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Life Insurance > Review > Flashcards

Review Flashcards

1
Q

Gross Premium for a life insurance policy is determined by adding which two components?

A. Net premium and interest
B. Interest and expenses
C. Net premium and Expenses
D. Mortality and interest

A

C. Net Premium and expenses.

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2
Q

An Individual receives a lump-sum inheritance. He’d like to use the money to create a lifetime income, since he’ll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 Months. What did he buy?

A. Single Premium immediate annuity
B. Flexible Premium deferred annuity
C. Flexible Premium Immediate annuity
D. Single Premium Deferred Annuity

A

A. Single Premium Immediate Annuity.

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3
Q

Restoring an insured financially after a claim is known as.

A. Reasonable expectations.
B. Indemnity
C. Adhesion
D. Restoration.

A

B. Indemnity

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4
Q

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is

A. Not taxed.
B. Taxed as income on 50% of the excess.
C. Assessed a fine of 10% of the excess.
D. Taxed as ordinary income.

A

D. Taxed as ordinary income.

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5
Q

What type of interest rate is guaranteed in universal life policies

A. Adjustable interest rate
B. Current interest rate
C. Contract interest rate
D. Nominal interest rate

A

C. Contract interest rate.

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6
Q

Cash Value Guarantees in a whole life policy called

A. Dividends.
B. Nonforfeiture value
C. Living Benefits.
D. Cash Loans.

A

B. Nonforfeiture value.

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7
Q

Under which of the following conditions would life insurance proceeds be taxable by the federal government?

A. If paid to the policyowner
B. if there is a transfer for value
C. if collaterally assigned to a lender
D. If taken as a lump sum

A

B. If there is a transfer for value.

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8
Q

In a variable life Insurance policy, all of the following assets are held in the insurance company’s general account except

A. Face amount reserves.
B. Incidental benefits amounts.
C. Cash surrender values.
D. Mortality reserves.

A

C. Cash surrender values.

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9
Q

An insured decides to surrender his whole life insurance policy. The cash value at surrender is higher than the premiums paid into the policy, due to interest. What part of the surrender value would be income taxable?

A. The entire cash value amount
B. The difference between the premium paid and the cash value
C. Nothing
D. The amount equal to the premium paid

A

B. The difference between the premium paid and the cash value.

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10
Q

Which of the following types of insurance is investment-based, has a level fixed premium, and nonguaranteed cash value?

A. Interest-based life
B. Universal life
C. Credit Life
D. Variable whole life

A

D. Variable whole life.

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11
Q

An example of an alien insurer doing business in this state is one formed under the laws of

A. Arizona.
B. Puerto Rico.
C. Mexico
D. District of Columbia.

A

C. Mexico

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12
Q

A whole life policy is surrendered for a reduced-paid up policy. The cash value in the new policy will.

A. Remain the same.
B. Decrease over time.
C. Reduce to the pre-surrender value.
D. Continue to increase.

A

D. Continue to increase.

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13
Q

An annuity owner receives the same guaranteed payment every month. What type of annuity is it?

A. Fixed
B. immediate
C. Guaranteed
D. Single

A

A. Fixed

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14
Q

Who is the annuity owner?

A. The person who receives the benefits
B. The person on whose life the annuity is written
C. The insurer
D. The person who purchases the annuity.

A

D. The person who purchases the annuity.

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15
Q

Which of the following is NOT a characteristic of variable insurance and annuities?

A. Cash value is adjusted for inflation.
B. Benefits are determined solely based on the policy premium.
C. Cash value accumulates based on the performance of stocks.
D. Benefits are not guaranteed.

A

B. Benefits are determined solely based on the policy premium.

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16
Q

An insurer incorporated the laws of the laws of another state, but doing business in this state is considered.

A. Foreign.
B. Multi-national.
C. Alien.
D. Domestic

A

A. Foreign.

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17
Q

An insurer that the appointment of an agent must notify the Commissioner within

A. 30 days
B. 45 days.
C. 60 days.
D. 10 days.

A

A. 30 days

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18
Q

Which dividend option will increase the death benefit?

A. Extended term
B. Reduced paid up
C. Paid-up Additions
D. Accumulation

A

C. Paid-up Additions.

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19
Q

Which Provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value?

A. Past Due Premium option
B. Application to Reduce Premium option
C. Automatic Premium Loan option
D. Mode of Premium option

A

C. Automatic Premium Loan option.

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20
Q

What does an annuity protect the annuitant against?

A. Living Longer than expected
B. Leaving beneficiaries without income
C. Estate taxes
D. The financial impact caused by premature death

A

A. Living Longer than expected.

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21
Q

Which of the following bears the investment risk in a variable life insurance policy?

A. The policyowner
B. The agent
C. The insurer
D. The financial adviser

A

A. The policyowner.

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22
Q

Which of the following are characteristics of term life insurance?

A. Nonforfeiture provisions and living benefits.
B. Temporary protection, renewability, no cash value.
C. Adjustable premiums and automatic increase in face amount at any given age
D. coverage to age 100, cash value, and high premiums.

A

B. Temporary protection, renewability, no cash value.

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23
Q

A life insurance policy that provides coverage to every family member in a single policy, with permanent insurance on the breadwinner and convertible term on other family members is called

A. A family member’s endowment.
B. A family income policy.
C. A family blanket policy.
D. A family policy.

A

D. A family policy.

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24
Q

An insurance agent changes his address, How long will the agent be given to notify the department of insurance?

A. 10 business days
B. 15 business days
C. 20 business days
D. 30 business days

A

A. 10 business days

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25
Q

All of the following statements about indexed whole life insurance are correct EXCEPT

A. The premium is fixed.
B. There is a guaranteed minimum interest rate.
C. The cash value depends on the performance of the equity index.
D. The policy face amount remains level throughout the life of the policy.

A

D. The policy face amount remains level throughout the life of the policy.

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26
Q

The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT

A. Birth of a child.
B Marriage.
C. Purchase of a new home.
D. Approximately every 3 years between the ages of 25 and 40.

A

C. Purchase of a new home.

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27
Q

An agent who knowingly misrepresents material information for the purpose of inducing an insured to lapse, forfeit, change or surrender a life insurance policy or annuity has committed an illegal practice known as

A. Misrepresention.
B. Twisting.
C. Fraud.
D. Concealment.

A

B. Twisting.

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28
Q

Which of the following will be eligible for a tax-sheltered annuity?

A. Dependents under the age of 21
B. Public school teachers
C. Military personnel
D. The elderly

A

B. Public school teachers.

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29
Q

Cash Value guarantees in a whole life policy are called

A. living Benefits.
B. Cash loans.
C. Dividends.
D. Nonforfeiture values.

A

D. Nonforfeiture values.

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30
Q

Because of an injury, an insured has been unable to work for 7 months. When his life insurance premium came due, he was unable to pay, yet the policy remained in force.

A. Guaranteed insurability benefits.
B. Facility of payments clause.
C. Nonforfeiture options
D. Waiver of premium rider.

A

D. Waiver of premium rider.

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31
Q

In North Carolina for Licensing Purposes, An applicant is considered a resident if he or she

A. Has lived in North Carolina for at least 90 Days in the past 5 years.
B. Lives in North Carolina or any county outside this state that borders North Carolina.
C. Lives only within the state borders.
D. Holds a resident license in any state.

A

B. Lives in North Carolina or any county outside this state that borders North Carolina.

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32
Q

The Provision that sets Forth the basic agreement between the insurer and states the insurer’s promise to pay the benefit upon the insured’s death is called the

A. Declarations.
B. consideration.
C. Insuring clause.
D. Payment of claims.

A

C. Insuring clause.

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33
Q

A Viatical settlement is a transaction outside the life insurance company where the owner sells the life insurance policy for which of the following?

A. A Predetermined multiple of the premium
B. The face amount of the policy
C. A percentage of the face amount of policy
D. More than the face value

A

C. A percentage of the face amount of policy.

34
Q

What does an annuity protect the annuitant against?

A. Estate taxes
B. The financial Impact caused by premature death
C. living longer than expected
D. Leaving beneficiaries without income

A

C. Living longer than expected.

35
Q

Which of the following is considered a failed underwriter?

A. An adjuster
B. An underwriter
C. An agent
D. Am insurer

A

C. An agent.

36
Q

Contributions to Roth IRAs are

A. Always subject to a 6% tax penalty.
B. Paid with pre-tax dollars.
C. Not tax-deductible.
D. Tax deductible.

A

C. Not tax-deductible.

37
Q

In whole life Insurance, When is the policy cash value scheduled to equal the face amount?

A. By the policy’s 1st year
B. When the insured paid up all policy loans
C. It depends on the type of whole life purchased
D. At the insured’s age 100

A

D. At the insured’s age 100

38
Q 
An insurer incorporated under the laws of another state doing business in this state is considered
A. Multi-national.
B. Alien.
C. Domestic.
D. Foreign.
A

D. Foreign.

39
Q

Which dividend option will increase the death benefit?

A. Paid-up Additions.
B. Accumulation.
C. Extended term.
D. Reduced paid-up.

A

A. Paid-up Additions.

40
Q

All of the following are true of the Survivorship Life policy EXCEPT

A. It can insure more the 2 lives.
B. The premium is based on the age of each insured.
C. The death benefit is not paid until the last death
D. The premium would be lower than in a joint life policy.

A

B. The Premium is based on the age of each insured.

41
Q

Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policyowner select?

A. Joint and Survivor.
B. Fixed-amount installments.
C. Fixed-period installments.
D. Life income.

A

A. Joint and Survivor.

42
Q

What type of an interest rate is guaranteed in universal life policies?

A. Current interest rate
B. Contract interest rate
C. nominal interest rate
D. Adjustable interest rate.

A

B. Contract interest rate

43
Q

Concerning the Family Protection policy, all of the following statement are true EXCEPT

A. Additional children born after the Policy is issued are covered automatically at no extra cost.
B. Children, upon reaching the age majority, are permitted to convert to an individual policy with proof of insurability.
C. This type of policy consists of whole life on the base insured and riders on the others.
D. Convertible term riders cover both the spouse and all children.

A

B. Children, upon reaching the age majority, are permitted to convert to an individual policy with proof of insurability.

44
Q

Which of the following would not be eligible for coverage under key person?

A. The manager of a small store.
B. The owner of a shop.
C. The executive officer of the company
D. The pharmacist in a drug store.

A

B. The owner of a shop.

45
Q

All of the following statements about indexed whole life insurance are correct EXCEPT

A THe cash value depends on the preformace of the equity index.
B. The policy face amount remains level throughout the life of the policy.
C. The premium is fixed.
D. There is a guaranteed minimum interest rate.

A

B. The policy face amount remains level throughout the life of the policy.

46
Q

Policy loan requests, except for loan request for the payment of due premiums, may be deferred for a period of time up to

A. 30 days.
B. 90 days.
C. 6 months.
D. 9 months.

A

C. 6 months.

47
Q

How many hours of ethics education are agents required to complete every licensing period?

A. None
B. 3 hours
C. 5 Hours
D. 10 Hours

A

B. 3 hours

48
Q

According to the life insurance replacement regulations, which of the following would be an example of policy replacement?

A. A lapsed policy is reinstated within a specific timeframe.
B. A policy is reinstated with a reduction in cash value.
C. A term policy expires, and the insured buys another term life policy.
D. Term insurnace is charged to a whole life policy.

A

B. A policy is reinstated with a reduction in cash value.

49
Q

Which of the following is true regarding a joint annuity?

A. The payments go to the surviving annuitant after the first death.
B. The payment stop at first death.
C. The payment stop at last death.
D. The payments go to a beneficiary upon the last death.

A

B. The payment stop at first death.

50
Q

A policy Matures and pays the face amount if the insured lives to a specified date. this best describes

A. An annuity.
B. Term insurance.
C. Social Security.
D. An endowment ploicy

A

D. An endowment ploicy

51
Q

Insurance contracts are untilateral in nature. What does that mean?

A. A promise is made only at the time policy application.
B. Only one party makes a promise.
C. The insured must make a promise to pay the premium.
D. All parties to the contract exchange something of vaule.

A

B. Only one party makes a promise.

52
Q

Which of the following policy loan interest rates is a set percentage per year?

A. Compound rate
B. Fixed rate
C Prime rate
D. Variable rate

A

B. Fixed rate

53
Q

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

A. Term life
B. Credit life
C. increasing term life
D. Whole life

A

D. Whole life

54
Q

Which of the following is true regarding pure life annuity settlement option?

A. The beneficiary will reveive a refund of the principal.
B. it guarantees income for a specified period of time.
C. It provides the highest monthly benefit.
D it guarantess that all the proceeds will be paid out.

A

C. It provides the highest monthly benefit.

55
Q

Which of the following is not true regarding a deferred annuity?

A. it is used to accumulate funds for retirement.
B. It can be purchased with a single lump sum.
C. The annuity grows tax deferred.
D. Income payments begin within 1 Year from the date of purchase.

A

D. Income payments begin within 1 Year from the date of purchase.

56
Q

Any person who intends to defaud an insurer of who knowingly presents a false or misleading statement on a claim is guilty of

A. Civil offense.
B. Felony.
C. Misdemeanor.
D Class A violation

A

B. Felony.

57
Q

What is the difference between a straight life policy and a 20-pay whole life policy?

A. The face amount and cash value.
B. Policy maturity date.
C. Premium payment period.
D. The benefit settlement option.

A

C. Premium payment period.

58
Q

An annuity would be purchased by an individual who wants to

A. Earn a higher rate of interest.
B. Create an estate.
C. Provide income for retirement.
D. Provide a death benefit to the surviving family.

A

C. Provide income for retirement.

59
Q

A resident applicant for a single-line license has educational training class prerequisite of

A. 15 hours.
B. 40 hours.
C. 10 hours.
D. 20 hours.

A

D. 20 hours.

60
Q

Which of the following is guaranteed under a variable whole insurance policy?

A. Stock performance.
B. Minimum death benefit.
C. Interest rates.
D. cash value

A

B. Minimum death benefit.

61
Q

Which of the following is incorrect regarding a 100,000 20-year level term policy?

A) The policy will expire at the end of the 20-year period.
B) At the end of the 20 years, the policy’s cash value will equal 100,000.
C) The policy premiums will remain level for 20 years.
D) If the insured dies before the policy expires, the beneficiary will receive 100,000.

A

B) At the end of the 20 years, the policy’s cash value will equal 100,000.

62
Q

All of the following entities regulate variable life policies EXCEPT

A) The SEC.
B) The Insurance Department
C) The Guaranty Association
D) Federal government

A

C) The Guaranty Association

63
Q

What does “level” refer to in term insurance
A)

A
64
Q

What Does “level refer to in term insurance?
A) Interest rate
B) Face amount
C) Premium
D) Cash value

A

B) Face amount

65
Q

Which of the best describes annually renewable term insurance?
A) It requires proof of insurability at each renewal.
B) Neither the premium nor the death benefit is affected by the insured’s age.
C) It provides an annually increasing death benefit.
D) It is level term insurance.

A

D) It is level term insurance.

66
Q

Which of the following would help prevent a universal life policy from lapsing?
A) Adjustable premium
B) Corridor of Insurance
C) Target Premium
D) Face amount

A

C) Target Premium

67
Q

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
A) The insured’s premiums will be waved until she is 21.
B) The Premiums will become tax deductible until the insured’s 18 birthday.
C) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected.
D) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums.

A

A) The insured’s premiums will be waved until she is 21.

68
Q

Which of the following is NOT a characteristic of variable annuities?
A) The contract owner bears the investment risk.
B) Benefits are dependent on the performance of the securities.
C) The cash value is adjustable for inflation.
D) They offer guaranteed stock performance.

A

D) They offer guaranteed stock performance.

69
Q

To sell variable life insurance policies, an agent must receive all of the following EXCEPT
A) A life insurance license.
B) SEC registration.
C) FINRA registration.
D) A securities license.

A

B) SEC registration.

70
Q

Which of the following types of annuities will generally provide the highest monthly income?
A) Installment refund
B) Life with a 10-year period certain
C) Straight life
D) Joint and survivor.

A

C) Straight life

71
Q

An agent selling annuities must be registered with
A) The Guaranty Association.
B) SEC.
C) FRINA.
D) Department of Insurance.

A

C) FRINA.

72
Q

Why is the indexed annuity considered to be a fixed annuity?
A) It has modest investment potential.
B) It has a fixed rate of return.
C) It is not tied to an index like the S&P 500.
D) It has a guaranteed minimum interest rate.

A

D) It has a guaranteed minimum interest rate.

73
Q

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
A) L life with period certain
B) Joint limited annuity
C) Joint life
D) Joint and survivor

A

C) Joint life

74
Q

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor’s 500 index. She would likely purchase a(n)
A) Flexible Annuity.
B) Immediate Annuity
C) Equity indexed Annuity.
D) Variable annuity.

A

C) Equity indexed Annuity.

75
Q

Before he did, an annuitant had received 12,500 in monthly benefits from his 25,000 straight life annuity. He was also the insured under a 50,000 Paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant’s spouse receive in benefits?
A) 50,000
B) 62,500
C) 75,000
D) Nothing

A

A) 50,000

76
Q

Which of the following will NOT be an appropriate use of deferred annuity?
A) Accumulating funds in an IRA
B) Funding a child’s college education
C) Creating an estate
D) Accumulating retirement funds

A

C) Creating an estate

77
Q

All of the following statements are true regarding installments for a fixed amount EXCEPT
A) This option pays a specific amount until the funds are exhausted.
B) The annuitant May select how big the Payments will be.
C) The payments will stop when the annuitant dies.
D) Value of the account and future earnings will determine the time period for the benefits.

A

C) The payments will stop when the annuitant dies.

78
Q

Which of the following is NOT true about joint and survivor annuity benefit option?
A) The surviving annuitant may receive reduced payments.
B) Payments stop after the first death among the annuitants.
C) A period certain option may be included.
D) This option guarantees income for two or more recipients.

A

B) Payments stop after the first death among the annuitants.

79
Q

Which of the following products requires a securities license?
A) Fixed annuity
B) Equity Indexed annuity
C) Deferred annuity
D) Variable annuity.

A

D) Variable annuity.

80
Q

All of the following statements about index annuities are correct EXCEPT
A) They invest on a more aggressive basis, aiming for higher returns.
B) The annuitant receives a fixed amount of return.
C) They have a guaranteed minimum interest rate.
D) The interest rate is tied to an index, such as the Standard & Poor’s 500.

A

B) The annuitant receives a fixed amount of return.

81
Q

Which of the following best describes a pure life annuity settlement option?
A) Pure life guarantees that all the proceeds will be paid out.
B) Benefits are paid for a fixed period of time, specified when the policy begins to pay.
C) Pure life provides payments for as long as both the annuitant and the spouse are living.
D) Pure life provides payment for as long as the annuitant is alive.

A

A) Pure life guarantees that all the proceeds will be paid out.

Life Insurance (8 decks)

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