CA Life Insurance Exam

As authorized by the California Insurance Code, the Insurance Commissioner has provided standards for names used by life insurance agents. Under these standards which, if any, of the following are automatically acceptable for Mary Brown, a holder of the CLU designation?

Mary Brown Insurance Services.

Which of the following information is not required to be communicated in a Life insurance contract?

Personal judgment.

The direct distribution of insurance utilizes all of the following to promote the sale of insurance EXCEPT

telephone call from an agent.

A contract in which one party promises to indemnify another against loss that arises from an unknown event is

an insurance policy.

All of the occurrences listed below are examples of an insurable event as defined by the California Insurance Code EXCEPT

an insured suffers a financial loss in the state lottery

All of the following statements about aleatory contracts are true EXCEPT

the insured and insurer contribute equally to the contract.

All of the following would be considered unfair trade practices EXCEPT

committing any act of discrimination whether it be deemed fair or unfair.

What is meant by referring to an insurance policy as a unilateral contract?

Only one party makes a legally enforceable promise.

When must insurance records of insurance agents and brokers be made available to the Insurance Commissioner?

At all times.

Any situation that presents the possibility of a loss is known as

a loss exposure

A contract of indemnity is one in which

one party is restored to the same financial position the party was in before the loss occurred.

In insurance terminology, "indemnity" means

make whole.

As defined in the California insurance Code, "insurance" is a

contract.

What would a person be guilty of who refuses to deliver any books, records, or assets to the commissioner once a seizure order has been executed?

A misdemeanor

An agent who is acting as an insurance agent, broker, solicitor, life agent, accident and health, or bail agent acts in which capacity when handling premiums or return premiums for an insured?

Fiduciary

Which of the following statements regarding risk is TRUE?

Only pure risks are insurable.

The purchase of an insurance policy may accomplish all of the following for the insured EXCEPT

the elimination of risk.

Insureds are entitled to recover an amount NOT greater than the amount of their loss under the principle of

indemnity.

What rule is used to determine the importance of a representation?

The materiality of concealment.

The required contents of a policy include all of the following EXCEPT

the probability of loss

All of the following are characteristics of reinsurance EXCEPT it

increases the unearned premium reserve.

According to the California Insurance Code, an insurance policy must specify all of the following EXCEPT the

financial rating of the insurer.

All of the following qualify as "background information" as defined in Section 1729.2 of the California Insurance Code, EXCEPT

misdemeanor charges filed, not resulting in a conviction.

Loss retention is an effective risk management technique when all of the following conditions exist EXCEPT the

probability of loss is unknown.

A situation in which there is a possibility of loss or a gain is a

speculative risk.

Why is having a large number of similar exposure units important to insurers?

The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums.

All of the following are benefits of insurance EXCEPT it

eliminates fraudulent losses.

Who are members of the Medical information Bureau?

Life and health insurers.

The process by which an insurer decides whether to issue requested insurance is called

underwriting.

Unless it is merely a statement of an expectation or belief, a representation as to the future is considered which of the following?

Promise

Upon notification of a claim, a claimant must be given access to the California Fair Claims Settlement Practices resolution by all of the following means EXCEPT

by interview appointment with the agent of record.

hat is the definition of premium?

Money an insured pays an insurer to obtain the benefits provided in the policy.

What is the goal of the underwriting process?

to avoid selecting a disproportionate number of bad risks.

Insurer policy expenses include all of the following EXCEPT

premiums.

Unintentional concealment entitles the injured party to which course of action, if any?

Rescission of the contract.

Making an insured whole by restoring them to the same condition as before a loss is an example of

the principle of indemnity.

Risk can be defined as all of the following EXCEPT

the cause of loss

Which of the following is a requirement of a contract?

There must be an offer and acceptance of the contract terms.

Moral hazard can be defined as the increase

chance of a loss occurring due to an insured's dishonest tendencies.

According to the California Insurance Code, the Commissioner can disapprove a licensee's request to use a fictitious name for any of the following reasons EXCEPT that the

name is the licensee's actual name.

It is considered an unfair method of competition for an agent to advertise that the insurer the agent is appointed with is

a member of the Insurance Guarantee Association.

All of the following are requirements of contract EXCEPT

there must be equal consideration between the parties.

If an insurer must have its rates accepted by the insurance Department prior to using them, the insurer would be operating in which of the following types of jurisdictions?

Prior approval.

It is Federal offense for an insurance agent to do all of the following EXCEPT

misrepresent facts on an insurance application.

How often MUST an insurer file the National Association of Insurance Commissioners (NAIC) financial statement?

Annually.

A person authorized by and on behalf of an insurer who transacts life, disability or life and accident and health insurance is defined as a

life agent.

An insurer entitled to transact business by complying with the California Insurance Code is known as an

admitted carrier.

Who are the members of the Medical Information Bureau?

Life and Health insurers.

If you have been convicted of a misdemeanor and that misdemeanor conviction is later expunged pursuant to California Penal Code Section 1203.4, which of the following is true?

Even though your misdemeanor conviction was expunged, you must still disclose your misdemeanor conviction on your individual application for an insurance license.

The direct response distribution of Insurance utilizes all of the following to promote the sales of insurance EXCEPT

telephone call from the agent.

The increase in the probability of a loss resulting from an insured's dishonest tendencies is known as

moral hazard.

Which is an agreement in which an insurer contacts with a third party to insure itself against losses from insurance policies it issues?

Reinsurance

Which if the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay?

A misdemeanor.

What rule is used to determine the importance of a representation?

The materiality of concealment.

Which of the following is a hazard?

A condition that may increase the likelihood of a loss occurring.

When are parties to a contract REQUIRED to communicate information solely based on personal judgment for a matter in question?

Never

According to the California Insurance Code, if an insurer's certificate of authority is revoked, the Commissioner can proceed with any of the following actions EXCEPT

using Guarantee Funds to pay salaries.

Section 1729.2 of the California Insurance Code requires insurance producer applications and licensees to notify the Insurance Commissioner in writing, within ___days of charges in background information after an application has been submitted or a license has been issued.

30

The insurer's department with PRIMARY responsibility for the risk selection process is called:

underwriting

A person owns a life annuity. He elects to receive his annuity payments monthly for the remainder of his life with "ten years certain". The annuity will make payments

for a minimum of 120 months and a maximum of the remainder of his life.

All of the following information is gathered during the personal financial planning process EXCEPT

a listing of a person's civic and professional organization memberships.

Which policy provision allows an insured to continue coverage under a previously lapsed policy?

The reinstatement provision

According to the California Insurance Code, governing the use of life insurance policy illustrations, the term illustration means

a presentation of policy features that includes non-guaranteed elements.

The life insurance grace period allows the insured to

pay the premium after the due date without loss of coverage.

When a family policy covers children, all of the following are true EXCEPT

evidence of insurability is required to convert coverage for children to permanent insurance.

An attempt by an agent to deter an insured from replacing an existing life insurance policy is called

conservation

Which of the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay?

A misdemeanor

The additional premium charged by an insurer for adding the accidental death benefit to a whole life policy

does not affect the policy's cash value.

How much employer-provided group term life insurance is exempt from income taxation?

$50,000

How long is the free cancellation period for the life insurance offered to individuals who are 60 or older?

30 days.

What does the statement "life insurance created an immediate estate" mean?

The total death benefit is paid whenever the insured dies.

Which report of an insurance applicant's creditworthiness and personal characteristics may influence eligibility for life and health insurance?

Consumer report.

In group life insurance, who is issued a certificate of insurance?

The participant.

Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium?

Renewable term.

If a life agent sells a whole life policy to a prospect on behalf of an insurer without an appointment, the

insurer must submit a notice of appointment to the Commissioner.

Which component of a life insurance premium is based on the insured's age and gender?

Mortality

Which benefits are provided by key employee insurance?

Payment to a business when an important employee dies.

How can partners guarantee a market for their share of the business in the event of death?

Buy-sell agreements.

Which policy covering two or more individuals pays the face amount only when the first person dies?

Joint life policy.

Which two insurance products are commonly used to fund buy-sell agreements?

Life insurance and disability insurance.

Which policy provision protects the insurer against possible adverse selection?

Suicide clause.

Which type of insurance coverage has both a savings element and a flexible premium option?

Universal life

A life insurance policy written after 1988 that fails to meet the seven-pay test is known as

a modified endowment contract.

What type of insurance policy provides a death benefit that matches the projected outstanding debt on an individual's home?

Mortgage redemption.

An agent who violates the laws governing life insurance policy illustrations is subject to all of the following EXCEPT

mandatory termination of all insurer appointments.

Which policy is a saving instrument designed to first accumulate funds and then systematically to liquidate the funds?

Deferred annuity.

Individual life insurance policies sold to seniors in the State of California must include a prominently placed statement that divulges all of the following information EXCEPT

proof of surrender must be notarized at the agent's principal office.

People commonly purchase an annuity to protect against the risk of:

outliving their financial resources.

What is one difference between group life an individual life underwriting?

Individual life insurance requires the applicant to answer medical questions.

A $50,000 whole life policy with a cash value of $10,000 has been in force for eleven years. The policyowner is unable to continue the premium payments. Which of the following describes the reduced paid-up nonfordeiture option?

The cash value is used to select a $20,000 paid-up policy.

Which of the following is a characteristic of nonqualified annuities?

Tax-deferred earnings.

A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments will the insurer make?

60 payments.

The payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified in the policy that the

insurer will make the payments until the insured juvenile reaches a specified age-usually twenty-one or twenty-five.

Which of the following contracts provides benefits that fluctuate automatically with investment results?

Variable life insurance.

The theory of probability is applied to life insurance through the use of

mortality tables.

What is the difference between deferred annuities and immediate annuities?

Deferred annuities have longer accumulation periods.

which of the following is NOT an option for the use of the policy dividends?

Fund the distribution of monthly income payments.

The insured is totally and permanently disabled. The insured's policy continues in force without payment of further premiums because the policy contains a

waiver of premium provision.

Your client has just bought a new home which he has financed with a $150,000, 7.5% interest, 30 -year bank loan. He would like to be sure that if he dies that the unpaid balance of the mortgage would be paid. He wants a policy that will cover the mortgage balance-no more, no less-anytime during the life of the mortgage. Which policy is designed to meet this need?

Decreasing term policy.

Death benefits that are received by a beneficiary are generally

exempt from federal income tax.