California Life Insurance Exam 216 Questions with Answers Latest
Renewable Term - CORRECT ANSWER Lynn owns a life policy that guarantees the right to
... [Show More] renew the policy each year at an increased premium.
10 % - CORRECT ANSWER In a modified endowment contract the penalty tax imposed on premature withdrawals is
10% - CORRECT ANSWER Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty for taking a loan against this policy prior to age 59 1/2?
5%
10%
15%
25%
Sign a consent form - CORRECT ANSWER What must an applicant do in order to authorize the release of an attending physician report?
Give verbal consent
Write a letter to the MIB
Sign a consent form
Agree to a physical examination
The beneficiary must sign the application before the insurer will issue the policy - CORRECT ANSWER Which of the following is NOT an important reason for a life insurance application?
The application identifies who is the applicant, insured, owner, payor, and beneficiary
If the proposed insured is someone other than the applicant, both the proposed insured and the applicant must sign the application
The beneficiary must sign the application before the insurer will issue the policy
Statement made in the application are considered to be representations
Dividend risk - CORRECT ANSWER Which of the following is NOT a risk classification that an underwriter would use?
Attending physician's statement - CORRECT ANSWER An applicant has revealed conditions that require more information. Which of the following is needed next?
Physical examination
Attending physician's statement
Agent's report
Credit report
Underwriting - CORRECT ANSWER When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called
Issuance
Underwriting
Regulation
Adverse selection
Medical ailments discovered during the underwriting process - CORRECT ANSWER What are members of the Medical Information Bureau (MIB) required to report?
Avoid selecting a disproportionate number of bad risks - CORRECT ANSWER The objective of underwriting is to
Assign the highest premium possible
Avoid selecting a disproportionate number of good risks
Decline as many applications as possible
Avoid selecting a disproportionate number of bad risks
Substandard - CORRECT ANSWER Which of the following risk classifications charges the highest premium?
Preferred
Standard
Level
Substandard
Medical Information Bureau (MIB) - CORRECT ANSWER Most U.S. life insurance companies belong to the
Medical Information Bureau
National Association of Insurance Commissioners
Underwriting Information Bureau
FINRA
Ethnicity - CORRECT ANSWER Which of the following types of information is NOT required for a life insurance application?
Health history
Ethnicity
Occupation
Hobbies
Loss exposure - CORRECT ANSWER Which of the following is considered to be any situation that has the potential for loss?
Law of large numbers
Adverse selection
Loss exposure
Risk transfer
Probability of loss is unknown - CORRECT ANSWER All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT
Loss cannot be catastrophic
Probability of loss is unknown
Highly predictable losses
Losses must be measurable
Speculative Risk - CORRECT ANSWER Which of the following is a situation where there is a possibility of either a loss or a gain?
Hazard
Pure risk
Speculative risk
Peril
Speculative risk - CORRECT ANSWER Which type of risk is gambling?
Pure risk
Risk transfer
Risk pooling
Speculative risk
Hazard - CORRECT ANSWER Which of the following refers to a condition that may increase the chance of a loss?
Adverse selection
Hazard
Risk
Peril
Risk is eliminated - CORRECT ANSWER Which of the following would NOT be accomplished with the purchase of an insurance policy?
Greater peace of mind
Risk is eliminated
Payments made for covered losses
Uncertainty is reduced
The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums - CORRECT ANSWER An insurer having a large number of similar exposure units is considered important because
the insurer can decrease its reserves
the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums
its financial rating will improve
the greater the number insured, the more premiums it collects
Pure risk - CORRECT ANSWER A situation in which there is ONLY a chance of loss or no loss is a
pure risk
particular risk
speculative risk
fundamental risk
100% - CORRECT ANSWER Under a 10-year vesting schedule, what percentage of employer contributions must be vested after 10 years of service?
25%
50%
75%
100%
Employee Stock Ownership Plan - CORRECT ANSWER What does ESOP stand for?
Employee Stock Ownership Plan
Employee Savings Optional Plan
Employee Savings Opportunity Plan
Employer Stock Offering Program
Tax-deductible by the employer - CORRECT ANSWER Employer contributions to qualified plans are
Tax-deductible by the employer
Taxable to the employee
Only available for key employees
only found in 403(b) plans
Non-deductible contributions and tax-free distributions - CORRECT ANSWER How are Roth IRA's treated for tax purposes?
Non-deductible contributions and tax-free distributions
Deductible contributions and taxable distributions
Distributions taxable as capital gains
Distributions taxable as income tax
Fully insured workers - CORRECT ANSWER Who is eligible for retirement benefits under Social Security?
Fully insured workers
Currently insured workers
Partially insured workers
All disabled workers
Buy-Sell Agreement (also known as Business Continuation Agreement) - CORRECT ANSWER Bob and Tom are partners in a business. If one of them were to die, which of the following would guarantee a market for each of their share of the business?
Split Dollar Plan
Buy-Sell agreement
Deferred compensation plan
Key person insurance
Income - CORRECT ANSWER The Human Life Value concept is based on
Education level
Age
Income
Occupation
When the insured dies, a death benefit is paid - CORRECT ANSWER Life insurance created an immediate estate. This phrase means:
Cash value has accumulated in the policy
The insured's estate receives the death benefit
When the insured dies, a death benefit is paid
Premiums are payable by the insured's estate
Statement that all values and benefits are guaranteed - CORRECT ANSWER Which of the following does NOT have to be included on life insurance policy illustrations?
Age of the insured
Name of the agent
Statement that all values and benefits are guaranteed
Name of the insurer
Individual wanting to sell their life policy to a third party - CORRECT ANSWER Who does a life settlement broker represent?
Insurance company
Life agent
Private firm
Individual wanting to sell their life policy to a third party.
Unnecessary Replacement - CORRECT ANSWER Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n)
Illegal transaction
Immediate annuity
Deferred annuity
Unnecessary replacement
Annually - CORRECT ANSWER Life insurance surplus must be distributed to policyowners at what frequency?
Monthly
Quarterly
Semi-annually
Annually
The free-look period begins on the policy delivery date - CORRECT ANSWER Why is a life insurance policy's delivery date important?
The probationary period begins on the policy delivery date
The elimination period begins on the policy delivery date
The free-look period begins on the policy delivery date
The grace period begins on the policy delivery date.
Incontestability Clause - CORRECT ANSWER What prevents a life insurance policy from being rescinded by the insurer after being in force for 2 years?
Incontestability clause
Free-look provision
Grace period provision
Subrogation.
Between 10 and 30 days - CORRECT ANSWER The California Code allows an individual how many days to cancel a life policy for a full-refund?
Up to 10 days
Between 15 and 20 days
Between 10 and 30 days
Between 30 and 45 days
30 days - CORRECT ANSWER The free-look period for life insurance policyowners age 60 or older is
10 days
15 days
30 days
60 days
Presentation of policy features that includes non-guaranteed elements - CORRECT ANSWER What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California Insurance Code?
Publication designed to help an applicant reach an informed decision about which coverage is appropriate
A copy of the sales materials used in an insurance transaction
A copy of the terms given for the free-look period
Presentation of policy features that includes non-guaranteed elements.
Conservation - CORRECT ANSWER An agent's attempt to stop the replacement of an existing life insurance policy is known as
Preservation
Prevention
Conservation
Concealment
Taxable income to the employee - CORRECT ANSWER How is the cost of employer-provided group life insurance with coverage amounts above $50,000 treated for tax purposes?
Individual policies - CORRECT ANSWER All of the following are considered characteristics of group life insurance, EXCEPT
Certificates of insurance
Conversion privilege
Individual policies
Master policy
Insurer and employer - CORRECT ANSWER Who are the parties to the master contract in a group life insurance policy?
Insurer and employee
Employer and employee
Insurer and employer
Employer and beneficiary
Part of the premium is paid by the employee - CORRECT ANSWER Which of the following describes a contributory group insurance plan?
All of the premium is paid by the employer
Part of the premium is paid by the employee
Employees are eligible for policy dividends
Federal government contributes a portion of the employee's premium
100% - CORRECT ANSWER Employee participation in a noncontributory group life plan must be
25%
50%
75%
100%
Term insurance into permanent insurance - CORRECT ANSWER A terminated employee that has exercised the conversion privilege is able to convert
Only after providing evidence of insurability
Without paying for the premiums
Permanent insurance into term insurance
Term insurance into permanent insurance
$50,000 - CORRECT ANSWER Employer-provided group term life insurance is exempt from income taxation up to
$10,000
$25,000
$40,000
$50,000
Employer pays the premium for the converted policy - CORRECT ANSWER Which of the following is NOT a characteristic of the conversion privilege?
Ex-employee pays the premium for the converted policy
Proof of insurability is not required
Employer pays the premium for the converted policy
Conversion must take place within 31 days of employment termination
Fiduciary - CORRECT ANSWER When handling premiums for an insured, an agent is acting in which capacity?
Representative
Proxy
Manager
Fiduciary
Misdemeanor charges filed, not resulting in a conviction - CORRECT ANSWER According to section 17.29.2 of the California Insurance Code, which of these does NOT qualify as "background information"?
Misdemeanor charges filed, not resulting in a conviction
A breach of fiduciary duty
A filing of felony criminal charges in state or federal court
An administrative action regarding a professional or occupational license
The name is the licensee's actual name - CORRECT ANSWER All of these are reasons the Commissioner may disapprove of licensee's request to use a fictitious name EXCEPT
The name is too similar to a name already filed and in use by another license
The use of the name may mislead the public in any respect
The name is the licensee's actual name
The name states, infers or implies that the licensee is an insurance company
Insurer's financial rating - CORRECT ANSWER Which of the following does the California Insurance Code NOT require an insurance policy to specify?
Insurer's financial rating
Policy period
Premium
What or who is being insured
An insured suffers a financial loss in the state lottery - CORRECT ANSWER According to the California Insurance Code, which of the following is NOT an example of an insurable event?
An insured suffers a financial loss in the state lottery
A guest is injured by a fall from the insured's driveway
An insured is sued for unintentional slander of another person
An insured is admitted to the hospital for delivery of a newborn
Notice of appointment must be submitted to the Commissioner - CORRECT ANSWER What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer?
Notice of appointment must be submitted to the Commissioner
Notice of appointment must be submitted to the insurer
Penalty is assessed to the insurer and life agent
Application is automatically turned away
Rescission of the contract - CORRECT ANSWER When intentional concealment is involved, what course of action is the injured party entitled to?
Rescission of the contract
Punitive damages
Reduction in premium
Nothing
Unfair discrimination - CORRECT ANSWER An insurer that has been found using higher rates based on race, religion, or ethnicity is said to be engaging in
Unfair discrimination
Rebating
Twisting
Defamation
Help an agent or broker sell insurance - CORRECT ANSWER What is an insurance solicitor authorized to do?
Settle life insurance claims
Manage an insurance agency
Solicit insurance
Help an agent or broker sell insurance
At all times - CORRECT ANSWER Insurance agents and brokers must make their insurance records available to the Commissioner
Only during the first month of the year
Only during the last month of the year
Only at the agent/brother's convenience
At all times
Advising a claimant to hire an attorney - CORRECT ANSWER Which of the following is NOT considered to be an unfair claims settlement practice?
Advising a claimant to hire an attorney
Failing to provide a reasonable basis for the denial of a claim upon request
Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims
Misrepresenting to insureds pertinent facts or policy provisions relating to coverage at issue
Theft - CORRECT ANSWER Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of?
Fiduciary misappropriation
Rebating
Mishandling
Theft
Misrepresentation on an insurance application - CORRECT ANSWER Which of the following acts is NOT a Federal offense committed by an insurance agent?
Embezzlement
Insurance fraud
Misrepresentation on an insurance application
Falsify records
Life agent - CORRECT ANSWER An individual who transacts life, disability, or life and accident and health insurance on behalf of an insurer is called a(n)
Adjuster
Analyst
Life agent
Insurance solicitor
Only before the insurance is in effect - CORRECT ANSWER A representation may be altered or withdrawn
Anytime with the applicant's initials
Anytime with the insurer's approval
Only before the insurance is in effect
Only after the policy has been issued
Prior approval - CORRECT ANSWER Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them?
Prior acceptance
File and use
Prior approval
State approval
Its paid-in capital - CORRECT ANSWER The California Insurance Code requires that an insurer must have enough assets to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount?
50% of its stock value
Its paid-in capital
$10,000,000
Amount determined by the Insurance Guarantee Association
Publishing a magazine where one of the advertisers is an insurer - CORRECT ANSWER Which of the following is NOT considered to be an act of insurance solicitation?
An agency sending out direct mail for a promotion
An agent giving a rate quotation
Airing a television commercial recommending an insurance product
Publishing a magazine where one of the advertisers is an insurer
Self-funded plans - CORRECT ANSWER The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCETP
Whole life
Immediate annuities
Disability
Self-funded plans
Solicitor - CORRECT ANSWER Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance
Assistant
Solicitor
Manager
Consultant
Insurers - CORRECT ANSWER Which of the following is NOT protected under the California Life and Health Guarantee Association?
Policyowners
Insureds
Primary beneficiaries
Insurers
To make whole - CORRECT ANSWER What does "indemnity" mean as it pertains to insurance?
To over-insure
To award punitive damages
To make whole
To assume risk
Foreign insurer - CORRECT ANSWER In California, an insurer organized under the state laws of Oregon is called a(n)
Unauthorized insurer
Foreign insurer
Alien insurer
Domestic insurer
Admitted - CORRECT ANSWER What is the insurance term the State of California uses for an insurer that is eligible to transact business in this state?
Admitted
Eligible
Authorized
Valid
Claimant - CORRECT ANSWER A person who asserts a right of recovery under an insurance policy is called
Tertiary
Claimant
Insured
Agent
Joint and survivor annuity - CORRECT ANSWER What kind of annuity pays income to two annuitants until their deaths?
Period certain annuity
Joint and survivor annuity
Straight life annuity
Installment refund
Deferred annuity - CORRECT ANSWER A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n)
Immediate annuity
Deferred annuity
Endowment
Whole life policy
The time at which the benefit payments start - CORRECT ANSWER What distinguishes a deferred annuity from an immediate annuity?
The time at which the benefit payments start
The benefit payment amount
The taxation of benefit payments
The age at which the annuity can be purchased
Offers a maximum interest rate that increases annually - CORRECT ANSWER Which of the following is NOT a feature of equity-indexed annuities?
Offers long term inflation protection
Offers a minimum guarantee rate
Offers a maximum interest rate that increases annually
Offers protection during a decline in the stock market
Variable annuity - CORRECT ANSWER An annuitant would like to determine the current value of her annuity. To do this, she multiplies the number of "accumulation units" she owns times the unit value of the "separate account". What kind of annuity BEST matches this description?
Variable annuity
Fixed annuity
Immediate annuity
Life annuity
To protect against the risk of outliving their financial resources - CORRECT ANSWER What is a common reason people purchase an annuity?
To create an immediate estate
To pay off a debt in the event of death
To minimize their tax burden
To protect against the risk of outliving their financial resources
Annuity - CORRECT ANSWER The systematic liquidation of a sum of money is provided by a(n)
Annuity
Endowment contract
Life insurance policy
1035 contract exchange
60 payments - CORRECT ANSWER Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary?
No payments
30 payments
60 payments
120 payments
Reinsurance - CORRECT ANSWER Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds?
Reinsurance
Captive insurance
Treaty insurance
Mutual insurance
Participating - CORRECT ANSWER John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?
Nonparticipating
Participating
Contributory
Surplus
Insurance policy - CORRECT ANSWER Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event?
Insurance policy
Warranty arrangement
Indemnification arrangement
Loss contract
Demutualization - CORRECT ANSWER When a mutual insurer becomes a stock company, the process is called
Mutualization
Demutualization
Reorganization
Reinsurance
Losses due to fraud are eliminated - CORRECT ANSWER Which of the following is NOT a benefit of insurance?
Losses due to fraud are eliminated
Source of investment funds
Makes a loss whole again
Reduces the uncertainty of loss exposures
Reinsurance - CORRECT ANSWER An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is this agreement called? [Show Less]