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An insurer has made all of the decisions regarding the provisions included in the insured's policy. The insured finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe? a) Unilateral b) Conditional c) Personal d) Adhesion - ✔✔Adhesion An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a) Modified Endowment Contract (MEC). b) Level term life. c) Graded premium whole life. d) Single premium whole life. - ✔✔Single Premium Whole Life All of the following are true regarding a decreasing term policy EXCEPT a) The payable premium amount steadily declines throughout the duration of the contract. b) It has a lower premium than level term. c) The contract pays only in the event of death during the term and there is no cash value. d) The face amount steadily declines throughout the duration of the contract. - ✔✔The payable premium amount steadily declines throughout the duration of the contract The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a a) Decreasing Term Policy. b) Whole Life Policy. c) Convertible Term Policy.
d) Renewable Term Policy. - ✔✔Convertible Term Policy The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a) The death benefit can be increased by providing evidence of insurability. b) The death benefit cannot be increased. c) The death benefit can be increased only when the policy has developed a cash value. d) The death benefit can be increased only by exchanging the existing policy for a new one. - ✔✔The death benefit can be increased by providing evidence of insurability When would a 20 - pay whole life policy endow? a) After 20 payments b) In 20 years c) When the insured reaches age 100 d) At the insured's age 65 - ✔✔When the insured reaches age 100 An insured had a $ 10 , 000 term life policy. The annual premium of $ 200 was due on February 1 ; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a) $ 0 b) $ 200 c) $ 9 , 800 d) $ 10 , 000 - ✔✔$ 9 , 800 What is the term for how frequently a policyowner is required to pay the policy premium? a) Consideration b) Mode c) Schedule d) Grace period - ✔✔Mode
c) The premium amount paid at the time of application d) The promise to pay covered losses - ✔✔The application given to a prospective insured If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? a) The insurer may deny coverage later, because of the information missing on the application. b) The policy will be interpreted as if the insurer waived its right to have an answer on the application. c) The policy will be interpreted as if the insured did not have an answer to the question. d) The policy will be void. - ✔✔The policy will be interpreted as if the insurer waived its right to have an answer on the application Who is a third-party owner? a) An insurer who issues a policy for two people b) An employee in a group policy c) An irrevocable beneficiary d) A policyowner who is not the insured - ✔✔A policy owner who is not the insured Which is TRUE about the cash surrender nonforfeiture option? a) Funds exceeding the premium paid are taxable as ordinary income. b) After the cash surrender, the insured is covered for a grace period of 1 month. c) The policy remains active for some time after the policyholder opts for cash surrender. d) The policyholder receives the original cash value of the policy. - ✔✔Funds exceeding the premium paid are taxable as ordinary income According to the Entire Contract provision, a policy must contain a) A declarations page with a summary of insureds. b) Buyer's guide to life insurance. c) Listing of the insured's former insurer(s) for incontestability provisions. d) A copy of the original application for insurance - ✔✔A copy of the original application for insurance
All of the following are general requirements of a qualified plan EXCEPT a) The plan must be communicated to all employees. b) The plan must be for the exclusive benefits of the employees and their beneficiaries. c) The plan must be permanent, written and legally binding. d) The plan must provide an offset for social security benefits. - ✔✔The plan must provide an offset for social security benefits An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an a) Credit Life. b) Annual Renewable Term. c) Adjustable Life. d) Interest-sensitive Whole Life. - ✔✔Interest-sensitive Whole Life Which of the following best describes what the annuity period is? a) The period of time from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments - ✔✔The period of time during which accumulated money is converted into income payments What is the purpose of a fixed-period settlement option? a) To provide a guaranteed income for life b) To provide a guaranteed amount of money each month c) To provide a guaranteed income for a certain amount of time d) To settle the insurance company's liability - ✔✔To provide a guaranteed income for a certain amount of time.
If an annuitant dies before annuitization occurs, what will the beneficiary receive? The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a) The contract can be issued without an annuitant. b) The annuitant must be a natural person. c) A corporation can be an annuitant as long as it is also the owner. d) A corporation can be an annuitant as long as the beneficiary is a natural person. - ✔✔The annuitant must be a natural person Which of the following statements is TRUE about a policy assignment? a) It authorizes an agent to modify the policy. b) It transfers rights of ownership from the owner to another person. c) It is the same as a beneficiary designation. d) It permits the beneficiary to designate the person to receive the benefits. - ✔✔It transfers rights of ownership from the owner to another person An individual has just borrowed $ 10 , 000 from his bank on a 5 - year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a) Variable life b) Universal life c) Whole life d) Decreasing term - ✔✔Decreasing Term What happens when a policy is surrendered for its cash value? a) The policy can be reinstated by paying back all policy loans and premiums. b) The policy can be converted to term coverage. c) Coverage ends and the policy cannot be reinstated. d) Coverage ends but the policy can be reinstated at any time. - ✔✔Coverage ends and the policy cannot be reinstated
In a life settlement contract, whom does the life settlement broker represent? a) Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount b) Amount paid into the plan c) Cash value of the plan d) Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount - ✔✔Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount An insured owns a $ 50 , 000 whole life policy. At age 47 , the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $ 20 , 000. What would be the face amount of the new term policy? a) $ 20 , 000 b) $ 25 , 000 c) $ 50 ,0 00 d) The face amount will be determined by the insurer. - ✔✔$ 50 , 000 Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? a) Annuitization period b) Pay-out period c) Liquidation period d) Depreciation period - ✔✔Depreciation Period What is the purpose of a conditional receipt? a) It is intended to provide coverage on a date earlier than the date of the issuance of the policy. b) It guarantees the applicant that a policy will be issued in the amount applied for in the application. c) It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company. d) It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue. - ✔✔It is intended to provide coverage on a date earlier than the date of the issuance of the policy
b) Graded c) Level fixed d) Increasing - ✔✔Level fixed Which of the following must an agent receive in order to sell variable life insurance policies? a) Variable products license b) Certificate of authority c) SEC registration d) FINRA registration - ✔✔FINRA registration When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? a) The insurance company b) The insured's estate c) The primary beneficiary's estate d) The insured's contingent beneficiary - ✔✔The insured's contingent beneficiary Which nonforfeiture option provides coverage for the longest period of time? a) Paid-up option b) Accumulated at interest c) Reduced paid-up d) Extended term - ✔✔Reduced paid-up In a survivorship life policy, when does the insurer pay the death benefit? a) Upon the last death b) Upon the first death c) Half at the first death, and half at the second death
d) If the insured survives to age 100 - ✔✔Upon the last death Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a) Term insurance only b) Permanent insurance only c) Universal life insurance only d) Any form of life insurance - ✔✔Any form of life insurance When an annuity is written, whose life expectancy is taken into account? a) Beneficiary b) Life expectancy is not a factor when writing an annuity. c) Owner d) Annuitant - ✔✔Annuitant Which policy component decreases in decreasing term insurance? a) Dividend b) Premium c) Face amount d) Cash value - ✔✔Face amount What required provision protects against unintentional lapse of the policy? a) Payment of premiums b) Reinstatement c) Grace period d) Assignment - ✔✔Grace period A life insurance policy has a legal purpose if both of which of the following elements exist?
c) From the original plan to the original custodian d) From trustee to trustee - ✔✔From trustee to trustee Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Life annuity with period certain b) Increasing term c) Limited pay whole life d) Interest-sensitive whole life - ✔✔Limited pay whole life All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT a) Upon conversion, the death benefit of the permanent policy will be reduced by 50 %. b) Evidence of insurability is not required. c) Most term policies contain a convertibility option. d) Upon conversion, the premium for the permanent policy will be based upon attained age. - ✔✔Upon conversion, the death benefit of the permanent policy will be reduced by 50 % A Return of Premium term life policy is written as what type of term coverage? a) Renewable b) Level c) Increasing d) Decreasing - ✔✔Increasing Employer contributions made to a qualified plan a) Are subject to vesting requirements. b) May discriminate in favor of highly paid employees. c) Are after-tax contributions. d) Are taxed annually as salary. - ✔✔Are subject to vesting requirements
Both Universal Life and Variable Universal Life have a a) Flexible premium. b) Level fixed premium. c) Decreasing premium. d) Increasing premium. - ✔✔Flexible premium An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? a) The date of policy delivery b) The date of issue c) The date of application d) The date of medical exam - ✔✔The date of medical exam If an insured continually uses the automatic premium loan option to pay the policy premium, a) The policy will terminate when the cash value is reduced to nothing. b) The face amount of the policy will be reduced by the automatic premium loan amount. c) The cash value will continue to increase. d) The insurer will increase the premium amount. - ✔✔The policy will terminate when the cash value is reduced to nothing Which two terms are associated directly with the premium? a) Fixed or variable b) Term or permanent c) Renewable or convertible d) Level or flexible - ✔✔Level or flexible In an annuity, the accumulated money is converted into a stream of income during which time period? a) Conversion period
b) Within 30 days after the first premium payment was collected. c) Prior to filling out an application for insurance. d) With the policy. - ✔✔With the policy. Which of the following best describes annually renewable term insurance? a) It is level term insurance. b) It requires proof of insurability at each renewal. c) Neither the premium nor the death benefit is affected by the insured's age. d) It provides an annually increasing death benefit. - ✔✔It is level term insurance. Which of the following would help prevent a universal life policy from lapsing? a) Corridor of insurance b) Target premium c) Face amount d) Adjustable premium - ✔✔Target premium SIMPLE Plans require all of the following EXCEPT a) No more than 100 employees. b) Employees must receive a minimum of $ 5 , 000 in annual compensation. c) At least 1 , 000 employees. d) No other qualified plan can be used. - ✔✔At least 1 , 000 employees. Which of the following is TRUE of a qualified plan? a) It may discriminate in favor of highly paid employees.
b) It may allow unlimited contributions. c) It has a tax benefit for both employer and employee. d) It does not need to have a vesting schedule. - ✔✔It has a tax benefit for both employer and employee. The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a) The death benefit can be increased only when the policy has developed a cash value. b) The death benefit can be increased only by exchanging the existing policy for a new one. c) The death benefit can be increased by providing evidence of insurability. d) The death benefit cannot be increased. - ✔✔The death benefit can be increased by providing evidence of insurability. Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must a) Defend the report if the agency feels it is accurate. b) Change the report. c) Send an actual certified copy of the entire report to the consumer. d) Respond to the consumer's complaint. - ✔✔Respond to the consumer's complaint. Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a) Concealment b) Indemnity c) Representation d) Warranty - ✔✔Warranty
d) The seller must be terminally ill. - ✔✔The seller must be terminally ill.
38. Which of the following allows the insurer to relieve a minor insured from premium payments if the
minor's parents have died or become disabled? a) Waiver of Premium b) Payor Benefit c) Jumping Juvenile d) Juvenile Premium Provision - ✔✔Payor Benefit
39. Which of the following best describes the concept that the insured pays a small amount of premium
for a large amount of risk on the part of the insurance company? a) Adhesion b) Subrogation c) Warranty d) Aleatory - ✔✔Aleatory
40. Which of the following, when attached to a permanent life insurance policy, allows the policyowner
to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? a) Accidental death and dismemberment rider b) Guaranteed insurability rider c) Change of insured rider d) Term rider - ✔✔Term rider
41. Which of the following will be included in a policy summary?
a) Comparisons with similar policies
b) Primary and secondary beneficiary designations c) Premium amounts and surrender values d) Copies of illustrations and application - ✔✔Premium amounts and surrender values
43. Which of the following terms means a result of calculation based on the average number of months
the insured is projected to live due to medical history and mortality factors? a) Risk exposure b) Morbidity c) Life expectancy d) Mortality rate - ✔✔Life expectancy Which of the following is true about the premium on the children's rider in a life insurance policy? a) It decreases when an adopted child is added to the policy. b) It remains the same no matter how many children are added to the policy. c) It decreases when the oldest child reaches the age of 21. d) It increases when a newborn baby is added to the policy. - ✔✔It remains the same no matter how many children are added to the policy.
47. An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in
accordance with the terms of the contract. This is called a) Acceptance. b) Consideration. c) Conditions. d) Utmost good faith. - ✔✔Consideration. Which of the following policy components contains the company's promise to pay?
