Download CA LIFE EXAM – PSI 157 questions and correct answers and more Exams Insurance law in PDF only on Docsity!
correct answers
CA LIFE EXAM – PSI 157 questions and
correct answers
A participating company is also referred to as which type of insurer? - ANSWER Mutual insurer
An insurer owned by its policyholders, is called a - ANSWER Mutual insurer
What is a participating life insurance policy? - ANSWER Contract that allows the policyowner to receive a share of surplus in the form of policy dividends
An insurer enter into a contract with a third-party to ensure itself against losses from insurance policies it issues. What is this agreement called? - ANSWER Reinsurance
John owns an insurance company that gives him the right to share and then sure surplus. What kind of policy is this? - ANSWER Participating
Which of the following is not a characteristic of reinsurance? - ANSWER Increases the unearned premium reserved
Which of the following is not a benefit of insurance? - ANSWER Losses due to fraud are eliminated
When a mutual insurer becomes a stock company, the process is called - ANSWER Demutualization
Which of the following is a contract that involves one party which indemnifies another one a loss arises from an unknown event? - ANSWER Insurance policy
Which of the following is an insurer established by a parent company's loss exposure's? - ANSWER Captive insurers
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Which of the following is not considered to be a definition for the term "loss"? - ANSWER Probability that an event will occur
Which of the following is not considered a definition of a risk? - ANSWER The cause of loss
Which of the following best describes the statement; " the more times, and event is repeated, the more predictable the outcome becomes"? - ANSWER Law of large numbers
Which of the following would not be accomplished with the purchase of an insurance policy? - ANSWER Risk is eliminated
Which of the following is a situation where there is a possibility of either a loss or gain? - ANSWER Speculative risk
Which of the following is any situation that presents the possibility of a loss? - ANSWER Loss
An insurer having a large number of similar exposure units is considered important because: - ANSWER the greater the number insured, the more accurately that is her can predict losses & set appropriate premiums
Which of these statements correctly describes risks? - ANSWER Pure risk is the only insurable risk
Which type of risk is gambling? - ANSWER Speculative risk
Moral hazard is described as the: - ANSWER increased chance of a loss because of an insured's dishonest tendencies
All of the following circumstances must be met for los retention to be an effective, risk management technique, except - ANSWER Probability of loss is unknown
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How is a life insurance policy dividend legally defined? - ANSWER A return of excess premium and non- taxable
An insurer can be protected from adverse selection by which policy provision? - ANSWER Suicide clause
What does the guaranteed insurability option allow and insured to do? - ANSWER Purchase additional coverage with no evidence of insurability required
How are the acts of war and aviation treated under a group life insurance policy? - ANSWER Policy exclusion
Which of these is not a valid policy dividend option? - ANSWER Monthly income payments
True statement of policy dividends? - ANSWER A dividend option is selected by the insured at the time of the policy purchase
The probability of death, listed by year, is demonstrated in - ANSWER Mortality tables
Which of the following describes the number of deaths in a year compared to the number of people in a select group? - ANSWER Mortality rate
Which of the following is not a life insurance settlement option? - ANSWER Extended term option
An annuity which is backed by a life insurer's separate account is called a(n) - ANSWER Variable annuity
What is a common reason people purchase an annuity? - ANSWER To protect against the risk of outliving their financial resources
A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n) - ANSWER Deferred annuity
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Victoria owns a life annuity & elects to receive and with your payments monthly for the remainder of her life, with "10 years certain" her annuity will make payments - ANSWER For a minimum of 120 months & a maximum of the remainder of her life
The systematic liquidation of a sum of money is provided by - ANSWER annuity
What distinguishes a deferred annuity from an immediate annuity? - ANSWER The time at which benefit payments start
How long no is a person expected to be disabled in order to receive social security disability benefits? - ANSWER 12 months
Which type of worker has Social Security benefits available to them? - ANSWER fully insured
The reason for social insurance is to - ANSWER protect certain vulnerable segments of the population
According to Social Security, an individual with six credits of coverage during the previous 13-quarter period is considered to be - ANSWER Currently insured
The "blackout period" affects whose benefits? - ANSWER Surviving spouse
What is considered to be the definition of disability, according to social security? - ANSWER Unable to engage in any substantial gainful activity
What determines the Social Security normal retirement age? - ANSWER Year in which worker was born
Which statement is not true regarding Social Security benefits? - ANSWER Benefits are designed to replace the entire amount of the workers earnings
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How long must life agents keep the transaction records? - ANSWER 5 years
An individual who transacts life disability, or life & accident & health insurance on behalf of an insurer is called a - ANSWER life agent
According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium? - ANSWER Materiality
What type of license is required for an individual who charges a fee to review an insured's existing life insurance policy? - ANSWER Life & disability analyst
What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer? - ANSWER Notice of appointment must be submitted to the Commissioner
An agent has advertised that the insurer to which the agent is appointed with is a member of the Insurance Guarantee Association. This agent has committed a(n) - ANSWER unfair method of competition
According to the California Insurance Code, how is the word "may" interpreted? - ANSWER permissive
Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could subject a license or applicant to - ANSWER fine, suspension, and denial
Which of the following is not considered to be an act of insurance solicitation? - ANSWER Publishing a magazine where one of the advertisers is an insurer
When an insurer has met the qualifications necessary to transact business in California, it is said to be - ANSWER admitted
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Which of the following acts is not a federal offense committed by an insurance agent? - ANSWER Misrepresentation on an insurance application
A creditor would be allowed rights to life insurance policy proceeds, if which of the following beneficiaries is chosen? - ANSWER The insured's estate
What is the price of insurance for each exposure unit? - ANSWER rate
How are death benefits that are received by a beneficiary normally treated for tax purposes? - ANSWER Exempt from federal income taxes
Which of these is the automatic mode of settlement for life insurance policy proceeds? - ANSWER lump sum
A spendthrift clause in a life insurance policy - ANSWER restricts the ability of the beneficiary to assign benefits
When calculating life, insurance, premium rates, which component would an agents commission fall under? - ANSWER Insurer's expenses
A beneficiary receives only the death benefit earnings in which settlement option? - ANSWER Interest option
Which of the following is NOT an insurer policy expense? - ANSWER premiums
Premiums are best described as - ANSWER the amount an insured pays per unit of coverage
Insurance premium is determined by each of the following factors EXCEPT - ANSWER liquidity
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What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California insurance code - ANSWER Presentation of policy features that includes non- guaranteed elements
An agent attempt to stop the replacement of an existing life insurance policy is known as - ANSWER conservation
The California insurance code allows an individual how many days to cancel a life policy for a full refund?
- ANSWER Between 10 and 30 days
What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - ANSWER Incontestability clause
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) - ANSWER unnecessary replacement
Why is a life insurance policies delivery date important? - ANSWER The free-look period begins on the policy delivery date
Life insurance surplus must be distributed to policy owners at what frequency? - ANSWER Annually
According to the California insurance code, what is the maximum penalty per violation for anyone who unwillfully commits an unfair method of competition? - ANSWER $5,
A person who asserts a right of recovery under an insurance policy is called - ANSWER claimant
According to the California insurance code, which of the following is not an example of an insurable event? - ANSWER An insured suffers a financial loss in the state lottery
The California Insurance Code defines "policy" as a(n) - ANSWER written contract
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According to the California code governing claims settlement practices, which of the following is not considered to be an act of unfair discrimination? - ANSWER Denial of a claim based on reckless behavior
All of these reasons the commissioner may disapprove a licensee's request to use fictitious name EXCEPT - ANSWER The name is the licensee's actual name
Which word implies permissiveness according to the California insurance code? - ANSWER may
Insurance, agents and brokers must make their insurance records available to the commissioner - ANSWER At all times
Which type of jurisdiction requires an insurer to have its rates excepted by the insurance department prior to using them? - ANSWER prior approval
The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCEPT - ANSWER Self-funded plans
According to section 1729.2 of the California Insurance Code, which of these does NOT qu alify as "background information"? - ANSWER Misdemeanor charges filed, not resulting in a conviction
How long must an individual be unable to engage in any gainful activity due to physical or mental disability in order to qualify for Social Security Total Disability? - ANSWER 12 months
An insured's status under Social Security can be described as - ANSWER Fully insured
Who is eligible for retirement benefits under Social Security? - ANSWER Fully insured workers
ESOP's are typically invested in - ANSWER Employer stock
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Which of the following pieces of information is NOT gathered during the personal financial planning process? - ANSWER An individual's civic organization memberships
Life insurance creates an immediate estate. This phrase means - ANSWER when the insured dies, a death benefit is paid
All of these are common personal uses of life insurance EXCEPT - ANSWER Fund a buy-sell agreement
Buy-sell agreements are typically by which two insurance products? - ANSWER Life insurance & disability insurance
Who does a life settlement broker represent? - ANSWER Individual wanting to sell their life policy to a third party
Which of the following does not have to be included on life insurance policy illustrations? - ANSWER Statement that all values and benefits are guaranteed
Which of the following is NOT an important reason for a life insurance application? - ANSWER The beneficiary must sign the application before the insurer will issue the policy
What must an applicant do in order to authorize the release of an attending physician report? - ANSWER sign a consent form
An applicant has revealed conditions that require more information. Which of the following is next? - ANSWER Attending physician's statement
Which of the following risk classification's charges the highest premium? - ANSWER Substandard
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Which of the following types of information is NOT required for a life insurance application? - ANSWER ethnicity
A terminated employee that has exercised the conversion privilege is able to convert - ANSWER term insurance into permanent insurance
Who are the parties to the master contract in a group life insurance policy? - ANSWER Insurer and employer
Which of the following describes a contributory group insurance plan? - ANSWER Part of the premium is paid by the employee
Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilege? - ANSWER Provide proof of insurability
Which of the following is not a characteristic of the conversion privilege? - ANSWER Employer pays the premium for the converted policy
How is the cost of employer-provided group life insurance with coverage amounts above $50, treated for tax purposes? - ANSWER Taxable income to the employee
All of the following are considered characteristics of group, l ife insurance, EXCEPT - ANSWER Individual policies
How does underwriting differ between group life and individual life insurance? - ANSWER Medical questions must be answered on individual life insurance
Employee participation in a non-contributory group life plan must be - ANSWER 100%
Employer-provided group term life insurance is exempt from income taxation up to - ANSWER $50,
