Test Review Flashcards
Because an agent is using stationary with logo etc what type of agent authority?
Apparent
When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming them this is called…
Class designation
I’m the executive bonus plan who is the owner of the policy and who pays the premium?
Executive is the owner, and executive pays the premium
Which authority is not stated in an agents contract but is required for the agent to conduct business?
Implied
The premiums paid by the employer in a business life insurance policy are tax __________ by the employer.
Deductible
A universal life policy is best described as a/an
Annually renewable term policy with a cash value account
With a class designation beneficiaries ______ identified by name.
Are not
What kind of policy allows withdrawals or partial surrenders?
Universal life
I’m forming an insurance contract when does acceptance usually occur?
When an insurers underwriter approved coverage
Within how many day of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
3 days
The director issues an order to an insurer and immediately receives a request for the charges to be reviewed in court. Within what number of days must the hearing be held?
30 days
Producers are required to report to the director any administrative action taken against them in another jurisdiction or by another governmental agency within how many days of the final disposition?
30 days
During replacement of life insurance, a replacing insurer must do what?
Obtain a list of all life insurance policies that will be replaced.
__ years term director of insurance.
4
__ years examine domestic insurers
5
__ days to hold hearing after receiving demand
30
__ days written notice of hearing
14
Age to apply for insurance license
18
License renewal period
2 years
Days to submit application after passing exam
180
Hours of continuing Ed every — years
24, 2
Hours in ethics
3
Temporary license period
180 days
Days to notify director of agent appointment
15
Days to notify director of termination of appointment
30
Days after license lapse to reinstate
90
Months max imprisonment for violating insurance code
6 months
Days to notify Director of change of address
30
Producer must keep records for
5 years
Days to send suspected fraudulent claims
60
Days to remit funds payable to policy holders
14
Days to remit funds payable to insurer
21
Days to place large funds collected by producer in fiduciary account (2k+)
3
Max fine for each conviction for violating the insurance code or cease and desist order.
$1000
Max fine for transacting insurance without a license
$15,000
Max fine for violation of unfair claims settlement practices by insurer
$10,000
Most insurers but _________ to protect themselves I. The event of catastrauphic loss.
Reinsurance
Dividends to shareholders are or are. Or guaranteed.
Are not
A reciprocal is managed by ….
An attorney in fact
Unincorporated association of individuals who insure each other.
Reciprocal insurer
The government offers insurance for social needs such as flood or workers comp but not for preventing ______
Fraud
A producers _______ authority is expressed in the producers contract with the insurer they represent
Binding
Elements of a legal contract - COAL
Consideration, offer, acceptance, legal purpose
Contracts of ____________ will always favor the insured.
Adhesion
When an insurer voluntarily gives up the right to obtain information
Waiver
Buying a life insurance policy creates an immediate _____
Estate
When life insurance is used to pay estate taxes
Estate conservation
HLVA is based on ______
Income
Needs approach does not consider ______ earnings
Future
___________ in small privately held closed corps often enter into buy/sell agreements with the Corp that are funded by life policies
Stockholders
A Corp may buy a policy on whom in the event of that persons death.
Shareholder
An agreement where a Corp agrees to buy back the stock of a deceased stockholder.
Stock redemption plan
Key person and partnership insurance as well as policies written on life of spouse or minor child are all examples of what
Third party policy ownership
Under executive bonuse premium paid to employee is _________ and amount paid to employee is reportable as ________ income to employee.
Tax deductible; taxable
Executive bonus policy belongs to whom
The employee
Mortality tables are based off what two factors.
People and time
A male has a ______ mortality rate than a female
Higher
Life insurance premiums are based off. What + what - what
Mortality + espense - interest
Conditional or binding receipts are used in what kind of insurance? And binders for what?
Health and life vs property and casualty
A conditional receipt is not given unless what?
Initial premium has been paid
Can life insurers discriminate based off of physical hazards such as age and health?
Yes
What kind of risk is likely to receive a premium discount?
Preferred
What kind of policy is issued to a substandard risk with dangerous hobbies or health problems.
Rated
Can term insurance be renewed without a physical exam?
Yes, up to a certain age
Type of life insurance provided in mortgage redemption insurance?
Decreasing term
Whole life policies must contains. Table showing what?
Guaranteed cash value at the end of each year (shown per unit)
_______ benefits are bundled (packaged) while ________ benefits are transparent (stand alone)
Whole life vs universal
Straight (traditional) life provides coverage until when?
Death or 100
Limited pay policies mature when?
100
Good policy for those with fluctuating income.
Adjustable whole life
Adjusting the premium on adjustable life will adjust the _____\ and vice versa
Face value
How is universal life different from whole life.
Flexible premium
Are partial surrenders allowed with universal?
Yes
With universal does the policyowner have to pay tax on the withdraw
No
Interest sensitive whole life
Universal
A combination a 1 year renewable term and a cash value account
Universal
Investing in ____\_ products is a hedge against inflation
Variable
A universal life policy that has an investment components
Variable universal life
A policy that invests its cash values in equities
Variable life
Flexible premium + self directed cash into equities =
Adjustable + variable whole life
“Variable” = —— license and FINRA
Securities
Commonly used in estate planning so the death benefit of the policy can be used to pay estate taxes when due
Survivorship life
How many employees must enroll in a group constributory plan?
75%
How many employees must participate in a non-contributory plan?
100%
Might an employer require an employee to pay premium for coverage for a dependent.
Yea
Group participant requirements help around what?
Adverse selection
T/F: experience rating is for large groups only.
True
Group rates are based on ______ experience of the group.
Claims
Conversion from group to individual is permitted for how many days, regardless of health.
31
What is the sole collateral for a policy loan? Are these loans taxable?
The policy, no
Policy modifications must be in _______ and signed by a company ______.
Writing, officer
Free look period starts when
Policy delivery
If policy is mailed free look happens when. Aka constructive delivery
Day policy is mailed
Incontestibility and suicide clauses due what upon reinstatement
Start over
Can a policy that has been surrendered for cash be reinstated?
No
Can oriceeds of a life policy left with an insurer for the. Need it if a beneficiary be attached by creditors?
No
Can benefits be paid directly to a minor?
No
If someone dies of suicide in first two years no benefit is paid but what happens?
Premiums are refunded to beneficiary
Does a beneficiary have to be a certain age to receive oriceeds.
No but must be paid through a trustee
Under common disaster it is assumed who died last?
The insured
What happens if an outstanding loan plus interest exceed the cash value if the policy?
It lapses
Loans may be taken against the policy when?
As soon as it develops cash value
Automatics premium loan rider cannot be added to what kind of policies.
Term and credit life
What policies allow partial surrender.
Annuities, universal life, variable life
Rider that Pays premium aftwr a short waiting period until insured either recovers or does
Waiver of premium
Rider that will pay proceeds prior to death for those with terminal Illness
Accelerates benefits
Riser that allows the switch from one key person to another.
Change of insured rider
Rider that covers the life of a child until 18 when it can then be converted to whole life
Term life rider
Term life rider covers who for one flat fee
ALL the insureds children
A level term rider may be added to a life policy in order to insure whom.
A child
A combo policy thay atomatically cover all family members including newborns after short waiting period at no extra premium charge.
Family policy
Guaranteed insurability rider is also known as what?
Guaranteed purchase benefit
Return of premium rider and return of cash value rider are both types ____ term coverage.
Increasing
Surrender charges by some insurers on ______\ and _______ life will reduce the amount the policyowner will receive upon _____ surrender.
Annuities, universal, cash
If a policy lapses for nonpayment how long does the insured have to select a Nonforfeiture option.
60
Which is the automatic forfeiture option
Extended term
The reduced paid up Nonforfeiture option may be taken anytime there is what?
Cash value
Which. On forfeiture option will provide coverage for life?
Reduced paid up
Dividend option where insured with mutual insurer allows the insurer to keep dividends but mail the insured a monthly check.
Monthly interest option
Participation dividend option where the policyowner uses the dividend to buy term insurance.
1-year term
If insured/owner doesn’t choose a settlement option what happens?
They choose. Usually cash lump sum.
If the interest settlement option is selected is the interest subject to taxes?
Yes
What settlemt option should be chosen for estate conservation purposes?
Interest only
A contract that will pay a specified indemnity to its owner over time
Annuity
Are annuity table the same as mortality tables?
No, since there is not insurance protection
Insurers take money from annuitants who die too soon and pay it to those who what?
Live too long
What happens if an insured dies during the annuity accumulation period?
Goes to insureds beneficiary
Who has to pay taxes on interest earned if the owner dies during the annuity accumulation period?
Beneficiary
When do rights of ownership become effective on an annuity?
Contract date
Whose life are annuity benefits based on?
The annuitant
Are annuity benefits taxable? Can spouse beneficiaries continue the contract?
Yes, and yes
Do endowments and annuities provide life insurance protection?
Yes and no
Life insurance vs annuities
Creates estate vs. liquidates estate
All annuities are _____ products though often sold by ________ with a life insurance licens
Insurance, bankers
Often used as life insurance settlement options
Annuities
I’m order to be a single-premium deferred annuity there must be a period longer than what?
One benefit payment interval
What annuity has a flexible premium, minimum guaranteed rate of return and death benefit equal to its cash value.
Flexible premium fixed deferred
A deferred annuity can only be surrendered when?
During accumulation
When a policyowner surrenders annuity for cash they have exercised what.
A Nonforfeiture option
During the surrender prior of an annuity the surrender value is less than what?
Cash balue
The surrender charge on an annuity is sometimes referred to as what?
A back-end load
Annuities waive surrender charges for what?
Death or disability
The death benefit on an annuity during the accumulation period is equal to what?
Cash value
If the owner of a life income annuity with a 10 year period certain dies 13 years after annuitizing the contract what will the beneficiary receive?
Nothing
Can you outlive the income from a life annuity?
No
Which annuity has no beneficiary and is the riskiest choice?
Life income (straight or pure life)
With a life annuity payments stop at ___
Death
Which annuity has the least risk.
Refund annuity
What option would you select if you wanted annuity payments to continue on to a beneficiary after death.
Period certain
Pay-out option thay will pay for a specified period of time
Fixed period
What is the primary chalked faced by those that purchase fixed annuities?
Purchasing power, since rage of return is fixed
What is the problem with fixed annuities?
May not keep up with inflation
Annuities with Fixed rate of return and backed by the state guaranty fund?
Fixed annuities
Fixed annuities usually pay an interest rate that is similar to what?
Other conservative investments
Have little purchasing power(inflation) risk since rate of return is based on equity stock index like s&p 500
Equity indexes annuitu
Annuitu where the contract will pay the specified interest rate if it is held for a specified period of time.
Market value adjusted
Market value adjusted annuities are only adjusted if when.
If the contract is surrendered early
Employers may use annuities to fund deferred ____________ plans, but not corporate _____ plans.
Compensation, pension
Lottery payouts and structured settlements are often funded by what?
Annuities
Can a self employed person use an annuity to fund 403(b) tax sheltered annuity? (TSA)
No
A 403(b) tsa is funded by making voluntary ________ ____ contributions.
Voluntary before tax
Who are 403(b) tsa’s owned by? Employee or employer?
Employee
Can a corporation use an annuity to build tax deferred growth on corporate assets?
No
Only whom is entitled to tax deferred annuity earnings?
Individuals
Why do people purchase immediate annuities usuallly?
Supplement retirement income
When recommending a variable annnuiru what should the agent inquire the applicant about?
Tax status
Selling annuities requires verifying suitability based off “FIT” status
Financial status, investment objectives, tax status
Are dividends received by the owner of stock taxable as ordinary income?
Yes
Are stick dividends taxed as capital gains?
NEVER
A cash surrender where the amount received is ______ than the amount paid in in premiums would cause a taxable event
More
Surrendering a life insurance policy for cash and using proceeds to buy a new one is what?
A tax deferred 1035 exchange
On cashe surrender, amounts received in excess of ______ _____ are taxable
Premiums paid
In group life insurance are benefits taxable to the beneficiary should the employee die?
No
Are epremiums paid for individual life insurance taxable? Are benefits taxed? What about with key person life insurance?
No, no, same
What happens if a life policy owner donates their policies to charity?
Tax deduction that year
Once an MEC, ____ an MEC
Always
MEC that fails the 7-pay would have taxable ______ and _______
Loans and withdraws
Making a material change to _________ _______ on a life policy may cause the 7 pay test to be applied again
Cash value
Does the director make rates?
No
