughout its lifetime.

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22
Q

A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is?

A

A policy;

a contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events as a policy.

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23
Q

A long stretch of national economic hardship causes a 7% rate of inflation. A policy owner notices that the face value of her in life insurance policy has been raised 7% as a result. What which policy writer caused this change?

A

A cost of living rider;

The cost of living writer annually, adjust the policies, face value in accordance with the national rate of inflation or deflation. This writer adjust the face amount of a policy to correspond with the rate of inflation in order to keep the initial value of the policy constant overtime.

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24
Q

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information except the applicant’s…

A

Ancestry

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25
Q

What will be included in a policy summary?

A

Premium amounts and surrender values

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26
Q

What is not an example of a valid insurable interest?

A

Debtor in the life of the creditor

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27
Q

An individual buys a flexible, premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died five years after beginning the annuity phase?

A

Payments for 15 years;

With any period certain death of the annuitant within the stated. Will provide payments to the beneficiary only for the remainder of the period certain.

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28
Q

Annually, renewable term policies provide a level of death benefit for a premium that?

A

Increases annually;

Annually, renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured

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29
Q

An applicant buys a non-qualified annuity, but dies before the starting date. For which of the following beneficiaries with the interest accumulate in the annuity, not be taxable?

A

The spouse.

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30
Q

A policy owner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains enforced. This is due to what provision?

A

Automatic premium loan;

The provision is not required, but is commonly added to the contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.

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31
Q

The automatic premium loan provision is activated at the end of the…

A

Grace Period;

Provide provided there is sufficient cash value in the policy the provision triggers a loan at the end of the grace period to keep a policy in force.

32
Q

Which provision of life insurance policy states that insurer’s duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

A

Insuring clause

33
Q

In insurance an offer is usually made when…

A

An applicant Clint submits an application to the insurer;

An insurance the offer is usually made by the applicant in the form of the application acceptance takes place when the insurers underwriter approves application and issues a policy.

34
Q

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

A

Limited pay life;

Unlimited pay policies the premiums for coverage will be completely paid up well before age 100 usually after a specified number of years.

35
Q

Infinite immediate annuity is purchased with the face amount at death or width of cash value at surrender this would be considered a…

A

Settlement option

36
Q

What components must a life insurance policy have to allow policy loans?

A

Cash value

37
Q

For the reported losses of an insured group to become more likely to equal the statistic probability of loss for that particular class, the insured group must become?

A

Larger

38
Q

If an applicant for a life insurance policy is found to be a substandard risk the insurance company is most likely to?

A

Charge a higher premium

39
Q

Any insurance agent who commits a repeated violation of the insurance code with respect to insurance replacement will be liable for?

A

An administrative penalty of no less than $5000 and no more than $50,000 per violation

40
Q

What are not beneficiary designations?

A

Specified;

Beneficiary designations determine the order in which benefits : primary or contingent which includes secondary and tertiary.

41
Q

In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by what?

A

Influence this information would have informing an estimate of the advantages or the disadvantages of the contract.

42
Q

What is not an allowable 1035 exchange?

A

A whole life insurance policy is exchanged for a term insurance policy;

The key is that the exchange may not be from a less tax advantage contract to a more tax advantage contract. Same to same is acceptable.

43
Q

Profitable distribution of exposure serves the purpose of?

A

Protecting the insurer against adverse selection.

44
Q

What is not considered by an underwriter when determining the premium rates for an individual seeking insurance?

A

Race.

45
Q

If only one party to an insurance contract has made a legally enforceable promise. What kind of contract is it?

A

Unilateral;

In a unilateral contract, only one of the parties to the contract is legally bound to do anything.

46
Q

What policies would have an IRS required corridor or gap between the cash value and the death benefit?

A

Universal life- Option A;

Universal life option a level death benefit option policy must maintain a specified corridor or gap between the cash value and the death benefit as required by the IRS.

47
Q

What is not true regarding the guaranteed insurability rider?

A

This writer is available to all insured with no additional premium.

48
Q

What is not one of the uses of annuities?

A

Estate creation

49
Q

What documents must be provided to the policy owner or applicant during policy replacement?

A

Notice regarding replacement

50
Q

What is not a business use of life insurance?

A

Funding against companies general financial loss.

51
Q

Social Security was created to provide benefits, except…

A

Unemployment income.

52
Q

If an annuitant dies before annuitization occurs what will the beneficiary receive?

A

Either the amount paid into the plan or the cash value of the plan which ever is the greater amount.

53
Q

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turned 16 and before surviving spouse turns age 60 called?

A

Blackout period.

54
Q

Representations are written or oral statements made by the applicant which?

A

Are considered true to the best of the applicants knowledge

55
Q

What is another term for the accumulation period of an annuity?

A

Pay in period.

56
Q

According to the code, how many separate requirements should an insurance policy have?

A

Six.

57
Q

What qualifies an individual to contribute to an IRA?

A

Earned income

58
Q

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of examination?

A

The insurer.

59
Q

The ownership provision, entitled the policy owner to do all of the following except what?

A

Set premium rates

60
Q

All of the following are features and requirements of the living needs rider except…

A

Diagnosis must indicate that the death is expected within three years.

61
Q

When the breadwinner that is insured by a family policy dies what rights are provided to the other family members that are covered under the policy?

A

They can convert their coverage to permanent life insurance without evidence of insurability.

62
Q

Twin brothers are starting a new business. They know it will take several years to build a business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

A

Joint life

63
Q

Which of the following is not true regarding the life with guaranteed minimum annuity settlement option?

A

It does not guarantee that the entire principal amount will be paid out.

64
Q

An insurers liability shall be limited to

A

The face amount of an individual insurance policy, subject to any exclusions and writers as applicable minus any outstanding policy loans and interest payments due to the insurer.

65
Q

If a policy includes a free look period of at least 10 days. The buyers guide may be delivered to the applicant no later than….

A

With the policy.

66
Q

Any insurance agent who engages in the insurance business and violates the code with respect to insurance replacement shall on the first violation…

A

Be fined a sum of $1000

67
Q

What are the authorities that an agent can hold?

A

Express and implied.

68
Q

The types of policies that are covered under the terms of the association include…

A

Direct non-group life health annuity, and supplemental policies.

69
Q

What is authorized to transact insurance on human lives?

A

Life agent

70
Q

In a life settlement contract, whom does the life settlement broker represent?

A

The owner

71
Q

The commissioner performs all of the duties established by the California insurance code and…

A

Enforces the execution of all provisions and laws

72
Q

On all printed documents placed before the public what size print should be used for the agents license number?

A

The same size print as the agent’s address or telephone number

73
Q

Which terms is associated with a mutual insurer, becoming a stock insurer?

A

Demutualization

74
Q

An agent solicited a policy for a client who originally qualified for standard premiums during the underwriting process. The applicant was rated as a substandard risk and assigned a higher premium upon policy delivery. The agent failed to mention that the premiums would be higher and the client filed a lawsuit against the insurer. This is an example of?

A

An omission and will be covered by an errors and omissions policy.

75
Q

An insurer that holds a certificate of authority in the state in which it transact business is considered a/an?

A

Authorized insurer.