Simulate Missed Questions Flashcards
1
Q
43.
Which of the following statements is TRUE concerning the Accidental Death Rider?
It is onlv available in group insurance
It will pay double or triple the face amount.
c) It is also known as a triple indemnity rider.
This rider is only available to insureds over the age of 65.
A
It will pay double or triple the face amount.
The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.
2
Q
S
#12.
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy
premium will be
a) Determined by the health of the insured.
Based on the issue age of the insured.
c Discounted
Adjusted to the insured’s age at the time of renewal.
A
Adjusted to the insured’s age at the time of renewal.
If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured
#13.
3
Q
An agent selling variable annuities must be registered with
a) The Guarantv Association.
b) SEC.
c) FINRA.
d) Department of Insurance.
A
FINRA
Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a lif
agent’s license in order to sell variable annuities.
4
Q
#14. The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the a) Insuring clause. b) Misstatement of Age clause. c) Incontestability clause. Reinstatement(ause.
A
Incontestability clause.
If an insurer wishes to contest any statements on an application, they must do so within the first two years. #15.
5
Q
#15. An insured receives an annual life insurance dividend check. What term best describes this arrangement? Reduction of Premium Annual Dividend Provision Accumulation at Interest • cash optior
A
• cash optior The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check. San in to vour ac.... C Phonemic Chart. * 6 Imo incuranco 1 #16.
6
Q
All of the following could own group life insurance ExCEp
a anaumnigroud
b)
A debtor group.
c) A group needing low-cost life insurance.
A group sponsored by an employer.
A
c) A group needing low-cost life insurance.
Groups purchasing group life insurance must be formed for a reason other than purchasing insurance
7
Q
17.
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
a) The amount of the distribution is reduced by the amount of a 20% withholding tax.
b) No taxes are due since the plan participant is over age 59 1/2.
There is a 10% early withdrawal penalty.
a The amount distributed is subject to ordinary income tax
A
a) The amount of the distribution is reduced by the amount of a 20% withholding tax.
Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are
deferred until the required minimum IRA distributions begin. Since this client actually took a distribution (instead of making a trustee-to-trustee roll over), the
distribution is subject to 20% withholding tax.
8
Q
23. Which of the following best describes what the annuity period is?
a) The period of time from the accumulation period to the annuitization period
b) The period of time during which money is accumulated in an annuity
c) The period of time from the effective date of the contract to the date of its termination
c. The period of tigge during which accumulated money is converted into income payments
A
The period of tigge during which accumulated money is converted into income payments
The annuity period is the time during which accumulated money is converted into an income stream.
9
Q
Which of the following is true of a children’s rider added to an insured’s permanent life insurance policy!
a Each child covered must show evidence of insurability.
b It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum
coverag
c tis permanent insurance
d) The policv covers onlv the natural children of the insured
A
b It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum
coverag
Children’s rider is term insurance covering all of the children in the family, including newly born children, and is convertible to permanent insurance upon a child reaching
the maximum age without evidence of insurability.
10
Q
life insuranc
#26. All of the following are business uses of life insurance EXCEPT
a Funding business continuation agreements
Funding against company s general financial loss.
© Compensating executives.
d) Funding against financial loss
caused by the death of a key employee.
A
Funding against company s general financial loss.
Both life and health insurance can be used for a variety of purposes in a business setting, including the tunding or business continuation agreements, compensating executives, and protectine the firm against financial loss resulting from the death or disability or key employees. #28.
11
Q
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to
$10,000. If the insured dies, how much will be paid out?
a) $10,000
b) $40,000
c) $50,000
d) $60,000
A
50,000
The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed
benefit amount.
12
Q
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? a) Payments for 20 years b) Payments for liA c) Nothing Payments for 15 years
A
Payments for 15 years
With an period certain, death of the annuitant within the stated period will provide payments to the beneficiary only for the remainder of the period certain.
13
Q
R I C life insuranco lifo #36. Which of the following is NOT part of the consent form to an HIV-related test given in New York? a The description or the test b) Applicant's sexual history c The purpose of the test A person to whom test results may be disclosed
A
b) Applicant’s sexual history
New York's written informed consent to an HIV-related test does not need to include information about the applicant's sexual history. #37.
14
Q
#37. In term policies, what happens to the premium throughout the term of the policy? a Premium fluctuates b) Premium always remains level. c) Premium gradually increases. d) Premium gradually decreases.
A
Premium always remains level.
There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy. #40.
15
Q
#40. Peril is most easily defined as a) The cause of loss insured against. b) An unhealthy attitude about safety. c) The chance of a loss occurring. d) Something that increases the chance of loss.
A
The cause of loss insured against.
Perils are the catises of loss insured against in an insurance policy,
16
Q
#42. What is the waiting period on a Waiver of Premium rider in life insurance policies? 30 davs 3 months months 6 months
A
6 months Most insurers impose a 6-month waiting period from the time of disabilitv until the tirst premium is waived. Sign in to your ac. Phonemic Chart: C life insurance lif #46.
17
Q
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
a
It is reduced to the amount of what the cash value would buv as a single premium.
It is increased when extra premums are pale
It decreases over the term of the policy
It remains the same as the original policy, regardless of any differences in value.
A
a
It is reduced to the amount of what the cash value would buv as a single premium.
In a reduced paid-up policy, the original policy’s cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence
the name. The new policv accumulates in cash value until its maturity or the insured’s death.
#52.
18
Q
#52. The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? The owner's estate will receive the money paid into the annuity. b) The insurance company will retain the cash value and pay back the premiums to the owner's estate. c) The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. d) The beneficiary will receive the greater of the money paid into the annuity or the cash value.
A
The beneficiary will receive the greater of the money paid into the annuity or the cash value.
If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value, whichever
is greater.
19
Q
Who bears all of the investment risk in a fixed annuity?
a) The beneficiary
b) The annuitant
c) The insurance company
d) The owner
A
The insurance company
Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The
insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its
?
investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.
20
Q
What type of insurance would be used for a Return of Premium rider? a) Level Term b) Decreasing Term © Annualv Renewable Term de increasing lerm
A
de increasing lerm
The Return of Premium Rider is achieved by using increasing term insurance. When added to a whole life policy it provides that at death prior to a given age, not only is
the original face amount payable, but also all premiums previously paid are payable to the beneficiary.
#59.
21
Q
59. Which of the following is NOT true regarding the needs approach method of determining the value of an individual’s life?
a) It must be assumed that the death of the insured will occur immediately.
b
Need is predicted using the number of years until the insured’s retirement.
c) Coverage is based on the predicted needs of that family.
The death of an insured must be premature.
A
Need is predicted using the number of years until the insured’s retirement.
In the needs approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen
immediately. The policy allows for benefits to be collected upon the insured’s death.
22
Q
71. Can the Superintendent investigate fraudulent claims if they occurred outside of the resident’s state according to the Insurance Fraud Prevention Act?
a) Yes, but only if it is a violation of another state’s insurance law.
b) No. Because insurance is regulated by the state, all claims must occur within state boundaries.
c) No. If fraudulent acts are believed to have been committed, the Superintendent must notify the state’s Superintendent or Commissioner. It will then become a federal
matter.
d) Yes. The Superintendent has the power to make an investigation within this state or outside of the state.
A
Yes. The Superintendent has the power to make an investigation within this state or outside of the state.
If the insurance frauds bureau has reason to believe that a person is engaged or is about to engage in a fraudulent act, the Superintendent has the power to make an
investigation within tilis state or outside of the state.
23
Q
73. If during the underwriting process an insurer obtains personal information about an applicant from the applicant, when must the insurer provide notice of its information
practices?
a) At the time of policy delivery
b) Never, since the information was obtained from the applicant
c) At the time of application
d)
At the time the insurer first collects the information
A
At the time of policy delivery
The notice is usually required at the time an insurer or producer first collects personal information from a source other than the applicant or public records, or at policy delivery if the information is collected from the applicant or from public records. #75.
24
Q
75.
If an association is applying for a life settlement broker’s license, which of the following requirements must the association meet
a)
Emplov a minimum of 10 individual brokers
b Maintain an active life license for at least 1 vear
Establish a board of directors
d) Authorize a natural person to act individually as a broker
A
d) Authorize a natural person to act individually as a broker
If a firm or association is applying for a broker’s license, they must name and authorize natural persons to act individually as life settlement brokers for the tirm.
#78.
25
```
#78. Which of the following types of agent authority is also called "perceived authority"?
a) Fiduciary
D Apparent
~ Express
d) Implied
```
Apparent
```
Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or
because of circumstances the principal created.
```
26
#82. An insurance compant sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act?
a) Insurance telemarketing
b) Direct response marketing
c) Independent agency marketing
d) Illegal
b) Direct response marketing
A direct response marketing system effectively bypasses the insurance agent. Business is conducted over the phone, through the mail, or online. This is a perfectly legal
approach to selling insurance. It is not mandatory in all situations for the insured to physically sign any documents in order for coverage to go into effect.
27
What is the purpose of a conditional receipt?
a tis intended to provide coverase on a date prior to the policv issue
b It guarantees that a policy will be issued in the amount applied for.
c It serves as proof that the applicant has been determined insurable
d) It is given only to applicants who fully prepay the premium
tis intended to provide coverase on a date prior to the policv issue
Coverage commences on the date of the application or the date of a medical examination. whichever is later. on the condition that the applicant is determined to be
insurable at the rate applied for.
28
#91. What is the tax consequence of amounts received from a Traditional IA after the money was left in the tax-deferred account by the beneficiary?
a) Income tax on distributions plus 10% penalty.
b) Capital gains tax on distributions and no penalty.
c) Capital gains tax on distributions plus 10% penalty.
d) Income tax on distributions and no penalty.
Income tax on distributions and no penalty.
If the beneficiary chooses to leave the money in the tax-deferred account until the calendar year in which the owner would have attained age 72, the distributions would
be subject to income taxation at the rate at the time of withdrawal.
#100.
29
```
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
A
a) Revocation of license
b) $2.500
C
$1,000
d) $100 per violation
```
2,500
An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.
30
```
Who represents the
insured in the
investigating of a claim?
D) Independent adiuster
Agent
d) Public adjuster
```
d) Public adjuster
A public adjuster is any person, firm, association or corporation, who for a commission, acts on behalf of the insured in negotiating a settlement of a claim for loss or damage to property
31
Who is included in the definition of an agent?
A producer who owns his own field office
A salaried emplovee of the insurer who does not solicit insurance or receive a commission
An agent who devotes only 25% of his time
to the solicitation of insurance contracts and does not receive commission
Agents of title insurance companies.
A producer who owns his own field office
All of the above are not included under the definition of an agent except for a producer who owns his own field office. Ownership of an insurance field office does not
exclude a producer from the definition of an agent.
32
Whatlicense or licenses are required to sell variable annuities?
Onlv
a securities license
No license is required
Both a life insurance license and a securities license
Onlv a life insurance license
Both a life insurance license and a securities license
```
Agents are required to have both a life insurance license and a securities license to sell variable annuities
#26.
```
33
During replacement of life insurance, a replacing insurer must do which of the following?
Guarantee a replacement for each existing policy
b
Designate a new producer for a replaced policy
Send a copy of the Notice Regarding Replacement to the Department of Insurance
Obtain a list of all life insurance policies that will be replaced
Obtain a list of all life insurance policies that will be replaced
The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice
provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.
34
#31. An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which
is currently $20.000. What would be the face amount of the new term policy?
$20,000
$25.000
$50,000
The face amount will be determined by the insurer.
50,000
The face of the term policy would be the same as the face amount provided under the whole life policy.
35
```
life insurance
429
The New York Superintendent has the responsibility to make sure each entity transacting insurance in this state remains solvent. Insurers are required to file a
statement with the Superintendent
Semiannuallv on or before January and June 1st
b) Every 2 years by the renewal date
Annually on or before March 1st.
d) Biannually on or before April 1st
```
Annually on or before March 1st.
Each entity must file a statement with the superintendent annually on or before March ist.
36
```
Before an agent can transact business in New York, every insurer, fraternal benefit society or HMO must file with the Superintendent which of the following?
Temporary license
o Nonresidenuicense
c Completion of appointment
Certificate of appointment
```
```
Certificate of appointment
Every insurer, fraternal, or HMO must file a certificate of appointment to ensure the agent is trustworthy and competent
#41.
```
37
#41.
An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do?
a Join durine the open enrollment derid
Provide medical records to the insurer
Sign a statement of continued good health
d) Nothing: proof of insurability is never required in group policies
A join durine the open enrollment derid
If one applies for coverage after the open enrollment period, proof of insurability may be required in order to avoid adverse selection.
38
```
#42. All of the following statements about equity index annuities are correct EXCEPT
a Thev invest on a more aggressive basis aiming for higher returns.
The annuitant receives a fixed amount of return.
Thev have a guaranteed minimum interest rate
d) The interest rate is tied to an index such as the Standard & Poor's 500.
```
The annuitant receives a fixed amount of return.
Equitv indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature
the annuitant will not have to worry about receiving less than
what the minimum interest rate would vield
39
```
O
© life insurance life.
#48. Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
a Option B
Corridor oon
variable option
Option A
```
Option B
Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases
each vear ov the amount that the cash value
increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value
#50.
40
```
Which of the following terms best describe the coverage provided ov term policies, as compared to anv other form of protection?
a Most comprehensive
b) Longest
Greates
Least
```
Greatest
erm policies provide for the greatest amount of coverage for the lowest premium, as compared to any other form of protection.
41
#51. An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the
following statements best describes what will happen?
The insurer will pay a reduced death benefit to the beneficiary.
The insurer will Dav the death benefit minus one month's premium
© The insurer will pav nothing because the employee has terminated his group insurance and hasn't started the individual one
The insurer will pay the full death benefit from the group policy to the beneficiary.
The insurer will pay the full death benefit from the group policy to the beneficiary.
The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered
under the original group policy.
42
#55
Which is generally
true regarding insureds who have been classified as preferred risks?
They can decide when to pay their monthly premiums.
b Thev keep a higher percentage of any interest earned on their policies.
c) Their premiums are lower.
They can borrow higher amounts off of their policies
c) Their premiums are lower.
The preferred risk classification indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits. These individuals qualify for lower
premiume
than those in the other categories.
43
```
#57.
How long does a licensee have to notify the Superintendent of a change of address?
90 days
b) Immediatelv
30 days
d 60 davs
```
30 days
```
The Superintendent must be notified within 30 days upon any change of primary residence or business address
#59.
```
44
#59. Which is INCORRECT concerning a Section 457 Deferred Compensation plan?
a It has a vesting requirement.
b) The deferred amount is paid upon death, disability, or retirement.
c) It is a nonqualified plan.
d It is a means of deferring current income until later when the employee is in a lower tax bracket
It has a vesting requirement.
```
Since the employee forfeits the amount deferred it he/she leaves the employment, it has no vesting requirement.
#62.
```
45
#62. According
to New York law, hearings ordered by the superintendent must be
a Held at least once a month.
b Attended by at least 2 insurance company representatives.
c) Held before a quorum consisting of 10 people.
d) Open to the public.
```
d) Open to the public.
Hearings must be open to the public unless the Superintendent feels a private hearing is in the best interest of the public
#66.
```
46
```
#66.
In a group life insurance policy, the employer may select all of the following EXCEPT
The amountoninsurance
I he premium payor.
c) lhe beneficiary.
The type or insurance.
```
The beneficiary
Employees must be allowed to select a beneficiary.
47
MarchingOrder
Stan in to vour ac...
- Phonemic Chart:...
#70
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable universal life is regulated solely through FINRA
Variable whole life allows policy loans from the cash value.
Variable universal life has a fixed premium.
Variable whole life has a guaranteed death benefit.
Variable whole life has a guaranteed death benefit.
Variable universallite insurance mav or mav not have a
minimum death benett, unlike variable whole life insurance which guarantees a minimum death benefit
#72.
48
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
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
The annuitant will always redyive the current interest rate.
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 annuitv. or current
interest rate. whichever is higher.
49
#73.
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthl
amount for as long as she lives. As her agent, you should recommend
a Installment refund.
b) Joint and survivor.
c) Straight life.
d Life income with period certain.
Straight life
With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option
provides the highest monthly benefits for an individual annuitant.
50
```
#77.
contracts that are prepared bi
one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Binding contracts
b) Contracts of adhesion
c Unilateral contracts.
d) Aleatory contracts.
```
b) Contracts of adhesion
Insurance policies are written by the insurer and submitted to the insured on a take-it-or-leave-it basis. The insured does not have any input into the contract, but simply
adheres to the
contract
51
@llife insu
#84
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Cash value of the olan
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
Either the amount paid into the plan or the cash value of the plan, whichever Is the lesser amol
Amount paid into the plar
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.
52
#85
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?
a) Predicted needs of the family after the insured's death.
b) Insured's current and futurerincome
caInsured's annual exoenses
d) Effect of inflation
on income over lime.
Predicted needs of the family after the insured's death.
The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages,
expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.
53
```
#87.
Which of the following insurance options would be considered a risk-sharing arrangement?
Reciprocal
Stock
Cr Mutual
d) Surplus lines
```
Reciprocal
When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.
54
Which of the following best describes annually renewable term insurance?
It requires proof of insurability at each renewal.
b) Neither the premium nor the death benefit is affected by the insured's age
It provides an annually increasing death benefit.
d) Itislevel term insurance.
d) Itislevel term insurance.
| Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost
55
#92.
what is the advantage o
reinstating a policy instead or for a on.
Proof of insurabilitv is not required
b The face amount can be increased
The cash values have gained interest while the policy was lapsed.
The original age is used for premium determination.
The original age is used for premium determination.
The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner
elects to reinstate the policy, as opposed
to purchasing a new policy, the reinstated pollcy Is restored to its original status.
$04
56
The policvowner want to make sure that upon his death, the policy will pay a portion of the annually
to his spouse,but that the principal wIll Be paired to their children
when they reach a certain age.
Which settlement option should the policyowner choose!
a Fixed amount ontion
smterestonyolion
Life income with period certain
Interest only option
With the interest-onlv option. the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals
57
```
#95. Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive
Nothing; the payments will cease.
Guaranteed minimum benefit
The amount paid into the annuitv
• The remainder or the principal.
```
Nothing; the payments will cease.
Straight or pure life annuity will pay a specific amount of income for the remainder of the annuitant's life. This payment will cease at death, regardless of the amount of
principal that hasn't been paid out. There is no refund or payments to survivors.
58
#98. Which of the following is NOT typically excluded from life policies?
Death that occurs while a person is committing a felony
b) Death due to war or militarviservice
c) Death due to plane crash for a fare-paying passenger
Self-inflicted death
Death due to plane crash for a fare-paying passenger
Generallv. policies do not exclude conditions in which an insured is a fare-paying passenger on a
commercial airlino
59
```
#100.
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
3 davs
5 davs
10 davs
14 days
```
3 days
Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.
60
#5. Which of the following is NOT true of Section 1035 Policy Exchanges?
a) It requires an absolute assignment of the existing policy to the replacing company who surrenders the contract and issues a replacement policy.
b) It is an IRS Code which permits like kind exchanges of property.
c It is typically used when exchanging or replacing a less competitive life policy with a more competitive life policy.
d)
Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.
d)
Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.
Section 1035 of the Internal Revenue Code does not give a specific time limit to complete such an exchange.
61
d
Phonemic Chart:...
… life insura
#9.
An agent and an applicant for a life insurance policy fill out and sign the
application. However, the applicant does not wish to give the agent the initial premium, and no
conditional receipt is issued. When will coverage begin?
a When the agent submits the application to the company and the company issues a conditional receipt
b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
On the designated effective date
d) On the application date
b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most
likely need to fill out a Statement of Good Health.
62
```
#13.
In a life settlement contract. who does the life settlement broker represent?
a The owner
b The insurer
The beneficiary
d)
The life settlement intermediary
```
The owner
Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only
the policvowners.
63
#14.
What is the purpose of a conditional receipt?
a It serves as proot that the applicant has been determined insurable
b It is given onlv to applicants who fullv prepav the premium.
c) It is intended to provide coverage on a date prior to the policy issue.
It guarantees that a policy will be issued in the amount applied for.
c) It is intended to provide coverage on a date prior to the policy issue.
Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be
insuran
Ie at the rate apolied for.
64
The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?
a) The cash value will be paid to the annuitant's estate.
b) The premium value will be paid to the annuitant's estate.
c) All benefits will be forfeited.
d) The cash value will be paid to the state government.
a) The cash value will be paid to the annuitant's estate.
```
If an annuitant dies during the accumulation period, the beneficiary is paid either the cash value of the policy or the amount of premiums paid, whichever is the larger
amount. In this case, a beneficiary is not named, so the cash value will be paid to the annuitant's estate.
#28.
```
65
```
According to the entire contract provision, what document must be made part of the insurance policy?
a) Copy of the original application
b) Buyer's Guide
c) Agent's report
Outline of coverage
```
a) Copy of the original application
An insurance contract must contain a copy of the original application.
66
```
#36. Which nonforfeiture option provides coverage for the longest period of time?
a) Paid-up option
Accumu ated at interest
c) Reduced paid-up
a Extended term
```
Reduced paid-up
```
The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy
#3%
```
67
#3% In order to qualify for a certificate of authority, every person, firm, association, corporation or joint-stock company must meet all of the following requirements EXCEPT
a) If a mutual company, provide statements of at least 3 incorporators, proof of the required initial surplus in cash or investments, and the required number and amount of
actual applications for insurance
b) The entity must be part of the New York Labor Union.
The entity must fully comply with all applicable provisions of New York's insurance laws.
If a stock company, the amount of capital and surplus required by law must be paid in cash or investments.
The entity must be part of the New York Labor Union.
In order to qualify for a certificate of authority, every person, firm, association, corporation or joint-stock company must meet all the above requirements except for
membersnio in the state Labor Union.
68
#38. Which of the following documents must be provided to the policyowner or applicant during policy replacement?
a) Buyer's Guide and Policy Summary
b) Policy illustrations
c) Notice Regarding Replacement
d) Disclosure Authorization Form
Notice Regarding Replacement
```
During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.
#40.
```
69
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
a) It is reduced to the amount of what the cash value would buy as a single premium.
b) It is increased when extra premiums are paid.
c) It decreases over the term of the policy.
d) It remains the same as the original policy, regardless of any differences in value.
a) It is reduced to the amount of what the cash value would buy as a single premium.
In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence
the name. The new policy accumulates in cash value until its maturity or the insured's death.
70
5 life in:
#44.
Which of the following is TRUE about a class designation?
a) Beneficiaries are not identified by name.
D
Beneficiaries must be part of the insured's immediate family.
c) It is not allowed.
d) It determines the succession of beneficiaries.
a) Beneficiaries are not identified by name.
```
A class of beneficiary is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or
illegitimate children. Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive.
#48.
```
71
#48. All of the following are business uses of life insurance EXCEPT
a
Funding against financial loss caused by the death of a key employee.
b) Funding business continuation agreements.
c Funding against company s general financial loss.
) Compensating executives.
Funding against company s general financial loss.
Both life and health insurance can be used for a variety of purposes in a business setting, including the tunding of business continuation agreements, compensating
executives, and protecting the firm against financial loss resulting from the death or disability of key employees
72
#54. A Universal Life insurance policy has two types of interest rates that are called
a) Option A and Option B.
b) Fixed and Variable.
c) Minimum and Target.
d) Guaranteed and Current.
```
d) Guaranteed and Current.
The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
#69.
```
73
What happens if a deferred annuity is surrendered before the annuitization period?
a) The owner will only receive a refund of premium.
b) The insurer can only apply the surrender value toward another annuity.
c) Deferred annuities cannot be surrendered prior to the annuitization period.
d) The owner will receive the surrender value of the annuity.
```
The owner will receive the surrender value of the annuity.
If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.
#72.
```
74
Who represents the insured in the investigating of a claim?
a) Agent
b) Public adjuster
c) Broker
d) Independent adjuster
Public adjuster
A public adjuster is any person, firm, association or corporation, who for a commission, acts on behalf of the insured in negotiating a settlement of a claim for loss or
damage to property.
75
#78. Employer contributions made to a qualified plan
a) Are taxed annually as salary.
b) Are subject to vesting requirements.
c) May discriminate in favor of highly paid employees.
d) Are after-tax contributions.
b) Are subject to vesting requirements.
Qualified plans must have a vesting requirement.
76
#85. Which of the following is NOT true regarding a nonqualified retirement plan?
a) It needs IRS approval!
b) Contributions are not currently tax deductible.
c) It can discriminate in benefits and selecting participants.
d) Earnings grow tax deferred.
a) It needs IRS approval!
Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be
approved by IRS.
77
#87. A producer who fails to separate premium monies from his own personal funds is guilty of
a) Theft.
b) Commingling.
c) Larceny.
d) Embezzlement.
Commingling.
It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.
78
#91. 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?
a) Income tax on distributions plus 10% penalty.
b) Capital gains tax on distributions and no penalty.
c) Capital gains tax on distributions plus 10% penalty.
d) Income tax on distributions and no penalty.
Income tax on distributions and no penalty.
If the beneficiary chooses to leave the money in the tax-deferred account until the calendar year in which the owner would have attained age 72, the distributions would
be subject to income taxation at the rate at the time of withdrawal.
79
#94. Another name for a substandard risk classification is
a) Controlled.
b) Declined.
c) Elevated.
d) Rated.
d) Rated.
Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.
?
#95.
80
Which of the following is true regarding a single life settlement option?
a) Payments continue until the entire principal is exhausted.
b) Proceeds are paid out in a lump sum.
c) It provides income for a specified period of time.
d) It provides income the beneficiary cannot outlive.
d) It provides income the beneficiary cannot outlive.
The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.
#100.
81
Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency
must
a) Send an actual certified copy of the entire report to the consumer.
b) Respond to the consumer's complaint.
c) Defend the report if the agency feels it is accurate.
d) Change the report.
Respond to the consumer's complaint.
The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is
required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.
82
In insurance, an offer is usuallv made when
a The insurer approves the application and receives the initial premium
The agent hands the policy to the policynolder.
c) An agent explains a policy to a potential applicant.
© An applicant submits an application to the insurer
© An applicant submits an application to the insurer
In insurance, the Offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurers underwriter approves the application and
Issues a policy.
83
```
#8.
Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated?
Refund life
in varian
c) Annuitv certair
d Fixed annuitv
```
Annuity certain
Annuity Certain option allows the annuitant to select the time period or the amount of the benefits to be paid out. Under the installments for a fixed period, distribution
Degins on a specific date and stops on a specific date.
84
#12.
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
a Its a percentage or the cash value and decreases over time.
It is always 7% of the cash value
c It is a flat fee determined by the annuity owner when the annuity is purchased.
© It will increase as the accumulation period increases.
Its a percentage or the cash value and decreases over time.
```
If a deferred annuitv is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.
#19.
```
85
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to
$10,000. If the insured dies, how much will be paid out?
a) $10,000
$50,000
dS60.000
50,000
The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed
beneft amount.
86
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is
currentiv$0.000.What would be the tace amount of the new term nolicv
$20,000
b) $25 000
$50,000
The face amount will be determined by the insurer.
50,000
```
The face of the term policy would be the same as the face amount provided under the whole life policy.
#22.
```
87
```
#22. If compensation is authorized, it must be made in writing, including the amount of compensation and signed by the person to be charged. How long must a copy of this
record be keot?
a) Atleast 2 years
At least 3 years
A- least a yearS
© Atleastl vear
```
At least 3 years
```
No licensed person may charge directly or indirectly any additional fees or compensation not authorized for examining, appraising, reviewing or evaluating any insurance
policv. annuity or retirement plan. This also includes other services in connection with a life insurance contract. A copy of this record must be kept for at least 3 years.
#23.
```
88
```
#23.
Which of the following is an example of a limited-pay life policy?
a) Renewable Term to Age 70
b Level Term Life
) Straight Life
d) Life Paid-up at Age 65
```
d) Life Paid-up at Age 65
Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that
is limited, not the maturity.
89
```
Which of the following would NOT be considered an insurance producer?
a) An insurers officer
An Insurance broker
A reinsurance intermediary
An insurance agent
```
An insurers officer
Insurance producer means any person required to be licensed to sell, solicit or negotiate insurance, including agents, brokers and intermediaries. Officers are not required
to delicensed
90
```
#32.
Events or
conditions that increase the chances of an insured loss occurring are referred to as
al Exposures
Risks
© Perils
Hazards.
```
```
Hazards.
Hazards are conditions or situations that increase the probability of an insured loss occurring.
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#37.
```
91
#37. If an employee wants to enter the group
outside of the open enrollment period, to reduce adverse selection. the insurer mav
Prolong the open enrollment period.
b Increase medical requirements
on exisung members.
c Require evidence of insurability
Require a higher premium.
Require evidence of insurability
In group underwriting the evidence of insurability is usually not required of each participant unless he or she is enrolling for coverage outside of the normal enrollment period
92
```
#40. When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer.
D) Domestic insurer
Foreign insurer.
Admitted insurer
```
Alien insurer
Alien insurer is defined as an insurer formed under the laws of another country.
93
```
#68.
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
a Defamation
coercion
© Misrepresentation
False advertising
```
False advertising
| This is considered to be false, deceptive or misleading advertising.
94
#91. Jack has a $20,000 life insurance policy on himself. He wants to insure the life of his 13 year old daughter. According to New York law, what is the maximum amount of life
insurance he can purchase on his daughter
$5,000
b s/500
c) $10,000
$50,000
$50,000
The limits for a minor under 14½ are $50,000 or 50% of the amount of insurance a person has on him/herself. $10,000 is 50% of $20,000, but Jack can purchase the
greater amount or either $50,000 or 50%
95
#92.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
a) Pay the policy proceeds only if it would have issued the policy.
Pay the policy proceeds up to an established limit.
Not Dav the policy proceeds under any circumstances.
d) Automaticallv pav the policy proceeds
a) Pay the policy proceeds only if it would have issued the policy.
The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the
applicant is found to be
insurable as a standard risk, and policy is issued exactly as applied for.
96
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
a) It is a life contingency option.
b) The beneficiary receives the remainder of the principal amount upon the annuitant's death.
c) Pavments can be made in installments and as a single cash refund
a It does not guarantee that the entire principal amount will be paid out.
a It does not guarantee that the entire principal amount will be paid out.
With the Life with Guaranteed Minimum annuity settlement option, if the annuitant dies before the principal amount the amount paid for the annuity) has been paid out,
the remainder of the principal amount will be refunded to his/her beneficiary. Pure life provides the highest monthly benefits for an individual annuitant.
#7.
97
In a defined contribution dlan.
a) The contribution and the benefit are unknown.
b) The contribution and the benefit are known.
c) The contribution is known and the benefit is unknown.
d) The benefit is known and the contribution is unknown.
The contribution is known and the benefit is unknown.
```
In a defined contribution plan the contribution is defined (known) and the benefit isundefined (unknown).
#15.
```
98
A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called
a) Qualified distribution.
b) Premature distribution.
c) Rollover.
d) 1035 exchange.
```
1035 exchange.
In accordance with Section 1035 of the Internal Revenue Code, certain exchanges of life insurance policies and annuities may occur as nontaxable exchanges.
#20.
```
99
#20. Which of the following entities has the authority to revoke a producer's license?
a) The Guaranty Association
b) The appointing insurer
c) The Department of Financial Services
d) The NAIC
The Department of Financial Services
The Department of Financial Services, through its Superintendent, has the authority to refuse to renew, revoke, or suspend the license of any insurance producer,
insurance consultant or adjuster if. after notice and hearing, it is determined that the licensee has violated any insurance law or regulation
100
What does "liquidity" refer to in a life insurance policy?
a) The death benefit replaces the assets that would have accumulated if the insured had not died.
b) The policyowner receives dividend checks each year.
The insured receives payments each month in retirement.
d) Cash values can be borrowed at any time.
```
d) Cash values can be borrowed at any time.
Liquidity in life insurance refers to availability of cash to the insured through cash values.
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#30.
```
101
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
a) Jumping Juvenile
b) Juvenile Premium Provision
c) Waiver of Premium
d) Payor Benefit
Payor Benefit
If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such
as 21.
102
#40. The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE?
a) The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary.
b) The beneficiary will receive the greater of the money paid into the annuity or the cash value.
c) The owner's estate will receive the money paid into the annuity.
d) The insurance company will retain the cash value and pay back the premiums to the owner's estate.
The beneficiary will receive the greater of the money paid into the annuity or the cash value.
The insurance company will retain the cash value and pay back the premiums to the owner's estate.
If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value, whichever
is greater.
103
#43. Which of the following is an example of liquidity in a life insurance contract?
a) The flexible premium
b) The money in a savings account
c) The cash value available to the policyowner
d) The death benefit paid to the beneficiary
c) The cash value available to the policyowner
Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for
immediate needs.
104
An IRA purchased by a small employer to cover employees is known as a
a) 403(b) plan.
b) Simplified Employee Pension plan.
c) 401(k) plan.
d) Defined contribution plan.
b) Simplified Employee Pension plan.
```
A Simplified Employee Pension (SEP) is an employer sponsored IRA. Contributions to the plan are not included in the employee's taxable income for the year, to the
extent that they do not exceed the maximums allowed. Distributions from a SEP are taxable as ordinary income when received at retirement.
#58.
```
105
Which of the following statements is correct regarding a whole life policy?
a) The policy premium is based on the attained age.
b) The death benefit may increase or decrease during the policy period.
c) The policyowner is entitled to policy loans.
d)
Cash values are not guaranteed.
The policyowner is entitled to policy loans.
Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age
100, and living benefits, which include policy loans.
106
#59. All of the following are general requirements of a qualified plan EXCEPT
a) The plan must provide an offset for social security benefits.
b) The plan must be communicated to all employees.
c) The plan must be for the exclusive benefits of the employees and their beneficiaries.
d) The plan must be permanent, written and legally binding.
The plan must provide an offset for social security benefits.
Plans must meet the general requirements established by IRS.
107
#74. Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death?
a) Estate conservation
b) Life insurance proceeds
c) State Education Waiver
d) Viatical settlement
Life insurance proceeds
There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Daycare is considered to be among
2
Need Help
these expenses.
108
```
Which two terms are associated directly with the way an annuity is funded?
a) Renewable or convertible
Single payment or periodic payments
c) Increasing or decreasing
d) Immediate or deferred
```
Single payment or periodic payments
Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments
over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the
amount and frequency of each installment varies.
109
#77. Traditional IRA contributions are tax deductible based on which of the following?
a) IRA limit
b) Owner's income
c) How long the plan has been in force
d) Owner's age
Owner's income
Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.
110
```
#80. Whichof the following is NOT a characteristic of an insurable risk?
a) The loss must be measurable.
b) The loss exposure must be large.
c) The loss must be catastrophic.
d)
The loss must be due to chance.
```
The loss must be catastrophic.
```
In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic.
#97.
```
111
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
a) Conditional
b) Personal
c) Adhesion
d) Unilateral
Adhesion
A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it is written.
112
#b.
If an insured changes his Davment olan from month
to annually, what happens to the total premium?
a Stavs the same
Doubles
Increases
• Decreases
• Decreases
Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount
#15.
113
Using a class designation for beneficiaries means
Not naming beneficiaries.
b Naming an estate as the beneficiary.
Naming each beneficiary by his or her name
Naming beneficiaries as a group.
Naming beneficiaries as a group.
Class designations are used when an insured chooses to distribute benefits among the living beneficiaries and/or their heirs without naming each individual person, such
as al mv children
114
#24. At a hearing, a person has the opportunity to do all of the following EXCEPT
Obtain witnesses on his or her own behalt.
b) File for dismissal of charges.
C) Appear in person and ov counsel.
d Give evidence why an order should not be made
b) File for dismissal of charges.
The person under a hearing cannot file a dismissal of charges. All the other actions are permitted.
115
736
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?
a Capital gains tax on distributions and no penalty.
Capital gains tax on distributions plus 10% penalty.
c) Income tax on distributions and no penalty.
Income tax on distributions plus 10% penalty.
Income tax on distributions and no penalty.
If the beneficiary chooses to leave the money in the tax-deferred account until the calendar year in which the owner would have attained age 72. the distributions would
be subject to income taxation at the rate at the time of withdrawal.
