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PracticeTest2 Flashcards

1
Q

The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a

  1. Whole Life Policy.
  2. Convertible Term Policy.
  3. Renewable Term Policy.
  4. Decreasing Term Policy.
A
  1. Convertible Term Policy.
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2
Q

All other factors being equal, the least expensive first-year premium payment is found in

  1. Annually Renewable Term.
  2. Increasing Term.
  3. Decreasing Term.
  4. Level Term.
A
  1. Annually Renewable Term.
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3
Q

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT

  1. Upon conversion, the premium for the permanent policy will be based upon attained age.
  2. Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
  3. Evidence of insurability is not required.
  4. Most term policies contain a convertibility option.
A
  1. Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
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4
Q

Which of the following policies is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy?

  1. Enhanced whole life
  2. Minimum deposit whole life
  3. Graded premium whole life
  4. Indeterminate premium whole life
A
  1. Graded premium whole life
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5
Q

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

  1. Annuitization period
  2. Pay-out period
  3. Liquidation period
  4. Depreciation period
A
  1. Depreciation period
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6
Q

Which of the following is an example of liquidity in a life insurance contract?

  1. The flexible premium
  2. The money in a savings account
  3. The cash value available to the policyowner
  4. The death benefit paid to the beneficiary
A
  1. The cash value available to the policyowner
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7
Q

In forming an insurance contract, when does acceptance usually occur?

  1. When an insured submits an application
  2. When an insurer’s underwriter approves coverage
  3. When an insurer delivers the policy
  4. When an insurer receives an application
A
  1. When an insurer’s underwriter approves coverage
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8
Q

Graded-Premium Whole Life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. After the period of increase the premiums will

  1. Continue to increase.
  2. Return to the initial premium amount.
  3. Decrease again.
  4. Be level thereafter.
A
  1. Be level thereafter.
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9
Q

What does “liquidity” refer to in a life insurance policy?

  1. The policyowner receives dividend checks each year.
  2. The insured is receiving payments each month in retirement.
  3. Cash values can be borrowed at any time.
  4. The death benefit replaces the assets that would have accumulated if the insured had not died.
A
  1. Cash values can be borrowed at any time.
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10
Q

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

  1. Never tax deductible.
  2. Partially tax deductible depending on the income level.
  3. Tax deductible.
  4. Deducted based on the income level.
A
  1. Tax deductible.
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11
Q

Which of the following statements about group life is correct?

  1. The premiums are higher than in an individual policy because there is no medical exam.
  2. The group sponsor receives a Certificate of Insurance.
  3. The policy can be converted to an individual term insurance policy.
  4. The cost of coverage is based on the ratio of men and women in the group.
A
  1. The cost of coverage is based on the ratio of men and women in the group.
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12
Q

Which of the following best defines target premium in a universal life policy?

  1. The minimum amount to make sure the policy is annually renewable
  2. The corridor of insurance
  3. The recommended amount to keep the policy in force throughout its lifetime
  4. The maximum amount the policyowner may pay on a policy
A
  1. The recommended amount to keep the policy in force throughout its lifetime
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13
Q

Which of the following is TRUE regarding the annuity period?

  1. It may last for the lifetime of the annuitant.
  2. During this period of time the annuity payments grow interest tax deferred.
  3. It is also referred to as the accumulation period.
  4. It is the period of time during which the annuitant makes premium payments into the annuity.
A
  1. It may last for the lifetime of the annuitant.
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14
Q

What does “liquidity” refer to in a life insurance policy?

  1. The insured is receiving payments each month in retirement.
  2. Cash values can be borrowed at any time.
  3. The death benefit replaces the assets that would have accumulated if the insured had not died.
  4. The policyowner receives dividend checks each year.
A
  1. Cash values can be borrowed at any time.
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15
Q

Which of the following types of insurance policies would perform the function of cash accumulation?

  1. Credit life
  2. Increasing term
  3. Whole life
  4. Term life
A
  1. Whole life
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16
Q

When must an IRA be completely distributed when a beneficiary is not named?

  1. December 31 of the year following the year of the owner’s death.
  2. Due date of the deceased owner’s final tax return including extensions.
  3. December 31 of the year that contains the fifth anniversary of the owner’s death.
  4. Due date of beneficiary’s tax return including extensions.
A
  1. December 31 of the year that contains the fifth anniversary of the owner’s death.
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17
Q

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

  1. Variable
  2. Term
  3. Securities
  4. Stock
A
  1. Variable
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18
Q

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

  1. Someone making contributions to an educational IRA
  2. A person whose contributions are funded by a return on investment
  3. An individual not covered by an employer-sponsored plan who has earned income
  4. Anybody: all IRA contributions are fully deductible regardless of income level
A
  1. An individual not covered by an employer-sponsored plan who has earned income
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19
Q

All of the following are true of key person insurance EXCEPT

  1. The plan is funded by permanent insurance only.
  2. There is no limitation on the number of key employee plans in force at any one time.
  3. The employer is the owner, payor and beneficiary of the policy.
  4. The key employee is the insured.
A
  1. The plan is funded by permanent insurance only.
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20
Q

An Adjustable Life policyowner can change which of the following policy features?

  1. The coverage period
  2. The mortality expense
  3. The investment account
  4. The insured
A
  1. The coverage period
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21
Q

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

  1. The benefit is subject to the exclusionary rule.
  2. IRS has no jurisdiction.
  3. The benefit is received as taxable income.
  4. The benefit is received tax free.
A
  1. The benefit is received tax free
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22
Q

All of the following statements are TRUE concerning Debtor Groups EXCEPT

  1. An insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer.
  2. The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor.
  3. The debtors eligible for insurance under the policy shall all be the debtors of the creditor(s).
  4. The premium for the policy shall be paid either from the creditor’s funds, or from charges collected from the insured debtors, or from both.
A
  1. The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor.
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23
Q

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

  1. Owner
  2. Insurance company
  3. Estate
  4. Beneficiary
A
  1. Beneficiary
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24
Q

Which of the following best describes gross annual premium?

  1. Basic insurance rate plus commissions
  2. Expense premium
  3. Annual cost of mortality plus expenses
  4. Annual loading
A
  1. Annual cost of mortality plus expenses
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25
Q

An agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the insured’s family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?

  1. The policy will remain in force as long as there are no material misrepresentations on the application.
  2. The policy is legal since the applicant was able to give all required information.
  3. The policy is not legal; agents cannot sell insurance over the phone.
  4. The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.
A
  1. The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.
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26
Q

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

  1. Prolong the open enrollment period.
  2. Increase medical requirements on existing members.
  3. Require evidence of insurability.
  4. Require a higher premium.
A
  1. Require evidence of insurability.
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27
Q

In terms of parties to a contract, which of the following does NOT describe a competent party?

  1. The person must not be under the influence of drugs or alcohol.
  2. The person must be of legal age.
  3. The person must be mentally competent to understand the contract.
  4. The person must have at least completed secondary education
A
  1. The person must have at least completed secondary education
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28
Q

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

  1. The death benefit can be increased only by exchanging the existing policy for a new one.
  2. The death benefit can be increased by providing evidence of insurability.
  3. The death benefit cannot be increased.
  4. The death benefit can be increased only when the policy has developed a cash value.
A
  1. The death benefit can be increased by providing evidence of insurability.
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29
Q

Which type of life insurance policy generates immediate cash value?

  1. Continuous Premium
  2. Single Premium
  3. Level Term
  4. Decreasing Term
A
  1. Single Premium
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30
Q

A key person insurance policy can pay for which of the following?

  1. Hospital bills of the key employee
  2. Costs of training a replacement
  3. Loss of personal income
  4. Workers compensation
A
  1. Costs of training a replacement
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31
Q

State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT

  1. Offering benefit certificates or securities in return for purchasing insurance.
  2. Inviting prospective clients to the grand opening of the company’s new office.
  3. Issuing or delivering insurance company stock in return for purchasing insurance.
  4. Promising returns and profits from the purchase of insurance.
A
  1. Inviting prospective clients to the grand opening of the company’s new office.
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32
Q

How many continuing education requirements must be met with a two-year period?

  1. 18
  2. 24
  3. 12
  4. 16
A
  1. 24
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33
Q

How often must continuing education requirements be met?

  1. Every 2 years
  2. Every 3 years
  3. Every 6 months
  4. Every year
A
  1. Every 2 years
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34
Q

Mr. E wants to become an insurance advisor. His hiring manager informs him that he must post a single security bond to quality. How much money must Mr. E post?

  1. $500
  2. $750
  3. $1,000
  4. $10,000
A
  1. $1,000
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35
Q

A company has 10,000 employees. If their insurance is noncontributory, how many of the employees must participate in the plan?

  1. 0
  2. 1,000
  3. 5,000
  4. 10,000
A
  1. 10,000
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36
Q

When an insurance agency published an advertising brochure, it emphasized the company’s financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement?

  1. Twisting
  2. Rebating
  3. False financial statement
  4. Defamation
A
  1. False financial statement
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37
Q

The act of trying to discourage a policyholder from dropping his/her existing policy is called

  1. Bargaining.
  2. Conservation effort.
  3. Dissuasive effort.
  4. Baiting
A
  1. Conservation effort.
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38
Q

Which of the following would be considered an illegal inducement to purchase insurance?

  1. Mailing an agency brochure to a prospective client
  2. Listing the insurance companies the agency represents in a letter
  3. Inviting prospective clients to the grand opening of the producer’s new office
  4. Confirming future dividends in a life insurance proposal
A
  1. Confirming future dividends in a life insurance proposal
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39
Q

All of the following could own group life insurance EXCEPT

  1. A debtor group.
  2. A group needing low-cost life insurance.
  3. An employer group.
  4. An alumni group.
A
  1. A group needing low-cost life insurance.
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40
Q

All of the following are characteristics of a group life insurance plan EXCEPT

  1. There is a requirement to prove insurability on the part of the participants.
  2. The participants receive a Certificate of Insurance as their proof of insurance.
  3. A minimum number of participants is required in order to underwrite the plan.
  4. The cost of the plan is determined by the average age of the group.
A
  1. There is a requirement to prove insurability on the part of the participants.
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41
Q

Which of the following types of insurance would be most suitable for mortgage protection?

  1. Increasing term
  2. Straight life
  3. Decreasing term
  4. Level term
A
  1. Decreasing term
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42
Q

Which of the following individuals must have insurable interest in the insured?

  1. Beneficiary
  2. Actuary
  3. Producer
  4. Policyowner
A
  1. Policyowner
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43
Q

An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments?

  1. It is paid out as dividends.
  2. It is used to fund executive bonuses
  3. It is used to increase the death benefit.
  4. It is used to lower premiums.
A
  1. It is used to lower premiums.
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44
Q

The annuity owner dies during the accumulation period of his annuity. The cash value of his annuity exceeds the premiums he paid. There is no named beneficiary. Which of the following is true?

  1. The premium value will be paid to the annuitant’s estate.
  2. The state government will receive the amount of premiums paid.
  3. The state government will receive the cash value of the annuity.
  4. The cash value will be paid to the annuitant’s estate.
A
  1. The cash value will be paid to the annuitant’s estate.
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45
Q

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

  1. Never tax deductible.
  2. Partially tax deductible depending on the income level.
  3. Tax deductible.
  4. Deducted based on the income level.
A
  1. Tax deductible.
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46
Q

Which of the following has the right to convert the existing term coverage to permanent insurance?

  1. Producer
  2. Policyowner
  3. Insurer
  4. Beneficiary
A
  1. Policyowner
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47
Q

Which of the following is TRUE regarding a policy issued to a labor union insuring members of the organization for the benefit of persons other than the union or organization?

  1. The members eligible for insurance under the policy must be all the members of the union or organization.
  2. The premiums for the policy must be paid either from funds of the union, or from funds contributed by the insured members specifically for their insurance, or from both.
  3. An insurer may exclude or limit the coverage on any person who provides unsatisfactory evidence of insurability to the insurer.
  4. All of the above are true
A
  1. All of the above are true
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48
Q

Which of the following statements concerning buy-sell agreements is true?

  1. Benefits received are considered income taxable.
  2. Buy-sell agreements pay in the event of a medical emergency.
  3. Buy-sell agreements are normally funded with a life insurance policy.
  4. Premiums paid are deductible as a business expense.
A
  1. Buy-sell agreements are normally funded with a life insurance policy.
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49
Q

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)

  1. Aleatory contract.
  2. Executive bonus.
  3. Key person policy.
  4. Fraternal association.
A
  1. Executive bonus.
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50
Q

At age 30, a man wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?

  1. Adjustable Life
  2. Single Premium Whole Life
  3. Interest-sensitive Whole Life
  4. Decreasing Term
A
  1. Adjustable Life
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51
Q

What is the purpose of establishing the target premium for a universal life policy?

  1. To pay up the policy faster
  2. To cover all policy expenses
  3. To keep the policy in force
  4. To accumulate cash value faster
A
  1. To keep the policy in force
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52
Q

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

  1. Premiums are taxable to the employee.
  2. Premiums are not tax deductible as a business expense.
  3. Premiums are tax deductible by the key employee.
  4. Premiums are tax deductible as a business expense.
A
  1. Premiums are not tax deductible as a business expense.
53
Q

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

  1. Anybody: all IRA contributions are fully deductible regardless of income level
  2. Someone making contributions to an educational IRA
  3. A person whose contributions are funded by a return on investment
  4. An individual not covered by an employer-sponsored plan who has earned income
A
  1. An individual not covered by an employer-sponsored plan who has earned income
54
Q

A Universal Life insurance policy has two types of interest rate that are called

  1. Option A and Option B
  2. Fixed and Variable
  3. Minimum and Target
  4. Guaranteed and Current
A
  1. Guaranteed and Current
55
Q

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

  1. Survivor protection
  2. Life planning
  3. Survivorship insurance
  4. Juvenile protection provision
A
  1. Survivor protection
56
Q

All of the following statements are true regarding mortgage protection insurance EXCEPT

  1. The face amount remains the same throughout the life of the policy.
  2. It is used to pay off the balance on the mortgage.
  3. The face amount decreases as the amount owed on the mortgage decreases.
  4. It’s a decreasing term insurance.
A
  1. The face amount remains the same throughout the life of the policy.
57
Q

In which of the following examples would a contract between an insurer and prospective insured be legal?

  1. The applicant is intoxicated at the time of application.
  2. The applicant is a 12-year-old student.
  3. The applicant is under the influence of medication at the time of application.
  4. The applicant has a prior felony conviction.
A
  1. The applicant has a prior felony conviction.
58
Q

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

  1. Is contributory.
  2. Has at least 50 members.
  3. Has a constitution and by-laws.
  4. Holds annual meetings.
A
  1. Has at least 50 members.
59
Q

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

  1. Remains level.
  2. Fluctuates.
  3. Increases annually.
  4. Decreases annually.
A
  1. Increases annually.
60
Q

All of the following information about a customer must be used in determining annuity suitability EXCEPT

  1. Beneficiary’s age.
  2. Tax status.
  3. Financial experience.
  4. Annual income.
A
  1. Beneficiary’s age.
61
Q

Which of the following best describes what the annuity period is?

  1. The period of time from the effective date of the contract to the date of its termination
  2. The period of time during which accumulated money is converted into income payments
  3. The period of time from the accumulation period to the annuitization period
  4. The period of time during which money is accumulated in an annuity
A
  1. The period of time during which accumulated money is converted into income payments
62
Q

Which of the following is the best reason to purchase life insurance rather than annuities?

  1. To liquidate a sum of money over a lifetime
  2. To create an estate
  3. To liquidate a sum of money over a period of years
  4. To create regular income payments
A
  1. To create an estate
63
Q

Vision, Inc. employs 500 people. The company offers group life insurance to its employees after 90 days of service. Who is considered the policyholder of the life insurance policies Vision, Inc. offers?

  1. The beneficiaries of the insurance policies
  2. The insurance company
  3. Vision, Inc.
  4. Each individual employee
A
  1. Vision, Inc.
64
Q

Which of the following best describes annually renewable term insurance?

  1. Neither the premium nor the death benefit is affected by the insured’s age.
  2. It provides an annually increasing death benefit.
  3. It is level term insurance.
  4. It requires proof of insurability at each renewal.
A
  1. It is level term insurance.
65
Q

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

  1. Increase medical requirements on existing members.
  2. Require evidence of insurability.
  3. Require a higher premium.
  4. Prolong the open enrollment period.
A
  1. Require evidence of insurability.
66
Q

An insured purchased a Life Insurance policy. The agent told him that depending upon the company’s investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an

  1. Credit Life.
  2. Annual Renewable Term.
  3. Adjustable Life.
  4. Interest-sensitive Whole Life.
A
  1. Interest-sensitive Whole Life.
67
Q

B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for B?

  1. Modified Life
  2. Limited Term
  3. Limited Pay
  4. Interest-sensitive Whole Life
A
  1. Modified Life
68
Q

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

  1. Contract of adhesion
  2. Acceptance
  3. Consideration
  4. Legal purpose
A
  1. Consideration
69
Q

The mode of premium payment

  1. Is the factor that determines the amount of dividends in a policy.
  2. Is the method used to compute the cash surrender value of the policy.
  3. Does not affect the amount of premium paid.
  4. Is defined as the frequency and the amount of the premium payment
A
  1. Is defined as the frequency and the amount of the premium payment
70
Q

An Adjustable Life policyowner can change which of the following policy features?

  1. The mortality expense
  2. The investment account
  3. The insured
  4. The coverage period
A
  1. The coverage period
71
Q

A viatical settlement is arranged between a viatical company and a/an

  1. Terminally ill insured.
  2. Insurance producer.
  3. Beneficiary.
  4. Lender.
A
  1. Terminally ill insured.
72
Q

Which of the following is an example of a limited-pay life policy?

  1. Level Term Life
  2. Straight Life
  3. Life Paid-up at Age 65
  4. Renewable Term to Age 70
A
  1. Life Paid-up at Age 65
73
Q

In forming an insurance contract, when does acceptance usually occur?

  1. When an insured submits an application
  2. When an insurer’s underwriter approves coverage
  3. When an insurer delivers the policy
  4. When an insurer receives an application
A
  1. When an insurer’s underwriter approves coverage
74
Q

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

  1. Income tax on distributions plus 10% penalty.
  2. Capital gains tax on distributions and no penalty.
  3. Capital gains tax on distributions plus 10% penalty.
  4. Income tax on distributions and no penalty.
A
  1. Income tax on distributions and no penalty.
75
Q

When must an IRA be completely distributed when a beneficiary is not named?

  1. Due date of the deceased owner’s final tax return including extensions.
  2. December 31 of the year that contains the fifth anniversary of the owner’s death.
  3. Due date of beneficiary’s tax return including extensions.
  4. December 31 of the year following the year of the owner’s death.
A
  1. December 31 of the year that contains the fifth anniversary of the owner’s death.
76
Q

Which of the following would describe a legal document which would dictate who can buy a deceased partner’s share of a business and for what amount?

  1. Profit and loss agreement
  2. Key person agreement
  3. Split dollar agreement
  4. Buy-sell agreement
A
  1. Buy-sell agreement
77
Q

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

  1. The annuitant must be a natural person.
  2. A corporation can be an annuitant as long as it is also the owner.
  3. A corporation can be an annuitant as long as the beneficiary is a natural person.
  4. The contract can be issued without an annuitant.
A
  1. The annuitant must be a natural person.
78
Q

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

  1. Decreased death benefit at each renewal.
  2. Required a premium increase each renewal.
  3. Built cash values.
  4. Required proof of insurability every year.
A
  1. Required a premium increase each renewal
79
Q

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

  1. The employer pays a bonus to a selected employee to fund the policy.
  2. It is considered a nonqualified employee benefit.
  3. The policy is owned by the company.
  4. Any type of insurance policy may be used.
A
  1. The policy is owned by the company.
80
Q

Which of the following statements is true regarding the cash value in a Universal life policy?

  1. The insurer backs the cash value with a current interest rate.
  2. The insurer credits the cash value in the policy with a current interest rate.
  3. The insurer credits the cash value in the policy with a guaranteed interest rate.
  4. The insurer backs the cash value with a nonguaranteed interest rate.
A
  1. The insurer credits the cash value in the policy with a current interest rate.
81
Q

What describes the specific information about a policy?

  1. Producer’s report
  2. Policy summary
  3. Illustrations
  4. Buyer’s guide
A
  1. Policy summary
82
Q

(MD) When a producer was reviewing a potential customer’s coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of

  1. Misrepresentation.
  2. Discrimination.
  3. Nothing, unless the remarks were in writing
  4. Defamation.
A
  1. Defamation.
83
Q

The duty (or duties) of a producer where replacement is involved include

  1. Leaving a copy or original of all solicitation material used for presentation to the applicant.
  2. Submitting to the replacing insurer a copy of all soliciting material.
  3. Submitting to the replacing insurer a statement signed by the applicant as to whether or not he has existing life insurance.
  4. All of the above
A
  1. All of the above
84
Q

Willful violations of insurance laws of this state are considered

  1. Misdemeanors.
  2. Felonies.
  3. Class A offenses.
  4. Crimes of moral turpitude.
A
  1. Misdemeanors.
85
Q

Paul is a producer in Vermont and wants to become a producer in Maryland. The Department will waive certain examination requirements, provided that Vermont would waive these same requirements if a Maryland producer sought licensure in Vermont. What term is used to describe this phenomenon?

  1. Equality
  2. Fair exchange
  3. Equanimity
  4. Reciprocity
A
  1. Reciprocity
86
Q

If the employer pays the full premium and 100% of the employees must participate, the coverage is called

  1. Noncontributory.
  2. Employer-funded.
  3. Contributory.
  4. Qualified.
A
  1. Noncontributory.
87
Q

If a licensee intentionally violates the Insurance Code, what is the maximum monetary penalty that he or she would be required to pay?

  1. $5,000
  2. $10,000
  3. $50,000
  4. $100,000
A
  1. $100,000
88
Q

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured’s best interest are guilty of

  1. Twisting.
  2. Defamation.
  3. Misrepresentation.
  4. Rebating
A
  1. Twisting.
89
Q

Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT

  1. An agent offers the use of his lake house to person as an inducement to buy.
  2. An agent offers to share his commission with a policyholder.
  3. An agent offers tickets to a baseball game as an inducement to buy insurance.
  4. An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.
A
  1. An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.
90
Q

Large group life insurance underwriting takes all of the following into consideration EXCEPT

  1. The health of each individual in the group.
  2. The nature or purpose of the group.
  3. The size of the group.
  4. The level of participation by the group.
A
  1. The health of each individual in the group.
91
Q

[Repeat Focus]
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
1. Until the policyowner’s age 100, when the policy matures.
2. For 20 years or until death, whichever occurs first.
3. Until the policyowner’s age 65.
4. For 20 years.

A
  1. For 20 years or until death, whichever occurs first.
92
Q

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

  1. The length of coverage.
  2. The premium.
  3. The amount of insurance.
  4. The type of investment.
A
  1. The type of investment.
93
Q

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

  1. Term insurance only
  2. Permanent insurance only
  3. Universal life insurance only
  4. Any form of life insurance
A
  1. Any form of life insurance
94
Q

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

  1. Limited pay whole life
  2. Interest-sensitive whole life
  3. Life annuity with period certain
  4. Increasing term
A
  1. Limited pay whole life
95
Q

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

  1. It will decrease for the new 5-year term since the insured is now a lesser risk to the company.
  2. It will increase each year during the next 5 years as the face amount increases each year.
  3. It will increase because the insured will be 5 years older than when the policy was originally purchased.
  4. It will remain the same for the new 5-year term.
A
  1. It will increase because the insured will be 5 years older than when the policy was originally purchased.
96
Q

When an annuity is written, whose life expectancy is taken into account?

  1. Beneficiary
  2. Life expectancy is not a factor when writing an annuity.
  3. Owner
  4. Annuitan
A
  1. Annuitan
97
Q

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

  1. The death benefit can be increased only by exchanging the existing policy for a new one.
  2. The death benefit can be increased by providing evidence of insurability.
  3. The death benefit cannot be increased.
  4. The death benefit can be increased only when the policy has developed a cash value.
A
  1. The death benefit can be increased by providing evidence of insurability.
98
Q

All of the following are true of an annuity owner EXCEPT

  1. The owner is the party who may surrender the annuity.
  2. The owner must be the party to receive benefits.
  3. The owner pays the premiums on the annuity.
  4. The owner has the right to name the beneficiary.
A
  1. The owner must be the party to receive benefits.
99
Q

Which of the following is the best reason to purchase life insurance rather than annuities?

  1. To create regular income payments
  2. To liquidate a sum of money over a lifetime
  3. To create an estate
  4. To liquidate a sum of money over a period of years
A
  1. To create an estate
100
Q

Which of the following types of insurance policies would perform the function of cash accumulation?

  1. Credit life
  2. Increasing term
  3. Whole life
  4. Term life
A

Whole life

101
Q

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

  1. Capital gains tax on distributions and no penalty.
  2. Capital gains tax on distributions plus 10% penalty.
  3. Income tax on distributions and no penalty.
  4. Income tax on distributions plus 10% penalty
A
  1. Income tax on distributions and no penalty.
102
Q

Which of the following best describes annually renewable term insurance?

  1. It requires proof of insurability at each renewal.
  2. Neither the premium nor the death benefit is affected by the insured’s age.
  3. It provides an annually increasing death benefit.
  4. It is level term insurance.
A
  1. It is level term insurance
103
Q

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

  1. Term insurance only
  2. Permanent insurance only
  3. Universal life insurance only
  4. Any form of life insurance
A
  1. Any form of life insurance
104
Q

What is the purpose of key person insurance?

  1. To provide health insurance to the families of key employees
  2. To insure retirement benefits are available to all key employees
  3. To maintain an account that insures the owner of a company remains solvent
  4. To lessen the risk of financial loss because of the death of a key employee
A
  1. To lessen the risk of financial loss because of the death of a key employee
105
Q

All of the following are characteristics of a group life insurance plan EXCEPT

  1. There is a requirement to prove insurability on the part of the participants.
  2. The participants receive a Certificate of Insurance as their proof of insurance.
  3. A minimum number of participants is required in order to underwrite the plan.
  4. The cost of the plan is determined by the average age of the group.
A
  1. There is a requirement to prove insurability on the part of the participants.
106
Q

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

  1. Juvenile protection provision
  2. Survivor protection
  3. Life planning
  4. Survivorship insurance
A
  1. Survivor protection
107
Q

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

  1. Never tax deductible.
  2. Partially tax deductible depending on the income level.
  3. Tax deductible.
  4. Deducted based on the income level.
A
  1. Tax deductible.
108
Q

Which of the following would help prevent a universal life policy from lapsing?

  1. Corridor of insurance
  2. Target premium
  3. Face amount
  4. Adjustable premium
A
  1. Target premium
109
Q

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

  1. Whether an insurable interest exists between the individuals.
  2. The gender of the applicant.
  3. The type of policy requested.
  4. Which individual will pay the premium.
A
  1. Whether an insurable interest exists between the individuals.
110
Q

An association could buy group insurance for its members if it meets all of the following requirements EXCEPT

  1. Holds annual meetings.
  2. Is contributory.
  3. Has at least 50 members.
  4. Has a constitution and by-laws.
A
  1. Has at least 50 members.
111
Q

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

  1. Adhesion
  2. Consideration
  3. Good faith
  4. Representation
A
  1. Consideration
112
Q

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

  1. Cash value of the plan
  2. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
  3. Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount
  4. Amount paid into the plan
A
  1. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
113
Q

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

  1. Someone making contributions to an educational IRA
  2. A person whose contributions are funded by a return on investment
  3. An individual not covered by an employer-sponsored plan who has earned income
  4. Anybody: all IRA contributions are fully deductible regardless of income level
A
  1. An individual not covered by an employer-sponsored plan who has earned income
114
Q

Which of the following is NOT the consideration in a policy?

  1. The promise to pay covered losses
  2. The application given to a prospective insured
  3. Something of value exchanged between parties
  4. The premium amount paid at the time of application
A
  1. The application given to a prospective insured
115
Q

Which of the following statements about group life is correct?

  1. The premiums are higher than in an individual policy because there is no medical exam.
  2. The group sponsor receives a Certificate of Insurance.
  3. The policy can be converted to an individual term insurance policy.
  4. The cost of coverage is based on the ratio of men and women in the group.
A
  1. The cost of coverage is based on the ratio of men and women in the group.
116
Q

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

  1. Required a premium increase each renewal.
  2. Built cash values.
  3. Required proof of insurability every year.
  4. Decreased death benefit at each renewal.
A
  1. Required a premium increase each renewal.
117
Q

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?

  1. Effect of inflation on income over time.
  2. Predicted needs of the family after the insured’s death.
  3. Insured’s current and future income.
  4. Insured’s annual expenses.
A
  1. Predicted needs of the family after the insured’s death.
118
Q

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?

  1. The Key Person is the owner and the employer is the beneficiary.
  2. The employer is the owner and beneficiary.
  3. The employer is the owner and the Key Person is the beneficiary.
  4. The Key Person is the owner and beneficiary.
A
  1. The employer is the owner and beneficiary.
119
Q

A Straight Life policy has what type of premium?

  1. A decreasing annual premium for the life of the insured
  2. A variable annual premium for the life of the insured
  3. A level annual premium for the life of the insured
  4. An increasing annual premium for the life of the insured
A
  1. A level annual premium for the life of the insured
120
Q

In insurance, an offer is usually made when

  1. The insurer approves the application and receives the initial premium.
  2. The agent hands the policy to the policyholder.
  3. An agent explains a policy to a potential applicant.
  4. The application is submitted.
A
  1. The application is submitted.
121
Q

(MD) A banker is ready to close on a customer’s loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of

  1. Loading.
  2. Defamation.
  3. Twisting.
  4. Coercion.
A
  1. Loading.
122
Q

In order to be covered in a group life insurance plan, the producer will have each individual fill out an application that includes

  1. The insured and the beneficiary.
  2. The date of employment and annual salary.
  3. All immediate family members and family medical history.
  4. A detailed medical history.
A
  1. The insured and the beneficiary.
123
Q

Agents are not required to be licensed if they sell

  1. Auto insurance.
  2. Credit insurance and health insurance.
  3. Travel insurance.
  4. Variable products.
A
  1. Travel insurance.
124
Q

Those who give advice to clients about insurance exposures and coverages and make recommendations about changes in coverage and limits are called

  1. Advisers.
  2. Brokers.
  3. Producers.
  4. Strategists
A
  1. Advisers.
125
Q

During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes

  1. Twisting.
  2. Coercion.
  3. Misrepresentation.
  4. Defamation.
A
  1. Misrepresentation.
126
Q

Who must notify the replacement company of a policy that is being replaced?

  1. Policyholder
  2. Counselor
  3. Producer
  4. Executive offer of the replacing company
A
  1. Producer
127
Q

An insurer publishes intimidating brochures that portray the insurer’s competition as financially and professionally unstable. Which of the following best describes this act?

  1. Legal, provided that the information can be verified
  2. Illegal until endorsed by the Guaranty Association
  3. Legal, provided that the other insurers are paid royalties for the usage of their names
  4. Illegal under any circumstances
A
  1. Illegal under any circumstances
128
Q

Mr. E wants to become an insurance advisor. His hiring manager informs him that he must post a single security bond to quality. How much money must Mr. E post?

  1. $500
  2. $750
  3. $1,000
  4. $10,000
A
  1. $1,000
129
Q

In replacement, an existing insurer must provide policyowners with a policy summary for existing life insurance within how many days of receiving the written communication and replacement?

  1. 20
  2. 31
  3. 60
  4. 3
A
  1. 20

Life2 (3 decks)

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