Final Exam - Pennsylvania Life Only

Which contract element is insurable interest a component of?

Legal purpose

When calculating the amount of life insurance needed for an income earner, what has to be determined when using the Needs Approach?

The family's financial objectives if the income earner were to die or become disabled

Agreements made by terminally ill persons to sell their life insurance policies at a discount in order to pay medical expenses are called

Viatical settlements

______ is NOT an element of a valid contract.

Countersignature

A licensee can have his/her license denied or revoked by the Commissioner if

the licensee has committed insurance-related fraud or dishonesty

When a producer offers something of value in return for the purchase of an insurance policy, which prohibited sales practice has been committed?

Inducement

The coverage, conditions, and limitations in the master policy of a group contract can be found in which document?

Certificate of coverage and benefits

What is an insurance policy's grace period?

Period of time after the premium is due but the policy remains in force

Which of these factors help determine an insured's life insurance premium?

avocation (hobby)

If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?

A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age

Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?

Accumulation period

What is the name of the provision which states that a copy of the application must be attached to the policy when issued?

Entire Contract

Which type of life insurance is normally associated with a Payor Benefit rider?

Juvenile insurance

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

Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's

income period

Which of the following policies does NOT build cash value?

Term

When collecting insurance premiums from a client, a producer MUST

forward premiums to the insurer on a timely basis

The free-look provision gives the policyowner

the right to return the policy for a full refund within a specified number of days

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

Section 1035 exchange

Which of these is a method of determining the level of funds required for ongoing support in the event of the breadwinner's death?

Human life value

What does the word "level" in Level Term describe?

The face amount

Ambiguities in an insurance policy are always resolved in favor of the

insured

A life insurance policyowner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability?

Disability income rider

Which of the following describes a person who is NOT acceptable by an insurer at standard rates because of health history, occupation, or hobbies?

Substandard risk

Which of these is considered to be a Living Benefit option in a life insurance policy?

Accelerated death benefit

Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?

Temporary annuity certain

Producers must complete a total of ___ Continuing Education credits for each two-year licensing period.

24

An Accelerated Death Benefit in Pennsylvania must be at least what percentage of the total death benefit?

25%

Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?

A good health statement

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life income

A producer's license CANNOT be revoked without

a hearing given to the producer

In what part of an insurance policy are policy benefits found?

Declarations

Under a contract of adhesion,

the terms must be accepted or rejected in full

Any of the following may be an unfair claims practice EXCEPT

Refusing to pay persons bringing false or fraudulent claims

Fixed period settlement options are considered to be a form of a(n)

annuity

Which of the following statements about the contestability of a life insurance policy is true?

The policy can be contested by the insurer only during the first two years of the contract

An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called

Partial Surrender

What is the primary reason for buying an annuity?

Provide future economic security

A rollover from a Traditional IRA to another IRA MUST be done within ___ days to avoid tax consequences.

60

All of the following are exempt from the 10% tax penalty for early qualified plan withdrawals EXCEPT

Stock purchase

Which of these would be the best example of a limited pay life insurance policy?

Whole life policy with premiums paid up after 20 years

Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?

Life annuity certain

During the first two years a life insurance policy is in force, the insurer may contest a policy for all of the following reasons EXCEPT

Misstatement of age in the application

In Pennsylvania, what's the requirement for a minor to receive proceeds from a death benefit?

A guardian must be appointed

A policyowner is prohibited from making any changes to the policy without the beneficiary's written consent under which beneficiary designation?

Irrevocable beneficiary

The premium for a Modified whole life policy is

lower than the typical whole life policy during the first few years and then higher than typical for the remainder

A spouse and child can be added to the primary insured's coverage as what kind of rider?

Family term

How do interest earnings accumulate in a deferred annuity?

On a tax-deferred basis

In Pennsylvania, who is responsible for Continuing Education (CE) course content approval?

Commissioner

Which of the following is a violation of Pennsylvania insurance law?

Offering insurance contracts through unlicensed entities

Which of these is NOT a characteristic of the Accelerated Death Benefit option?

The benefit can be offered as a rider at a specific extra cost or may be at no cost

Legal purpose is a term used in contract law meaning

there must be legal reasons for entering into the contract

The promise of a discount in premium as an inducement to purchase insurance is an Unfair Trade Practice known as

Rebating

When an applicant for a producer's license has a principal place of residence or business location in Pennsylvania, for licensing purposes the State of Pennsylvania is known as the

home state

A Modified Endowment Contract (MEC) is best described as

A life insurance contract which accumulates cash values higher than the IRS will allow

Which of these riders will pay a death benefit if the insured's spouse dies?

Family term insurance rider

The two major actions required for a policyholder to comply with the Reinstatement Clause are

provide evidence of insurability, pay past due premiums

An applicant's character and personal habits can be obtained for underwriting purposes from which source?

Investigative consumer report

An endorsement found in an insurance plan which modifies the provisions of the policy is called a(n)

rider

Viatical settlement brokers send packets of information to potential viatees. These information packets normally include existing policy terms and which of the following?

Viator's medical prognosis

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

adverse selection

A limited payment whole life policy provides

lifetime protection

Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)?

Death benefit

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

Roth IRA

In an insurance contract, the element that shows each party is giving something of value is called

consideration

A transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered is called

Replacement

Craig purchased a life insurance policy for enabling his heirs to pay estate taxes. What is this called?

Estate conservation

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called

A self-funded plan

Which of these is NOT considered to be a common life insurance nonforfeiture option?

Life income annuity

Which market index is normally associated with an indexed annuity's rate of return?

S & P 500

A change in an insurance application requires

an initial made by the applicantv

A life insurance policy which contains cash values that vary according to its investment performance of stocks is called

Variable Whole Life

A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that

The policyowner may need to resume premium payments depending on actual results

James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount?

The death benefit paid will be what the premium would have purchased at the correct age

Which type of multiple protection policy pays on the death of the last person?

Survivorship life policy

An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if

the insured outlived the beneficiary

Which of these is considered a major tax advantage of life insurance?

Income tax is typically not owed on proceeds paid directly to a beneficiary

Which of the following does a life insurance policy summary normally include?

The policy's cash value

Insurance companies determine risk exposure by which of the following?

Law of large numbers and risk pooling

Which of the following is a person who negotiates an insurance contract on behalf of an insurer?

Producer

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

How does life insurance create an immediate estate?

After first premium is paid, the face amount may be available to the beneficiary

A beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed?

No federal income tax is owed on life insurance proceeds

The type of multiple protection coverage that pays on the death of the last person is called a(n)

survivorship life policy

During the accumulation period, who can surrender an annuity?

Policyowner

The Fair Credit and Reporting Act's main purpose is to

protect consumers with guidelines regarding credit reporting and distribution

In Pennsylvania, completion of continuing education is required upon license renewal for which of the following?

Licensed individuals qualified in major lines of insurance

A whole life policy option where extended term insurance is selected is called a(n)

nonforfeiture option

Under a Traditional IRA, interest earned is taxed

upon distribution

What happens to interest earned if the annuitant dies before the payout start date?

It is taxable

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

Individual underwriting

In Pennsylvania, an insurance producer license can be denied for failure to pay each of the following. EXCEPT?

Property tax

The Pennsylvania Insurance Department is responsible for each of the following EXCEPT

Shareholders

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

Equity-indexed annuity

According to Pennsylvania law, which of the following is NOT considered to be personally identifiable financial information?

Blind trust data that does not include names and addresses

An insurance producer is often responsible for field underwriting during the application process. All of these are possible field underwriting roles EXCEPT

providing commission information to the applicant

The free look period provided in a life insurance policy is usually

10 days

What is considered to be the primary reason for buying life insurance?

Provide death benefits

All of the following are considered appropriate uses of life insurance for business purposes EXCEPT

Protecting the business by covering entry level employees with life insurance

Pennsylvania law requires that an insurer must notify the Commissioner of a producer appointment termination

within 30 days of termination