Practice exam questions:

The paid-addition option uses the divided:
A. to purchase a one-year term insurance in the amount of the cash value.
B. to purchase a smaller amount of the same type of insurance as the original policy. [correct answer]
C. to accumulate additional saving additional savings for retirement.
D. to reduce the next year’s premium.
An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
A. With the primary beneficary’’s written consent
B. If the primary beneficiary predeceases the insured. [correct answer]
C. If the insured dies from an accident
D. The primary and contingent beneficiaries share death benefits equally.
what would be an advantage to naming a contingent ( or secondary) beneficiary in a life insurance policy?
A. It determines who receives policy benefits if the primary beneficiary is decreased. [correct answer]
B. it requires that someone who is not the primary beneficiary handles the estate
C. It ensures that the policy proceeds will be split between the primary and contingent beneficiaries.
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
A. the policy is rendered null and void
B. the policy beneficiary receives the full death benefit.
C. the balance of the loan will be taken out of the death benefit [correct answer]
D. the policy beneficiary takes over the loan payment
What is the benefit of choosing extended term as a nonforfeiture option?
A. It can be converted to a fixed annuity
B. It has the highest amount of insurance protection [correct answer]
C. it mutates at age 100
D. it allows for coverage to continue beyond the maturity date
Which of the following statements is TRUE about a policy assignment?
A. It is the same as a beneficiary designation
B. It transfers the right of ownership from the owner to another person [correct answer]
C. it authorizes an agent to modify the policy
D. it permits the beneficiary to designate the person to receive the benefits.
Which of the following statements is TRUE about is policy assignment?
A. It is the same as a beneficiary designation
B. It transfers rights of ownership from the owner to another person [correct answer]
C. It authorizes an agent to modify the policy
D. it permits the beneficiary to designate the person to receive the benefits.
An insured died by suicide one year after the life insurance policy was issued. The insurer will
A. pay nothing
B. pay the policy’s cash value,
C. Redund the premium paid [correct answer]
D. pay the full death benefit to the beneficiary
The automatic premium loan provision is activated at the end of the
A. Eliminate period
B. Policy period
C. Free-look period
D. Grace period [correct answer]
Which of the following statements best describes the effect the Accelerated benefit provision would have on the benefits paid to the beneficiary?
A. It will not affect the benefit paid to the beneficiary
B. It will increase the benefits paid to the beneficiary
C. it will decrease the benefits paid to the beneficiary [correct answer]
D. it will reduce the benefits by 70%
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider offering a double indemnity benefit. The insured was severely insured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. How much will the beneficiary receive from the policy?
A. $100,000
B. $0
C. $200,000 [correct answer]
D. $100,000 plus the total of paid premiums
Which of the following riders added to a life insurance policy can be part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

A. Payor benefit

B. Guaranteed insurability

C. Long-term care [correct answer]

D. Accidental death

All of the following are the responsibilities of every long-term care insurer in California EXCEPT:
A. Establish marketing procedures to assure that any comparison of policies will be fair and accurate.
B. Submit to the Commissioner a list of all agents authorized to solicit individual consumers for the sale of long-term care insurance.
C. Provide enough business to solicit long-term care insurance [correct answer]
D. Establish marketing procedures to assure excessive insurance is not sold or issued.
The insured under a $100,00 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by this insured in any manner. In this case, what will the policy beneficiary receive?
A. $0
B. $100,000 [correct answer]
C. $50,000 (50% of the policy value)
D. $300,000 (triple the amount of policy value)
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
A. The beneficiary receives the remainder of the principal amount upon the annuitant’s death
B. It is a life contingency option.
C. It does not guarantee that the entire principal amount will be paid out. [correct answer]
D. Payments can be made in installments and as a single cash refund.
Who breaks all of the investment risk in a fixed annuity?
A. The insurance company [correct answer]
B. the owner
C. the beneficiary
D. the annuitant
All of the following statements are true regarding the installment for a fix. Annual settlement option EXCEPT:
A. the payments are not regulated for life
B. The insurer determines the amount of each payment
C. It is a life contingency option [Correct answer]
D. It will pay the benefits only for the designated period of time
Which of the following will not be an appropriate use of a deferred annuity?
A. Funding a child’s college education
B. Creating an estate [correct answer Creating an estate correct answer]
C. Accumulating retirement funds
D. Accumulating funds in an IRS
Which of the following is not a term for the period of time during which the annuitant or the beneficiary receives income?
A.Payout period
B. Annualization period
C. Liquidation period
D. perception period [correct answer]
What of the following statements are true of a non-qualified retirement plan What of the following statements are true of a non-qualified retirement plan except EXECPT
A. increases of funds are not taxed to receive
B. Contribution or tax-exempt [correct answer]
C. They do not qualify for special tax retirement by the IRS
D. Contribution grow tax-deferred
When an annuity is written, who is life expectancy is taken into account?
A. Beneficiary
B. Owner
C. Life expectancy is not a factor when writing an annuity
D. Annuitant [correct answer]
What determines the penalty of surrendering a market value-adjusted annuity prematurely
A. The fat three are reminded by an index of interest gain and the amount of time and would mature
B. There are no penalties imposed for renting There are no penalties imposed for renting prematurely
C. The current interest rate at the time of the surrender [correct answer]
D. The guaranteed minimum interest rate provided in the contract
Did the annuitant die while the annuity is still in the accumulation stage? Which of the following is true
A. The insurance company will retain the cash value and pay back the premium to the owner’s estate
B. The money will continue to grow tax-deferred until the liquidation period and then will be paid to the beneficiary. The money will continue to grow tax-deferred until the liquidation period and then will be paid to the beneficiary
C. The owners of the state who received the money paid into the annuity
D. The beneficiary will receive the greater of the money paid into an annuity or the cash value [correct answer]
During the free look. The premium for a variable annuity may be invested in all of the following, except.
A. Money market funds
B.Fixed income investment
C. Mutual funds (only upon the investor's request)
D. Value funds [correct answer]
Which of the following is true regarding a policy with a face value of less than $10,000?
A. If it’s returned during the free look. The agreement will be void. [coorect answer
B. An insured cannot return the policy
C. If it’s returned during the free period the contract will be canceled, but the insurance will be remaining the premium paid
D. The policy can be canceled with a full refund of the premium at any time
A legally acceptable attempt by an exiting insurer to dissuade a current policy owner from the replacement of existing life insurance is called
A. Solicitation
B. Rebating
C. Conservation [correct answer]
D.Retention
During the cancellation period, an insurer must refund any premiums and policy fees within how many days of written cancellation by the insured?
A. 60
B. 10
C. 20
D. 30 [correct answer]
The notice to senior consumers regarding their to cancel to policy must be printed on the cover or policy jacket in at least what type of print?
A. 14-point standard print
B. 12-point bold print [Correct answer]
C. 12-point standard print
D. 14-point bold print
During the replacement of life insurance, a replacing insurer must do which of the following?
A. Obtain a list of all insurance policies that will be replaced. [correct answer]
B. Guarantee a replacement for each existing policy.
C. designate a new producer for a replacement policy
D. send a copy of the notice regarding replacement to the Department of Insurance.
Every individual life insurance policy must provide for a free-look provision that lasts for at least
A. 10 Days [correct answer]
B. 90 Days
C. 60 days
D. 30 days
The protection of the insurer from adverse selection is provided in part by,
A. Reducing cost
B. A drop in applicants
C. A reduction in coverage
D. A profitable distribution of exposures [correct answer]
Which of the following is NOT an example of valid insurable interest?
A. Debtor in the life of the creditor [correct answer]
B. Child in parents’ lives
C. Business partners in each other’s lives
D. Employer in key employee’s life
If an applicant for a life insurance policy and the person to be insured by the policy are two different people, the underwriter would be concerned about,
A. Which individual will pay the premium
B. The type of policy requested
C. Whether an insurable exists between the individuals [correct answer]
D. THe gender of the applicant.
In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following
A. Truthfulness of such statement being made.
B. Amount of information that has been previously disclosed through the inquiry process.
C. Interpretation that the seller places on such information in the agreement
D. Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract. [correct answer]
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses converted by the policy. What contract element does this describe?
A. conditional
B. Aleatory
C. Unilateral [correct answer]
D. Unidirectional
All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT
A. An international omission in determining if a warranty is false
B. The amount of paid exceeds the premiums paid [ correct answer]
C. The Violation of a material warranty
D. When concealment is unintentional
All of the following must be specified in an insurance policy EXCEPT
A. The parties between whom the contract is made
B. The period during which the insurance is in force
C. The financial rating of the insurer [correct answer]
D. The risks insured against.
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a converted loss, what characteristic of an insurance contract does this describe?
A. Adhesion
B. Aleatory [correct answer]
C. Good health
D. Conditional
Which of the following would qualify as an implied warranty in an insurance contract?
A. An oral representation by the applicant [correct answer]
B. Contract’s legal purpose
C. The applicant’s signature
D. Statement in the policy
Who is protected by a Temporary Insuring Agreement?
A. Only the applicant
B. Only the insurer
C. The policy beneficiary
D. The applicant and the insurer [Correct answer]
A key person insurance policy can pay for which of the following?
A. Loss of personal income
B. Hospital bills of the key employee
C. Workers compensation
D. Costs of training a replacement [correct answer]
An applicant is denied insurance because of information found in a consumer report. Which of the following require of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
A. Fair Credit Reporting Act [correct answer]
B. Disclosure rule
C. Consumer Privacy Act
D. Conditional Receipt
A life insurance Policy can be delivered by all of the following means, EXCEPT
A. Personal delivery by a trained employee of the insurer, with a delivery receipt
B. Priority Mail [correct answer]
C. First-class mail with a delivery receipt
D. Certifies mail
Which of the following information about the applicant is NOT Included in the General information section of the application for insurance?
A. Martal status
B. medical background [correct answer]
C. Gender
D. Occupation
Stranger-originated life insurance policies are in direct opposition to the principle of
A. Good faith
B. Law of larger numbers
C. Insurable interest [correct answer]
D. Indemnity
The premium of a survivorship life policy compared with that of a joint life policy would be
A. Higher
B. As high
C. Lower [correct answer]
D. Half the amount
A return of premium term life policy is written as what type of term coverage?
A. decreasing
B. level
C. Renewable
D. Increasing [correct answer]
Which of the following policies would have an IRB required or a gap between the cash value and the death benefit?
A. Universal Life- Option A [ Correct answer]
B. Universal Life- Option B
C. Variable Universal Life
Which of the following best defines target premium in a universal life policy?
A. The recommended amount to keep the policy in force throughout its lifetime [correct answer]
B. THe minimum amount to make sure the policy is annually renewable
C. The maximum amount the policy owner may pay on a policy
D. The corridor of insurance
what is another name for interest-sensitive whole life insurance?
A. Variable life
B. Term life
C. Current assumption life [correct answer]
D. Adjustable life
Which of the following policies would be classified as a traditional-level premium contract?
A. Varaible Universial life
B. Universal life
C. straight life [correct answer]
D. Adjustable Life
How is Social Security funded?
A. federal grant money
B. sales tax
C. taxes imposed on a woorke’s earned income [correct answer]
D. state payroll taxes
Employer contributions made to a qualified plan
A. Are after-tax contributions.
B. May Discriminate in favor of highly paid employees
C. Are subject to vesting requirements [correct answer]
D. Are taxed annually as salary
which of the following is TRUE of a qualified plan?
A. It may discriminate in favor of highly paid employees
B. It may allow unlimited contributions
C. it does not need to have a vesting schedule
D. It has a tax benefit for both employer and employees [correct answer]
All of the following are examples of their-party ownership of a life insurance policy EXCEPT
A. When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company.
B. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan [correct answer]
C. A company purchases a life insurance policy on their manager, who is an important part of the operation
D. An insured couple purchases a life insurance policy insuring the life of their grandson
In a single employer group plan, what is the name of the policy issued to the employer?
A. Employer-insurer contract
B. certificate of authority
C. Master Contract [correct answer]
D. Certificate of insurance
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage plan if terminated?
A. Those who have been insured under the plan for at least 5 years [correct answer]
B. Those who have worked in the company for at least 3 years
C. Those who have dependents
D. those who have no history of claims
For a retirement plan to be qualified, it must be designed for the benefit of
A. Key employee
B. Employer
C. Employees [correct answer]
D. IRS
If an employee wants to enter the group outside of the enrollment period, to reduce adverse selection, the insurer may:
A. Require a higher premium
B. Impose medical requirements on existing members
C. Require evidence of insurability. [correct answer]
Who is the third-party owner?
A. An irrevocable beneficial
B. A policy owner who is not insured [correct answer]
C. An insurer who issues a policy for two people
D. An employee in a group policy
An insured decided to surrender his $100,000 whole-life policy. The premiums paid into the policy added up to $15,000, At policy surrender, the cash surrender was $18,000. What part of the surrender value would be income taxable?
A. $18,000
B. $3,000 [correct answer]
C. 15,000
D. 50,000
Life insurance death proceeds are
A. Taxed as a capital gain
B. Taxable to the extent that they exceed 7.5% of the beneficiary’s adjusted gross income.
C. Generally not taxed as income [ correct answer]
D. Taxed as ordinary income.
What method is used to determine the taxable portion of each annuity payment?
A. THe excise ration
B. The marginal tax formula
C. The annuity-to-age ratio
D. The exclusion ratio [correct answer]
Which of the following best describes taxation in the accumulation period of an annuity?
A. The growth is subject to immediate taxation.
B. Taxes are deferred [correct answer]
C, The annuity is subject to both state and federal taxation
D. The annuity is subject to state taxes only
A policy wants to exchange a life insurance policy for an annuity. This nontaxable is called:
A. rollover
B. Qualified distribution
C. 1035 exchange [correct answer]
D. Early withdrawal
Which of the following statements regarding the taxation of Modified contracts is FALSE?
A. Policy loans are taxable distributions
B. Withdrawals are not taxable [correct answer]
C. Distributions before age 59/12 incur a 10% penalty on policy gains
D. Accumulations are tax-deferred.
An applicant buys a nonqualified and dies before the starting date, For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?
A. Dependents
B. Annuitant
C. Spouse [correct answer]
D. Charitable organization
When contributions to an immediate annuity are made with before-tax dallors, which of the following is true of the distribution?
A. There are no distributions
B. Distributions cannot begin prior to age 73
C. Distributions are taxable [correct answer]
D. Distribution are nontaxable
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten, which of the following would be taxable annually?
A. $3,000 (correct answer)
B. 10,000
C. $7,000
D $13,000
If taken as a lump sum, life insurance proceeds to beneficiaries passed:
A. Part tax-free and part taxable
B. Tax deductible
C. Without interest
D. free of federal income taxation [correct answer]
An insured has a Modified endowment contract. He wants to withdraw some money to pay medical bills. Which of the following is true?
A. He will have to pay a penalty if he is younger than 59 ½ [correct answer]
B. He will have to pay a penalty regardless of his age.
C. He cannot withdraw money from his MEC before age 59 ½
D. He will not have to pay a penalty, regardless of his age.
The insured provided a proof of claim to the
A. insured
B. commissioner
C. Guarantee Association
D. Insurer [Correct answer
The insured provides proof of claim to the:

A. Insured

B. Commissioner

C. Guarantee Association

D. Insurer [correct answer]

74: When a discounted policy contains a death benefit, what term is used in the CIC to describe the length of the applicable extension of benefits?

A. Reasonable [Correct Anwer]

B. Until death or cancellation

C. Insurer’s discretion

D. Client’s Description

Which of the following can an insured submit that would provide evidence of a claim and illustrate how severe the loss is?
A. Proof of claim [correct answer]
B. Petition of remittance
C. Statement of claim
D. Notification of loss
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the pol
A. Rebating [Correct answer]
B. False advertising
C. Coercion
D. Twisting
In a life settlement contract, whom does the life settlement broker represent?
A. The life settlement intermediary
B. The beneficiary
C. The insurer
D. The owner [correct answer]
Which of the following best describes an insurance company that has been formed under the laws of this state?
A. Domestic [correct answer]
B. Local
C. Sovereign
D. Admitted
Which of the following terms means a result of a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
A. Mortality rate
B. Life expectancy [correct answer]
C. Morbidity
D. Risk Exposure
Which of the following is NOT considered an insurance fraud red flag?
A. Inconsistent answer
B. Refusal to allow inspection of collateral
C. Wanting liability coverage on an old vehicle [Correct Answer]
D. Insisting coverage be bound immediately
To Comply with the Insurance Frauds Prevention Act and the California Regulations, insurance companies must do which of the following?
A. Establish a Special Investigative Unit [correct answer]
B. Always hire a disinterested third party for fraud investigation
C. Develop mandatory anti-fraud training for employees
D. Sign up for the FBI’s white-collar crime program
What is the focus of the Fraud Division within the Enforcement Branch?
A. Fraud committed against the insurer [correct answer]
B. Fraud committed against the consumer
C. Fraud committed by agents or brokers
D. Fraud committed against elder/seniors
In which of the following cases will the insured be able to receive the full face amount from a whole-life policy?
A. If there are no named beneficiaries when the policy is paid up
B. At age 65
C. If the insured lives to age 100 [correct answer]
D. As soon as the cash value exceeds the face amount
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives an annuity. When the wife dies the husband no longer receives annuity payments. What type of annuity did the couple buy?
A. Joint and survivor
B. Life with period certain
C. Joint limited annuity
D. Joint life [correct answer]
Any insurance agent who commits a repeated violation of the Insurance Code with respect to instance replacement will be liable for
A. An administrative penalty of no less than $5,000 and no more than $50,000 per violation [correct answer]
B. An administrative penalty of no less than $30,000 and have his/her license revoked.
C. A penalty not to exceed $1,000 per violation
D. A criminal penalty of up to $10,000
What is the penalty tax on premature distribution from a modified endowment contract (MEC)?
A. 6%
B. 10% [correct answer]
C. There is no penalty on MEC
D. 20%
Which of the following is TRUE about nonforfeiture values?
A. Policyowners do not have the authority to decide how to exercise nonforfeiture values.
B. They are optional provisions
C. A table showing nonforfeiture values for the next 10 years must be included in the policy.
D. They are required by state law to be included in the policy. [correct answer]
What is the purpose of annuity riders?
A. To increase the cost of an annuity
B. To provide more annuity products to consumers
C. To allow investors to obtain additional benefit [correct answer]
D. To allow an annuity to build cash value.
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
A. Consideration
B. Stop-loss
C. Reasonable expectations
D. Indemnity [correct answer]
Which employees of an insurance company are responsible for the final risk selection?
A. Underwriters [correct answer]
B. Executive officers
C. Accountants
D. Producers/agent
The policy owner of a Universal Life policy may skip playing the premium and the policy will not lapse as long as
A. The policy contains sufficient cash value to cover the cost of insurance. [correct answer]
B. The next month’s premium is sufficient to cover both the current premium amount and the skipped amount
C. THe previous payments were high enough to create an excess premium.
D. The policy owner cannot skip premiums without the policy lapsing.
When the policy owner specified a dollar amount in which installments are to be paid, which settlement options are that?
A. Life income period certain
B. Fixed period
C. Extended term
D. Fixed amount [correct answer]
In addition to penalties, fines, and possible imprisonment for violating the provision relating to misrepresentation, the commissioner may suspend the license of such person for a period up to
A. 6 months
B. 1 years
C. 5 years
D. 3 years [correct answer]
A life insurance policy has a legal purpose if both of which of the following elements exist?
A. Policyowners and named beneficiaries
B. Offer and counteroffer
C. Underwriting and reciprocity
D. Insurable interest and consent [correct answer]
If a policy includes a free-look period of at least 10 days, the Buyer’s Guide may be delivered to the applicant no later than
A. With the policy [ correct answer]
B. Within 30 days after the first premium payment was collected
C. upon issuance of the policy.
D. Prior to filling out an application for insurance
Which of the following statements is Not, true regarding an insurance solicitor in California?
A. A solicitor cannot act at the same time.
B. A solicitor must be a natural person
C. A solicitor aids in transecting insurance other than life.
D. A solicitor may act as an insurance agent at the same time [correct answer]
The premiums paid by the employer in a business life insurance policy are
A. Always taxable to the employee
B. Tax deductible by the employee.
C. Never taxable to the employee.
D. Tax deductible by the employer. [correct answer]
Which of the following annuity riders ensures that the owner will receive from an annuity at least the amount paid for the annuity?
A. Guaranteed Lifetime Withdrawal [Correct answer]
B. Guaranteed Lifetime Earning
C. Guaranteed Minimum Accumulation
D. Guaranteed Minimum Income
Nonforfeiture value guarantee which of the following for the policy owner?
A. That the death benefit will be paid in a lump sum
B. That the cash value will not be lost [correct answer]
C. That the dividends will be paid annually
D. That the policy premiums will never increase
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
A. Nonforfeiture Clause
B. Settlement Clause
C. Spendthrift Clause
D. Common Disaster Clause