Texas Life Insurance exam

Who is considered a field underwriter?

An agent

When must insurable interest exist in life insurance?

Application or issue date

If no receipt is issued at the time of application, a statement of good health is usually required at the time of?

Policy delivery

The Medical Information Bureau is?(MIB)

a source of medical information to alert insurers to adverse medical history

A substandard risk compared to a standard risk would pay?

a higher premium

Which document describes specific information about policy provisions and benefits?

Policy summary

Does not have an insurable interest?

Insured's best friend

What is the main source of underwriting information used by the company in the risk selection process?

Application

An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?

On the date of application

What is the main responsibility of a company's underwriting unit?

Risk selection and classification

What best describes the USA PATRIOT Act with regards to the insurance industry?

To prevent terrorism activities through monitoring of financial transactions

If the agent feels that could misrepresentation on the part of the applicant for insurance, what must the agent do?

Inform the insurance comapny

Representations are statements made by the applicant that are?

Considered true to the best of the applicant's knowledge

If an agent fails to obtain an applicants signature on the insurance application, the agent must?

Return the application to the applicant for signature

What includes information regarding a person's credit, character, reputation, and habits?

Consumer report

When the insured purchased a new home, he wanted to purchase a life insurance policy that would protect his family against losing it should he die before the mortgage was paid. Which of the following policies is best suitable for that need?

Decreasing term

An annually renewable term policy?

Renews each year with an increased premium

The time period during which an annuitant contributes to annuity is called?

The accumulation period

An example of limited-pay life policy?

Life paid-up at the age 65

An individual owns an adjustable life policy. Sometimes in the future he wants to increase the death benefit. What is correct regarding the death benefit increase?

It can be increased by providing evidence of insurability

What is true regarding a universal life policy?

The premiums can be decreased by the insured

With a traditional whole life policy, the death benefit..

Remains constant over time

Whose life expectancy is taken into consideration in an annuity?

Annuitant

An insured receives a monthly summary of his life insurability policy. The cash value this month is significantly lower than it was last month. What type of policy is it?

Variable

An individual inherited a large sum of money at age 40 and wanted to use it to provide a guarantee income after his retirement at age 60. Which of the following types of annuities would best meet this need?

Deferred

What would be considered a disadvantage of term insurance?

If the insured dies after the end of the term, there is no death benefit to the beneficiary

The renewable provision allows the policy-owner to renew the coverage at the expiration date

Without evidence of insurability

Which type of life insurance policy generates immediate cash value?

Single premium

What is true regarding a joint life policy?

Premium is based on the average age of the insureds

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

What provision of a life insurance policy states the application is part of the contract?

Entire contract

A life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specific period of time is known as the..

Incontestability clause

When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What will the insurer take?

Pay a reduced death benefit based on the insured's actual age

What term refers to the transfer of some or all of the ownership of some or all of the ownership rights of a life insurance policy from one individual to another?

Assignment

What is true about the free-look period in a life insurance policy?

It commences when the policy is delivered

A spouse receives $5,000 a month until the principle and interest on her husband"s life insurance policy have been paid out. Which settlement option did this beneficiary choose?

Fixed amount

What feature allows an insurance policy to remain in force for a specific number of days beyond the premium due date?

Grace period provision

The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend option has the insured chosen?

Reduction of premium

What is NOT a non forfeiture options in life insurance policies?

Automatic premium loans

Which of the following is true of the fixed-period and fixed-amount settlement options?

Both guarantee that the principle and interest will be fully paid out

What is NOT a standard exclusion in life insurance policies?

Disability

Under what circumstance will the contingent beneficiary receive the death benefit?

If the primary beneficiary dies before the insured

If a life insurance policy has irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary

Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes

Waiver of premium rider

What is not TRUE about the guaranteed insurability rider?

it is available automatically, for no extra premium

Generally, the premium paid for personal life insurance is?

Not tax deductible

What is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

What is NOT a requirement of a qualified plan?

it must be temporary

If a life policy does not pass the 7-pay test, that policy...

Becomes a Modified Endowment Contract

The 10% early withdrawal penalty from an IRA can be waived for...

Catastrophic medical expenses

The number of Quarters required to obtain a fully insured status to receive Social Security benefits is...

40

What kind of person would not be eligible to set up contribution to a traditional IRA?

Age 72, a nurse

What is the requirement for a number of employees in a SIMPLE plan

No more than 100

The advantage of qualified plans to employers is

Tax-deductible contributions

With personal life insurance, the lump-sum death is received by the beneficiary...

Tax free.

In group life policies, individual certificates are given to..

Each insured person

What insurance arrangement will be appropriate for a parent buying a life insurance policy on a child where the parent is the policy-owner?

Third-party ownership

Social Security benefits

Retirement, disability, and survivors

A key-person insurance policy benefit will pay for...

Cost of training a replacement

An employee quits his job and converts his group insurance to individual policy. On which of the following will premium for the individual policy be based?

Insured's attained age

A temporary license is normally valid for..

90 Days

A life agent's license must be renewed..

Every 2 years on the anniversary date of issuance

In an insurance transaction, which of the following does a licensed agent represent?

Insurer

An agent who offers a cash reward to a prospect for buying a policy is guilty of..

Rebating

An insurer who deliberately makes a malicious statement about another insurance company is guilty of an illegal trade practice called..

Defamation

Who is considered a nonresident agent?

An agent who resides in another state, but is licensed to write insurance in this state.

The Commissioner of Insurance issues a Cease and Desist Order and immediately revceives a request for the charges to be reviewed in a hearing. Within how many days must the hearing be held?

10 Days

The Commissioner of Insurance is NOT responsible for?

Setting premium rates

What is not consider an insurance transaction?

Obtaining an insurance license

What person is required to a producer license?

A nonresident agent who negotiates insurance contracts

What is the minimum required number of continuing education credits in the ethics every licensing period?

2 Hours

What is the main purpose of requiring license for persons who transact insurance?

To protect insurance companies from incompetent producers

What is NOT an example of a company's location of incorporation?

Authorized

Agents whose license has been revoked will not be able to receive another license in Texas for at least..

5 Years

How often must producers renew their licenses?

Every 2 Years

Representations

Statement made by the applicant on the insurance application that are BELIEVED to be true, but are not guaranteed to be true

Fixed annuity

An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to the purchase payment or payments.

Irrevocable designation

May not be changed WITHOUT THE WRITTEN CONSENT OF THE BENEFICIARY

Entire Contract

Stipulates that the policy and a copy of the application, along with any rider or amendments

Adjustable Life

Life insurance that permits changes in the face amount, premium amount, period of protection, and the premium payment period

Insurable Interest

A financial interest in the life of another person; a possibility of losing something of value if the insured should die. Must also exist at the time of policy application or policy issue.

Investigative Consumer Report

a report similar to consumer report, but one that also provides information on the consumers character, reputation and habits.

Dividends

Paid only on participating polices.

A return of excess premiums

Not taxable

Are not Guaranteed

Decreasing Term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy

Limited payment

A variation of whole life insurance that changes a level premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100.

Designed so that the premiums for coverage will be completely paid-up well before age 100

Payor Benefit Rider

Found in juvenile polices which waivers the premiums if the person paying them (often the parent) is disabled or dies while the child is still a minor

Common Disaster

Under the Uniform Simultaneous Death, the law will assume that the primary beneficiary dies first. This provides that the proceeds will be paid to either the contingent beneficiary or to the insured's estate

Equity-Indexed Life

(indexed whole life) main future is that the cash value is dependent upon the performance of the equity index, such as S&P 500, although there is a guaranteed minimum interest rate

Renewable Term

Insurance which can, at the election of the policy owner be renewed at the end of a term without evidence of insurability

Interest-sensitive Whole Life policy

(Current Assumption) is a fixed premium whole life policy that provides a guarantee death benefit to age 100. Premiums may very according to interest rate fluctuations

Nonforfeiture Option

permenant life insurance policies have cash values, certain guarantees are built into the policy that CANNOT BE FORFEITED by the policy owner. (known as nonforfeiture values) are required by state law to be included in the policy

Ex. cash surrender value, reduced paid-up insurance, or extended term

Term Insurance

Temporary protection because it only provides coverage for a specific period of time. Also know as (pure Life insurance).

Provides for the greatest amount of coverage for the lowest premium compared to other forms of protection

The Basic types of Term insurance are?

Level, Increasing, Decreasing

Buyers Guide

General information about life insurance policies

Insurable Interest

The policy owner must face the possibility of losing money or something of value in the event of loss

Policy Summary

Written statement describing the FEATURES and ELEMENTS of the policy being issued

The application consist of?

2 Parts

1. General Information

2. Medical Information

Fair Credit Reporting Act

Established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used.

Fair Credit Reporting Act 2

Protects consumers against circulation of inaccurate or obsolete information

Consumer reports

Include written and/or oral information regarding a consumers credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports and other public sources