Simulation Questions Flashcards
The following are features of a ___________ option:
- The policyholder has the right to withdraw the accumulations at any time
- The annual dividend is retained by they company
- The interest is credited at a rate specified by the policy
- The interest credited under this option is taxable
Accumulation at interest
The _____________ in a modified guaranteed annuity is usually the % of the difference between the contracted rate of interest in the annuity and the current rate at surrender
Market value adjustment
The _________ stipulates that if an employee receives property or other benefits in lieu of income, such property or benefits would have been taxable income had they received in cash; therefore, an economic benefit has been received and will be taxed accordingly.
Doctrine of economic benefit
How many years of experience does an agent have to have before becoming a consultant?
5 years
The __________ option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.
The guaranteed insurability option
Suspension or revocation of the license of a solicitor ( does / does not ) automatically suspend the license of the agent who employs the solicitor.
Does not
The ___________ 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 _______ approach.
Human Lie Value approach….Needs approach
With the ________ receipt (aka a temporary insurance agreement), coverage begins immediately and continues for a specific length of time or until the policy is issued or declined.
Binding receipt
Automatic premium loan riders ( do / do not ) require a minimum payment as they ( do / do not ) increase the risk for an insurer,
Do not / do not
Which reason is NOT a legitimate use of insurance in a business:
A) funding against financial loss due to death of a key employee
B) funding business continuation agreements
C) funding against general company financial loss
D) compensating executives
C) funding against general company financial loss
Can a life policy been reinstated after the cash value has been surrendered?
No
Are insurance company underwriters allowed to discriminate?
Yes, but not unfairly. The company will discriminate in favor of good risks and against poor risks; however, it cannot discriminate unfairly by using factors such as race or national origin in their underwriting.
What is the authority granted to an agent through the agent’s contract referred to as?
Express authority - these are written into the contract between the insurer and the agent
A _______ in insurance is a statement guaranteed to be true. When an applicant is applying for the insurance Contract, the statements he or she makes are generally not __________, but representations.
Warranty / warranty
A policy which pays monthly income upon the death of the breadwinner for a predetermined number of years after the death, plus a lump sum at death, and combines level term and whole life is known as which policy?
Family maintenance
All of the following are characteristics of social insurance except:
A) social insurance is not equitable
B) govt is the only insurance provider
C) benefits are provided under contract
D) involuntary participation in social insurance is required of all eligible taxpayers
C) benefits are provided under a contract
Licensees must complete at least _____ hours of CE related to ethics every ______ years,
Three hours / 2 years
The ________ Period is the period when, should the insured die prematurely, the surviving spouse will have dependent children to support. The family’s income will be greatest during this period.
Family income dependency period
The primary difference between an SEP and an IRA is the much larger amount can be contributed each year to an ______.
SEP
If an annuitant contract holder dies before the effective starting date, the contract’s interest continues to be taxable, unless the beneficiary is a _________. In that case, this tax can be deferred.
Spouse
An insurer may delay or defer a request for a policy loan for up to ______ months, unless the loan is made for the purpose of paying a premium that is due. In this case, the loan is made ___________.
Six months / immediately
The ________ clause states that the insurer agrees to provide life insurance for the named insured which will be paid to a designated beneficiary when proof of loss is received by the insurer. It states the party is to be covered by the policy and names of the beneficiary who will receive the policy proceeds in the event of the insured’s death.
The insuring clause
What is considered a non-medical insurance application?
A) an app on which the medical info is completed buy the applicant & agent only
B) an app hat doesn’t ask questions about the applicant’s medical history
C) an agent’s report
D) an application for life insurance w
A) an application on which the medical info is completed by the applicant and the agent only
Which statement regarding insurable risks is NOT correct?
A) insurance cannot be mandatory
B) the insurable risk needs to be statistically predictable
C) an insurable risk must involve a loss that is definite as to cause, time, place, and amount
D) insured’s cannot be randomly selected
D) insured’s cannot be randomly selected
What does the commissioner do if he or she believes a. Person has violated the code or other law?
Report the findings to the attorney general
The waiver of cost rider is found in what type of insurance?
Universal life
If the irrevocable Bene dies before the insured, any assignment made by the bene is no longer valid unless the policy owner agrees (in writing) that the assignment will remain valid if the bene should die first. In the absence of such an agreement signed by the policy owners the proceeds of the policy are paid as if the assignment ( had / had not ) been made.
Had not
Policies must contain a statement as to the interest rate that will be charged on policy loans. Once set, can this interest rate be changed?
No
How will a policy be interpreted if answers are left blank?
The contract will be interpreted as if the insurer waived its right to have an answer for the question. They would later be barred from any right if denying coverage based on any information that the unanswered question might have developed.
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
The type if insurance company organized to return any surplus money to its policyholders is known as what?
Mutual company
What are the four elements of an insurance contract?
Agreement (offer and acceptance)
Consideration
Competent parties
Legal purpose
For the purpose of insurance, what is risk?
Uncertainty of loss
If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
Provide the applicant a Disclosure Authorization Notice
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of Authority
What is the term for the causes of loss insured against in an insurance policy?
Peril
In orders to transact insurance within a given state, an alien insurer must first obtain what?
Certificate of Authority
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application
Who owns stock companies?
Stockholders
An insurance company that is formed under the laws of another state is known as what type if insurer?
Foreign
An insurance policy paid a no taxable dividend to the insured one year and nothing the next. From what type of insurer did the insured purchase the policy?
Mutual
What are the three types of agent authority?
Express
Implied
Apparent
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
What two elements are necessary for life insurance contract to have a legal purpose?
Insurable Interest
Consent
In an agent/insurer relationship, who is considered the principal?
Insurer
If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?
Send the app back to the applicant for signature
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept a higher risk, and accepting a risk at a higher rate
What are the three types of hazards?
Physical
Morale
Moral
What are the most common penalties for violations of insurance statutes?
A cease and desist order
A fine
License suspension or revocation
What type of policy is typically issued without proof of insurability from the insured?
Group policy
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
In calculating the amount of life insurance needed, what is the needs approach based on?
The predicted needs of a family after the premature death of the insured
What are the three factors that determine the premium for a particular life insurance policy?
Mortality
Interest
Expense
What are the three factors that determine the premium for a particular life insurance policy?
Mortality
Interest
Expense
What are the personal uses for life insurance?
Survivor protection
Estate creation and conservation
Cash accumulation
Liquidity
Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?
Estate conservation
What is the purpose of the agent’s report during the application process?
It discusses the agent’s personal observations about the proposed insured that may help in the underwriting process
What type of insurance would perform the function of cash accumulation?
Life insurance
How does the premium mode affect the total premium paid for the insurance for the year?
Higher frequency of premium payments will result in higher overall premium
Who is responsible for the contents of insurance advertisements?
The insurance company
When planning for survivor protection in life insurance, what needs to be considered?
The insured’s current assets, liabilities, and survivors needs
What is the main responsibility of a company’s underwriting unit?
Risk selection
When must a policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
What is the blackout period for social security benefits?
A period of time during which the surviving spouse does not receive benefits
Who is a replacing insurer?
The company that issues a new policy during policy replacement
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of the application or the date of the medical exam (whichever occurs last)
What document must a producer provide to the insured during policy replacement?
Notice Regarding Replacement
What is policy replacement?
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value
What does ‘liquidity’ mean in a life insurance policy?
Availability of cash value
What are the three main instances when insurable interest exists in life insurance?
Insuring your own life
Insuring the life of a family member
Insuring the life of a business partner/someone w financial obligation to policy owner
What is the main purpose of the regulation on life insurance policy illustrations?
To help the public make educated decisions about buying life insurance
What type of insurance creates an immediate estate?
Life insurance
What type of insurance policy can be changed from a policy with no cash value to one that generates cash value?
Convertible term
Between adjustable life and universal life policies, which one provides more flexibility to the policy owner?
Universal life
What does ‘level’ refer to in level term insurance?
Face amount
How is the premium determined in a joint life insurance policy?
Based on the average age of the insured’s
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Evidence of insurability
In a joint life policy, when is the death benefit paid?
Upon the first death
What type of life insurance policy is Life Paid-up at age 65?
Limited pay whole life
Group life insurance policies are written as what type if insurance?
Annually renewable term
Group life insurance policies are written as what type of insurance?
Annually renewable term
During partial withdrawal from a universal life policy, which portion, if any, will be taxed?
Interest earned on the withdrawn cash value
What happens to the cash value when a whole life insurance policy matures?
Cash value is is paid to the policy owner
Who owns a group life insurance contract?
The employer aka the sponsor of the group
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 for what time period?
For 20 years or until the insured’s death! whichever occurs first
What is the main advantage of converting from group life insurance to individual coverage?
Evidence of insurability is not required
What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured’s a 100?
Single premium whole life
What are the living benefits of whole life insurance?
Loan values
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
Regarding taxation, how does the cash value of a universal life policy accumulate?
Tax deferred
Under option B in a universal life policy, what happens to the DB?
The DB increases each year by the amount of the cash value increases
In what type of life insurance policies can the policy owner skip premium payments without the policy lapsing?
Universal life
Universal life policies have two types of interest rates. What are they?
Guaranteed and current
The death protection component of a universal life policy is expressed as what type of coverage?
Annually renewable term
When would a 20-pay whole life policy endow?
When the insured reaches age 100
What universal life option has a gradually increasing cash value and a level death benefit?
Option A
What type of life insurance is best suited to cover a mortgage?
Decreasing term
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
What are the DB options in universal life policies?
Option A - level DB
Option B - increasing DB
What policy component must decrease in decreasing term insurance?
Face amount
A whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy?
Limited pay whole life
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Group purpose, size, financial strength, turnover
If an insured terminates membership in a group life insurance, to what type of insurance can the insured convert the coverage?
Whole life
In VUL insurance, to what policy component does the term variable refer?
Cash value and DB
What type of life insurance policy offers pure death protection?
Term
What type of life insurance policy provides permanent protection?
Whole life
An individual has just borrowed $10,000 on a five year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?
Decreasing term
A policy states that it will pay a specified face amount if the insured dies during the 20 year premium paying period and nothing if the death occurs after the twenty year period. What type of policy is this?
Twenty year level term
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy
Who is insured under a juvenile life policy?
A minor
What elements of an adjustable life insurance policy can be changed by the policy owners?
The amount and payment period of the premium, the face amount, and the period for protection
