CA Life Insurance Agent Flashcards
Life Insurance Agent's License test (240 cards)
1
Q
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy’s cash value, which is currently $20,000. What would be the face amount of the new term policy?
A
$50,000
2
Q
The act of revoking or terminating an insurance policy is called
A
Cancellation
3
Q
In a survivorship life policy, when does the insurer pay the death benefit?
A
Upon the last death
4
Q
Attempting to determine how much insurance an individual would require based upon their financial objectives is known as
A
Needs approach
5
Q
For the purpose of a contract, which of the following could be considered a “person”?
a) An association
b) A business trust
c) A limited liability corporation
d) Any of these would qualify as a person
A
Any of these would qualify as a person
6
Q
In a group life insurance policy, the employer may select all of the following EXCEPT
a) The type of insurance.
b) The amount of insurance.
c) The premium payor.
d) The beneficiary.
A
The beneficiary.
7
Q
Insurance is the transfer of
A
Risk
8
Q
What is a major problem with naming a trust as the beneficiary of a life insurance policy?
A
They are expensive to administer.
9
Q
What type of insurance policy would perform the function of cash accumulation?
A
Whole life
10
Q
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
A
Cash option
11
Q
Profitable distribution of exposures serves the purpose of
a) Preventing the insurer from being stopped.
b) Helping the insurer determine payable benefits
c) Protecting the insurer against adverse selection
d) Helping the insurer select only the ideal insurable risks
A
Protecting the insurer against adverse selection
12
Q
A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?
A
Business overhead expense policy
13
Q
During the free-look period, the premium for a variable annuity may be invested in all of the following EXCEPT
a) Money-market funds.
b) Mutual funds (only upon the investor’s request).
c) Value funds.
d) Fixed-income investments.
A
Value funds
14
Q
Which of the following insureds has a right to cancel an individual life policy within 30 days?
a) All insureds
b) Insureds who have dependents only
c) Insureds age 55 1/2 or older
d) Insureds 60 years of age of older
A
Insureds 60 years of age of older
15
Q
The title page of the policy provides a summary of the benefits and coverages provided by the policy. All of the following information is included in the title page EXCEPT
a) Type of policy, amount of coverage provided.
b) The premium amount and modal.
c) The effective date and the termination date of the policy.
d) The insured’s beneficiaries
A
The insured’s beneficiaries
16
Q
The insured under a $100,000 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 the insured in any manner. In this case, what will the policy beneficiary receive?
A
$100,000
17
Q
Every individual life insurance policy must provide for a free-look provision that lasts for at least
A
10 days
18
Q
All of the following are requirements for life insurance illustrations EXCEPT
a) They may only be used as approved.
b) They must identify nonguaranteed values.
c) They must differentiate between guaranteed and projected amounts.
d) They must be part of the contract.
A
They must be part of the contract
19
Q
If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?
A
Lump sum
20
Q
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
A
One-year term option
21
Q
Which of the following does NOT need to be identified in an insurance policy?
a) A statement of insurable interest
b) The first named insured
c) The insurer’s financial rating
d) The stated periodic premium
A
The insurer’s financial rating
22
Q
What describes the specific information about a policy?
A
Policy summary
23
Q
What does “liquidity” refer to in a life insurance policy?
a) The death benefit replaces the assets that would have accumulated if the insured had not died.
b) The policyowner receives dividend checks each year.
c) The insured receives payments each month in retirement.
d) Cash values can be borrowed at any time.
A
Cash values can be borrowed at any time
24
Q
If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT
a) Utilities.
b) Employee payroll.
c) Loss of the owner’s income.
d) Rent.
A
Loss of the owner’s income
25
All of the following entities regulate variable life policies EXCEPT
a) The SEC.
b) The Insurance Department.
c) The Guaranty Association.
d) Federal government.
The Guaranty Association
26
Which of the following are generally NOT considered when underwriting group insurance?
a) The size of the group
b) The insureds' medical history
c) The nature of the group
d) The group’s past claim experience
The insureds' medical history
27
A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?
a) Inflation Rider
b) Cost of Living Rider
c) Value Adjustment Rider
d) Return of Premium Rider
Cost of Living Rider
28
In insurance, an offer is usually made when
a) The completed application is submitted.
b) The insurer approves the application and receives the initial premium.
c) The agent hands the policy to the policyholder.
d) An agent explains a policy to a potential applicant.
The completed application is submitted
29
A tornado that destroys property would be an example of
a peril
30
An agent with an active license CANNOT act as a broker unless
a) He is designated by his company as an appointed broker.
b) He is on the Commissioner’s list of appointed brokers.
c) He does not have an appointment with the company that he is brokering.
d) He has satisfied the mandatory licensing requirements for “broker” status.
He does not have an appointment with the company that he is brokering
31
The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
a) The death benefit can be increased only when the policy has developed a cash value.
b) The death benefit can be increased only by exchanging the existing policy for a new one.
c) The death benefit can be increased by providing the evidence of insurability.
d) The death benefit cannot be increased.
The death benefit can be increased by providing the evidence of insurability.
32
All of the following topics may be included in the continuing education requirement for long-term care insurance EXCEPT
a) Alternatives to the purpose of private long-term care insurance.
b) The effect of inflation in eroding the value of benefits and the importance of inflation protection.
c) Sales techniques and overcoming client objectives in the purchase of long-term care insurance.
d) Available long-term care services and facilities.
Sales techniques and overcoming client objectives in the purchase of long-term care insurance.
33
All of the following are true about variable products EXCEPT
a) Policyowners bear the investment risk
b) The premiums are invested in the insurer's general account
c) The minimum death benefit is guaranteed
d) The cash value is not guaranteed
The premiums are invested in the insurer's general account
34
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
a) The surrender charge is a percentage of the cash value and decreases over time.
b) The surrender charge is always 7% of the cash value.
c) The surrender charge is a flat fee determined by the annuity owner when the annuity is purchased.
d) The surrender charge will increase as the accumulation increases.
The surrender charge is a percentage of the cash value and decreases over time.
35
Which of the following ultimately determines the interest rates paid to te owner of a fixed annuity?
a) Investment performance of the company
b) Investment performance of the insured
c) Statewide predetermined annual interest rate
d) Insurer's guaranteed minimum rate of interest
Insurer's guaranteed minimum rate of interest
36
Which of the following is the best reason to purchase life insurance rather than annuities?
a) To liquidate a sum of money over a period of years.
b) To create regular income payments
c) To liquidate a sum of money over a lifetime
d) To create an estate
To create an estate
37
One of the advantages of a family life insurance policy that provides coverage for children is that it
a) Allows the spouse extra coverage for every child coverage
b) Allows any income the children make to be included in coverage
c) May be converted to permanent insurance for the children without requiring evidence of insurability
d) Covers children for free
May be converted to permanent insurance for the children without requiring evidence of insurability
38
In which of the following examples would a contract between an insurer and prospective insured be legal?
a) The applicant is intoxicated at the time of application
b) The applicant is a 12-year-old student
c) The applicant is under the influene of a mind-impairing medication at the time of application
d) The applicant has a prior felony conviction
The applicant has a prior felony conviction
39
Using a class designation for beneficiaries means
a) Naming the estate as the beneficiary
b) Naming each beneficiary by his/her name
c) Naming beneficiaries as a group
d) Not naming beneficiaries
Naming beneficiaries as a group
40
During the accumulation period ina nonqualified annuity, what are the tax consequences of a withdrawal?
a) Nontaxable principal may be withdrawn first, but the 10% penalty will be imposed if under the age 59 1/2
b) Both interest and principal are taxed; no other penalties are imposed
c) Neither interest nor principal is taxed, but penalties may be imposed
d) Taxable interest will be withdrawn first and the 10% penalty will be imposed if under the age 59 1/2
Taxable interest will be withdrawn first and the 10% penalty will be imposed if under the age 59 1/2
41
Which of the following is TRUE about credit life insurance?
a) Debtor is the olicy beneficiaty
b) Creditor is the policyowner
c) Debtor is the annuitant
d) Creditor is the insured
Creditor is the policyowner
42
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2,500
43
Which of the following best defines earned surplus?
a) Dividends paid to policyholders
b) Insurer's unassigned funds
c) Insurer's expenses and liabilities
d) None of the above
Insurer's unassigned funds
44
What allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit
45
The wrongful act or the violation of someone's rights that leads to legal liability
Tort
46
If a life insurance policy has an irrevokable beneficiary designation,
a) The owner can always change the beneficiary at will
b) The beneficiary cannot be changed
c) The beneficiary can only be changed with a written permission of the beneficiary
d) The beneficiary cannot be chnged for at least 2 years
The beneficiary can only be changed with a written permission of the beneficiary
47
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
a) When the agent submits the application and the company issues a conditional receipt
b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statemtent of Good Health
c) On the designated effective date
d) On the appliction date
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statemtent of Good Health
48
Which of the following is NOT a characteristic of pure risk?
a) The loss must be masurable in dollars
b) The loss exposure must be large
c) The loss must be catastrophic
d) The loss must be due to chance
The loss must be catastrophic
49
All of the following are true regarding a decreasing term policy EXCEPT
a) The payable premium amount steadily declines throughout the duration of the contract.
b) The death benefit is $0 at the end of the policy term
c) The contract pays only in the event of death during the term and there is no cash value
d) The face amount steadily declines throughout the duration of the contract
The payable premium amount steadily declines throughout the duration of the contract.
50
What insured has a right to cancel an individual life policy within 30 days?
Insureds 60 years of age or older
51
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract
52
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term for the policy's cash value, which is currently $20,000. What would be the face amount on the new term policy?
$50,000
53
Harry has just recieved his life insurance policy. In reviewing the title page, Harry was ascertain the following information EXCEPT
a) His total annual premium amount
b) His spouse had been assigned the primary beneficiary
c) His children have been covered by a child rider
d) He had purchased a 20 year renewable term insurance policy in the face amount of $150,000
His spouse had been assigned the primary beneficiary
54
If the applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about
whether the insurable interest exists between the individuals
55
Concerning AIDS and HIV risks, all of the following acts may be subject an insurer to liability claims or fines EXCEPT
a) Declining applicant for a positive HIV test result
b) Not providing counseling contacts and educational information about HIV and AIDS
c) Disclosing test results to third party without applicant's consent
d) Requiring applicant to pay for HIV test in order to be underwritten
Declining applicant for a positive HIV test result
56
Which of the following is TRUE regarding the accumulation period of an annuity?
a) It is a period of time during which the beneficiary recieves income
b) It is limited to 10 years
c) It is a period during which the payments into the annuity grow tax deferred
d) It is also referred to as the annuity period
It is a period during which the payments into the annuity grow tax deferred
57
An applicant wants to buy a life-insurance policy in which he can count on recieving the same benefits as stated in the contract. Which type should he buy?
Fixed
58
When a beneficiary recieves payments consisting of both principal and interest portions, which parts are taxable as income?
Interest only
59
Which of the following is true regarding a single life settlement option?
a) Payments continue until the entire principal is exhausted
b) Proceeds are paid out in a lump sum
c) It provides income for a specified period of time
d) It provides income the beneficiary cannot outlive
It provides income the beneficiary cannot outlive
60
Which of the following statements regarding Business Overhead Expense policies is NOT true?
a) Benefits are usually limited to six months
b) Premiums paid for BOE are tax-deductible
c) Any benefits recieved are taxable to the business
d) Leased equipment expenses are covered by the plan
Benefits are usually limited to six months
61
According to the Code, how many separate requirements should an insurance policy have?
6
62
What determines the cash value of a variable life policy?
The performance of the policy portfolio
63
A policy which pays monthly income upon a death of the breadwinner for a predetermined number of years after death, plus a lump sum at death, and combines level term at whole life is
Family maintenance
64
What is another term for the accumulation period of an annuity?
Pay-in period
65
What kind of policy issues certificates of insurance to insureds?
Group insurance
66
Which of the following is true regarding a policy with a face value less than $10,000?
a) The policy can be cancelled with full refund of premium at any time
b) If it is returned during the free-look period, the agreement will be void
c) An insured cannot return the policy
d) If it is returned during the free-look period, the contract will be cancelled, but the insurer will retain the premium paid
If it is returned during the free-look period, the agreement will be void
67
During the free-look period, the premium for a variable annuity may be invested in all of the following EXCEPT
a) Mutual funds (only upon the investor's request)
b) Value funds
c) Fixed-income investments
d) Money-market funds
Value funds
68
Stranger-originated life insurance policies are in direct opposition to the principle of
Insurable interest
69
What insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only recieve benefits for the amount lost?
Indemnity
70
A situation in which a person can only lose or have no change represents
Pure risk
71
A corporation is the owner and beneficiary of the key person life insurance policy. If the corporation collects the policy benefit, then
a) IRS has no jurisdiction
b) The benefit is received as taxable income
c) The benefit is received tax free
d) The benefit is subject to the exclusionary rule
the benefit is received tax free
72
All of the following are true regarding installments for a fixed period annuity settlement option EXCEPT
a) The insurer determines the amount for each payment
b) It is a life contingency option
c) It will pay the benefit only for a designated period of time
d) The payments are not guaranteed for life
It is a life contingency option
73
Which of the following best describes the policy nonrenewal?
a) Voiding of a policy due to a misrepresentation on the application
b) Revocation of one's insurance policy by the insurer
c) Discontinuance of an insurance policy by the insured on the policy anniversary date
d) Return of the policy after a 10-day free look
Discontinuance of an insurance policy by the insured on the policy anniversary date
74
The failure to disclose known facts
Concealment
75
All of the following are true regarding a qualified annuity EXCEPT
a) Funds accumulate on a tax-deferred basis
b) Employer contributions are not counted as income to the employee while the plan is in force
c) At distribution, all amounts recieved by the employee are tax free
d) Employer conttributions are tax deductible as ordinary business expense
At distribution, all amounts recieved by the employee are tax free
76
Which of the following is NOT true regarding the annuitant?
a) The annuitant's life expectancy is taken into consideration for the annuity
b) The annuitant recieves the annuity benefits
c) The annuitant must be a natural person
d) The annuitant cannot be the same person as the annuity owner
The annuitant cannot be the same person as the annuity owner
77
What document delivered to the policyowner includes information about premium amounts, cash values, surrender values, and death benefits for specific policy years?
A policy summary
78
When a life insurance policy was issued, the policyowner designated a primary and a contigent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it wa impossible to determine who died first. Which of the following would recieve the death benefit?
a) The insured's contingent beneficiary
b) The insirance company
c) The insured's estate
d) The primary beneficiary's estate
The insured's contingent beneficiary
79
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
a) Apparent
b) Assumed
c) Express
d) Implied
Implied
80
The annuity owner dies while the annuity is still in te accumulation stage. Which of the following is TRUE?
a) Because the annuization period has not started, the owner's estate will recieve the money paid into the annuity
b) The insurance company will retain the cash value and pay back the premiums to the owner's estate
c) The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary
d) The beneficiary will recieve the greater of the money paid into the annuity or the cash value
The beneficiary will recieve the greater of the money paid into the annuity or the cash value
81
What type of insurance would be used for a Return of Premium rider?
Increasing Term
82
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries
Joint and survivor
83
What distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer?
Direct response system
84
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
85
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection
86
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
The employer is the owner and beneficiary
87
Which of the following is NOT typically excluded from life policies?
a) Death due to a plane crash for a fare-paying passenger
b) Self-inflicted death
c) Death that occurs while a person is committing a felony
d) Death due to war or military service
Death due to a plane crash for a fare-paying passenger
88
Every individual life insurance policy must provide for a free-look provision that lasts for at least
10 days
89
When an individual purchases insurance, what risk management technique is he/she practicing?
Transfer
90
What is the term for a sales campaign conducted through the mail?
Direct-response
91
All of the following are the responsibilities of every long-term care insurer in California EXCEPT
a) Provide enough business to solicit long-term care insurance
b) Establish marketing procedures to assure that any comparison of policies will be fair and accurate
c) Establish marketing procedures to assure excessive insurance is not sold or issued
d) Submit to the Commissioner a list of all agents authorized to solicit individual consumers for the sale of long-term care insurance
Provide enough business to solicit long-term care insurance
92
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which insurance principle has the insurer violated?
Consideration
93
A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before annuitization period. The agent most likely explained which of the following?
a) It is not possible to surrender an annuity before the annuitization period
b) Nonforfeiture option guarantees that the owner will recieve a surrender value of the contract
c) The owner will recieve some of the money back will depend on the surrender value established by the insurer at the time that the contract is terminated
d) The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned
Nonforfeiture option guarantees that the owner will recieve a surrender value of the contract
94
A contract which one party undertakes to indemnify another against loss
Insurance
95
Which of the following is true regarding taxation of dividends in participating policies?
a) Dividends are not taxable
b) Dividends are taxable only after a certain amount is accumulated annually
c) Dividends are taxable in some life insurance policies and nontaxable in others
d) Dividends are considered income for tax purposes
Dividends are not taxable
96
In case of a loss, the indemnity provision in insurance policies
a) allows the insured to collect 20% more than the actual loss
b) pays the insured a percentage of the loss above and beyond the loss
c) pays the insured as much as 95% of the loss
d) restores an insured person for the same financial state as before the loss
restores an insured person for the same financial state as before the loss
97
What happens when a policy is suurendered for it's cash value?
a) the policy can be converted to term insurance
b) coverage ends and the policy cannot be reinstated
c) coverage ends but the policy can be reinstated at any time
d) the policy can be reinstated by paying back all policy loans and premiums
coverage ends and the policy cannot be reinstated
98
The Federal Fair Credit Reporting Act
a) Regulates telemarketing
b) Prevents money laundering
c) Regulates consumer reports
d) Protects customer privacy
Regulates consumer reports
99
Number of credits required for fully insured status for Social Security disability benefits
40
100
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
101
If the owner prematurely surrenders hid deferred annuity before the annuitization period begins, which of the following is more likely to occur?
a) a surrender charge will not be imposed because the account has been open for at least one year.
b) the owner will forfeit any premiums he has paid into the account, but will recieve any interest earned on the account
c) the owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge
d) a surrender charge will be imposed that is equal to 3 of the owner's monthly annuity payments
the owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge
102
An insurer has made all of the decisions regarding the provisions included in the insured's policy. The insured finds an objectable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?
Adhesion
103
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an
a) endowment
b) nonqualified annuity
c) modified endowment contract
d) accelerated benefit policy
modified endowment contract
104
What is the purpose of key person insurance?
a) to maintain an account that insures the owner of a company remains solvent
b) to lessen the risk of financial loss because of the death of a key employee
c) to provide health insurance to the families of key employees
d) to insure retirement benefits are available to all key employees
to lessen the risk of financial loss because of the death of a key employee
105
What is an unilateral contract?
a) two or more parties go into a contract understanding there may be an unequal exchange of value
b) one author: the company wrote the contract; the insured must accept it as written
c) if one party makes a condition, the other party can counteroffer
d) one-sided: only one party makes an enforceable promise
one-sided: only one party makes an enforceable promise
106
Credit Life Insurance
a) insures the life of a creditor
b) has a maximum term for insurance of 20 years
c) insures the life of a debtor
d) is purchased on an installment basis
insures the life of a debtor
107
What qualifies an individual to contribute to an IRA?
earned income
108
Every long-term care insurer in California must submit to the Commissioner a list of agents or other inurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least
semiannually
109
A licensee is NOT required to comply with continuing education requirements in the state of California if which conditions are met?
a) The licensee has been good standing for 30 continuous years, and is at least 70 years old
b) The licensee has been good standing for 30 continuous years, and is at least 65 years old
c) The licensee has been good standing for 20 continuous years, and is at least 70 years old
d) The licensee has been good standing for 20 continuous years, and is at least 55 years old
The licensee has been good standing for 30 continuous years, and is at least 70 years ol
110
In forming an insurance contract, when does acceptance usually occur?
a) when an insured submits an application
b) when an insurer's underwriter approves coverage
c) when an insurer delivers the policy
d) when an insurer receives an application
when an insurer's underwriter approves coverage
111
What type of beneficiary designation allows the benefit to pass from a deceased primary beneficiary to the beneficiary's heirs, instead of splitting the benefit among surviving primary benefits?
a) by the head
b) per capita
c) per stirpes
d) by class
per stirpes
112
What is the most common way to transfer risk?
Purchase insurance
113
Wendy owns a policy in which she is covered as the bread winner with permanent insurace and with decreasing term insurance in the form of a rider. What type of policy is this?
a) Family Rider
b) Family Maintenance Policy
c) Family Protection Policy
d) Family Income Policy
Family Income Policy
114
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
a) signed waiver of premium
b) statement of good health
c) payment of premium
d) delivery receipt
signed waiver of premium
115
During the grace period, the policyowner can
a) return the policy to the insurer for a full refund
b) add riders to the existing policy
c) renew the policy without proof of insurability
d) pay a late premium without penalty
pay a late premium without penalty
116
Which of the following statements is INCORRECT regarding IRA's?
a) Accumulated contributions grow tax deferred
b) Married couples are required to purchase a jointly owned IRA
c) A nonworking spouse is eligible to contribute to a separate IRA account
d) Anyone with earned income under the age of 70 1/2 may open a traditional IRA
Married couples are required to purchase a jointly owned IRA
117
The paid-up addition option uses the dividend
a) to purchase a one-year term insurance in the amount of the cash value
b) to reduce the next year's premium
c) to accumulate additional savings for retirement
d) to purchase a smaller amount of the same tyep of insurance as the original policy
to purchase a smaller amount of the same type of insurance as the original policy
118
Life income joint and survivor settlement option guarantes
a) income for 2 or more recipients until they die
b) payment of interest on death proceeds
c) payment of the entire death benefit
d) equal payments to all recipients
income for 2 or more recipients until they die
119
The insured provides proof of claim to the
Insurer
120
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?
a) insured's annual expenses
b) effect of inflation on income over time
c) predicted needs of the family after the insured's death
d) insured's current and future income
predicted needs of the family after the insured's death
121
An individual wants to transact business as a life agent in this state. In addition to obtaining a life agent license, what else must the applicant have?
Appointment
122
Which of the following best describes fixed-period settlement option?
a) both the principal and interest will be liquidated over a selected period of time
b) only the principal amount will be paid out within specified period of time
c) the death benefit must be paid out in a lump sum within a certain time period
d) income is guaranteed for the life of the beneficiary
both the principal and interest will be liquidated over a selected period of time
123
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
a) the policy is owned by the company
b) any type of insurance policy may be used
c) the employer pays a bonus to a selected employee to fund the policy
d) it is considered a nonqualified employee benefit
the policy is owned by the company
124
An individual's tendency to be dishonest would be indicative of a
moral hazard
125
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
a) Universal Life
b) Whole life
c) Decreasing term
d) Variable Life
Decreasing term
126
What is the term used when a person sells his assets as a way to gain money?
Liquidation
127
The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as
Legal hazard
128
An agent may continue operating under an expired license for a period of 60 days provided that the agent has
a) Notified the insurer of his plans to renew the license
b) filed an application for renewal and paid the renewal fee on or before the expiration date
c) Notified the Commissioner of his plans to renew the license
filed an application for renewal and paid the renewal fee on or before the expiration date
129
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on everything on every family member?
Family term rider
130
An independent agent may have contracts with which of the following?
a) The Department of Insurance
b) The Commissioner
c) Brokers
d) More than one insurer
More than one insurer
131
Which of the following would NOT be considered a form of direct response marketing?
a) a sign in an insurer's office
b) an ad in the newspaper
c) a circular mailed to a city's residents
d) an insurance company's TV commercial
a sign in an insurer's office
132
Which of the following is NOT a goal of risk retention
a) to fund losses that cannot be insured
b) to minimize the insured's level of liability in the event of loss
c) to reduce expenses and improve cash flow
d) to increase control of claim and improve cash flow
to minimize the insured's level of liability in the event of loss
133
When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy?
a) They can convert their coverage to permanent life insurance without evidence of insurability
b) They can convert their coverage to permanent life insurance with evidence of insurability
c) Family members are not provided any rights
They can convert their coverage to permanent life insurance without evidence of insurability
134
What kind of policy does NOT typically require proof of insurability?
Group insurance
135
How long will the beneficiary recieve payments under the single life settlement option?
Until the beneficiary's death
136
What is the penalty for IRA distributions that are below the required minimum for the year?
a) 10%
b) 25%
c) 50%
d) 60%
50%
137
A person that DOES NOT work on the behalf of the company for which he/she does business, but rather represents the prospect, insured, or client is called
a) An insurance solicitor
b) an insurer's agent
c) a fiduciary trustee
d) an insurance broker
an insurance broker
138
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
a) contracts of adhesion
b) unilateral contracts
c) aleatory contracts
d) binding contracts
contracts of adhesion
139
The following are features of the Indexed Universal Life EXCEPT
a) policy's cash value is dependent on the performance of the equity index
b) sale of this product requires a securities license
c) flexible premium
d) adjustable death benefit
sale of this product requires a securities license
140
The key factor of representation that allows the injured party to rescind the contract is
a) that any misrepresentation is considered fraud
b) Representations are statements believed to be true and hold no legal consequences
c) the promise or assurance of the representation
d) if the representation is false in a material point
if the representation is false in a material point
141
An insurance agent explains to his client the difference bewtween two disability income policies and then offers to fill out an application with the client's personal information and history. Upon completion of the application, the agent informsthe client that he will "shop around" to find the company with the most favorable rates. If the agent presents the client's application to an insurer, he will be acting in which of the following capacities?
a) an insurance agent
b) an insurance broker
c) a life agent
d) an insurance solicitor
an insurance broker
142
All of the following statements are correct regarding Credit Life Insurance EXCEPT
a) Benefits are paid to the borrower's beneficiary
b) The amount of insurance permissible is limited per borrower
c) Premiums are usually paid by the borrower
d) Benefits are paid to the creditor
Benefits are paid to the borrower's beneficiary
143
Which of the following is an example of a limited-pay life policy?
a) Level Term Life
b) Straight Life
c) Life Paid-up at Age 65
d) Renewable Term to Age 70
Life Paid-up at Age 65
144
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuization period
145
In dertermining 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) Amount of information that has been previously disclosed through the inquiry process
b) Truthfulness of such statements being made
c) Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
d) Interpretation that the seller places on such information in the agreement
Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract
146
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
Settlement option
147
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
a) Incontestability period
b) Assignment
c) Automatic premium loan
d) Waiver of premium
Automatic premium loan
148
Which of the following will be included in a policy summary?
a) copies of illustrations and application
b) comparisons with similar policies
c) primary and secondary beneficiary designations
d) premium amounts and surrender values
premium amounts and surrender values
149
Which of the fllowing is INCORRECT concerning a noncontributory group plan?
a) they help to reduce adverse selection against the insurer
b) They require 100% employee participation
c) The employer pays 100% of the premiums
d) The employees receive individual policies
The employees receive individual policies
150
Which provision of a life insurance policy states that the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
a) Beneficiary clause
b) Consideration clause
c) Insuring clause
d) Entire contract clause
Insuring clause
151
The interest earned on policy dividends is
Taxable
152
All of the following are personal uses of life insurane EXCEPT
a) Cash accumulation
b) Buy-sell agreement
c) Survivor protection
d) Estate creation
Buy-sell agreement
153
According to the Entire Contract provision, a policy must contain
a) Buyer's guide to life insurance
b) Listing of the insured's former insurer(s) for incontestability provisions
c) A copy of the original application for insurance
d) A declaration's page with a summary of insureds
A copy of the original application for insurance
154
How does an insured typically decide which settlement option to choose for his/her beneficiary?
a) He/she decides based on the amount of the death benefit
b) He/she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income
c) He/she usually decides based on how many beneficiaries he/she has chosen to receive benefits
d) He/she typically decides based on the advice of the insurer
He/she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income
155
An agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the insured's family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?
a) the policy will remain in force as long as there are no material representations on the application
b) the policy is legal since the applicant was able to give all required information
c) the policy is not legal; agents cannot sell insurance over the phone
d) the policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application
the policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application
156
Which of the following is TRUE of a qualified plan?
a) it may allow unlimited contributions
b) it has a tax benefit for both employer and employees
c) it does not need to have a vesting schedule
d) it may discriminate in favor of highly paid employees
it has a tax benefit for both employer and employees
157
An insured has the right to return the new insurance policy for a full refund during the
free-look period
158
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds wil go to
a) the insurance company
b) the insured's estate
c) the insured's firstborn child
d) both children who share equally on a per-capita basis
the insured's estate
159
Which of the following is NOT true regarding Equity Indexed Annuities?
a) The insurance company keeps a percentage of the returns
b) They have guaranteed minimum interest rates
c) They are less risky than variable annuities
d) They earn lower interest rates than fixed annuities
They earn lower interest rates than fixed annuities
160
Selection of coverage in employee benefits plans refers to
a) employee choosing benefits
b) employer choosing benefits
c) employer choosing the benefits for the employees
d) None of the above
employee choosing benefits
161
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
a) The contract can be issued without an annuitant
b) The annuitant must be a natural person
c) A corporation can be an annuitant as long as it is also the owner
d) A corporation can be an annuitant as long as the beneficiary is a natural person
The annuitant must be a natural person
162
If an insurer's legal reserve funds are found to be less than the minimum required by law, the insurer is
a) Unauthroized
b) Fraudulent
c) Insolvent
d) Solvent
Insolvent
163
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
a) Subrogation
b) Warranty
c) Aleatory
d) Adhesion
Aleatory
164
An absolute assignment is
a) Change of insurer
b) Transfer of all ownership rights in a policy
c) Transfer of some ownership rights in a policy
d) Change of beneficiary
Transfer of all ownership rights in a policy
165
Which statement regarding insurable risks is NOT correct?
a) Insurance cannot be mandatory
b) The insurable risk needs to be statistically predictable
c) An insurable risk must involve a loss that is definite as to cause, time, place, and amount
d) Insureds cannot be randomly selected
Insureds cannot be randomly selected
166
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 injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
a) $0
b) $100,000
c) $200,000
d) $100,000, plus the total of paid premiums
$200,000
167
Which of the following policies would be classified as a traditional level premium contract?
a) Variable Universal Life
b) Straight Life
c) Adjustable Life
d) Universal Life
Straight Life
168
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term
169
An insured becomes disabled at age 22 and can no longer work. She meets the definition of total disability under Social Security. What other requirement must the insured have met to receive Social Security disability benefits?
a) Have accumulated 20 work credits in the past 10 years
b) Have accumulated 40 work credits
c) Have reached the age of 25.
d) Have accumulated 6 work credits in the past 3 years
Have accumulated 6 work credits in the past 3 years
170
Which of the following is true regarding a modified guaranteed annuity?
a) The insurer bears all the market risk of changing interest rates.
b) There are no penalties for a premature surrender of the annuity.
c) It provides a level benefit payment.
d) The owner is guaranteed a fixed interest rate for a specific period of time.
The owner is guaranteed a fixed interest rate for a specific period of time.
171
Every policy of individual life insurance must include a notice of right to cancel the policy, stating the specific time frame for the free-look period. Once the insured has cancelled the policy, within how many days must the insurer refund all premiums and policy fees?
30 days
172
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable?
a) Dependents
b) Annuitant
c) Spouse
d) Charitable Organization
Spouse
173
Who is protected by a Temporary Insuring Agreement?
a) Only the applicant
b) The applicant and the insurer
c) The policy beneficiary
d) Only the insurer
The applicant and the insurer
174
What percentage of a company's employees must take part in a noncontributory group life plan?
a) 0%
b) 25%
c) 75%
d) 100%
100%
175
In which of the following instances would the premium be tax deductible?
a) Premiums paid by an employer on the life of a key person
b) Premiums paid by an employer on a $30,000 group term life insurance plan for employees
c) Premiums paid by an individual on his/her own life insurance
d) Premiums paid by a mother on her son's policy
Premiums paid by an employer on a $30,000 group term life insurance plan for employees
176
Which of the following does NOT apply to Errors and Omissions liability contracts?
a) They are written for the clients of the producer covered by the policy.
b) They are renewable annually.
c) They are written with per-claim deductibles of at least $500.
d) Benefits are usually limited per claim or by the policy period.
They are written for the clients of the producer covered by the policy.
177
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's
a) Habits.
b) Prior insurance.
c) Ancestry.
d) Credit history.
Ancestry.
178
In order for an insurer to legally transact insurance, it must obtain which of the following?
a) Certificate of Insurance
b) Certificate of Authority
c) Power of Attorney
d) Director's Decree
Certificate of Authority
179
Which nonforfeiture option provides coverage for the longest period of time?
a) Extended term
b) Paid-up option
c) Accumulated at interest
d) Reduced paid-up
Reduced paid-up
180
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
a) Nonforfeiture options
b) Guaranteed insurability option
c) Dividend options
d) Guaranteed renewable option
Guaranteed insurability option
181
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?
a) The insured's contingent beneficiary
b) The insurance company
c) The insured's estate
d) The primary beneficiary's estate
The insured's contingent beneficiary
182
Which of the following would qualify as an implied warranty in an insurance contract?
a) The applicant’s signature
b) Contract’s legal purpose
c) Statements in the policy
d) An oral representation by the applicant
An oral representation by the applicant
183
An intentional or unintentional concealment entitles the affected party to which of the following?
a) Rescission of a contract.
b) Estoppel.
c) Waiver of concealed conditions.
d) Subrogation of a contract.
Rescission of a contract.
184
A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?
a) Business overhead expense policy
b) Key person insurance
c) Disability buy-sell agreement
d) Business disability policy
Business overhead expense policy
185
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
186
Applicants for insurance who are blind may be rated substandard for life insurance
a) Only on the basis of information unrelated to their blindness.
b) Only if they have been blind from birth.
c) Only if their blindness resulted from an injury.
d) Always, because they cannot avoid the risk of injury or death.
Only on the basis of information unrelated to their blindness.
187
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?
a) Distributions are taxable.
b) Distributions are nontaxable.
c) Distributions cannot begin prior to age 70½.
d) There are no distributions.
Distributions are taxable.
188
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
a) It is reduced to the amount of what the cash value would buy as a single premium.
b) It is increased when extra premiums are paid.
c) It decreases over the term of the policy.
d) It remains the same as the original policy, regardless of any differences in value.
It is reduced to the amount of what the cash value would buy as a single premium.
189
In the event of a loss, business overhead insurance will pay for
a) Salary of the business owner.
b) Medical bills of the business owner.
c) Rent.
d) Loss of profits.
Rent.
190
After a cease and desist order is final, if the Commissioner finds that the person has continued to willfully violate the insurance code, what penalty may be applicable in addition to initial penalties?
a) Minimum $10,000
b) Maximum $5,000
c) Minimum $25,000
d) Maximum $55,000
Maximum $55,000
191
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 benefits paid to the beneficiary.
b) It will reduce the benefits by 70%.
c) It will increase the benefits paid to the beneficiary.
d) It will decrease the benefits paid to the beneficiary.
It will decrease the benefits paid to the beneficiary.
192
If a retirement plan or annuity is "qualified," this means
a) It has a penalty for early withdrawal.
b) It accepts after-tax contributions.
c) It is noncancellable.
d) It is approved by the IRS.
It is approved by the IRS.
193
A set of legal or regulatory conditions that affect an insurer’s ability to collect premiums commensurate with the level of risk incurred would be considered a(n):
a) Legal hazard.
b) Underwriting gamble.
c) Legal peril.
d) Fiduciary risk.
Legal hazard
194
Both Universal Life and Variable Universal Life have what kind of premium?
Flexible premium
195
Which type of life insurance policy generates immediate cash value?
a) Decreasing Term
b) Continuous Premium
c) Single Premium
d) Level Term
Single Premium
196
An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?
a) The cost of coverage is a deductible expense by the employer.
b) The value of insurance will be deducted from the employees’ compensation.
c) The cost of coverage paid by the employer is taxed to the employees.
d) The cost of coverage paid by the employer is tax deductible by the employees.
The cost of coverage is a deductible expense by the employer.
197
Which of the following is TRUE about a class designation?
a) Beneficiaries are not identified by name.
b) Beneficiaries must be part of the insured's immediate family.
c) It is not allowed.
d) It determines the succession of beneficiaries.
Beneficiaries are not identified by name.
198
Which of the following insurance options would be considered a risk-sharing arrangement?
a) Stock
b) Mutual
c) Surplus lines
d) Reciprocal
Reciprocal
199
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
a) Fixed-amount
b) Life income with period certain
c) Joint and survivor
d) Single life
Life income with period certain
200
Which of the following is a feature of a variable annuity?
a) Securities license is not required.
b) Benefit payment amounts are not guaranteed.
c) Payments into the annuity are kept in the company’s general account.
d) Interest rate is guaranteed.
Benefit payment amounts are not guaranteed.
201
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
a) No penalties, since the owner is older than 59 ½
b) 10% for early withdrawal
c) 15% for early withdrawal
d) 50% tax on the amount not distributed as required
50% tax on the amount not distributed as required
202
Which of the following methods to designate a beneficiary literally means "by the head?"
a) Contingent
b) Per capita
c) Per stirpes
d) Tertiary
Per capita
203
If a policy includes a free-look period of at least 10 days, the Buyer’s Guide may be delivered to the applicant
a) With the policy.
b) Upon issuance of the policy.
c) Within 30 days after the first premium payment was collected.
d) Prior to filling out an application for insurance.
With the policy.
204
Any insurer who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation
a) Be fined a sum of $10,000.
b) Be fined a sum no less than $30,000 and no more than $300,000.
c) Have his/her license suspended.
d) Be fined a sum of $1,000.
Be fined a sum of $10,000.
205
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
a) As of the first of the month after the policy issue
b) As of the policy issue date
c) As of the application date
d) As of the policy delivery date
As of the application date
206
Who would be eligible to contribute to an IRA?
a) An 18-year old non-working student
b) A 50-year old school teacher
c) A 75-year old professional earning income
d) A 35-year old receiving monthly unemployment checks
A 50-year old school teacher
207
An insurer has been found guilty of a Code violation regarding replacement. The insurer then repeats the violation. What will be the minimum penalty?
a) $10,000
b) $25,000
c) $30,000
d) $100,000
$30,000
208
All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT
a) An intentional omission in determining if a warranty is false.
b) The amount of paid claims exceeds the premiums paid.
c) The violation of a material warranty.
d) When concealment is unintentional.
The amount of paid claims exceeds the premiums paid.
209
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
a) Contracts of adhesion.
b) Unilateral contracts.
c) Aleatory contracts.
d) Binding contracts.
Contracts of adhesion.
210
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?
a) Insured's annual expenses.
b) Effect of inflation on income over time.
c) Predicted needs of the family after the insured's death.
d) Insured's current and future income.
Predicted needs of the family after the insured's death.
211
When must insurable interest exist in a life insurance policy?
a) At the time of loss
b) At the time of application
c) At the time of policy delivery
d) When there is a change of the beneficiary
At the time of application
212
The set of regulations issued by the California Insurance Commissioner that identifies the standards for the insurance code and how it is to be administered is
a) California Advisory Administrative Code.
b) California Advisory Code.
c) California Administrative Code of Regulations.
d) California Regulatory Code of Conduct.
California Administrative Code of Regulations.
213
Which of the following is NOT true about a joint and survivor annuity benefit option?
a) The surviving annuitant may receive reduced payments.
b) Payments stop after the first death among the annuitants.
c) A period certain option may be included.
d) This option guarantees income for two or more recipients.
Payments stop after the first death among the annuitants.
214
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
a) The beneficiary will receive the lump sum, plus interest.
b) The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments.
c) The beneficiary will only receive payments of the interest earned on the death benefit.
d) The beneficiary must pay interest to the insurer.
c
215
All of the following statements are true regarding policy dividends EXCEPT
a) They are generated by mutual insurers.
b) They are guaranteed.
c) They are paid to the policyholders.
d) They are refunds of unused premiums.
b
216
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
a) Interest only option
b) Life income with period certain
c) Joint and survivor
d) Fixed amount option
a
217
Which of the following are NOT fundable by annuities?
a) A person's retirement
b) Estate liquidation
c) Death benefits
d) Cash accumulation for any reason
c
218
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
a) Executive bonus.
b) Key person policy.
c) Fraternal association.
d) Aleatory contract.
a
219
What happens when a policy is surrendered for its cash value?
a) The policy can be reinstated by paying back all policy loans and premiums.
b) The policy can be converted to term coverage.
c) Coverage ends and the policy cannot be reinstated.
d) Coverage ends but the policy can be reinstated at any time.
c
220
Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older?
a) Life insurance policy illustrations
b) Insurance monetary value index
c) Life insurance surrender cost index
d) MIB report
b
221
An insured committed suicide one year after his life insurance policy was issued. The insurer will
a) Refund the premiums paid.
b) Pay the policy’s cash value.
c) Pay the full death benefit to the beneficiary.
d) Pay nothing.
a
222
What is the penalty for excessive contributions to an IRA?
a) 4%
b) 6%
c) 10%
d) 15%
b
223
Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?
a) There is a 10% penalty for early distribution of the death benefit.
b) They are tax free to terminally ill insured.
c) They are always taxable to chronically ill insured.
d) They are always taxed.
b
224
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?
a) A husband or wife has an insurable interest in their spouse.
b) An individual has an insurable interest in his or her own life.
c) A debtor has an insurable interest in the life of a lender.
d) Business partners have an insurable interest in each other.
c
225
All of the following are true regarding the guaranteed insurability rider EXCEPT
a) The insured may purchase additional insurance up to the amount specified in the base policy.
b) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events.
c) This rider is available to all insureds with no additional premium.
d) The insured may purchase additional coverage at the attained age.
c
226
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
a) Pay the policy proceeds only if it would have issued the policy.
b) Pay the policy proceeds up to an established limit.
c) Not pay the policy proceeds under any circumstances.
d) Automatically pay the policy proceeds.
a
227
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
a) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.
b) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies.
c) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
d) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.
c
228
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
a) Variable period
b) Variable amount
c) Fixed period
d) Fixed amount
d
229
According to the California Insurance Code, all of the following are general powers and duties of the Commissioner of insurance EXCEPT
a) To establish a program to investigate consumer complaints against insurers.
b) To make public service announcements to inform consumers of toll free access to make inquiries.
c) To prepare a written report detailing consumer complaints regarding insurers.
d) To delegate the power to approve a settlement.
d
230
Any person who knowingly and willfully obtains information about an individual from an insurance company, agent or organization supporting insurance under false pretenses shall be fined
a) Not more than $10,000, imprisonment not to exceed one year or both.
b) Not more than $20,000, imprisonment not to exceed one year or both.
c) Not more than $10,000, imprisonment not to exceed two years or both.
d) Not more than $20,000, imprisonment not to exceed two years or both.
a
231
Every insurer is required to provide all records requested by the Commissioner within
a) A period of 60 days following a written request.
b) 5 business days of notification by the Commissioner’s office.
c) 10 business days of notification by the Commissioner’s office.
d) A period of 30 days following a written request.
d
232
In order to be paid for his or her services, a Life and Disability Insurance Analyst must do which of the following?
a) Disclose the fee in writing to, and have it approved by, the client in advance
b) Have a signed notice of appointment with the insurance company
c) Send an invoice for reimbursement to the insurance company
d) Have a signed notice of appointment with the insurance company and send an invoice for reimbursement to the insurance company
a
233
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation
a) Be fined a sum of $1,000.
b) Be fined a sum of $10,000.
c) Be administratively suspended from licensing for a period of 180 days.
d) Be fined a sum of $5,000.
a
234
Social security benefits are available for a surviving spouse until the youngest child reaches age 16. Benefits are again available for the spouse after reaching age 60. What is the time period called during which the surviving spouse does not receive benefits?
a) Waiver of premium
b) Annuitization period
c) Cancellation
d) Blackout period
d
235
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a
a) Convertible Term Policy.
b) Renewable Term Policy.
c) Decreasing Term Policy.
d) Whole Life Policy.
a
236
All of the following are true regarding representations EXCEPT
a) They may be made before or at the time of policy issue.
b) They may be oral or written.
c) They may be altered or withdrawn after the issuance of the policy.
d) They are statements believed to be true.
c
237
Which is TRUE about the cash surrender nonforfeiture option?
a) After the cash surrender, the insured is covered for a grace period of 1 month.
b) The policy remains active for some time after the policyholder opts for cash surrender.
c) The policyholder receives the original cash value of the policy.
d) Funds exceeding the premium paid are taxable as ordinary income.
d
238
An association could buy group insurance for its members if it meets all of the following requirements EXCEPT
a) Has a constitution and by-laws.
b) Holds annual meetings.
c) Is contributory.
d) Has at least 50 members.
d
239
What is the main purpose of the Seven-pay Test?
a) It requires level premium payments for 7 years.
b) It ensures that the policy benefits are paid out in 7 years.
c) It guarantees interest minimum.
d) It determines if the insurance policy is an MEC.
d
240
Each of the following factors are used in determining insurance rates EXCEPT
a) Mortality
b) Expenses
c) Dividends
d) Interest
c
