Insurance MCQ

Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken?  a) $1,000 b) $3,000 c) $5,000 d) $7,000 Answer: c) $5,000

Crimes that involve the business of insurance and affect interstate commerce fall under US Code 1033. Any violations would be prosecuted by  a) the US Attorney General b) the Director of Insurance c) the Insurance Department d) the FBI Answer: a) the US Attorney General

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?  a) $0 b) $5,000 c) $10,000 d) $15,000 Answer: c) $10,000

Under a contract of adhesion,  a) there is the potential for an unequal exchange of value b) the insurer's obligations are dependent upon certain acts of the insured individual c) the terms must be accepted or rejected in full d) only one party makes any kind of enforceable promise Answer: c) the terms must be accepted or rejected in full

A beneficiary change can occur  a) only upon the request of the revocable beneficiary b) only on specified dates within the policy c) normally at any time during the policy term d) at no time Answer: c) normally at any time during the policy term

Under the subrogation clause, legal action can be taken by the insurer against the  a) responsible third party b) beneficiary c) policyowner d) State Answer: a) responsible third party

Which of the following is an annuity that is linked to a market-related index?  a) Market-related annuity b) Equity-indexed annuity c) Deferred-risk annuity d) Fixed-amount annuity Answer: b) Equity-indexed annuity

Which type of multiple protection policy pays on the death of the last person?  a) Joint life policy b) Survivorship life policy c) Dual life policy d) Multiple life policy Answer: b) Survivorship life policy

During the first two years a life insurance policy is in force, the insurer may contest a policy for all of the following reasons EXCEPT  a) Misstatement of age in the application b) Material misrepresentation in the application c) Fraud in the purchase of the policy d) Material concealment in the purchase of a policy Answer: a) Misstatement of age in the application

An agent who sells an individual life insurance policy in MUST deliver to the policy owner  a) An Underwriting Report Disclosure b) A Prospectus and Ledger Statement c) A Policy Summary and Buyer's Guide d) An Annual Financial Statement of the insurer Answer: c) A Policy Summary and Buyer's Guide

Which of the following basics is an agent's fiduciary responsibility?  a) Collecting premiums and paying them to the insurance company b) Maintaining a separate bank account for each insurance company the agent represents c) Acting as a referee in the event of a disagreement between an insured and the insurance company d) Advising prospective insureds of the lowest rates available Answer: a) Collecting premiums and paying them to the insurance company

Who reports an agent's termination of appointment to the CFO?  a) The agent b) The insurer c) The Insurance Department d) The State Answer: b) The insurer

When must a claim on a life insurance policy be paid after proof of loss has been received by the insurer?  a) Promptly b) Within 10 days c) Within 20 days d) Within 30 days Answer: a) Promptly

Under the Federal Fraud and False Statements Act, interstate commerce includes  a) Mexico b) Canada c) Bahamas d) Puerto Rico Answer: d) Puerto Rico

In order to act as an insurance agent, an agent must hold a valid insurance license and  a) Be appointed by an authorized insurance company b) Reside in this state c) Maintain an office in this state d) Obtain a certificate of authority Answer: a) Be appointed by an authorized insurance company

In accordance with federal fraud and false statements regulation, a prohibited person cannot transact insurance business without  a) The signed approval of the insurer b) A court order from the U.S. Attorney General c) The written consent of an insurance regulatory official d) Being grandfathered in by employment Answer: c) The written consent of an insurance regulatory official

The life insurance buyer's guide includes information about all of the following EXCEPT how to  a) take civil action against an insurer b) decide how much life insurance to buy c) compare life insurance policy rates d) compare life insurance policy requirements Answer: a) take civil action against an insurer

Which of the following is an example of replacement?  a) Canceling a term insurance policy to purchase a long-term care policy b) Canceling a whole life policy to purchase a term policy c) Canceling a term policy to purchase a disability policy d) Canceling a major medical insurance policy to purchase a disability policy Answer: b) Canceling a whole life policy to purchase a term policy

A group policy may be issued to a labor union. The members eligible for insurance under the policy shall be  a) members of any union b) all of the members of the union c) only members of the union who are under the age of 65 d) healthy members of the union Answer: b) all of the members of the union

Replacing an existing life insurance policy with a new one may result in  a) capital gains tax b) small business taxation c) an illegal transaction d) a surrender charge Answer: d) a surrender charge

The conversion period for converting a group policy to an individual policy is  a) 11 days b) 21 days c) 31 days d) 41 days Answer: c) 31 days

The Entire Contract provision states that the policy and _______ constitutes the entire contract between the parties.  a) Application b) Buyer's Guide c) Policy Summary d) Illustrations Answer: a) Application

Any transaction in which new life insurance is purchased and, as a result, the existing life insurance will be surrendered is called  a) Retention b) Reinstatement c) Replacement d) Reduction Answer: c) replacement

No existing agent's license will be revoked until  a) The agent has been afforded a right to a hearing on the charges b) At least three violations have been incurred c) A cease and desist order has been issued d) A jury has decided upon such action Answer: a) The agent has been afforded a right to a hearing on the charges

Under federal law, an individual convicted of a felony involving dishonesty may engage in the business of insurance ONLY after:  a) Paying a fine of at least $5,000 b) Serving five years in prison c) Completing two years of community service d) Receiving written consent from the state insurance regulatory agency Answer: d) Receiving written consent from the state insurance regulatory agency

A person who is not a legal resident of Washington may be licensed to act in this state as a ______ insurance producer without taking a written examination.  a) Alien b) Domestic c) Resident d) Nonresident Answer: d) Nonresident

An association operating solely for the benefit of its members and their beneficiaries is called a  a) Fraternal benefit society b) Maternal benefit society c) Paternal benefit society d) Fraternity benefit society Answer: a) Fraternal benefit society

An insurance company that has been denied or not yet applied for a Certificate of Authority is called  a) Authorized b) Unauthorized c) Participating d) Mixed Answer: b) Unauthorized

The Washington Life and Health ______ Association is used to rehabilitate insolvent insurers. a) Rehabilitation b) Guaranty c) Warranty d) Representation Answer: b) Guaranty

Newborn coverage for a health and accident family policy begins. a) at the moment of birth b) 30 days after birth c) 15 days after birth d) 7 days after birth Answer: a) at the moment of birth

What enables applicants to compare different life insurance policies and helps them choose which policy is best for their needs?  a) Policy summary b) Buyer's summary c) Buyer's guide d) Policy guide Answer: c) Buyer's guide

A company that is chartered and organized in any country other than the United States is called a(n) _____ company.  a) Alien b) Foreign c) Domestic d) Nonadmitted Answer: a) Alien

Before the Commissioner will issue a license, a person must be at least  a) 18 years old b) 19 years old c) 20 years old d) 21 years old Answer: a) 18 years old

An insurance company that has qualified and received a Certificate of Authority from the Insurance Department to sell insurance in this state is called a(n)  a) fraternal organization b) nonadmitted insurer c) unauthorized insurer d) authorized insurer Answer: d) authorized insurer

A person who is not a legal resident of Washington may be licensed to act in this state without taking a written examination. What kind of license would this be?  a) Admitted b) Foreign c) Resident d) Nonresident Answer: d) Nonresident

An individual insurance producer who allows his or her license to expire may, within ___ months from the expiration date, reinstate the same license without passing a written exam.  a) 6 b) 12 c) 18 d) 24 Answer: b) 12

Any inducement offered to the insured in the sale of insurance products that is not specified in the policy is called  a) Rebating b) Twisting c) Misrepresentation d) Defamation Answer: a) Rebating

Every producer licensed in Washington must notify the Commissioner within ____ days of any change of address. a) 15 b) 20 c) 25 d) 30 Answer: d) 30

Making an oral or written statement that is intended to injure a person engaged in the insurance business is called  a) false advertising b) defamation c) rebating d) twisting Answer: b) defamation

Replacing an insurance policy from one insurer to another based on representation is called  a) unfair discrimination b) misrepresentation c) twisting d) rebating Answer: c) twisting

The Commissioner of Insurance along with the Department of Insurance are responsible for  a) administering Washington's insurance laws b) hiring industry lobbyists c) making insurance laws d) establish sales quotas Answer: a) administering Washington's insurance laws

Which of these is a method of determining the level of funds required for ongoing support in the event of the breadwinner's death?  a) Financial loss value b) Human life value c) Assessment value d) Replacement value Answer: b) Human life value

Which of these factors is NOT taken into account when determining an applicant's life insurance needs?  a) Social security b) automobile c) savings d) pension Answer: b) automobile

When calculating the amount of life insurance needed for an income earner, what has to be determined when using the Needs Approach?  a) The income earner's future projected income b) The family's financial objectives if the income earner were to die or become disabled c) The insurance company's financial rating d) The income earner's credit score Answer: b) The family's financial objectives if the income earner were to die or become disabled

Which approach predicts a person's earning potential and determines how much of that would be devoted to dependents?  a) Future value approach b) Earnings approach c) Needs approach d) Human life value approach Answer: d) Human life value approach

A professional liability for which producers can be sued for mistakes of putting a policy into effect is called  a) fiduciary bond b) errors and omissions c) fiduciary trust d) errors and oversights Answer: b) errors and omissions

In order for a contract to be valid, it must  a) In order for a contract to be valid, it must b) be signed and witnessed by an attorney c) be in writing d) contain an offer and acceptance Answer: d) contain an offer and acceptance

In an insurance contract, the element that shows each party is giving something of value is called  a) offer b) acceptance c) consideration d) purpose Answer: c) consideration

Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months afterwards. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds?  a) Tom's spouse b) Bob's estate c) Bob's spouse d) Tom Answer: d) Tom

A type of group that has a constitution and bylaws and has been organized for purposes other than obtaining insurance is called a(n)  a) employer group b) employee group c) association or labor group d) multiple coalition Answer: c) association or labor group

The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as  a) Apparent b) Estoppel c) Aleatory d) Unilateral Answer: c) Aleatory

Which of these factors would an insurer consider when determining whether to accept a group life plan?  a) Number of dependents b) Incontestable period c) Average age d) Grace period Answer: c) Average age

Under a group life policy, the insurer will issue an individual _____ to the policyowner for delivery to each person insured.  a) policy b) certificate c) application d) rider Answer: b) certificate

When the principal gives the agent authority in writing, it's referred to as  a) express authority b) implied authority c) apparent authority d) imposed authority Answer: a) express authority

Converting a group plan to permanent life insurance involves  a) submitting proof of insurability b) paying a lower premium c) converting to term life insurance d) the conversion being applied within 1 month of termination Answer: d) the conversion being applied within 1 month of termination

Which type of clause describes the following statement: "We have issued the policy in consideration of the representations in your applications and payment of the first-term premium".  a) Premium clause b) Consideration clause c) Adhesion clause d) Contestability clause Answer: b) Consideration clause

The conversion privilege under a group life plan allows an employee to convert to a(n)  a) family plan with another insurer b) individual plan with another insurer that has better rates c) individual plan upon employment termination d) individual policy in the spouse's name Answer: c) individual plan upon employment termination

Intentional withholding of material facts that would affect an insurance policy's validity is called a(n)  a) estoppel b) concealment c) adhesion d) misrepresentation Answer: b) concealment

What makes an insurance policy a unilateral contract?  a) Only the insured pays the premium b) Only the insured can change the provisions c) Only the insurer is legally bound d) Only the insured is legally bound Answer: c) Only the insurer is legally bound

How do insurers predict the increase of individual risks?  a) Law of large numbers b) U.S. Census c) Average mortality incidents d) Experience of morbidity Answer: a) Law of large numbers

An example of risk sharing would be  a) Adding more security to a high-risk building b) Choosing not to invest in the stock market c) Doctors pooling their money to cover malpractice exposures d) Buying an insurance policy to cover potential liabilities Answer: c) Doctors pooling their money to cover malpractice exposures

How does one qualify as a fully-insured individual under Social Security disability coverage?  a) Individual has been credited with the appropriate number of quarters of coverage b) Individual is currently covered under Medicaid c) Individual is expected to be disabled for 5 months d) Individual is currently employed Answer: a) Individual has been credited with the appropriate number of quarters of coverage

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called  a) risk retention b) preexisting conditions c) law of large numbers d) adverse selection Answer: d) adverse selection

Which of these are considered to be events or conditions that increase the chances of an insured's loss?  a) Risks b) Hazards c) Indemnity d) Perils Answer: b) Hazards

An insured's status under Social Security can be described as  a) partially insured b) actively insured c) fully insured d) completely insured Answer: c) fully insured

Which of the following employers is required to follow ERISA regulations?  a) A local government with 150 employees b) A church with 30 employees c) A local electrical supply company with 12 employees d) A Canadian company with 300 employees working in the United States Answer: c) A local electrical supply company with 12 employees

Within how many days must a rollover be completed in order to avoid being taxed as current income?  a) 30 b) 60 c) 90 d) 120 Answer: b) 60

Which of these retirement plans do NOT qualify for a federal income tax deduction?  a) SIMPLE Plan b) Traditional IRA c) Keogh Plan d) Roth IRA Answer: d) Roth IRA

Dana is an employee who deposits a percentage of her income into her individual annuity. Her company also contributes a percentage into a separate company pension plan. What kind of annuity is this considered?  a) Qualified retirement annuity b) Key employee retirement annuity c) Executive compensation plan d) Keogh annuity plan Answer: a) Qualified retirement annuity

Which of these statements concerning Traditional IRAs is CORRECT?  a) Earnings are not tax deductible b) Earnings are taxable when withdrawn c) Contributions are never tax-deductible d) Contributions are always made by the employer Answer: b) Earnings are taxable when withdrawn

When a qualified plan starts making payments to its recipient, which portion of the distributions is taxable?  a) Principal b) Contributions made by employee c) Contributions made by employer d) Gains Answer: d) Gains

A Roth IRA owner must be at least what age in order to make tax-free withdrawals?  a) 59 1/2 and owned account for a minimum of 10 years b) 59 1/2 and owned account for a minimum of 5 years c) 70 1/2 and owned account for a minimum of 10 years d) 70 1/2 and owned account for a minimum of 5 years Answer: b) 59 1/2 and owned account for a minimum of 5 years

Within how many days must a Traditional IRA be rolled over to another IRA in order to avoid tax consequences?  a) 30 b) 45 c) 60 d) 90 Answer: c) 60

Who were Keogh plans designed to provide pension benefits for?  a) Corporate officers b) Public school employees c) The self-employed d) Government employees Answer: c) The self-employed

How are contributions made to a Roth IRA handled for tax purposes?  a) Fully tax deductible b) Not tax deductible c) Partially tax deductible d) Conditionally tax deductible Answer: b) Not tax deductible

All of these statements concerning whole life insurance are false EXCEPT  a) Policyowner can take out a policy loan up to the face amount b) When a whole life policy is surrendered, income taxes may be owed c) Coverage is normally temporary d) The death benefit is not affected by outstanding loans Answer: b) When a whole life policy is surrendered, income taxes may be owed

A Renewable Term Life insurance policy can be renewed  a) at a predetermined date or age, regardless of the insured's health b) only if the insured provides evidence of insurability c) anytime at the policyowner's request d) typically with no change in premium Answer: a) at a predetermined date or age, regardless of the insured's health

Which of the following are the premium payments for a Universal life policy NOT used for?  a) Death benefits b) Cash value c) Loading costs d) Separate account investments Answer: d) Separate account investments

Decreasing term life insurance is often used to  a) provide retirement funds b) provide coverage for a home mortgage c) accumulate cash value d) provide coverage for estate taxes Answer: b) provide coverage for a home mortgage

Which type of life insurance offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested?  a) Adjustable life policy b) Variable universal policy c) Universal policy d) Modified whole life policy Answer: b) Variable universal policy

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?  a) Adjustable life policy b) Modified life policy c) Endowment policy d) Universal life policy Answer: c) Endowment policy

Which type of life insurance is normally associated with a Payor Benefit rider?  a) Juvenile insurance b) Family income insurance c) Spouse insurance d) Term rider Answer: a) Juvenile insurance

Rob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals $250,000. Rob recently died at age 60. The death benefit would be  a) $250,000 b) $750,000 c) $375,000 d) $500,000 Answer: d) $500,000

Which of the following policies does NOT build cash value?  a) Term b) Straight Life c) Endowment d) Variable Life Answer: a) Term

Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance?  a) Policyowner may increase or decrease the premium payments b) Policyowner may increase or decrease the face amount c) Policyowner can contribute large sums of money d) Policyowner has the right to select the investment which will provide the greatest return Answer: d) Policyowner has the right to select the investment which will provide the greatest return

A life insurance policy which contains cash values that vary according to its investment performance of stocks is called  a) Increasing Term Life b) Modified Whole Life c) Variable Whole Life d) Adjustable Whole Life Answer: c) Variable whole life

A securities license is required for a life insurance producer to sell  a) modified life insurance b) Modified Endowment Contracts (MEC) c) variable life insurance d) universal life insurance Answer: c) variable life insurance

A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n)  a) adjustable life policy b) limited pay policy c) level term policy d) variable universal policy Answer: b) limited pay policy

Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true?  a) The policy automatically converts to whole life after the 10-year period b) The face amount will remain constant and the premium will increase over the 10-year period c) The premium will remain constant and the face amount will increase over the 10-year period d) The face amount and premium will remain constant over the 10-year period Answer: d) The face amount and premium will remain constant over the 10-year period

All of these are characteristics of a universal life insurance policy EXCEPT  a) Flexible death benefit b) Fixed surrender value c) Flexible premiums d) Builds cash value Answer: b) Fixed surrender value

The premium for a Modified whole life policy is  a) higher than the typical whole life policy during the first few years and then lower than typical for the remainder b) lower than the typical whole life policy during the first few years and then higher than typical for the remainder c) normally graded over a period of 20 years d) level for the first 5 years then decreases for the remainder of the policy Answer: b) lower than the typical whole life policy during the first few years and then higher than typical for the remainder

Under a non-qualified annuity, interest is taxed after the  a) deposits have been made b) death of the annuitant c) distribution of payments d) exclusion ratio has been calculated Answer: d) exclusion ratio has been calculated

Which of these annuities require premium payments that vary from year to year?  a) Flexible premium immediate annuity b) Flexible premium deferred annuity c) Fixed premium deferred annuity d) Fixed premium immediate annuity Answer: b) Flexible premium deferred annuity

Who assumes the investment risk with a fixed annuity contract?  a) The owner b) The annuitant c) The insurer d) The beneficiary Answer: c) The insurer

Which type of annuity stops all payments upon the death of the annuitant?  a) Life annuity b) Period certain annuity c) Cash refund annuity d) Joint and survivor annuity Answer: a) Life annuity

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?  a) Fixed period b) Interest only c) Installment refund d) Life income Answer: d) Life income

Which of the following is considered to be the period when the accumulated value in an annuity is paid out?  a) Annuitization phase b) Accumulation phase c) Principal Phase d) Period certain phase Answer: a) Annuitization phase

A beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed?  a) A flat tax of 10% is owed on all proceeds b) Federal income tax is owed if proceeds exceed $250,000 c) No federal income tax is owed on life insurance proceeds d) Tax liability owed depends on the type of life insurance policy Answer: c) No federal income tax is owed on life insurance proceeds

An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?  a) Variable annuity b) Refund annuity c) Rebate annuity d) Return annuity Answer: b) Refund annuity

Over the course of a year, which premium payment mode is most expensive?  a) monthly b) quarterly c) semi-annual d) annual Answer: a) monthly

Fixed period settlement options are considered to be a form of a(n)  a) cash value loan b) variable life policy c) annuity d) endowment Answer: c) annuity

Level premium term life insurance policies  a) build cash value in a separate account b) automatically convert to permanent insurance at a predetermined date c) automatically renew at predetermined dates d) have premiums that are averaged over the policy period Answer: d) have premiums that are averaged over the policy period

Why are dividends from a mutual insurer not subject to taxation?  a) Because insurance premiums are tax-deductible b) Because dividends are already subject to capital gains c) Because dividends are payable directly to the policyholder d) Because dividends are considered to be a return of premium Answer: d) Because dividends are considered to be a return of premium

An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?  a) 1 month b) 6 months c) 12 months d) 24 months Answer: a) 1 month

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?  a) nonparticipating life insurance policy b) participating life insurance policy c) divisible surplus life insurance policy d) straight life insurance policy Answer: b) participating life insurance policy

During the accumulation period, who can surrender an annuity?  a) Payor b) Annuitant c) Beneficiary d) Policyowner Answer: d) Policyowner

Which of these statements regarding the annuitant is CORRECT?  a) The contract can only be assigned by the annuitant b) The annuitant is the only individual who can surrender the contract c) The annuitant must also be the beneficiary d) The annuitant's life expectancy determines the annuity payments Answer: d) The annuitant's life expectancy determines the annuity payments

A nonparticipating policy will  a) provide a return of premium b) provide tax advantages c) not pay dividends d) give policyowners special privileges Answer: c) not pay dividends

The taxable portion of each annuity payment is calculated using which method?  a) Exclusion ratio b) Taxable ratio c) Cost Basis d) Tax Basis Answer: a) Exclusion ratio

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called  a) A self-derived plan b) A multiple-employer plan c) A blanket plan d) A self-funded plan Answer: d) A self-funded plan

If the annuitant dies before the annuity start date,  a) the benefits will be given tax-free only to a stated beneficiary b) nothing is given to the beneficiary c) the premiums paid will be given to the beneficiary d) the premiums paid plus interest earned will be given to the beneficiary Answer: d) the premiums paid plus interest earned will be given to the beneficiary

What is the nonforfeiture value of an annuity before annuitization?  a) All premiums paid b) All premiums paid plus interest c) All premiums paid minus any withdrawals and surrender charges d) All premiums paid, plus interest, minus any withdrawals and surrender charges Answer: d) All premiums paid, plus interest, minus any withdrawals and surrender charges

What is considered the primary reason for buying life insurance?  a) Provide death benefits b) Provide money for retirement c) Provide living benefits d) Provide money for college Answer: a) Provide death benefits

Which of these is considered a major tax advantage of life insurance?  a) Tax credits are available for life insurance premiums paid b) Annual earnings are tax free c) Premiums are tax deductible by an employee if paid for by an employer d) Income tax is typically not owed on proceeds paid directly to a beneficiary Answer: d) Income tax is typically not owed on proceeds paid directly to a beneficiary

What is the primary purpose of a rating service company such as A.M Best?  a) Determine which insurer offers the best rates b) Determine which insurer offers the best policies c) Determine financial strength of an insurance company d) Determine which agent to use locally Answer: c) Determine financial strength of an insurance company

Which market index is normally associated with an indexed annuity's rate of return?  a) NAIC b) SEC c) S & P 500 d) A & P 300 Answer: c) S & P 500

When does an immediate annuity begin making payments?  a) After multiple premiums have been paid b) After the first premium has been paid c) After policy has been active for one year d) After the incontestable period Answer: b) After the first premium

Which of these factors help determine an insured's life insurance premium?  a) insured's salary b) marital status c) place of residence d) avocation (hobby) Answer: d) avocation (hobby)

Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?  a) Life annuity certain b) Secure life annuity c) Irrevocable survivor annuity d) Guaranteed life annuity Answer: a) Life annuity certain

What is the primary feature of a viatical settlement?  a) No interest on policy loans b) Reduced death benefit prepayment c) Longer contestable period d) Lower premiums Answer: b) Reduced death benefit prepayment

Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?  a) Active b) Status c) Results d) Leave Answer: c) Results

Which of the following enables a life policy to be replaced with another life policy and results in the postponement of the tax consequence?  a) Section 1040 exchange b) Section 1035 exchange c) Nonforfeiture Option d) Spendthrift Opyion Answer: a) Section 1035 exchange

A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?  a) Reduction of premium dividend option b) Extended term option c) Paid-up option d) Cash dividend option Answer: a) Reduction of premium dividend option

Mortality is calculated by using a large risk pool of  a) hobbies and time b) people and time c) family history and geographical area d) insurance companies and agents Answer: b) people and time

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid  a) minus indebtedness and with interest b) during the last 12 months c) minus indebtedness and without interest d) during the last 6 months Answer: c) minus indebtedness and without interest

The premium payment mode that results in the least overall cost would be  a) monthly b) quarterly c) semi-annual d) annual Answer: d) annual

Which of these is affected by the frequency of an insurance policy's premium payments?  a) Settlement options b) Cash value c) Death benefit d) Cost Answer: d) Cost

The premium payment mode that results in the highest overall cost would be  a) monthly b) quarterly c) semi-annual d) annual Answer: a) monthly

Which of these is considered to be a Living Benefit option in a life insurance policy?  a) Reinstatement b) Waiver of premium c) Accelerated death benefit d) Payor benefit Answer: c) Accelerated death benefit

How is the cost of a policy affected when a policyowner pays premiums more frequently?  a) Not affected b) Increases c) Decreases d) Depends on the type of coverage Answer: b) Increases

The double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n)  a) sickness b) suicide c) accident d) war Answer: c) accident

What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured?  a) Policy dividend b) Specified amount of money c) Policy's cash value d) Funeral expense fund Answer: b) Specified amount of money

An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if  a) the insured outlived the beneficiary b) the beneficiary outlived the insured c) no beneficiary was ever named d) the insured and beneficiary died at the same time Answer: a) the insured outlived the beneficiary

Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?  a) interest only b) dividends only c) extended interest d) fixed period Answer: a) Interest only

What is created after policy proceeds are obtained in a lump sum and then immediately invested?  a) Viatical settlement b) Emergency fund c) Lump Sum Fund d) Estate Answer: d) Estate

Where would policy proceeds be paid if both the insured and primary beneficiary were killed in the same accident?  a) primary beneficiary's estate b) contingent beneficiary c) insured's estate d) children of the insured Answer: b) contingent beneficiary

Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?  a) protection clause b) creditor clause c) spendthrift trust clause d) beneficiary trust clause Answer: c) spendthrift trust clause