Life Insurance practice exam questions

life insurance exam

A contract that ha s as it's basic function the systematic if liquidation of accumulated assets through periodic payments is called an:

A: Indemnity Contract

B: Investment Contract

C: Endowment

D: Annuity

An insured intentionally understates their age on their application for a life policy. At death, the insurer will take which of the following actions?

A: Refuse to pay the claim based on material misrepresentation on the application

B: Pay the face amount of the policy if the death occurred after the end of the incontestable period.

C: Pay a reduced Death benefit base on the insured’s age

D: Pay the stated Death benefit less the unpaid premium owed to the company as a result of the understated age.

A life insurance policy is usually contestable due to material misrepresentation on the application for a period of?

A: 30 day s

B: 6 Months

C: 2 years

D: 5 years

A prospect is critical of the low interest assumption used in the Whole Life product for purchase. Which of the following products could be used to resolve the prospect’s concerns?

A: Modified Endowment

B: Interest-Sensitive Whole Life

C: Adjustable Life

D: Single Premium Whole Life

The Waiver of Premium provision of a life policy allows the insure to take which of the following actions?

A: Waive an insured’s premiums if the insured becomes totally disabled before a certain age.

B: Waive an insured’s premiums if the insured becomes partially disabled for a minimum time

C: Increase an insured’s coverage at an attained age without a premium increase

D: Reduce an Insured’s Premiums if the insured pays them annually instead of monthly.

An applicant for life insurance may question the validity and source of any consumer information developed under the:

A: Medical information Bureau Disclosure Act

B: Fair credit reporting act

C: Equal employment opportunity act

D: Medicare act

Which of the following is CORRECT about the Paid-Up Additions in a participating Whole Life Policy?

A: They are subject to underwriting approval

B: They doi not generate dividend

C: They are considered Term Policies

D: They are purchased on an attained age basis

When a producer submits an insurance application to the company, the producer must take all of the following actions EXCEPT:

A: submit the initial premium, if it collected

B: ensure any changes on the application were initialed by the applicant

C: submit a completed medical information report

D: complete the producer’s report.

A type of annuity in which the cash values are invested in securities is called:

A: Variable

B: Deferred

C: Fixed

D: Joint and Survivorship

In life insurance, the Free Look provisions begins on the

A: Effective date if coverage

B: Policy delivery date

C: Date of application

D: Date that the insurer issues the policy

A producer takes applications from identical twins who want to buy the same type of policy in the same amount. The insurer issues the policies as applied for, but changes a 25 percent higher premium for one of the policies. The difference in premiums is probably due to which of the following factors?

A: Incontestability

B: Insurable interest

c: Consideration

D: Risk Classification

A Variable Life Policy differs from whole policy in which of the following ways?

A: The size of the Death Benefit

B: The length of the Contestable Period

C: How premiums are paid

D: How reserves are invested

Which of the following annuities BEST suits the needs of a 35-year-old factory worker concerned about inflation who wants to establish a retirement plan?

A: A single Premium Deferred Annuity

B: A single Premium Immediate Annuity

C: A Level Premium Fixed Annuity

D: A Flexible Premium Variable Annuity

An applicant’s statements on an application are considered to be legal:

A: warranties

B: representations

C: guarantees

D: waivers

A Renewable Term policy may be renewed only if which of the following is correct?

A: The insured requests renewal at a specified attained age

B: The insured requests renewal at the end of the policy term

C: The beneficiary requests renewal on the policy anniversary

D: The insurance company approves renewal within 90 days after receiving the request

An insured owns a $10,000 policy with a $4,000 cash value and a 6 percent loan interest rate. On January 1, the insured borrows $500 and pays one year’s interest in advance. During the year, the insured does not repay any part of the loan or interest. If the insured dies on December 31, the beneficiary will be entitled to a MAXIMUM of

A: $3,500

B: $6,000

C: $9,470

D: $9,500

Which of the following group life plans requires at least 75 percent of the eligible members to participate?

A: Contributory

B: Non contributory

C: Participating

D: Nonparticipating

Reinstatement of a life insurance policy requires an insured to take all of the following actions EXCEPT.

A: provide evidence of insurability

B: make collateral assignment to the insurer

C: pay back interest on any outstanding policy loan

D: pay all past-due premiums

If an insured commits suicide after Suicide clause in the insured’s life insurance policy has expired. The insurer will take which of the following actions?

A: Refuse to pay the Death benefit or refund any premiums

B: Refund only the premiums paid

C: Refund the premiums paid plus interest

D: Pay the Death benefit

Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?

A: Nonforfeiture

B: Endorsement

C: Transfer for value

D: Assignment

In which of the following contracts is the Death benefit called the principal sum?

A: Survivorship Annuity

B: Accidental Death and Dismemberment (AD&D)
C: Decreasing Term

D: Joint life

Which of the following statements is NOT correct about representations?

A: They can be a part of the contract

B: They are true in every respect

C: They are assumed to be accurate

D: They influence the insurer’s acceptance of the risk

A 40 year-old insured who buys a Single Premium Whole life Policy and Lives to age 85 will have paid a total out-of-pocket cost that is

A: equal to the premiums paid for a 5-Year Life policy

B: equal to the premiums paid for a Straight Life policy

C: more than the premiums paid for a Straight Life policy

D: less than the premiums paid for a Straight Life policy

A life insurance policy that combines Term insurance and an interest bearing account is BEST classified as which of the following types of policies?

A: Variable Life

B: Universal Life

C: Variable Universal Life

D: Whole Life

Under the Social Security Retirement Benefits, all of the following factors will influence how much a retiring individual will receive as a monthly income benefit EXCEPT the individual’s

A: age

B: “primary insurance amount”

C: “fully insured” or “currently insured” status

D: gender

A Joint Life policy

A: insures more than one person but only pays on the death of one

B: pay double the face value if death is accidental

C: provides medical as well as life insurance

D: provides a small amount of coverage for the children of the insured

Which of the following retirement plans is tax qualified?

A: Key person

B: Defined contribution

C: Section 457 deferred compensation

D: Split dollar life insurance

The PRIMARY purpose of an inspection report is to assess an applicant’s:

A: credit rating

B: personal characteristics

C: job performance

D: health profile

If an Adjustable Life policyowner makes an additional premium payment, the policy may be affected in all of the following ways EXCEPT the:

A: premium paying period may decrease

B: value of the nonforfeiture Options may decrease

C: face amount may increase

D: length of coverage may increase

If life insurance policy applicant is classified as a substandard risk, the insurance company will MOST likely

A: issue the policy with riders

B: charge an extra premium

C: require an annual medical examination

D: lower the rate per thousand charged

Which of the following life policy provisions specifies the manner in which proceeds will be paid to a beneficiary on the death of the insured?

A: Nonforfeiture options

B: Settlement Options

C: Conditions

D: Modes of Payment

Which of the following statements is CORRECT about Group Life conversion privileges?

A: Under the COBRA law, a departing employee may elect to remain a member of the Group Life plan for a limited period of time

B: Death during the conversion period is covered even if the departing employee chose not to convert the policy.

C: A departing employee must individually pay the premium if the employee elects to be covered during conversion period.

D: If a departing employee elects to convert a life insurance policy, the insurer must offer Term insurance as one of the choices.

All of the following policies may be of Third party ownership EXCEPT

A: Modified Life

B: Group Life

C: Split dollar Life

D: Key Employee

The PRIMARY reason for selecting a Variable Whole Life policy instead of traditional Whole Life policy is that the Variable Whole Life policy:

A: provides flexible premium payments

B: allows the policyowner to borrow a larger percentage of the cash value

C: has the potential to earn a higher rate of return on the cash value

D: allows the policy owner more flexibility in naming and changing beneficiaries

Which of the following features allows an insurance policy to remain in force for a specified number of days beyond the premium due date?

A: Reinstatement prevision

B: Nonforfeiture Option

C: Grace Period provision

D: Consideration clause

If a policy contains a Guaranteed Insurability rider, the insured has the right to purchase.

A: additional coverage when the insured reaches retirement age

B: additional coverage whenever the insured changes jobs

C: additional coverage at specified ages

D: coverage on the insured’s children within thirty one days after they are born.

At which of the following time MUST a life insurance applicant be informed of their right under the Fair Credit Reporting Act?

A: During the initial appointment

B: When the insured’s application is completed

C: When the policy is delivery

D: Upon initial premium receipt

Federal income tax laws generally treat proceeds of life insurance policies as:

A: graduated taxes

B: deferred taxes

C: nontaxable

D: tax credits

Which of the following policy provisions states that the application is part of the policy?

A: Entire contract

B: Ownership clause

C: Nonforfeiture option

D: Assignment clause

A life insurance application is incomplete if it is missing the signature of which of the following?

A: A revocable beneficiary

B: The president of the insurer

C: The proposed insured’s primary care physician

D: The proposed adult insured

In life insurance, insurable interest must exist at the time the:

A: producer delivers a policy

B: proposed insured has a medical examination

C: producer writes an application on a proposed insured

D: beneficiary files a claim

A client needs a substantial amount of protection but has limited financial resources. Which if the following insurance policies would BEST meet the client’s needs?

A: Term Life

B: Adjustable Life

C: Whole Life

D: Limited-Pay Life

If an applicant for life insurance submits a completed application to a producer without paying the first premium, coverage becomes effective when the:

A: producer accepts the application

B: applicant successfully completes the medical examination

C: insurer approves the application

D: policy is delivered and the premium paid

The right to change a beneficiary designation is reserved for the:

A: beneficiary

B: policyowner

C: insurer

D: Insured

A payor benefit rider provides which of the following benefits?

A: A disability income benefit payable to the payor if the payor becomes disabled

B: A permanent waiver of premium should the payor die

C: A temporary waiver of premium should the payor die, until the insured reaches a predetermined age

D: A double indemnity Death benefit payable to the beneficiary upon the death of the payor

Which of the following policies is an interest-sensitive form of permanent protection?

A: Universal Life

B: Limited-Pay Life

C: Graded Premium Whole Life

D: Modified Whole Life

An employer can deduct premium payment as an ordinary business expense for which of the following life coverages?

A: Buy and Sell Agreements

B: Group

C: Key Employee

D: Joint Life, if the business is named as the beneficiary

An insurance producer takes an application for a life insurance policy but does not collect the initial premium. On delivery of the policy to the proposed insured the producer must collect the initial premium and which of the following?

A: A copy of the MIB Report

B: The insured’s signed statement of continued good health

C: A copy of the conditional receipt

D: A copy of the temporary insurance agreement that covered the period between the application date and the delivery date

A contract that promises to pay an income to an insured until their death is called:

A: Family income

B: Modified Endowment

C: Survivorship Life

D: Life Annuity

Two business partners own life insurance on each other if one partner dies, which of the following contracts will allow the other partner to buy 100 percent of the business interest?

A: Buy and Sell Agreement

B: Key Employee Life policy

C: Survivorship Life

D: Joint and Several Annuity

Which of the following situations is considered rebating?

A: A producer exaggerates the financial strength of the company to an insured

B: A producer returns a portion of the commission to an insured

C: An insurer pays an independent adjuster to settle a loss in a favor of the company’s insured

D: An insurer pays excessive commissions to its producers

The major difference between a mutual insurance company and a stock insurance company is the:

A: number of producers each is permitted to license

B: size of the cash reserves each is required to maintain

C: type of policies each market

D: form of ownership each company is permitted

All of the following elements must be included in a policy summary given to a purchaser of life insurance EXCEPT the

A: names and addresses of each beneficiary

B: full name and address of the insurance company

C: generic names of the basic policy and each rider

D: name and address of the insurance producer

In order for nonresident applicants to be eligible for an insurance producer license in this state, they MUST

A: reside less than twenty-fives mile from the state border

B: hold a like license in another state

C: plan to move to this state within six months after they submit their application

D: maintain an office in this state

A Variable Life contract must contain all of the following provisions EXCEPT

A: Reinstatement

B: Nonforfeiture

C: Accidental Death

D: Grace Period

The insurance Commissioner may examine the records of an insurance company at which of the following times?

A: Only when a state court has ordered an examination

B: Only when consumers complaints against the company become unusually frequent

C: Only when the company is filing for reorganization

D: At any time the insurance Commissioner sees fit

An insurance company formed under the laws of a state other than this state is known as:

A: a foreign company

B: a reciprocal company

C: a domestic company

D: an alien company

An insurance company doing business in this state must operate under

A: an advisory

B: a resident board of directors

C: a certificate of authority

D: articles of incorporation filed with the secretary of state

The insurance Commissioner may revoke or suspend a producer’s license if the producer

A: is no longer producing a minimum amount of business

B: has been indicted for a criminal offense

C: has used the license principally to solicit corporate insurance

D: has forged another person’s name on a insurance application

An individual who, for the purpose of collecting premiums, acts for another in negotiating a contract if insurance is considered to be

A: a principal

B: a broker

C: a solicitor

D: a producer

Which of the following statements about replacement of existing life insurance is CORRECT?

A: Replacement of a policy that has been in existence for more than ten years is prohibited

B: Replacement of group life insurance policies requires prior approval from the insurance Commissioner

C: The Notice Regarding Replacement of Life Insurance or Annuity must be presented to an applicant no later than the date on which the policy is delivered.

D: Both the applicant for insurance and the insurance producer must sign a statement stating whether existing insurance is to be replaced

An individual appointed by an insurance company to solicit applications for policy of insurnace on its behalf is known as:

A: an adjuster

B: a consultant

C: an insurance broker

D: an insurance producer

Controlled business defined as insurance a producer writes on all of the following individuals EXCEPT the producer’s

A: relatives

B: employees

C: neighbors

D: spouse

Which of the following terms may be used in advertisements for life insurance?

A: Charter Life Plan

B: Universal Life Plan

C: Interest Life Plan

D: Investment Life Plan

A producer may be guilty of misrepresentation if the producer

A: tells an insured the deductible on a policy is less than it actually is

B: cancels a policy because of the insured’s loss history

C: gives part of a commission to the applicant in order to make a sale

D: neglects to record information reported by an insured

Which of the following persons is authorized to enforce state insurance laws?

A: The insurance Commissioner

B: The state Attorney General

C: The Governor

D: The state Auditor

Which of the following statements is CORRECT about insurance producers who fail to satisfy the continuing education requirements?

A: They may be subject to a fine

B: They may be subject to legal prosecution

C: Their licenses will be terminated

D: Their licenses will be suspended

An insurance producer who makes false statement that harm the reputation of another insurance company is guilty of

A: discrimination

B: defamation

C: misrepresentation

D: controlled business

All of the following groups are considered eligible for group life insurance EXCEPT

A: veteran associations

B: credit unions

C: labor union groups

D: volunteer religious groups

Which of the following statements about Credit Life insurance is CORRECT?

A: It may be provided through a group or individual policy

B: The face amount must exceed twice the amount of the debt

C: The premiums must be paid by the lender

D: The lender may require that it be purchased through a particular insurance company

Which of the following types of insurance policies is EXEMPT from the Life insurance and Annuity Replacement Rule?

A: Group Life

B: Convertible Term Life

C: Ordinary Whole Life

D: Universal Life

The Life Insurance and Annuity Replacement Rule is designed for which of the following purposes?

A: To prohibit the replacement of life insurance polices and annuities

B: To ensure that policyowners receive adequate information on which to base a replacement decision

C: To protect the interest if insurance companies and their producers

D: To regulate the replacement of group life insurance and group annuities

In a life policy, a special benefit that prepays a portion of the death benefit during the lifetime of an insured in the event of a specified illness is called

A: an accidental death and dismemberment benefit

B: an acceleration of life insurance benefit

C: a major medical benefit

D: a waiver of premium disability benefit

All of the following provisions must be included in group life insurance policies issued in this state EXCEPT

A: Nonforfeiture

B: Payments of Benefits

C: Suicide

D: Incontestable

An individual may obtain a temporary insurance producer’s license without passing the licensing examination if the individual

A: is a deceased licensed producer’s next of kin

B: is taking insurance courses at a university

C: has met the minimum experience requirement

D: holds a license in another state