Michigan Life Insurance State Exam

Under a traditional IRA, interest is taxed:

Upon distribution

Which of these statements concerning Traditional IRAs is CORRECT?

Earnings are taxable when withdrawn

Which of these describes the result of a modified endowment contract that failed to meet the seven- pay test?

Pre- death distributions are typically taxable

In order for a contract to be valid, it must

Contain offer and acceptance

Which of the following actions is REQUIRED by a producer who is replacing an existing life insurance policy?

Submit to the replacing insurer a list of the policies to be replaced

Who were Keogh plans designed to provide pension benefits for?

The self emplyed

A producer's fiduciary duty requires that

Premiums are forwarded on a timely basis

An individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging in

Risk avoidance

A type of group that has a constitution and has been organized for purposes other than obtaining insurance is called a(n)

association or labor group

Which of the following is NOT a federal requirement of a qualified plan?

Employee must be able to make unlimited contributions

The acceptance of a credit life application requires the submission of a certificate of insurance to the insured within __ days.

30

What does the Group Life underwriting risk selection process help protect insurance companies from?

Adverse Selection

A guaranteed issue insurance policy has no

Medical Underwriting

A Universal Life policyowner must receive a notice of cash surrender value at LEAST every

year

A Roth IRA owner must be at least what age in order to make tax free withdrawals?

59 1/2 and owned the account for 5 years

In Michigan, legal action may be taken against an insurer for up to ___ Years for failing to pay a life insurance claim after proof of loss was submitted

6

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount of the policy

Under a life insurance policy, what does the insuring clause state?

The Insurers obligation to pay a death benefit upon an approved death claim

Term insurance is appropriate for someone who

seeks temporary protection and lower premiums

Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds?

Tom

Michigan requires that a licensee complete __ hours of continuing education on the subject of ethics every reporting period

3

What kind of insurance policy issued by a mutual insurer provides a return of divisible surplus?

Participating life insurance policy

Which of these would limit a company's liability to provide insurance coverage?

Exclsuion

How do insurers predict the increase of individual risks?

Law of large numbers

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because

the MEC tends to be an investment vehicle

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?

Equity index whole life

A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability is called a(n)

guaranteed insurability rider

Which type of policy combines the flexibility of a universal life policy with investment choices

Variable universal life policy

Which of the following is an annuity that is linked to a market related index?

Equity indexed annuity

Paul the producer has provided a false statement in relation to an insurance claim. Which illegal act has been committed?

Fraud

Which of the following BEST describes a conditional insurance contract?

A contract that requires certain conditions or acts by the insured individual

All of these are valid policy dividend options for a life insurance policyowner EXCEPT

accumulate without interest

The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?

implied

The period in which there are no Social Security benefits for the surviving spouse is called the

Blackout period

All of the following statements correctly describe the purpose of social security EXCEPT

It provides a source of meaningful standard of living during retirement

All of the following are characteristics of a Group Life Insurance Plan EXCEPT

Individual Underwriting

A non contributory health insurance plan helps the insurer avoid

adverse selection

A type of insurer that is owned by its policyowners is called

Mutual

Which of these factors would an insurer consider when determining whether to accept a group life plan?

Average age

All of these are common exclusions to a life insurance policy EXCEPT

accidental death

What is the automatic continuance of insurance coverage referred to as?

Renewal

A nonparticipating company is sometimes called a(n)

Stock insurer

Insurance companies determine risk exposure by which of the following?

law of large numbers and risk pooling

The act of using misrepresentation to induce an insured person to terminate an existing policy and purchase a new policy is referred to as

Twisting

Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?

The policy may be paid up early by using policy dividends

If an insured dies during the grace period with no premiums paid

the policy would be payable, minus the premium amount

A life insurance policy written on one contract for two people in which it is payable upon the first death is called

Joint

Which of the following is considered to be an act of misrepresentation?

Falsifying the terms, benefits, advantages, or conditions of an insurance policy

A life insurance policy that is subject to a contract interest rate is referred to as

Universal life

What happens to the coverage under a children's term rider when that child reaches a certain specified age?

Coverage is eliminated

Which annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?

Period certain

An annuitant is guaranteed to NOT outlive their benefits with a(n)

Guaranteed lifetime withdrawal benefit

What is the primary purpose of a rating service company such as A.M Best?

Determine financial strength of an insurance company

An example of risk sharing would be

Doctors pooling their money to cover malpractice exposures

Fraternal Benefit Society has each of the following characteristics EXCEPT

Exist for profit

The least expensive option to pay off a 30 year mortgage balance would be

decreasing term life

Erica is 35 years old and owns an IRA. At what age can she begin to receive distributions without a tax penalty?

59 1/2

Which of the following enables a life policy to be replaced with another life policy and results in postponement of the tax consequence?

Section 1035 exchange

Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death?

Results

In the Michigan Insurance Code, Chapter 45, insurance fraud defines financial loss as all of the following EXCEPT

additional premiums

Which contract element is insurable interest a component of?

legal purpose

Which type of annuity stops all payments upon the death of the annuitant

Life annuity

Life insurance policies will normally pay for losses arising from

Commercial aviation

An insurance applicant with a below-average likelihood of loss is typically considered to be a

Preferred risk

A life insurance policyowner does NOT have the right to

revoke an absolute assignment

A foreign insurance company doing business in Michigan

is a company domiciled under the laws of another state

Which of the following is present when an applicant stands to lose value if the insured dies?

Insurable interest

Which of these retirement plans do NOT qualify for a federal income tax deduction?

Roth IRA

What is the purpose of the Medical Information Bureau (MIB)?

To help underwriters evaluate risk

Which of the following annuity payout makes no additional payments regardless of when the annuitant dies?

Life only