Agent Thompson received a letter from the Department of Insurance asking her to provide proof of completing the continuing education requirements. Within
... [Show More] how many days must Agent Thompson respond to the Department's inquiry?
20
30
10
45 - ANSWER-10 days
Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Pennsylvania. Which of the following conditions must she satisfy?
She must move to Pennsylvania.
She must surrender her Ohio license.
She must be sponsored by a producer licensed in Pennsylvania.
She must show her Ohio license is in good standing. - ANSWER-She must show her Ohio license is in good standing
The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following?
using life insurance to fund future cash needs
using life insurance as a speculative investment on another person's
life
overusing life insurance
designating an ineligible person as the policy beneficiary - ANSWER-using life insurance as a speculative interest on another person's life
Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them?
group life insurance
industrial life insurance
ordinary term insurance
ordinary whole life insurance - ANSWER-industrial life insurance
Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy?
the policy's cash value
her ability to borrow an interest-free loan from the cash value
policy dividends
payment of premiums on Sylvia's behalf in the event of emergencies - ANSWER-the policy's cash value
Carl is a policyowner who prefers to pay premiums monthly rather than annually. How will Carl's insurance company adjust his premium to accommodate this request?
The insurer divides the annual premium by 12 and then adds a modest charge.
The insurer simply divides the annual premium by 12.
The insurer divides the annual premium by 12 and then reduces the premium amount to reflect the fact that premiums will be paid throughout the year.
The insurer divides the annual premium by 12 and then adds a modest charge in the first policy year after which premiums equal the annual premium divided by 12. - ANSWER-The insurer divides the annual premium by 12 and then adds a modest charge
All of the following statements about key person life insurance are correct, EXCEPT:
The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee.
Upon the insured employee's death, the employee's surviving family receives the policy's death benefit.
Key person, or key employee, life insurance is an example of third-party ownership.
Life insurance used as key person life is normally owned by the business rather than the insured. - ANSWER-XXX Upon the insured employee's death, the employee's surviving family receives the policy benefit XXX
The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance are generally called:
field underwriting
fiduciary process
agency development
due diligence - ANSWER-field underwriting
How is increasing term life insurance normally sold?
as an endorsement
as a permanent insurance policy
as a stand-alone term life insurance policy
as a rider attached to a permanent life insurance policy - ANSWER-as a rider attached to a permanent insurance policy
Andrea bought a $300,000 term-to-age-55 policy. All the following statements about her policy are correct EXCEPT:
The policy provides $300,000 of coverage until Andrea reaches age 55.
The policy will generate a cash value that is payable at age 55.
It is possible that Andrea could convert the term policy to a life insurance policy that provides coverage for Andrea's entire life even if she becomes uninsurable.
The premium for the policy stays the same until the policy expires. - ANSWER-XXX The policy will generate a cash value that is payable at age 55 XXX
The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner:
reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability
convert the term policy to a permanent life insurance policy
renew the policy with a higher face amount without having to provide evidence of insurability
renew the policy at lower current rates rather than guaranteed renewal rates - ANSWER-renew the policy at lower current rates rather than guaranteed renewal rates
Term life insurance is well suited for all the following needs EXCEPT:
mortgage protection
a source of emergency cash for any financial need
inexpensive protection until the policyowner can afford permanent life insurance
protection while the family children are living at home or attending college - ANSWER-XXX a source of emergency cash for any financial need XXX
Premium rates will vary unpredictably depending on the insurer's actual experience in which one of the following types of whole life insurance?
straight whole life
current assumption whole life
limited pay whole life
graded premium whole life - ANSWER-current assumption whole life
Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own?
10-pay whole life
single premium whole life
graded premium whole life
modified premium whole life - ANSWER-graded premium whole life
Which one of the following statements about variable life insurance is correct?
Variable life policyowners can invest all of their premiums in the insurer's general account.
Subaccounts are managed within the insurer's general account.
Variable life policyowners can choose flexible premium payment schedules.
With a variable life insurance policy, the policyowner assumes most of the investment risk. - ANSWER-With a variable life insurance policy, the policyowner assumes most of the investment risk.
Which of the following statements best explains the basic level premium concept of ordinary whole life insurance?
The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age.
Funds are withdrawn from the policy's cash value in the later years to pay the rising cost of pure insurance.
The death benefit is decreased to offset the rising cost of insurance with age.
The insurer averages the cost of pure insurance over the insured's life expectancy so that the mortality charge remains level. - ANSWER-the steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age
All the following statements about ordinary (straight) whole life insurance are correct EXCEPT:
The insured pays premiums for his or her entire life.
Premiums remain level.
The death benefit increases during the early policy years and then levels off.
It has a steadily increasing cash value. - ANSWER-XXX the death benefit increases during the early policy years and then levels off XXX
Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following statements is most correct?
Barb and Jill will pay approximately the same monthly premium amount every year, and their policies will mature at about the same time.
Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time.
Jill will pay a higher monthly premium than Barb, and their policies will mature at about the same time.
Barb and Jill will pay approximately the same monthly premium amount every year, but Barb's policy will mature before Jill's. - ANSWER-barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time
Unlike traditional fixed interest UL policies, many variable universal life policies offer a third death benefit option, which provides a guaranteed minimum death benefit equal to:
he policy's net amount at risk plus its cash value
the policy's net amount at risk plus its cash value minus the sum of premiums paid
the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid
the policy's net amount at risk plus its cash value plus the sum of premiums paid - ANSWER-the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid
In a front-end loaded universal life contract, when does the insurer deduct a charge to cover the costs of administering the policy?
from the cash value after the premium has been deposited to it
from the premium payment before it is credited to the policy's cash value
once, when the first premium is paid
at the start of each policy year - ANSWER-from the premium payment before it is credited to the policy's cash value
Jack bought a life insurance policy that will provide a lump-sum death benefit plus a ten-year stream of income should he die before a specified date. Five years after purchasing the policy, before the specified date, Jack died and the policy began paying a monthly benefit to his family for ten years. What type of policy did Jack buy?
ten-year family maintenance policy
ten-year family income policy
survivorship life insurance policy
ten-year family protection policy - ANSWER-ten-year family maintenance policy
All of the following statements regarding joint life insurance and survivorship life insurance are correct EXCEPT:
Joint life insurance lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death.
Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds.
Joint life insurance is especially popular in the estate planning market.
Survivorship life insurance pays the death benefit upon the death of the second insured. - ANSWER-XXX joint life insurance is especially popular in the estate planning market XXX
How does a family income policy differ from a family maintenance policy?
A family income policy combines whole life insurance with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance.
A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and decreasing term.
A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and level term insurance.
A family income policy combines whole life insurance with level term insurance, while a family maintenance policy combines whole life and decreasing term. - ANSWER-A family income policy combines whole life with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance
Endowment contracts are NOT considered life insurance (for tax purposes) because:
They never mature.
They endow before age 120.
They do not pay a death benefit if the insured dies before the contract matures.
They do not build cash values. - ANSWER-they endow before age 120
Which statement is correct if a group offers noncontributory group life insurance?
The employer must pay most of the premiums.
The employees must pay part of the premiums.
The plan must cover at least 75 percent of eligible group members.
The plan must cover 100 percent of eligible group members. - ANSWER-the plan must cover 100% of eligible group members
All the following statements about standard policy exclusions are correct EXCEPT:
Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends.
The war exclusion usually excludes paying the death benefit only if the death directly resulted from war.
The war and commission of a felony exclusions are required by law.
If a policy excludes a risk from coverage, the insurer will not pay the policy's benefit if death results from that risk. - ANSWER-XXX the war and commission of a felony exclusions are required by law XXX
Which of the following most accurately describes who can be a life insurance policy beneficiary?
The beneficiary must have an insurable interest in the insured.
The beneficiary can be anyone as long as it is a natural person.
The beneficiary must be a blood relative of the insured.
It can be virtually any person or entity the policyowner chooses. - ANSWER-it can be virtually any person or entity the policyowner chooses
Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's daughter from a previous marriage, Sue, is not a beneficiary. Reggie and Mary are in a car accident in which Reggie dies instantly and Mary survives for three days before dying from accident-related injuries. Under the policy's common disaster clause, to whom will the policy's death benefit be paid?
Sue
Reggie's estate
Mary
Carl - ANSWER-Carl
Which of the following most correctly describes the option(s) available with a universal life insurance policy the owner no longer wishes to maintain?
surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions
surrender the policy for its cash value, convert it to extended term insurance, or convert it to paid-up whole life insurance
surrender the policy for its cash value or convert it to extended term insurance
surrender the policy for its cash value or convert it to paid-up whole life insurance - ANSWER-surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions
If a permanent life insurance policy lapses and the owner does NOT select a nonforfeiture option, the insurer will automatically:
suspend coverage until the policyowner either reinstates or surrenders the policy
apply the extended term insurance option
surrender the policy and pay out the cash value
apply the reduced paid-up option - ANSWER-apply the extended term insurance option
All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT:
If the lapsed policy was a participating policy, the paid-up policy remains eligible for dividends.
The paid-up policy will not build any more cash value.
A policyowner of a lapsed policy can take the reduced paid-up option regardless of whether the lapsed policy was issued on a standard or substandard (rated) basis.
A paid-up policy under the reduced paid-up insurance option requires no further premiums nor can any be paid. - ANSWER-XXX the paid-up policy will not build any more cash value XXX
The automatic premium loan (APL) provision does which of the following?
prevents a life insurance policy from lapsing if the policyowner fails to pay a premium
provides cash for emergencies and opportunities
provides liquidity if the insured wants to increase a policy's face amount
improves the policyowner's credit rating - ANSWER-prevents a life insurance policy from lapsing if the policyowner fails to pay a premium
With a variable life insurance policy, policy loans can be as high as:
50-75 percent of the cash value, less any outstanding debt against the policy
25 percent of the cash value, less any outstanding debt against the policy
75-90 percent of the cash value, less any outstanding debt against the policy
100 percent of the cash value, less any outstanding debt against the policy - ANSWER-75-90% of the cash value, less any outstanding debt against the policy
With a traditional whole life insurance policy, policy loans can be as high as:
50-75 percent of the cash value, less any outstanding debt against the policy
75-90 percent of the cash value, less any outstanding debt against the policy
25 percent of the cash value, less any outstanding debt against the policy
100 percent of the cash value, less any outstanding debt against the policy - ANSWER-100% of the cash value, less any outstanding debt against the policy
If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium?
It increases.
It fluctuates up and down thereafter.
It stays level.
It goes down. - ANSWER-it goes down
Regarding policy dividends, which type of insurance is used with the so-called fifth dividend option?
one-year term life insurance
extended-term insurance
one-year permanent insurance
renewable term insurance - ANSWER-one-year term life insurance
Which of the following correctly describes the two basic categories of life insurance settlement options?
period certain and refund
straight life and survivorship
fixed period and fixed amount [Show Less]