Testing

Question 1

In Florida, when agents recommend changes be made for existing coverage, the agent must follow established procedures. The name of this rule is called the

Answer 1

Florida Replacement Rule

Question 2

Which arrangement allows one to bypass insurable interest laws?

Answer 2

Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.

Question 3

At what point does an informal contract become binding?

Answer 3

When one party makes an offer and the other party accepts that offer

Question 4

Insurance policies are offered on a “take it or leave it” basis, which make them

Answer 4

Contracts of Adhesion

Question 5

Insurance policies are considered aleatory contracts because

Answer 5

Insurance contracts are aleatory. This means there is an element of chance and potential for unequal exchange of value or consideration for both parties. An aleatory contract is conditioned upon the occurrence of an event.

Question 6

Level term

Answer 6

also called level premium level term, has a level face amount and level premiums. Premiums
tend to be higher than annual renewable term because they are level throughout the policy period.
However, the premiums will increase at each renewal.

Question 7

Decreasing term:

Answer 7

Term life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection

Question 8

Increasing term:

Answer 8

Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

Question 9

Convertible term:

Answer 9

A term life policy has a provision that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability.

Question 10

Renewable term:

Answer 10

Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.

Question 11

Annual renewable term:

Answer 11

Term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.

Question 12

Straight life:

Answer 12

This is basic whole life insurance with a level face amount and fixed premiums payable over the insured’s entire life. Premium payments made until death of insured or age 100 (maturity of policy).

Question 13

Limited Pay life:

Answer 13

This is whole life insurance where the insured is covered for his entire life, but premiums are paid for a limited time. As the premium payment period shortens, cash values increase faster and the fixed premiums are higher. For example, under a life paid-up at 65 policy, premiums are
only paid until the insured is 65 years old. With a 20-pay life policy, the insured only pays for 20 years. These policies are in effect until the insured’s death or they reach age 100.

Question 14

Graded whole life:

Answer 14

Under a typical graded premium life insurance policy, the premium increases yearly for a stated number of years, then remains level. Premiums continue to stay level for the remainder of the policy. For example, a policy can start out low in a graded whole life and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy.

Question 15

Graded whole life:

Answer 15

Under a typical graded premium life insurance policy, the premium increases yearly for a stated number of years, then remains level. Premiums continue to stay level for the remainder of the policy. For example, a policy can start out low in a graded whole life and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy.

Question 16

Family Plan Policies:

Answer 16

These are designed to insure all family members under one policy. Usually the family head is covered by permanent (whole life) insurance and the spouse/children are included on the same policy as level term life riders (family term riders) . The term coverage on the spouse and children are normally convertible to permanent coverage without evidence of insurability.

Question 17

Family Income Policies:

Answer 17

Whole life and decreasing term insurance (begins date of purchase). Provides monthly income to a beneficiary if death occurs during a specified period after date of purchase. If the insured dies after the specified period, only the face value is paid to the beneficiary since the decreasing term insurance expired.

Question 18

Family Maintenance Policy:

Answer 18

Whole life and level term (begins date of death). Provides income to a beneficiary for a selected period of time if an insured dies during that period. At the end of the income paying period, the beneficiary also receives the entire face amount of the policy. If an insured dies after the
end of the selected period, the beneficiary receives only the face value of the policy.

Question 19

Multiple protection policies:

Answer 19

Pays a benefit of double or triple the face amount if death occurs during a specified period. If death occurs after the period has expired, only the policy face amount is paid. The period may be for a specified number of years - 10, 15, or 20 years or to a specified age such as 65. These
policies are combinations of permanent insurance and level term insurance.

Question 20

Joint Life Policy:

Answer 20

A policy that covers two or more people. The age of the insureds are “averaged” and a single premium is charged. It uses permanent insurance (as opposed to term) and pays a death benefit when one of the insureds dies. The survivors then have the option of purchasing an individual policy without evidence of insurability. The premium for a joint life policy is less than the premium for
separate, multiple policies.

Question 21

Joint and survivor policy, or a

“survivorship life policy”

Answer 21

This plan also covers two lives, but the benefit is paid upon the death of the last surviving insured. Compared to the combined premium for separate life insurance policies on two individuals, the premium for a survivorship life policy is lower.

Question 22

Juvenile Insurance:

Answer 22

Life insurance which is written on the lives of a minor is called juvenile insurance. The adult applicant is usually the premium payor as well, until the child comes of age and is able to take over the payments. A payor provision is typically attached to juvenile policies. It provides that, in the event of death or disability of the adult premium payor, the premiums will be waived until the child
reaches a specified age (such as 18, 21, or 25).

Question 23

Credit life insurance:

Answer 23

Is designed to cover the life of a debtor and pay the amount due on a loan if the
debtor dies before the loan is repaid. It is normally issued in an amount not to exceed the
outstanding loan balance and is usually paid entirely by the borrower. A decreasing term policy is
most often used.

Question 24

Interest-Sensitive Whole Life:

Answer 24

Interest-sensitive life insurance is a type of whole life insurance where the cash value can increase beyond the stated guarantee if economic conditions warrant. This is also called current assumption whole life insurance. It also gives the insured the opportunity to either increase the face amount or use the extra cash value to lower future premiums. Premiums can vary to reflect the
insurer’s changing assumptions with regard to its death, investment, and expense factors. CAWL
(current assumption whole life) policies are almost always a MEC due to accelerated premiums

Question 25

Adjustable life policies:

Answer 25

Are distinguished by their flexibility that comes from combining term and whole life insurance into a single plan. The policyowner determines how much face amount protection is needed and how much
premium the policyowner wants to pay
• Adjustable life insurance allows you to vary your coverage as your needs change without
requiring evidence of insurability
• Consequently, no new policy needs to be issued when changes are desired
• Adjustable life has all the usual features of level premium cash value life insurance

Question 26

Universal life:

Answer 26

is a variation of whole life insurance, characterized by considerable flexibility.
• Changes may be made with relative ease by the policyowner with these flexible-premium
policies
• Unlike whole life (with its fixed premiums, fixed face amounts, and fixed cash value
accumulations) universal life allows its policyowners to determine the amount and frequency
of premium payments which will adjust the policy face amount
• Basic characteristics of a universal life policy are flexible premiums, flexible benefits, no minimum
death benefit, and cash value withdrawals
• Cash value accumulations are subject to a minimum interest guarantee
• Any surrender charges of a universal policy must be disclosed

Question 27

What are the characteristics of MEC’s?

Answer 27

If withdrawn prior to age 59 ½, there is a 10% penalty.
• Taxation only occurs when cash is distributed
• Funds withdrawn from a MEC are subject to last-in first-out (LIFO) tax treatment, which assumes that the
investment or earnings portion of the contract’s values is withdrawn first (making these funds fully
taxable as ordinary income).
• Penalty taxes on premature distributions from a modified endowment contract (MEC) normally apply to
policy loans

Question 28

What are the characteristics of MEC’s?

Answer 28

If withdrawn prior to age 59 ½, there is a 10% penalty.
• Taxation only occurs when cash is distributed
• Funds withdrawn from a MEC are subject to last-in first-out (LIFO) tax treatment, which assumes that the
investment or earnings portion of the contract’s values is withdrawn first (making these funds fully
taxable as ordinary income).
• Penalty taxes on premature distributions from a modified endowment contract (MEC) normally apply to
policy loans

Question 29

Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?

Answer 29

There is a flexible premium payment because cash value can be used to lower future premiums.

Question 30

Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?

Answer 30

increase face amount

Question 31

Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT

Answer 31

partial withdrawal features beyond a surrender charge period

Question 32

Additional coverage can be added to a Whole Life policy by adding a(n)

Answer 32

decreasing term rider

Question 33

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?

Answer 33

Family Maintenance Policy

Question 34

The amount of coverage on a group credit life policy is limited to

Answer 34

the insured’s total loan value

Question 35

Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?

Answer 35

Joint Life

Question 36

A policy that becomes a Modified Endowment Contract (MEC)

Answer 36

will lose many of its tax advantages

Question 37

What kind of life insurance product covers children under their parent’s policy?

Answer 37

Term rider

Question 38

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?

Answer 38

Family Maintenance Policy

Question 39

A Return of Premium life insurance policy is

Answer 39

“Whole life and Increasing term”. A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.

Question 40

How are policyowner dividends treated in regards to income tax?

Answer 40

“Interest on accumulations is taxed”. If the dividends exceed the total premium payments for the insurance policy, the excess dividends are considered taxable income.

Question 41

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Answer 41

Life Income

Question 42

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?

Answer 42

Entire cash surrender value is taxable

Question 43

C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?

Answer 43

The cost

Question 44

The Common Disaster clause provides that if both the insured and the named beneficiary were to die in a common accident, which of the following is true?

Answer 44

The correct answer is “The estate taxes in the beneficiary’s estate may be reduced”. Under the Common Disaster clause, the estate taxes in the beneficiary’s estate may be reduced.

Question 45

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?

Answer 45

Life settlement contract

Question 46

K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?

Answer 46

Proceeds will be payable to K’s estate if P dies within a specified time

Question 47

Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy’s primary beneficiary?

Answer 47

All proceeds are income tax free in the year they are received

Question 48

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Answer 48

Binding receipt

Question 49

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Answer 49

Aviation exclusion

Question 50

On delivery of a policy, a signed statement of good health is typically requested if

Answer 50

The application was submitted without the initial premium

Question 51

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has

Answer 51

The correct answer is “waived one of its legal rights”. If an insurer accepts an application that contains unanswered questions and makes the application part of the life contract, the company has waived one of its legal rights.

Question 52

Which of these actions should a producer take when submitting an insurance application to an insurer?

Answer 52

Inform insurer of relevant information not included on the application

Question 53

What action should a producer take if the initial premium is NOT submitted with the application?

Answer 53

The correct answer is “Forward the application to the insurer without the initial premium”. In this situation, the producer should submit the application to the insurance company without the premium. However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected.

Question 54

An underwriter determines that an applicant’s risk should be recategorized due to a health issue. This policy may be issued with a(n)

Answer 54

exclusion for the medical condition

Question 55

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

Answer 55

Inspection report

Question 56

What is the purpose of a Policy Summary?

Answer 56

It highlights the critical parts of the policy issued

Question 57

An applicant’s medical information received from the Medical Information Bureau (MIB) may be furnished to the

Answer 57

applicant’s physician

Question 58

When an employee is terminated, which statement about a group term life conversion is true?

Answer 58

The correct answer is “Policy proceeds will be paid if the employee dies during the conversion period”. An individual must apply for individual coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversion period.

Question 59

S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?

Answer 59

Full benefits are payable under the Master contract

Question 60

If an annuity is terminated prior to beginning of the income payment period, the contract owner receives

Answer 60

The contract surrender value at that time

Question 61

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Answer 61

Flexible Installment Deferred

Question 62

Which of the following factors affects the amount of monthly disability benefits payable under Social Security?

Answer 62

The amount of the benefits available from other sources

Question 63

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

Answer 63

20% is withheld for income taxes

Question 64

A 55 year old recently received a $30,000 distribution from a previous employer’s 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Answer 64

Correct. All withdrawals from a qualified retirement plan are taxable as current income. In addition, any withdrawals made before age 59 1/2 is subject to an additional tax penalty of 10% of the amount withdrawn.

Question 65

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Answer 65

The correct answer is “Distribution is subject to federal income tax withholding”. A participant must complete a rollover to another qualified plan within 60 days or the distribution is considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsor must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.

Question 66

Tom has a qualified retirement plan with his employer that is currently considered to be 80% “vested”. How can this be interpreted?

Answer 66

In this situation, 80% “vested” means that 20% of the funds could be forfeited if Tom’s employment is terminated.

Question 67

What does a 401(k) plan generally provide its participants?

Answer 67

The correct answer is “Salary-deferral contributions”. A 401(k) plan normally provides participants with a salary-deferral option for contributions to the plan.

Question 68

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

Answer 68

There is no federal tax withholding involved in a transfer of funds from one qualified plan into another. Rollovers, however, involve a 20% withholding. Once the rollover takes place to the new custodian, the remainder of the distribution is made.

Question 69

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?

Answer 69

The employee

Question 70

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the

Answer 70

marital deduction

Question 71

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

Answer 71

In this situation, the maximum allowable IRA contribution is $25,000.

Question 72

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?

Answer 72

A surviving spouse who inherits IRA benefits or benefits from the deceased spouse’s qualified plan is eligible to establish a rollover IRA in the surviving spouse’s own name.

Question 73

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Answer 73

Annuity, NOT A VARIABLE PLAN

Question 74

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

Answer 74

The correct answer is “59 1/2”. Traditional Individual Retirement Account (IRA) withdrawals are normally subject to a tax penalty if they are made before the owner reaches age 59 1/2.

Question 75

Which of these is NOT considered to be a cost connected with an individual’s death?

Answer 75

Business expenses

Question 76

What is considered a valid reason for small businesses to insure the lives of its major shareholders?

Answer 76

Life insurance is purchased to fund a buy-sell agreement in the event of the death of a major shareholder in a business.

Question 77

Which of these is NOT a reason for a business to buy key person life insurance?

Answer 77

All of these are reasons for a business organization to purchase key person life insurance EXCEPT “A pension deficiency if the key employee dies”.

Question 78

In Florida, an element of an insurance transaction would be

Answer 78

The issuance of an insurance contract is considered to be an element of an insurance transaction.

Question 79

Which entity approves the insurance policy forms used in Florida?

Answer 79

Office of Insurance Regulation (OIR)

Question 80

In Florida, when agents recommend changes be made for existing coverage, the agent must follow established procedures. The name of this rule is called the

Answer 80

Florida Replacement Rule

Question 81

What are the consequences for placing business with an unauthorized insurer?

Answer 81

First Degree Misdemeanor

Question 82

Which of the following employer tasks does a Professional Employer Organization normally handle?

Answer 82

Administration tasks

Question 83

A stock life insurance company that issues both participating and nonparticipating policies is doing business on

Answer 83

The correct answer is “a mixed plan”. When a stock life insurance company issues both participating and nonparticipating policies, the company is doing business on a mixed plan.

Question 84

As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?

Answer 84

The correct answer is “Coercion”. A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.

Question 85

How can an agent-in-charge have more than one location?

Answer 85

The correct answer is “Only if the agent-in-charge is present when insurance activity occurs”. Multiple locations are allowed as long as the agent-in-charge is present when insurance activity occurs.

Question 86

The Bureau of Unclaimed Property is overseen by the

Answer 86

The correct answer is “Chief Financial Officer”. The Chief Financial Officer oversees the Bureau of Unclaimed Property.

Question 87

In Florida, what is the maximum percentage of controlled business an agent may produce?

Answer 87

50%

Question 88

How many days does an insurance company have to reject a reinstatement application before it is automatically reinstated?

Answer 88

45

Question 89

In Florida, agents are allowed to engage in rebating if

Answer 89

offered to all insureds in the same actuarial class

Question 90

A group plan was recently terminated. In Florida, how many days are covered individuals guaranteed coverage after a group plan’s termination?

Answer 90

The correct answer is “31 days”. If a group plan is terminated, covered persons are guaranteed coverage for 31 days after termination.

Question 91

Which of the following areas of state regulation is NOT protected by the savings clause in ERISA?

Answer 91

Commerce

Question 92

Which of the following is NOT considered rebating?

Answer 92

The correct answer is “Sharing commissions with an agent licensed in the same line of business”. Sharing commissions with other licensed agents is not considered rebating.

Question 93

What are adjustable rates for life policy loans in Florida based on?

Answer 93

Adjustable rates for life insurance policy loans in Florida are based on Moody’s corporate bond index.

Question 94

Which of the following professional organizations has its code of ethics incorporated into Florida law?

Answer 94

The correct answer is “National Association of Insurance and Financial Advisors (NAIFA)”. The professional organization whose code of ethics is incorporated into Florida law, and whose responsibility is to establish the activities of agents is the National Association of Insurance and Financial Advisors.

Question 95

Which of the following acts is an agent NOT authorized to do on behalf of an insurer?

Answer 95

Agents do not authorize payment of claims.

Question 96

Which of the following documents must an agent submit to the replacing insurance company during the replacement of an existing life insurance policy?

Answer 96

The correct answer is “Notice to existing and replacing insurers of intention to replace”. When replacing an existing life insurance policy, an agent must submit notice to existing insurer and replacing insurer of intentions.

Question 97

A variable life insurance agent must be licensed and appointed as a life and variable contract agent, as well as a(n)

Answer 97

The correct answer is “broker dealer”. An agent marketing variable life insurance must be licensed and appointed as a life and variable contract agent and a broker dealer.

Question 98

Florida requires that an insurance agent must complete __ hours of continuing education on the subject of law and ethics every two years.

Answer 98

The correct answer is “5”. Florida requires that an insurance agent must complete 5 hours of continuing education on the subject of law and ethics every two years.

Question 99

According to Florida law, an additional lapse notice must be issued after the standard grace period has expired for policyowners age

Answer 99

The correct answer is “64 years or older”. In Florida, insurers are required to issue an additional lapse notice after the applicable statutory grace period has expired for policyholders 64 years of age or older.

Question 100

P is the insured on a participating life policy. Which statement is true if P’s premiums are waived due to a disability?

Answer 100

The correct answer is “P will still receive declared dividends”. Even though premiums are waived because of the disability, the insured will continue to receive dividends just as if the insured were still making the payments themselves.

Question 101

Which of these life insurance riders allows the applicant to have excess coverage?

Answer 101

Term riders allow an applicant to have excess life insurance coverage.

Question 102

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Answer 102

The correct answer is “Binding receipt”. A binding receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.

Question 103

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

Answer 103

In this situation, coverage will go into effect the date the agent delivers the policy, collects the initial premium, and obtains a good health statement from the insured.

Question 104

If an agent would like to sell Variable annuities, which state examination must the agent pass?

Answer 104

An agent who wants to sell Variable annuities must be licensed by the state which includes examinations in Life and Variable contracts.

Question 105

Which of the following policies combines investment choices with a form of Term coverage?

Answer 105

Variable Universal Life

Question 106

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Answer 106

Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.

Question 107

K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?.

Answer 107

The correct answer is “Level”. A level term policy pays the same benefit amount if death occurs at any point during the term. Level term policies may be renewable.

Question 108

Which of the following actions is NOT possible with a Universal Life policy?

Answer 108

Policy’s cash value may be used to pay premiums.
Premium payments may be made at unscheduled times.
Premiums may be applied as a credit against income tax.
Face amount may be adjusted. The correct answer is that premiums may be applied as a credit against income tax.

Question 109

When an employee is terminated, which statement about a group term life conversion is true?

Answer 109

An individual must apply for individual permanent coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversion period.

Question 110

G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G’s family receive an income?

Answer 110

In this situation, the family would receive an income from the policy for 10 years. Family Income policies pay an income beginning at the insured’s death and continues for a period specified from the date of policy issue.

Question 111

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Answer 111

A participant must complete a rollover to another qualified plan within 60 days or the distribution is considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsor must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.

Question 112

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

Answer 112

The correct answer is “additional Whole Life coverage at specified times”. A guaranteed insurability option in a Whole Life Policy permits the policyowner to purchase, without evidence of insurability, stated amounts of Whole Life insurance at specified times.

Question 113

A Return of Premium life insurance policy is

Answer 113

The correct answer is “Whole life and Increasing term”. A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.

Question 114

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

Answer 114

An inspection report may include information obtained by a telephone call to the proposed insured.

Question 115

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?

Answer 115

The correct answer is “Entire cash surrender value is taxable”. This is incorrect. The total cash surrender value is NOT taxable. The interest gained is taxable.

Question 116

All of the following are Nonforfeiture Options EXCEPT

Answer 116

Cash Surrender Option
Extended Term Option
Reduced Paid-Up Option
* Automatic Premium Loan Option *

Question 117

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Answer 117

Flexible Installment Deferred

Question 118

Which of these is NOT a reason for a business to buy key person life insurance?

Answer 118

The correct answer is “A pension deficiency if the key employee dies”. All of these are reasons for a business organization to purchase key person life insurance EXCEPT “The increased pension liability resulting from the key person’s death”.

Question 119

Which of the following Dividend options results in taxable income to the policyowner?

Answer 119

Paid-up Additions
Cash
Accumulation at Interest
Reduced Premium

The correct answer is “Accumulation at Interest”. While policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy.

Question 120

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)

Answer 120

The correct answer is “Straight Life annuity”. The Straight Life Annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.

Question 121

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?

Answer 121

A Family Maintenance Policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period.

Question 122

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

Answer 122

A plan sponsor must withhold 20% of the distribution in federal taxes on a rollover. Once the rollover takes place to a new custodian, the remainder of the distribution is made.

Question 123

Additional coverage can be added to a Whole Life policy by adding a(n)

Answer 123

decreasing term rider

Question 124

How many days does an insurance company have to reject a reinstatement application before it is automatically reinstated?

Answer 124

The correct answer is “45”. If the insurer takes no action within 45 days, the policy will be reinstated automatically.

Question 125

If an annuity is terminated prior to beginning of the income payment period, the contract owner receives

Answer 125

The correct answer is “The contract surrender value at that time”. If an annuity is terminated prior to beginning of the income payment period, the contract owner receives the contract surrender value at that time.

Question 126

On delivery of a policy, a signed statement of good health is typically requested if

Answer 126

The correct answer is “The application was submitted without the initial premium”. On delivery of a policy, a signed statement of good health is typically requested if the application was submitted without the initial premium.

Question 127

Which life insurance rider typically appears on a Juvenile life insurance policy?

Answer 127

The correct answer is “Payor Benefit rider”. A payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.

Question 128

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

Answer 128

The correct answer is “Waiver of Premium”. The Waiver of Premium is a rider on a life insurance policy that guarantees that the premium will be paid if the insured is disabled for a specified period of time.

Question 129

D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?

Answer 129

The correct answer is “Level term”. Life insurance written to cover a need for a specified period of time at the lowest premium is called level term insurance.

Question 130

According to Florida law, group life insurance conversion privileges must NOT

Answer 130

The correct answer is “require evidence of insurability”. Florida’s insurance law that governs group life insurance conversion privileges provides that the individual policies do not require evidence of insurability.

Question 131

If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase

Answer 131

In this situation, the applicant should purchase a Whole Life Policy with an Other Insured Rider.

Question 132

In Florida, an element of an insurance transaction would be

Answer 132

ordering an MIB report
setting up the sales appointment
*** issuing an insurance contract
determining how much coverage is needed

Question 133

A group plan was recently terminated. In Florida, how many days are covered individuals guaranteed coverage after a group plan’s termination?

Answer 133

The correct answer is “31 days”. If a group plan is terminated, covered persons are guaranteed coverage for 31 days after termination.

Question 134

All of these statements about Equity Indexed Life Insurance are correct EXCEPT

Answer 134

• Cash value has a minimum rate of accumulation
• If the gain on the index goes beyond the policy’s minimum rate of return, the cash value will mirror that of the index
• ** The premiums can be lowered or raised, based on investment performance
• Tied to an equity index such as the S&P 500

Question 135

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Answer 135

The correct answer is “Life Annuity with Period Certain”. This situation involves a Life Annuity with Period Certain.

Question 136

Which of the following professional organizations has its code of ethics incorporated into Florida law?

Answer 136

Financial Industry Regulatory Agency (FINRA)
National Association of Insurance Commissioners (NAIC)
** National Association of Insurance and Financial Advisors (NAIFA)
The American College of Life Insurance

The correct answer is “National Association of Insurance and Financial Advisors (NAIFA)”. The professional organization whose code of ethics is incorporated into Florida law, and whose responsibility is to establish the activities of agents is the National Association of Insurance and Financial Advisors.

Question 137

If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?

Answer 137

The correct answer is “Insured’s contingent beneficiary”. Under the Uniform Simultaneous Death Act, if both insured and primary beneficiary are killed in the same accident and there is insufficient evidence to show who died first, policy proceeds will be paid as if the insured died last. In other words, the proceeds will be paid to the secondary or contingent beneficiary.

Question 138

Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?

Answer 138

*** There is a flexible premium payment
There are no guaranteed minimum interest rates
Mortality charges do not impact the investment amount
Interest rates determine cash values

The correct answer is “There is a flexible premium payment”. An Interest-Sensitive Whole Life policy is characterized by premiums that vary to reflect the insurer’s changing assumptions regarding its death, investment, and expense factors.

Question 139

According to Florida law, group life insurance conversion privileges must NOT

Answer 139

The correct answer is “require evidence of insurability”. Florida’s insurance law that governs group life insurance conversion privileges provides that the individual policies do not require evidence of insurability.

Question 140

An insured’s inability to perform two or more activities of daily living may trigger which type of policy rider?

Answer 140

The correct answer is “Long term care”. A long term care rider is triggered by the insured’s inability to perform two or more activities of daily living.

Question 141

Which of these terms accurately defines an underwriter’s assessment of information on a life insurance application?

Answer 141

The correct answer is “Risk classification”. Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.