Practice Test 6 Flashcards
All of the following are true statements concerning the treatment of federal income tax on life insurance except:
Annuity death benefits proceeds are exempt from all taxation
The policy owner, age 50, has been paying the premiums on his whole life policy for 15 years. He needs the equivalent of 1/3 of the cash value of the policy over the next two years. He wants to continue to have the policy protection, and can afford to pay the premiums. Which of the following would appear to be his best course of action?
Use the policy loan provision to borrow money from the policy, but keep paying the policy premiums to keep the policy in force
An insured bought a $150,000 non-participating whole life policy many years ago. She is 100 years old today. She has never borrowed from the policy, and has made all premium payments when due. The policy cash value is:
$150,000
In Insurance terms a representation can be considered:
An implied warranty
In life insurance, the loss of a key family member is considered a:
Personal loss
Under the 10-day right to return, the policy will pay proceeds:
If the policy is not returned but premium is paid
Identify the penalty for each violation for a person engaging in any unfair method of competition:
No more than $5,000 for each act, or no more than $10,000 for each act if the act is judge to be willful
Unless it is merely a statement of an expectation or a belief, a representation as to the future is considered which of the following?
Promise
Regarding life insurance coverage for a company, the one responsible for obtaining the coverage, maintaining the policy, and paying the premium is:
The master policy holder
The purchase of an insurance policy may not provide one of the following for the insured. Select the most complete answer:
Elimination of the risk
Which type of life insurance policy gives the policy owner the right to share in the insurer’s surplus?
Participating
Which of the following is a correct statement about life insurance policy types?
The initial premium for term insurance is lower than the initial premium for whole life insurance
Which of the following is true regarding participation in a group plan?
A non-contributory group health plan must involve all members
The department responsible for evaluation, selection and distribution of risks is:
The underwriting department
Joe receives a large bonus at work and decides to purchase an annuity with it. His monthly income payments from the annuity will begin the following month. Which of the following has Joe purchased?
A single premium immediate annuity
The policy provision which comes into effect when the insured and primary beneficiary die in a simultaneous (common) accident with no evidence as to who died first is:
Common disaster provision
In group insurance the Certificate of Insurance are issued to:
The group members
Renewable term Insurance can best be described as:
A level death benefit with a raising premium
The Common Disaster provision is designed to protect the interests of which of the following?
The contingent or secondary beneficiary
How much continuing education is a new agent who is both life end fire & casualty licensed is required to complete?
25 hours per year for either license
In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase:
Key person insurance
What would a person be guilty of who refuses to submit books and records to the Commissioner?
Misdemeanor
Which of the following requires a reporting company to respond to a consumer’s complaint that his file contains inaccurate information?
Fair Credit Reporting Act
Which of the following statements about policy dividends is true?
the insured usually selects the dividend option at the time of policy purchase
Insurers make an adjustment to the cash value of an account of a universal life policy each time a payments is made. They add the premium paid and:
Current interest; adjusted for mortality and a general expense charge
After a life insurance policy has been in effect for two years, what keeps it from being rescinded by the insurer?
The incontestability clause
Usually, in order to join a group insurance plan without proving insurability, an employee must:
Join the plan during the enrollment period
Which of the following is true about life insurance beneficiary designations?
If there is no surviving beneficiary, the death benefit is paid to the insured’s estate
Renewable term insurance can be best described as:
A level death benefit with an increase in premium
How do rights of an irrevocable beneficiary differ from those of a revocable beneficiary?
An irrevocable beneficiary has a vested right that neither the policy owner nor his creditors can impair without the beneficiary’s consent
What recourse does an insurer have if a violation of a material warranty on the part of the insured is discovered?
Rescission of the policy
Which of the following describes an insurer who has enough financial resources only to provide for all its liabilities and for all reinsurance of all outstanding risks?
Insolvent
All of the following statements about the election of a life insurance policy’s settlement options are true, except:
When no settlement option is chosen, the proceeds are automatically paid to the policy owner’s estate
What is the purpose of “key person” insurance?
To cover decreased business earnings due to the death of a key employee
What would be the Insurance Commissioner’s most likely course of action if an applicant for an insurance license had a previous application for a professional license denied for cause by any licensing authority within five years of the date of the filing?
Deny the application without a hearing
An insured bought a $150,000 non-participating whole life policy many years ago. He is 100 years old today. He has never borrowed from the policy’s cash value and has faithfully made all payments when due. The policy’s cash value is:
$150,000
An intentional concealment entitles the injured party to which course of action?
Rescission of the contract
Loss retention is an effective risk management technique when all of the following conditions exist, except:
The probability of loss is unknown
When are parties to a contract required to communicate information solely based on personal judgement for a matter in question?
Never
The guaranteed insurability option provides the ability to:
Purchase additional insurance regardless of insurability
Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium?
Renewable term
RW and Associates is an agency which represents BLG Insurance Corporation. RW and Associates may leave the name BLG Insurance Corporation in its advertisements by clearly stating the relationship between the two businesses in any of the following ways, except:
RW and Associates underwriting for BLG Insurance Corporation
The probationary period in a group policy is intended for people:
Who joined the group after the policy effective date
Which provision will pay a portion of the death benefit prior to the insured’s death due to a serious illness?
Accelerated death benefit
An individual with a low income and high insurance needs should buy:
Term Insurance
All of the following statements about contingent beneficiaries are true, except:
The contingent beneficiary shares death proceeds equally with the primary beneficiary
They payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified on the policy:
The insurer will make the payments until the insured juvenile reaches the specified age
The insured is totally and permanently disabled. The insured’s policy continues in force without the payment of a premium because the policy contains a:
Waiver of premium provision
All of the following statements about survivorship life insurance are true, except:
the policy face amount is paid out only upon the death of the first insured to die
If an insurer is not able to meet financial obligations when due, the insurer would be considered:
Insolvent
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 revoke the license of the agent
People commonly purchase an annuity to protect against the risk of:
Outliving their financial resources
In the event of an accidental death, the principal sum in a disability policy will be paid:
In one lump sum
Why is having a large number of similar exposure units important to insurers?
The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums.
the insured, aged 65, owns a $100,000 non-participating whole life policy. the policy is paid-up as of today. When would the cash value reach $100,000?
Age 100
According to the CA Insurance Code, an insured’s policy must specify all of the following, except:
The financial rating of the insurer
Which of the following is a hazard?
A condition that might increase the likelihood of a loss occurring
When a licensed agent submits a renewal application with applicable fee on or before the expiration date:
The agent will be able to operate for up to 60 days after the specified expiration date.
Common life insurance policy riders include all of the following, except:
Extended term
Term insurance is typically characterized by:
Low premiums and no cash value
A $150,000 whole life policy with a cash value of $10,000 has been in force for 11 years. The policy owner is unable to continue the premium payments. Which of the following describes the reduced paid-up non-forfeiture option?
The cash value is used to purchase a $20,000 paid-up policy
What would we call a representation which fails to correspond with its stipulations or assertions?
False
In the state of California:
Providing free insurance coverage in connection with the sale of services as an inducement for completing the transaction is not legal
The adjustments that an insurer makes in a cash value account in a universal life policy each time a payment is made includes all of the following except:
Trust and solvency reports
The Employee Retirement Income Security Act of 1974 (ERISA) mandates requiring plan sponsor to provide participants with:
Plan descriptions and benefit statements
Which of the following requires a reporting company to respond to a consumer’s complaint that his file contains inaccurate information about them?
Fair Credit Reporting Act
Which of the following is a true statement regarding the social security (OASDHI) program?
The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs.
What makes up the entire contract in a life insurance policy?
The policy, and when attached, the application
Which of the following is a correct statement about life insurance policy types?
The initial premium for term insurance is lower than the initial premium for whole life insurance
While an insurer is paying the premium for a life insurance policy under the waiver of premium rider:
The policy remains in full force in every respect
According to the CA Insurance Code, all insurers must maintain a department to investigate:
Possible fraudulent claims from insureds
Unintentional concealment entitles the injured party to which course of action?
Rescission of the contract
When may a representation be withdrawn?
Only before the insurance is in effect
A significant benefit to the insured in group underwriting verses individual is:
The cost of coverage is lower
How long must a life-only agent maintain records regarding policies sold in this state?
5 years
