Primerica Test 2 Flashcards
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
a) Reciprocal
b) Nonprofit service organization
c) Stock
d) Mutual
d) Mutual
Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.
Which of the following insurance options would be considered a risk-sharing arrangement?
a) Reciprocal
b) Stock
c) Mutual
d) Surplus lines
a) Reciprocal
When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.
When is the insurer NOT required to deliver a policy summary to a policy applicant?
a) When the policy death benefit is over $5,000
b) When the insurer provides a written statement of coverage
c) When the insurer provides an illustration during the sale of a policy
d) When the policy does not contain an unconditional refund provision
c) When the insurer provides an illustration during the sale of a policy
The authority granted to an agent through the agent’s contract is referred to as
a) Express authority.
b) Apparent authority.
c) Implied authority.
d) Absolute authority.
a) Express authority.
Express powers are written into the contract between the insurer and the agent.
A married couple’s retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?
a) Joint annuity
b) Cash refund annuity
c) Straight life
d) Joint and survivor
d) Joint and survivor
Under a joint settlement option, payments would stop at the first death, but under the joint and survivor, payment would continue until both recipients die. Usually, the surviving beneficiary receives 1/2 or 2/3 of the amount received when both beneficiaries were alive.
All of the following are true regarding the guaranteed insurability rider EXCEPT..
a) The insured may purchase additional coverage at the attained age.
b) The insured may purchase additional insurance up to the amount specified in the base policy.
c) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events.
d) This rider is available to all insureds with no additional premium.
d) This rider is available to all insureds with no additional premium.
All of the following statements are true regarding installments for a fixed amount EXCEPT…
a) Value of the account and future earnings will determine the time period for the benefits.
b) This option pays a specific amount until the funds are exhausted.
c) The annuitant may select how big the payments will be.
d) The payments will stop when the annuitant dies.
d) The payments will stop when the annuitant dies.
Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
a) Equity Indexed Universal Life
b) Variable Universal Life
c) Universal Life – Option A
d) Universal Life – Option B
c) Universal Life – Option A
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
a) Variable life
b) Universal life
c) Whole life
d) Decreasing term
d) Decreasing term
A decreasing term policy’s face amount decreases as the amount of debt is reduced.
Which Universal Life option has a gradually increasing cash value and a level death benefit?
a) Juvenile life
b) Term insurance
c) Option B
d) Option A
d) Option A
Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
a) The policyholder has the right to withdraw the accumulations at any time.
b) The interest is not taxable since it remains inside the insurance policy.
c) The annual dividend is retained by the company.
d) The interest is credited at a rate specified by the policy.
b) The interest is not taxable since it remains inside the insurance policy.
The interest credited under this option is TAXABLE, whether or not the policyowner receives it.
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?
a) Term insurance only
b) Permanent insurance only
c) Universal life insurance only
d) Any form of life insurance
d) Any form of life insurance
Any form of Life insurance may be used to fund a buy-sell agreement.
The equity in an equity index annuity is linked to
a) An index like Standard & Poor’s 500.
b) The returns from the insurance company’s separate account.
c) The annuitant’s individual stock portfolio.
d) The insurance company’s general account investments.
a) An index like Standard & Poor’s 500
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by…
a) A home office underwriter.
b) A paramedic or examining physician at the insurer’s expense.
c) The agent.
d) A physician of the applicant’s choice and at his expense.
b) A paramedic or examining physician at the insurer’s expense.
The applicant may be allowed to select the physician or paramedic facility to perform the examination. The insurer pays the cost of such an examination
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
a) The annuitant will receive the lower of either the guaranteed minimum rate or current rate.
b) The annuitant will only receive the guaranteed minimum specified in the contract.
c) The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
d) The annuitant will always receive the current interest rate.
c) The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
With a fixed annuity, the insurer invests the principal and gives the annuitant a guaranteed interest rate based on a minimum rate specified in the annuity, or current interest rate, whichever is higher.
