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23 Cards in this Set
- Front
- Back
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If the annuitant dies during the accumulation period, who will receive the annuity benefits? a) The annuitant's estate b) The beneficiary c) The annuity owner d) The insurance company |
b) The beneficiary If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater. |
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Which of the following is NOT an example of a valid insurable interest? a) Business partners in each other's lives b) Employer in key employee's life c) Child in parents' lives d) Debtor in the life of the creditor |
d) Debtor in the life of the creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring their own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to the policyowner. A debtor does not have an insurable interest in the creditor. |
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When is the earliest a policy may go into effect? a) When the insurer approves the application b) After the underwriter reviews the policy c) When the application is signed and a check is given to the agent d) When the first premium is paid and the policy has been delivered |
c) When the application is signed and a check is given to the agent The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for. |
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What is a material misrepresentation? a) Any misstatement made by an applicant for insurance b) Any misstatement by the producer c) Concealment d) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company |
d) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company. |
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When must insurable interest exist in a life insurance policy? a) At the time of loss b) At the time of application c) At the time of policy delivery d) When there is a change of the beneficiary |
b) At the time of application In life insurance, insurable interest must exist at the time of application. |
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Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Universal Life - Option B b) Equity Indexed Universal Life c) Variable Universal Life d) Universal Life - Option A |
d) Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance. |
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What happens when a policy is surrendered for its cash value? a) The policy can be reinstated by paying back all policy loans and premiums. b) The policy can be converted to term coverage. c) Coverage ends and the policy cannot be reinstated. d) Coverage ends but the policy can be reinstated at any time. |
c) Coverage ends and the policy cannot be reinstated. Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated. |
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A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy a) Required a premium increase each renewal. b) Built cash values. c) Required proof of insurability every year. d) Decreased death benefit at each renewal. |
a) Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values. |
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All of the following are duties and responsibilities of producers at the time of application EXCEPT a) Explain the nature and type of any receipt the producer is giving to the applicant. b) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. c) Check to make sure that there are no unanswered questions on the application. d) Change any incorrect statement on the application by personally initialing next to the corrected statement. |
d) Change any incorrect statement on the application by personally initialing next to the corrected statement. Any changes to information on an application must be initialed by the applicant. |
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All of the following are characteristics of group life insurance EXCEPT a) Amount of coverage is determined according to nondiscriminatory rules. b) Individuals covered under the policy receive a certificate of insurance. c) Certificate holders may convert coverage to an individual policy without evidence of insurability. d) Premiums are determined by the age, sex and occupation of each individual certificate holder. |
d) Premiums are determined by the age, sex and occupation of each individual certificate holder. Premiums are determined by the age, sex and occupation of the entire group. |
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What happens if a deferred annuity is surrendered before the annuitization period? a) The insurer can only apply the surrender value toward another annuity. b) Deferred annuities cannot be surrendered prior to the annuitization period. c) The owner will receive the surrender value of the annuity. d) The owner will only receive a refund of premium. |
c) The owner will receive the surrender value of the annuity. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision. |
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All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a) The payments are not guaranteed for life. b) The insurer determines the amount for each payment. c) It is a life contingency option. d) It will pay the benefit only for a designated period of time. |
c) It is a life contingency option. Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies. |
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If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a) Nonforfeiture option. b) Guaranteed insurability rider. c) Paid-up additions option. d) Cost of living provision. |
b) Guaranteed insurability rider. The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age. |
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Which of the following types of agent authority is also called “perceived authority"? a) Fiduciary b) Apparent c) Express d) Implied |
b) Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. |
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Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? a) Agent's Report b) General Information c) Medical Information d) Inspection Report |
c) Medical Information Part 2 - Medical Information of the application includes information on the prospective insured's medical background, present health, any medical visits in recent years, medical status of living relatives, and causes of death of deceased relatives. |
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An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a) $20,000 b) $25,000 c) $50,000 d) The face amount will be determined by the insurer. |
c) $50,000 The face of the term policy would be the same as the face amount provided under the whole life policy. |
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What is another name for interest-sensitive whole life insurance? a) Variable life b) Term life c) Adiustable life d) Current assumption life |
d) Current assumption life Interest-sensitive whole life, also referred to as current assumption life, is a whole life policy that provides a guaranteed death benefit to age 100. |
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Which settlement option provides a single beneficiary with income for the rest of his/her life? a) Fixed Amount b) Lump Sum c) Retained Assets d) Single Life |
d) Single Life The Single Life Option provides a single beneficiary with income for the rest of his/her life. |
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A key person insurance policy can pay for which of the following? a) Costs of training a replacement b) Loss of personal income c) Workers compensation d) Hospital bills of the key employee |
a) Costs of training a replacement A key person insurance policy will pay for costs of running the business and replacing the employee. |
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The following areas are regulated by the Insurance Department EXCEPT a) Insurer financial requirements. b) Policyowner rights and disclosures. c) Producer commission schedules. d) Producer regulations and testing requirements. |
c) Producer commission schedules. Commissions are set by a schedule or negotiation between the producer and the insurance company. The Insurance Department regulations are to protect the insurance-buying public. |
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An applicant wants to buy a policy that has a cash value element. Which type should she buy? a) Permanent b) Stock c) Investment d) Term |
a) Permanent Unlike term insurance, permanent insurance provides lifetime death protection and a savings or cash value option. |
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Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? a) Payor Benefit b) Jumping Juvenile c) Juvenile Premium Provision d) Waiver of Premium |
a) Payor Benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21. |
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What insurance concept is associated with the names Weiss and Fitch? a) Index used by stock companies b) Guides describing company financial integrity c) Policy dividends d) Types of mutual companies |
b) Guides describing company financial integrity Because an insurance company's strength and stability are two very crucial factors in its sustainability, independent rating services have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of these services, although there are more. |
