Practice Exam Flashcards
A producer must do all of the following when delivering a new policy to the insured except…
Disclose commissions earned from the sale of the policy.
Which of the following types of policies will provide permanent protection?
Whole Life
The insurer may suspect that a moral hazard exists if the policyholder…
Is not honest about his health on an application for insurance
Which of the following policy components contains the companies’s promised to pay?
Insuring clause
What is not an option for Nonforfeiture?
Interest only
What is not typically excluded from life policies?
Death due to plane crash for a fare paying passenger
Events in which a person has both a chance of winning or losing our classified as what?
Speculative risk; speculative risk involves the chance of gain or loss and is not insurable.
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?
The insured’s estate; in the absence of a viable beneficiary proceeds will be paid to the estate of the insured.
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?
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
Which of the following types of policies allows for a flexible, premium, and a variable investment component?
Variable universal life insurance;
A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.
The growing tendency of individuals to file lawsuits and a claim tremendous amounts of alleged damages is known as?
Legal risk;
Legal hazards arise from court actions, which increase the likelihood or size of a loss
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?
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.
The medical information bureau (MIB) was created to protect…
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.
Who can make a fully deductible contribution to a traditional IRA?
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.
What is not true regarding the convertibility option under a term life insurance policy?
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.
When must insurable interest exist in a life insurance policy?
At the time of application;
In life insurance, insurable interest must exist at the time of application.
During the free look. The premium for a variable annuity may be invested in all of the following, except….
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.
The waiver of cost of insurance writer is found in what type of insurance?
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.
Which of the following is true of a qualified plan?
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.
Peril is most easily defined as…
The cause of loss insured against;
Perils are the causes of loss insured against in an insurance policy.
What best defines target premium in a universal life policy?
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.
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is?
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.
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 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.
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…
Ancestry
What will be included in a policy summary?
Premium amounts and surrender values
What is not an example of a valid insurable interest?
Debtor in the life of the creditor
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?
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.
Annually, renewable term policies provide a level of death benefit for a premium that?
Increases annually;
Annually, renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured
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?
The spouse.
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?
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.