NC-LIFE INSURANCE PRACTICE EXAM QUESTIONS SET 24-25, Exams of Insurance law

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NC-LIFE INSURANCE PRACTICE

EXAM QUESTIONS SET 24 - 25

All of the following are included within the Insurance Commissioner's duties EXCEPT a) Conducting investigation of all domestic insurers. b) Reviewing the insurers' annual reports. c) Writing North Carolina insurance laws. d) Reporting any violations of insurance laws to the Attorney General. Writing insurance law is not the Insurance Commissioner's responsibility, but enforcing the law is. c) Writing North Carolina insurance laws. Writing insurance law is not the Insurance Commissioner's responsibility, but enforcing the law is. Which of the following insurance providers must be nonprofit and sell insurance only to its members? a) Reciprocal b) Fraternal c) Service d) Mutual b) Fraternal

The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a)$ b)$50,000 (50% of the policy value) c)$100, d)$300,000 (triple the amount of policy value) c)$100, The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit. In term policies, what happens to the premium throughout the term of the policy? a) Premium gradually increases. b) Premium gradually decreases. c) Premium fluctuates.

d) Premium always remains level. d) Premium always remains level. There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy. An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Representation b) Adhesion c) Consideration d) Good faith c) Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.

d) Misleading advertising. b) Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them. When an insurer requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company must a) Request a police report from the Department of Motor Vehicles. b) Furnish a blank form to be used for that purpose. c) Document the request for further investigation. d) Submit the loss claim to underwriting for premium review and resolution. b) Furnish a blank form to be used for that purpose. When any company under any insurance policy requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company or its representative must furnish a blank form to be used for that purpose.

Insurance companies are required to provide proof of loss forms to the claimant within how many days after receipt of notice of loss? a) 15 b) 30 c) 31 d) 45 a) 15 When any company under any insurance policy requires a written proof of loss after notice of the loss has been given by the insured or beneficiary, the company must furnish a blank form within 15 days. Which is true about a spouse term rider? a) The rider is usually level term insurance. b) Coverage is allowed for an unlimited time. c) The rider is decreasing term insurance. d) Coverage is allowed up to age 75. a) The rider is usually level term insurance.

d)Paid-up option b)Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy. Which of the following is NOT true regarding the accumulation period of an annuity? a)It is also known as the pay-in period. b)It would not occur in a deferred annuity. c)It is the period during which the annuity payments earn interest. d)It is the period over which the owner makes payments into an annuity. b)It would not occur in a deferred annuity. The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity). Life insurance death proceeds are

a)Taxed as ordinary income. b)Generally not taxed as income. c)Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. d)Taxed as a capital gain. b)Generally not taxed as income. Life insurance death benefits are generally not taxed as income. Which of the following is TRUE regarding an indeterminate premium whole life policy? a) The premium is lower in the first year of the policy; then it is gradually raised every year. b) The premium is level throughout the life of the policy. c) The premium is usually higher in the first few years of the policy. d) The premium can be raised up to a guaranteed maximum rate. d) The premium can be raised up to a guaranteed maximum rate. Indeterminate premium whole life policy premium rate may vary from year to year. After the initial period (usually 2-3 years) when a lower premium is paid, the insurer establishes a new rate which could be raised up to the guaranteed maximum stated in the policy, kept the same or lowered, based on the company's expected mortality, expense and investments.

The initial amount of credit life insurance may not exceed the total amount repayable under the contract of indebtedness. All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a)The insurer determines the amount for each payment. b)It is a life contingency option. c)It will pay the benefit only for a designated period of time. d)The payments are not guaranteed for life. b)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. The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

a)Reduction of premium b)Paid-up addition c)Accumulation at interest d)Cash option a)Reduction of premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year. An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? a)Inspection Report b)Medical Information Bureau's report c)Agent's Report d)Underwriter's Report a)Inspection Report

c)Increases annually. d)Decreases annually. c)Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured. What are the two components of a universal policy? a)Insurance and investments b)Mortality cost and interest c)Separate account and policy loans d)Insurance and cash account d)Insurance and cash account A universal policy has two components: an insurance component and a cash account. The insurance component of a universal life policy is always annual renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher. A Universal Life Insurance policy is best described as a/an

a)Annually Renewable Term policy with a cash value account. b)Variable Life with a cash value account. c)Whole Life policy with two premiums: target and minimum. d)Flexible Premium Variable Life policy. a)Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance. Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Corridor option b)Variable option c)Option A d)Option B d)Option B

c)Policyowners bear the investment risk. d)The premiums are invested in the insurer's general account. d)The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk. Which of the following best describes a misrepresentation? a)Discriminating among individuals of the same insuring class b)Issuing sales material with exaggerated statements about policy benefits c)Making a deceptive or untrue statement about a person engaged in the insurance business d)Making a maliciously critical statement that is intended to injure another person b)Issuing sales material with exaggerated statements about policy benefits Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a)Premiums are taxable to the employee. b)Premiums are not tax deductible as a business expense. c)Premiums are tax deductible by the key employee. d)Premiums are tax deductible as a business expense. b)Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free. Any person who violates a cease and desist order of the Commissioner pertaining to consumer information privacy may be subject to which of the following penalties? a)Imprisonment for up to 5 years b)Imprisonment for up to 1 year c)A monetary fine up to $5,000 for each violation