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48 Cards in this Set
- Front
- Back
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Because of the imposed blackout period, the surviving spouse will not receive social security benefits until a) He or she qualifies for retirement benefits. b) The age of 65. c) He or she becomes fully insured. d) The age of 59 1/2. |
a) He or she qualifies for retirement benefits. Blackout period begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60. |
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Which of the following actions does NOT constitute false advertising? a) Representing an insurance policy as a share of stock b) Using names that disguise the true nature of a policy c) Stating that dividends are not guaranteed d) Misrepresenting the terms of a policy |
c) Stating that dividends are not guaranteed In general, insurance advertisements cannot include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it. |
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Who is responsible for the content and form of insurance advertisements? a) The producer who distributed them b) The insurer whose policies are being advertised c) The company that designed and published them d) The Commissioner who approved them |
b) The insurer whose policies are being advertised Insurance companies must establish and maintain a system of control over the advertising of their policies. The insurer is responsible for advertisements regardless of who wrote, created, presented or distributed them. |
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If an applicant submits the initial premium with an application, which action constitutes acceptance? a) The underwriters approve the application. b) The applicant submits a statement of good health. c) The producer delivers the policy. d) The insurance company receives the application and initial premium. |
a) The underwriters approve the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy. |
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Because of an injury, an insured has been unable to work for 9 months. He paid the policy premium for his life insurance for the first 6 months of disability, but didn't have to pay anything for the remaining 3 months, yet the policy remained in force. The policy includes a) Nonforfeiture options. b) Waiver of premium rider. c) Guaranteed insurability benefits. d) Facility of payment clause. |
b) Waiver of premium rider. The Waiver of Premium rider causes the insurer to waive future premiums if the premium payor is disabled for a period beyond 6 months or more. |
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When life insurance proceeds are used to pay inheritance taxes and federal estate taxes, it is known as a) Liquidity. b) Life settlement. c) Estate conservation. d) Estate creation. |
c) Estate conservation. Life insurance proceeds can be used to pay for a variety of expenses, including federal estate taxes and state inheritance taxes. |
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All of the following statements are true regarding an Ordinary (Straight) Life policy EXCEPT a) It does not have a guaranteed death benefit. b) It is funded by a level premium. c) It builds cash value. d) If the insured lives to age 100, the policy matures, and the face amount is paid to the insured. |
a) It does not have a guaranteed death benefit. Straight Life (also called Ordinary Life or Continuous Premium Whole Life) charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit. If the insured lives to age 100, the policy endows (matures) and the face amount is paid to the insured at that time. During the insured's lifetime the straight life policy builds cash value. The insurer guarantees the cash value and death benefit under a straight life policy. |
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A whole life policy is surrendered for a reduced paid-up policy. The cash value in the new policy will a) Remain the same. b) Decrease over time. c) Reduce to the pre-surrender value. d) Continue to increase. |
d) Continue to increase. The new policy continues to build its own cash value and will remain in force until the insured's death or maturity. |
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J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? a) Fixed Period b) Interest Only c) Joint and Survivor d) Fixed Amount |
d) Fixed Amount The fixed-amount option pays a fixed, specified amount in installments until the proceeds (principal and interest) are exhausted. The recipient selects a specified fixed dollar amount to be paid until it is gone. If the beneficiary dies before the proceeds are exhausted, installments will continue to be paid to a contingent beneficiary until all proceeds have been paid out. |
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If an insured dies, and it is discovered that the insured misstated his/her age or gender, the life insurance company will a) Adiust the death benefit to what the premium would have purchased at the actual age or gender. b) Pay the face amount specified at the time of policy issue. c) Deny all claims because of the misrepresentation. d) Adjust the back premiums for the proper age or gender. |
a) Adiust the death benefit to what the premium would have purchased at the actual age or gender. If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adiust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased. |
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The policyowner has an option to pledge the life insurance policy as collateral for a bank loan. This is called a) A collateral assignment. b) An insurance pledge. c) A unilateral agreement. d) An absolute assignment. |
a) A collateral assignment. With a collateral assignment, the policy is pledged as collateral to pay the balance of a loan at the insured's death. The balance of the death benefit is paid to the beneficiary. |
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Which of the following elements of an insurance contract requires payment of premium? a) Competent parties b) Offer and acceptance c) Consideration d) Legal purpose |
c) Consideration
The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss. |
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All of the following are true about Group Life insurance EXCEPT a) The employee is the insured. b) The employer is the beneficiary. c) It is usually written as annual renewable term insurance. d) Evidence of insurability is usually not required. |
b) The employer is the beneficiary. The employee, as the insured, may designate any beneficiary they so desire, which would usually be either their spouse or children. |
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For a contract to be enforceable by law, the purpose of the contract must be a) Legal and not against public policy. b) For financial gain. c) For the benefit of the general public. d) Of pure intent. |
a) Legal and not against public policy. The purpose of a contract must be legal and not against public policy for the contract itself to be enforceable by law (or legal). |
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The family term rider incorporates a) Key person whole life and dependents term. b) Cost of living rider and family protection rider. c) Spouse term and children's term. d) Whole life and other-insured term. |
c) Spouse term and children's term. A single rider that provides coverage on every family member is called a "family rider." It incorporates the spouse term rider and the children's term rider. |
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In life insurance, which of the following is NOT required to have an insurable interest in the insured? a) The beneficiary b) The policyowner c) The insured d) The applicant |
a) The beneficiary The beneficiary does not have an insurable interest in the life of the insured. |
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An applicant for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a a) Fraudulent answer. b) Representation. c) Warranty. d) Concealment. |
b) Representation. In regards to insurance applications, representations are statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true. |
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Key person insurance can provide protection for all of the following economic losses to a business EXCEPT a) Fund the cost of training a current employee to perform the duties of a deceased employee. b) Pay the death benefit to the estate of the insured. c) Provide deferred compensation retirement benefit if the insured key person survives to retirement. d) Fund the expense of finding a suitable replacement following the death of an employee. |
b) Pay the death benefit to the estate of the insured. The business, not the family or estate of the insured, is the policyowner, premium payor, and the beneficiary. |
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Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is a) Not taxed. b) Taxed as income on 50% of the excess. c) Assessed a fine of 10% of the excess. d) Taxed as ordinary income. |
d) Taxed as ordinary income. Upon surrender or endowment, any cash value in excess of cost basis (premium payments) is taxable as ordinary income. |
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When an insured terminates membership in the insured group, the insured can convert to a) Term with proof of insurability. b) Whole life without proof of insurability. c) Whole life with proof of insurability. d) Term without proof of insurability. |
b) Whole life without proof of insurability. When a member terminates membership in a group, he or she can convert to whole life without proof of insurability. |
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Which of the following statements describes one of the reasons individuals purchase life insurance? a) It helps liquidate an estate through death proceeds. b) It always accumulates cash value. c) It provides income an insured cannot outlive. d) It creates an immediate estate. |
d) It creates an immediate estate. Life insurance death proceeds can create an estate when the insured dies. |
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With Adjustable Life, the owner can change all of the following EXCEPT a) The premium. b) The length of time the coverage will last. c) The insured. d) The death benefit. |
c) The insured. The mortality charge is determined by the actuary in the home office. The owner of the policy has no control over this mortality cost. |
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Who is the annuity owner? a The person who receives the benefits b) The person on whose life the annuity is written c) The insurer d) The person who purchases the annuity |
d) The person who purchases the annuity The owner of an annuity is the person who purchases the contract, but does not have to be the one who receives the benefits. |
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Which of the following indicates the person upon whose life the annuity income amount is determined? a) Owner b) Insured c) Annuitant d) Beneficiary |
c) Annuitant The annuitant is the person upon whose life the annuity income amount is determined. |
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An agent decides to start selling variable life insurance products. What must the agent do before transacting this type of insurance? a) Register with the SEC b) Obtain a separate license c) Obtain the DOl authorization d) Register with FINRA |
d) Register with FINRA Agents performing transactions involving any variable products are required to be registered with the FINRA - Financial Industry Regulatory Authority (formerly NASD National Association of Securities Dealers). |
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At what point would an automatic premium loan be generated? a) Upon the insured's death b) Once the policy is delivered c) Upon the surrender of the policy d) Following the grace period |
d) Following the grace period Automatic premium loans are designed to automatically take a portion of the policy's cash value in order to pay the policy premium, thus preventing the policy from lapsing. Automatic premium loans are initiated after the grace period has ended. |
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Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum. |
b) Income payments begin within 1 year from the date of purchase. Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities. |
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Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum. |
b) Income payments begin within 1 year from the date of purchase. Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities. |
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Under what circumstances will the contingent beneficiary receive the death benefit? a) If the primary beneficiary dies before the insured b) If the tertiary beneficiary dies before the insured c) If designated by the insured d) If designated by the primary beneficiary |
a) If the primary beneficiary dies before the insured The only way the contingent beneficiary will receive the death benefit is if the primary beneficiary dies before the insured. |
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At what point would an automatic premium loan be generated? a) Upon the insured's death b) Once the policy is delivered c) Upon the surrender of the policy d) Following the grace period |
d) Following the grace period Automatic premium loans are designed to automatically take a portion of the policy's cash value in order to pay the policy premium, thus preventing the policy from lapsing. Automatic premium loans are initiated after the grace period has ended. |
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Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum. |
b) Income payments begin within 1 year from the date of purchase. Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities. |
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Which dividend option will increase the death benefit? a) Extended term b) Reduced paid up c) Paid-up additions d) Accumulation |
c) Paid-up additions Paid-up additions option uses the dividend to purchase small amounts of the same type of insurance as the original policy. |
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Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum. |
b) Income payments begin within 1 year from the date of purchase. Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities. |
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Under what circumstances will the contingent beneficiary receive the death benefit? a) If the primary beneficiary dies before the insured b) If the tertiary beneficiary dies before the insured c) If designated by the insured d) If designated by the primary beneficiary |
a) If the primary beneficiary dies before the insured The only way the contingent beneficiary will receive the death benefit is if the primary beneficiary dies before the insured. |
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Which dividend option will increase the death benefit? a) Extended term b) Reduced paid up c) Paid-up additions d) Accumulation |
c) Paid-up additions Paid-up additions option uses the dividend to purchase small amounts of the same type of insurance as the original policy. |
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In contrasting stock insurers with mutual insurers, which statement is true? a) Stock dividends are tax free while policy dividends are taxable. b) Nonparticipating policies can pay out dividends to the policyholders. c) Mutual insurers are owned by the shareholders and issue participating policies. d) Stock insurers are owned by the shareholders and issue nonparticipating policies. |
d) Stock insurers are owned by the shareholders and issue nonparticipating policies. Stock insurers are owned by their shareholders/stockholders. Their policies are labeled nonparticipating since the insureds do not share in the divisible surplus (dividends). |
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Under what circumstances will the contingent beneficiary receive the death benefit? a) If the primary beneficiary dies before the insured b) If the tertiary beneficiary dies before the insured c) If designated by the insured d) If designated by the primary beneficiary |
a) If the primary beneficiary dies before the insured The only way the contingent beneficiary will receive the death benefit is if the primary beneficiary dies before the insured. |
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In contrasting stock insurers with mutual insurers, which statement is true? a) Stock dividends are tax free while policy dividends are taxable. b) Nonparticipating policies can pay out dividends to the policyholders. c) Mutual insurers are owned by the shareholders and issue participating policies. d) Stock insurers are owned by the shareholders and issue nonparticipating policies. |
d) Stock insurers are owned by the shareholders and issue nonparticipating policies. Stock insurers are owned by their shareholders/stockholders. Their policies are labeled nonparticipating since the insureds do not share in the divisible surplus (dividends). |
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Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application b) Risk analysis c) The law of large numbers d) Agent's Report |
Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application Insurance application is the data-gathering tool utilized in evaluating an individual risk. |
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Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum. |
b) Income payments begin within 1 year from the date of purchase. Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities. |
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Under what circumstances will the contingent beneficiary receive the death benefit? a) If the primary beneficiary dies before the insured b) If the tertiary beneficiary dies before the insured c) If designated by the insured d) If designated by the primary beneficiary |
a) If the primary beneficiary dies before the insured The only way the contingent beneficiary will receive the death benefit is if the primary beneficiary dies before the insured. |
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In contrasting stock insurers with mutual insurers, which statement is true? a) Stock dividends are tax free while policy dividends are taxable. b) Nonparticipating policies can pay out dividends to the policyholders. c) Mutual insurers are owned by the shareholders and issue participating policies. d) Stock insurers are owned by the shareholders and issue nonparticipating policies. |
d) Stock insurers are owned by the shareholders and issue nonparticipating policies. Stock insurers are owned by their shareholders/stockholders. Their policies are labeled nonparticipating since the insureds do not share in the divisible surplus (dividends). |
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What type of an interest rate is guaranteed in universal life policies? a) Adiustable interest rate b) Current interest rate c) Contract interest rate d) Nominal interest rate |
c) Contract interest rate The insurer guarantees a contract interest rate. A current interest rate is not guaranteed in the contract and may be higher because of current market conditions. |
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Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum. |
b) Income payments begin within 1 year from the date of purchase. Deferred annuity benefit payments begin sometime after one year after the contract was purchased. The rest of the statements are true regarding deferred annuities. |
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In contrasting stock insurers with mutual insurers, which statement is true? a) Stock dividends are tax free while policy dividends are taxable. b) Nonparticipating policies can pay out dividends to the policyholders. c) Mutual insurers are owned by the shareholders and issue participating policies. d) Stock insurers are owned by the shareholders and issue nonparticipating policies. |
d) Stock insurers are owned by the shareholders and issue nonparticipating policies. Stock insurers are owned by their shareholders/stockholders. Their policies are labeled nonparticipating since the insureds do not share in the divisible surplus (dividends). |
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Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application b) Risk analysis c) The law of large numbers d) Agent's Report |
Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application Insurance application is the data-gathering tool utilized in evaluating an individual risk. |
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What type of an interest rate is guaranteed in universal life policies? a) Adiustable interest rate b) Current interest rate c) Contract interest rate d) Nominal interest rate |
c) Contract interest rate The insurer guarantees a contract interest rate. A current interest rate is not guaranteed in the contract and may be higher because of current market conditions. |
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Which of the following is required in order for a plan to be qualified? a) The plan must be for the exclusive benefit of the employer. b) The plan's contribution formula is allowed to discriminate in favor of officers of the company. c) The plan must be formally written and communicated to the employees. d) The plan must not be permanent. |
c) The plan must be formally written and communicated to the employees. The plan must be for the exclusive benefit of the employees and their beneficiaries, formally written and communicated to the employees, and the plan's benefit or contribution formula cannot discriminate in favor of the prohibited group. Participation in a plan may not be geared exclusively to the prohibited group. The plan must be permanent. |
