Practice Test 6

Question 1

All of the following are true statements concerning the treatment of federal income tax on life insurance except:

Answer 1

Annuity death benefits proceeds are exempt from all taxation

Question 2

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?

Answer 2

Use the policy loan provision to borrow money from the policy, but keep paying the policy premiums to keep the policy in force

Question 3

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:

Answer 3

$150,000

Question 4

In Insurance terms a representation can be considered:

Answer 4

An implied warranty

Question 5

In life insurance, the loss of a key family member is considered a:

Answer 5

Personal loss

Question 6

Under the 10-day right to return, the policy will pay proceeds:

Answer 6

If the policy is not returned but premium is paid

Question 7

Identify the penalty for each violation for a person engaging in any unfair method of competition:

Answer 7

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

Question 8

Unless it is merely a statement of an expectation or a belief, a representation as to the future is considered which of the following?

Answer 8

Promise

Question 9

Regarding life insurance coverage for a company, the one responsible for obtaining the coverage, maintaining the policy, and paying the premium is:

Answer 9

The master policy holder

Question 10

The purchase of an insurance policy may not provide one of the following for the insured. Select the most complete answer:

Answer 10

Elimination of the risk

Question 11

Which type of life insurance policy gives the policy owner the right to share in the insurer’s surplus?

Answer 11

Participating

Question 12

Which of the following is a correct statement about life insurance policy types?

Answer 12

The initial premium for term insurance is lower than the initial premium for whole life insurance

Question 13

Which of the following is true regarding participation in a group plan?

Answer 13

A non-contributory group health plan must involve all members

Question 14

The department responsible for evaluation, selection and distribution of risks is:

Answer 14

The underwriting department

Question 15

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?

Answer 15

A single premium immediate annuity

Question 16

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:

Answer 16

Common disaster provision

Question 17

In group insurance the Certificate of Insurance are issued to:

Answer 17

The group members

Question 18

Renewable term Insurance can best be described as:

Answer 18

A level death benefit with a raising premium

Question 19

The Common Disaster provision is designed to protect the interests of which of the following?

Answer 19

The contingent or secondary beneficiary

Question 20

How much continuing education is a new agent who is both life end fire & casualty licensed is required to complete?

Answer 20

25 hours per year for either license

Question 21

In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase:

Answer 21

Key person insurance

Question 22

What would a person be guilty of who refuses to submit books and records to the Commissioner?

Answer 22

Misdemeanor

Question 23

Which of the following requires a reporting company to respond to a consumer’s complaint that his file contains inaccurate information?

Answer 23

Fair Credit Reporting Act

Question 24

Which of the following statements about policy dividends is true?

Answer 24

the insured usually selects the dividend option at the time of policy purchase

Question 25

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:

Answer 25

Current interest; adjusted for mortality and a general expense charge

Question 26

After a life insurance policy has been in effect for two years, what keeps it from being rescinded by the insurer?

Answer 26

The incontestability clause

Question 27

Usually, in order to join a group insurance plan without proving insurability, an employee must:

Answer 27

Join the plan during the enrollment period

Question 28

Which of the following is true about life insurance beneficiary designations?

Answer 28

If there is no surviving beneficiary, the death benefit is paid to the insured’s estate

Question 29

Renewable term insurance can be best described as:

Answer 29

A level death benefit with an increase in premium

Question 30

How do rights of an irrevocable beneficiary differ from those of a revocable beneficiary?

Answer 30

An irrevocable beneficiary has a vested right that neither the policy owner nor his creditors can impair without the beneficiary’s consent

Question 31

What recourse does an insurer have if a violation of a material warranty on the part of the insured is discovered?

Answer 31

Rescission of the policy

Question 32

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?

Answer 32

Insolvent

Question 33

All of the following statements about the election of a life insurance policy’s settlement options are true, except:

Answer 33

When no settlement option is chosen, the proceeds are automatically paid to the policy owner’s estate

Question 34

What is the purpose of “key person” insurance?

Answer 34

To cover decreased business earnings due to the death of a key employee

Question 35

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?

Answer 35

Deny the application without a hearing

Question 36

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:

Answer 36

$150,000

Question 37

An intentional concealment entitles the injured party to which course of action?

Answer 37

Rescission of the contract

Question 38

Loss retention is an effective risk management technique when all of the following conditions exist, except:

Answer 38

The probability of loss is unknown

Question 39

When are parties to a contract required to communicate information solely based on personal judgement for a matter in question?

Answer 39

Never

Question 40

The guaranteed insurability option provides the ability to:

Answer 40

Purchase additional insurance regardless of insurability

Question 41

Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium?

Answer 41

Renewable term

Question 42

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:

Answer 42

RW and Associates underwriting for BLG Insurance Corporation

Question 43

The probationary period in a group policy is intended for people:

Answer 43

Who joined the group after the policy effective date

Question 44

Which provision will pay a portion of the death benefit prior to the insured’s death due to a serious illness?

Answer 44

Accelerated death benefit

Question 45

An individual with a low income and high insurance needs should buy:

Answer 45

Term Insurance

Question 46

All of the following statements about contingent beneficiaries are true, except:

Answer 46

The contingent beneficiary shares death proceeds equally with the primary beneficiary

Question 47

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:

Answer 47

The insurer will make the payments until the insured juvenile reaches the specified age

Question 48

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:

Answer 48

Waiver of premium provision

Question 49

All of the following statements about survivorship life insurance are true, except:

Answer 49

the policy face amount is paid out only upon the death of the first insured to die

Question 50

If an insurer is not able to meet financial obligations when due, the insurer would be considered:

Answer 50

Insolvent

Question 51

What does the Insurance Commissioner have the right to do if an agent lacks authority from an insurer named on a binder for coverage?

Answer 51

Suspend or revoke the license of the agent

Question 52

People commonly purchase an annuity to protect against the risk of:

Answer 52

Outliving their financial resources

Question 53

In the event of an accidental death, the principal sum in a disability policy will be paid:

Answer 53

In one lump sum

Question 54

Why is having a large number of similar exposure units important to insurers?

Answer 54

The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums.

Question 55

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?

Answer 55

Age 100

Question 56

According to the CA Insurance Code, an insured’s policy must specify all of the following, except:

Answer 56

The financial rating of the insurer

Question 57

Which of the following is a hazard?

Answer 57

A condition that might increase the likelihood of a loss occurring

Question 58

When a licensed agent submits a renewal application with applicable fee on or before the expiration date:

Answer 58

The agent will be able to operate for up to 60 days after the specified expiration date.

Question 59

Common life insurance policy riders include all of the following, except:

Answer 59

Extended term

Question 60

Term insurance is typically characterized by:

Answer 60

Low premiums and no cash value

Question 61

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?

Answer 61

The cash value is used to purchase a $20,000 paid-up policy

Question 62

What would we call a representation which fails to correspond with its stipulations or assertions?

Answer 62

False

Question 63

In the state of California:

Answer 63

Providing free insurance coverage in connection with the sale of services as an inducement for completing the transaction is not legal

Question 64

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:

Answer 64

Trust and solvency reports

Question 65

The Employee Retirement Income Security Act of 1974 (ERISA) mandates requiring plan sponsor to provide participants with:

Answer 65

Plan descriptions and benefit statements

Question 66

Which of the following requires a reporting company to respond to a consumer’s complaint that his file contains inaccurate information about them?

Answer 66

Fair Credit Reporting Act

Question 67

Which of the following is a true statement regarding the social security (OASDHI) program?

Answer 67

The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs.

Question 68

What makes up the entire contract in a life insurance policy?

Answer 68

The policy, and when attached, the application

Question 69

Which of the following is a correct statement about life insurance policy types?

Answer 69

The initial premium for term insurance is lower than the initial premium for whole life insurance

Question 70

While an insurer is paying the premium for a life insurance policy under the waiver of premium rider:

Answer 70

The policy remains in full force in every respect

Question 71

According to the CA Insurance Code, all insurers must maintain a department to investigate:

Answer 71

Possible fraudulent claims from insureds

Question 72

Unintentional concealment entitles the injured party to which course of action?

Answer 72

Rescission of the contract

Question 73

When may a representation be withdrawn?

Answer 73

Only before the insurance is in effect

Question 74

A significant benefit to the insured in group underwriting verses individual is:

Answer 74

The cost of coverage is lower

Question 75

How long must a life-only agent maintain records regarding policies sold in this state?

Answer 75

5 years