Practice Exam Five Flashcards
Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as:
replacement
According to the CA Insurance Code, in which for the following classes of insurance can a binder NOT be issued:
Life insurance
An organization will cease to exist as an entity eligible to hold a license for all of the following reasons, except:
Termination of a key employee
What does it mean if an agent’s license is inactive?
The agent cannot transact any insurance business for which a license is not required
If the Commissioner issues a Notice of Seizure for documents and the individual fails to send those documents what is the penalty?
Each state handles discipline in its own way
Which of the following must any person engaged in the business of acting as an insurance agent or broker who receives compensation for arranging or directing sales in connection with a premium financing agreement do?
Maintain a list of accounts in connection with compensation exempted in premium financing payments for three years
All of the following would be considered one of the three major types of loss exposures, except:
Financial loss exposure
Tony Brown has a CLU certification. Which of the following names would be automatically approved for his agency’s use?
Agency names are never automatically approved
A person paid $50,000 into a fixed annuity over 20 years. When he decides to begin income payments the insurer calculates that he will receive $4,000 per year for life, which means that he will receive a total of $100,000. In the first 10 years of payments how much is taxable each year?
$2,000. Question refers to the exclusion ratio formula
According to the code, all insurers must maintain a department to investigate:
possible fraudulent claims from insureds
What does the insurance commissioner have the right to do if an agent lacks authority from an insurer named on a binder for coverage?
suspend or revolk the license of an agent
An insured bought an annuity ten years ago. He will retire in five years. To determine the value of the annuity the number of accumulation units is multiplied by the value of the separate account. What type of annuity was purchased?
Variable annuity. The key phrase is separate account.
The class beneficiary designation which means that the beneficiaries will receive equal shares of the death benefit divided among the surviving members of the class is:
Per capita.
The mathematical rule that says that as the number of individual but similar exposure units increases the easier it is to predict losses is which of the following?
The law of large numbers
Which of the following is a description of a Life and Disability Analyst?
A person licensed to advise clients about life and disability insurance for a fee
What happens to a license after the death of a natural person who holds a valid insurance license?
It always terminates
Which of the following are common insurance policy provisions?
Entire contract, grace period, reinstatement
With the cost of living rider, the life insurance policy holder:
Gets the automatic increase in the face value if there is an increase in the cost of living index. There is an additional premium for the additional coverage
All of the following statements regarding survivorship life insurance are true, except:
The policy face amount is made out based only on the death of the first to die
All of the following is require on a life insurance application, except:
The amount of disability income insurance in force
Which of the following is not an option for the use of the policy dividends?
Fund the distribution of monthly income payment
What information can a party to a contract of insurance be allowed NOT to communicate according to California law?
Information which the other party already knows
According to the CA insurance code, a judgement against an applicant who entered a plea of “nolo contendere” is considered to be:
convicted
The policy provision which prevents an insurer from voiding a policy for misstatements after two years is:
Incontestability
The clause that protects the proceeds of a life insurance policy from attachment by creditors after the death of the insured is:
Spendthrift trust clause
Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability?
Guaranteed insurability
Which is not part of transacting insurance?
Establishing a list of clients
An insurer organized under the laws of the State of California is a:
Domestic insurer
An insured and beneficiary die in a car accident and it is impossible to determine who died first. Who will receive the life insurance proceeds?
The insured’s estate
A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted. Which settlement option should be chosen?
Fixed amount option
Which of the following applies to the social insurance program known as social security?
Contributions are compulsory for most workers
Any person who diverts or misappropriates fiduciary funds is guilty of:
Theft
A probationary period in a group policy is intended for people:
Who joined the group after the effective date
An insurer owned by policyholders is:
Mutual insurer
All of the following are valid reasons for the insurance commissioner to deny the applicant for an insurance license, except:
Applicant does not have a California business address
An agent who replaces an existing life insurance contract, must do all of the following except:
Submit a copy of the replacement notice to the existing insurer
Why should a contingent beneficiary be named in a life insurance policy?
To determine who receives the policy benefits if the primary beneficiary is deceased
Which statement best describes a life insurance policy dividend?
It is a distribution of excess funds accumulated by the insurer on participating policies
In order for an entity to be eligible to hold a license, a co-partnership whose membership has changed must do all of the following, except:
Return the old license with signatures of the original partners to the Commissioner with an explanation
The Federal Act that is designed to protect group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is:
ERISA
How is the Insurance Commissioner selected?
An election by the people
A policy is returned to the insurer within ten days of the date the policy is delivered. How much of the premium is returned to the applicant?
100%
The person whose life is the object of a life insurance policy is:
Insured
The SEC is involved in the regulation of:
Variable life policies
The guaranteed insurability rider provided that the policy holder can purchase more insurance:
On his own life at certain specified ages without proof of insurability
The purpose of laws regarding the replacement of life and annuity contracts includes all of the following, except:
To protect the interest of life insurers and their agent
Who has the right to change life insurance policy beneficiaries?
The policyholder
A person who acts in a capacity that requires an active license without having a valid license, is guilty of a:
Misdemeanor
Any attempt by an existing insurer or their agent to dissuade a policy owner from replacing an existing life insurance or annuity contract is known as:
Conservation
Unless the applicant indicates otherwise during the right-to-return period in an individual annuity, the premium for a variable annuity would be invested only in:
Fixed income investments and money market funds
Along with having enough assets to provide for its liabilities and for reinsurance for all outstanding risks, in order to remain solvent, the Insurer must also meet minimum requirements equal to what amount required by the California Code?
Paid-in capital
All of the following would be considered unfair trade practices, except:
Committing an act of discrimination whether it be fair or unfair
All of the following would be considered unfair claim practices, except:
Directly advising a claimant to obtain the services of an attorney
A variable annuity applicant request that the premium be immediately invested in a stock portfolio. The policy is returned to the insurer within the cancellation period. What is the applicant entitled to receive?
The policy amount value on the date the policy was received by the insurer
If a person gives an erroneous statement on an application unintentionally, this is:
False
As an employer, the sudden death of an employee is considered a:
Personnel loss
Regarding an organizational license, what happens when a corporation is dissolved?
The license is terminated
Which of the following would be considered a morale risk?
The insured drives too fast
Senior citizens are given a thirty day right to return a life insurance policy:
At age sixty or older
Subject to the restrictions of the CA insurance code, any personal capable of making a contract may be considered:
An insurer
The purpose of the California Life and Health Guarantee Association is:
Subject to limitations: to protect life and health policy holders and/or insureds when member insurers become insolvent
If an insurance agent or broker receives a commission for arranging a premium finance agreement they must do which of the following?
Disclose to the client the amount of commission received for arranging the financial agreement
Which of the following is Not ordinary life insurance?
A group life insurance policy
A failure to communicate information which a party to an insurance contract knows and should communicate, is called an act of:
Concealment
When a family policy covers children all of the following are true, except:
Evidence of insurability is required if coverage for children is permanent insurance
Which of the following is not one of the common personal uses of life insurance?
Funding a buy/sell agreement
An individual license is considered terminated:
On the death of the licensee
A movie company concerned about their financial losses in case of the illness of one of their actors would purchase:
Surety insurance
What must an insurer do who accepts an application from an agent who is not specifically appointed by that insurer and then issues a policy from that application?
Forward to the insurance commissioner a notice of appointment within fourteen days of receipt of application
Which of the following is considered ordinary life insurance?
Mortgage insurance
Which of the following is a true statement regarding the social security (OASHDI) program?
The program provides a minimum floor of income, and is meant to supplement a retirees own personal program
Which party has rights in a life insurance policy only after the death of the insured?
The beneficiary
A person who spends $10,000 in a single premium annuity, and another $10,000 in a Certificate of Deposit (CD). Both pay 10% interest annually. The person is in a 31% income tax bracket. For 40 years, this person does not touch his annuity, and reinvests all income from the CD at 10%. Which of the following statements is true?
The annuity would be worth several hundred thousand more because of the tax deferral of the earnings
Listed below are descriptions of four types of policies. Which is the term policy?
The policy has a face amount of $100,000. Every five years, the premium paid increases. After ten years, the policyholder stops paying premiums and the coverage stops. The policy has no cash value.
The main master policy owner of a group insurance contract is the:
Employer
