Comprehensive Exam pt. 1

Question 1

Which of the following is not a fixed annuity?
A. Guaranteed
B. Variable
C. Indexed
D. Fixed

Answer 1

B. Variable
A variable annuity is not a fixed type of annuity since it is supported by the separate account and not the general account.

Question 2

M’s policy was issued with an incorrect age. M was actually older than what was listed in the policy. Which of the following will the insurer most likely do? If M had died 5 years after the policy issue, but prior to this discovery?
A. The insurer would pay out a reduced benefit in proportion to the underpayment of premiums
B. The insurer would bill the beneficiary for the underpayment in premiums
C. The insurer would have to pay out the full face amount since the policy is now beyond the contestable period

Answer 2

A. The insurer would pay out a reduced benefit in proportion to the underpayment of premiums

The misstatement of age or gender provision allows the insurer to pay out the benefit that the correct premiums would have purchased. This means that the death benefit could be reduced if the age was understated. In the case that this provision applied, the Incontestability clause does not apply. There is no time limit to discover a misstatement of age or gender, and that discover will not cancel or void the policy.

Question 3

A partnership involving four equal partners is valued at $1,800,000. Under a Cross Purchase Plan, the amount of the policy on the life of each partner would be:
A. $150,000
B. $450,000
C.$900,000
D.$1,800,000

Answer 3

A. $150,000

Each partner’s ownership share equals $450,000, thus each partner would own a %150,000 policy on the life of each of the other three partners under a Cross Purchase Plan (3 X $$150,000= $450,000) There would be a total of 12 (4 X 3) policies (12 X $150,000 each +$1,800,000)

Question 4

Cash values within an ordinary straight whole life insurance policy_________ over time.
A. Vary
B. Remain consistent
C. Decrease
D. Increase

Answer 4

D. Increase

Cash values increase over time as premium is paid in and intrest is reflected in the cash values shown in the policy;s non forfeiture table.

Question 5

A generic brochure was developed by the _________ To assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs.
A. NAIC
B. FIO
C. SEC
D. FINRA

Answer 5

A. NICA

A buyer’s guide is a generic brochure developed bu the NAIC to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance, as well ad comparative costs of each type of plan.

Question 6

An insurer NOT authorized to do business within a state is considered what type of insurer?
A. Foreign
B. Alien
C. Domestic
D. Non-admitted

Answer 6

D. Non-admitted

An insurer not authorized to do business in a state is referred to as a non-admitted insurer. Foreign, domestic, and alien refer to where an insurer is domiciled. Domicile is not the same as admittance.

Question 6

To have Currently Insured Status under Social Security, a worker mist have at least_______ quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reached retirement age.
A. 12
B. 3
C. 20
D. 6

Answer 6

D. 6
To have Currently Insured status under Social Security, a worker mist have at least 6 quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disables, or reaches retirement age.

Question 7

All of the following are dividend options, except:
A. One-year term
B. Paid up additions
C. Extended Term
D. Cash

Answer 7

C. Extended term,

Extended term is a non forfeiture option, not a dividend option.

Question 7

Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?
A. Reinstatement
B. Automatic Premium Loan
C. Spendthrift
D. Partial Withdrawal

Answer 7

B. Automatic Premium Loan

The automatic premium loan provision enables the insurer to borrow automatically from the policy’s cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.

Question 8

To be qualified accelerated death benefit it must meet all of the following criteria, except:
A. The benefit amount cannot exceed the lesser of $50,000 or 7.5% of AGI
B. A physician must give a prognosis of 24 months or less life expectancy for the named insured.
C. The insured provides a monthly report to the insured showing the amount paid and the amount of benefit remaining in the life insurance policy
D. The amount of the benefit must at least be equal to the present value of the reduced death benefit remaining after payment of the accelerated benefit.

Answer 8

A. The benefit amount cannot exceed the lesser of $50,000 or 7.5% of AGI

To be qualified accelerated death benefit the benefit must meet the following conditions: B, C, & D

Question 9

The __________ Branch is responsible for interpreting and determining the constitutionality of the statutes.
A. Executive
B. Electoral
C. Legislative
D. Judicial

Answer 9

D. Judicial

Question 10

If a copy of the application, which led to a life insurance policy being issued, is attached to the policy:

Answer 10

A. It is considered a part of the entire contract

Question 11

All of the following annuities can be sold without a securities registration/license, except:
A. Variable
B. Fixed
C. Guaranteed
D. Indexed

Answer 11

B. Fixed

Only a life insurance license is required in order to sell fixed annuities in most states.

Question 12

Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which non forfeiture option provides this protection?
A. Reduced Paid-Up
B. Extended Term
C. Fixed Amount
D. Paid-Up option

Answer 12

B. Extended term

extended term would allow the present cash value of the policy to buy a single premium term policy of the same face amount for the time period stated in the policy’s non forfeiture table. Fixed Amount is a Settlement Option, and Paid- Up Option is a dividend.

Question 14

Within how many days must an insurer notify a claimant it is either accepting or denying the claim?
A. 21
B. 10
C. 30
D. 15

Answer 14

D. 15

Withing 15 working days of receiving necessary documentation that establishes the nature and extent of a claim, insurers must notify the claimant whether the claim is accepted or denied.

Question 15

When it comes to life insurance insurable interest on one’s own life is?

Answer 15

Unlimited

Question 16

If a beneficiary is designated as irrevocable, then all of the following require the irrevocable beneficiary’s approval except:
A. Reducing the coverage
B. Policy assignment
C. Changing the mode of premium
D. Taking a policy loan

Answer 16

C. Changing the mode pf premium

Irrevocable means it cannot be changed

Question 17

If a policy owner has a whole life insurance policy with a disability waiver of premium rider, when does the rider benefit start if a qualifying disability should occur?
A. Typically 6 months after the disability occurs
B. Immediately
C. One year after the claim forms are received by the insurer
D. After the doctor certifies the disability

Answer 17

A. Typically 6 months after the disability occurs

During the 6 month time period premiums are expected to be paid in order to keep the policy in force.

Question 18

The net amount at risk in an Ordinary Whole Life Insurance Policy ________ over the life of the policy?
A. Decreases
B. Increases
C. Varies
D. Remains the same

Answer 18

A. Decreases

As cash values build, the net amount at risk for the insurer declines since the face amount is the benefit paid out upon death of the insured. it is a way to keep the premiums affordable as the insured ages and the risk of death increases.

Question 19

All of the following regarding employer group life insurance are true, except:
A. Employer-paid premiums do not constitute taxable income to the employee unless the death benefit exceeds $50,000
B. Death benefit proceeded paid to an employee’s named beneficiary are received income tax free
C. Employee-paid premiums are tax-deductible to the employee
D. Premiums paid by an employer are tax-deductible to the business as an ordinary and necessary business expense

Answer 19

C. Employee-paid premiums are tax-deductible

Question 20

Which of the following is the proper sequence of beneficiaries?
A. Primary, contingent, tertiary
B. Primary, estate, tertiary
C. Primary, tertiary, contingent
D. Estate, contingent, primary

Answer 20

A. Primary, contingent, tertiary

Question 21

At what age does the cash value equal the face amount of the traditional whole life policy issued 25 years ago?
A. 115
B. 95
C. 100
D. 85

Answer 21

C. 100

Question 22

C has a $100,000 traditional whole life insurance with $30,000 cash surrender value. He applies for and receives a $10,000 policy loan from the insurer. All of the following about this transaction are true except:
A. If C were disabled, his beneficiaries would receive $70,000, less any outstanding interest charges.
B. If the policy is surrendered, C would receive $20,000 less any outstanding interest charges.
C. If C died, his beneficiaries would receive $90,000, less any outstanding interest charges.
D. The loan carries a fixed or variable interest rate.

Answer 22

D. The loan carries a fixed or variable interest rate.

Policy loans carry a fixed or variable loan interest rate. If the policy is surrendered or a death claim is paid, the proceeds are reduced by the outstanding policy loan and policy loan intrest.

Question 23

If the Department of Insurance denies a producer license application , the applicant may request a hearing within how many days of the denial?

Answer 23

30

Question 24

An insurer can pay commissions to any agent, except which of the following? A. Agent who assumes less than 5% of the insurance risk. B. Licensed producer who negotiates an insurance contract. C. Agent receiving varied commissions based on loss experience. D. Agent who has written agreement with the insured to be paid a certain commission.

Answer 24

A. Agent who assumes less than 5% of the insurance risk. An insurer may not use a compensation arrangement that transfers any portion of the insurance risk to the producer, but it may vary commissions based on the loss ecperience of the policies the producer has written.

Question 25

How is the funding for Social Security provided? A. Through FICA taxes that are paid by employees B. Through FICA taxes that are paid by employers C. Through FICA taxes that are paid by both employees and employers D. Through PIA

Answer 25

C. Through taxes paid by employees and employers. Self-employed persons pay entire amount

Question 26

Increases in insurance protection to keep a Current Assumption policy from endowing is provided: A. With full underwriting B. With simply part 1 of the application process. C. With limited underwriting. D. Without evidence of insurability

Answer 26

D. Without evidence of insurability. It is possible that the cash value will increase too quickly and could cause the policy to mature prior to age 100. To prevent this from happening, the insurer will add a corridor of insurance protection without requiring evidence of insurability to keep the policy from endowing.

Question 27

Making a false statement about the benefits or the nature of the policy is known as which of the following? A. Twisting B. Defamation C. Misrepresentation D. Unfair discrimination

Answer 27

C. Misrepresentation

Question 27

_______ Options allow for the distribution of the life insurance death benefit, to the named beneficiary or contract owner, as the situation warrants. A. Settlement B. Dividend C. Non-Forfeiture D. Accumulation

Answer 27

A. Settlement A settlement option dictates a mode of payment to a beneficiary. The owner may choose Settlement Option for a beneficiary that may not be changed by the beneficiary.

Question 28

Annually renewable term life insurance's premiums increase every: A. 5 years B. 10 years C. Year D. 15 years

Answer 28

C. Year To reflect increased risk to the company.

Question 29

All of the following regarding revocable beneficiaries is true, except: A. The policy owner can change a revocable beneficiary at any time. B. Most beneficiaries are designated as revocable C. The have no vested interest in the policy. D. They have rights in the policy just like any other party to the contract.

Answer 29

D. They have rights in the policy just like any other party to the contract.

Question 30

With a Life Income Payment Option, what happens at the annuitant's death?

Answer 30

All payments cease

Question 31

Which of the following is not a way to access the money accumulated in a traditional ordinary permanent life insurance policy? A. Partial surrender B. Cash surrender C. Policy loan D. Endowment

Answer 31

A. Partial surrender Partial surrenders are typically available only on universal life insurance types and policies.

Question 32

Variable Whole Life has all of the following features except: A. The owner may select which separate account they want their premium to be invested in B. The premium is determined by the insurer and remains fixed and level throughout the contract. C. Partial surrenders are allowed D. The policy provides for both a general account and a separate account

Answer 32

C. Partial surrender is allowed

Question 33

The following criteria are taken into account by the insurer when underwriting individual life insurance, except: A. Education level completed B. Physical condition C. Gender D. Medical history

Answer 33

A. Education level completed

Question 34

A small business owner used her life insurance policy as collateral for a bank loan. The face amount of the whole life policy was $100,000 and the original amount of the loan was $20,000. If the outstanding loan balance at the time the small business owner dies was $10,000, how much will the policy's names beneficiary receive? A $100,000 B. $80,000 C. $70,000 D. $90,000

Answer 34

D. $90,000 The collateral assignee, the bank, will take a priority claim on the policy's death benefit limited to the amount of the loan outstanding at the time of death, the named beneficiary will receive the balance. In this case $90,000 ($100,000-$10,000)

Question 35

Missouri law requires what standard of fiscal care and conduct of producers? A. Care of a trustee B. Fiduciary responsibility C. Legal capacity D. Financial duty

Answer 35

B. Fiduciary responsibility

Question 36

Which of the following individuals is not required to be licensed as a producer in Missouri? A. Business entity B. Limited lines agent C. Health agent D. Underwiter

Answer 36

D. Underwriter A person whose duties are underwriting, loss control, or claims inspection is not required to be licensed as a producer.

Question 37

Life insurance policies in Missouri may contain a suicide exclusion for up to?

Answer 37

1 year after the policy's issue date

Question 38

If the insured outlives all of the beneficiaries named in the policy and then dies, by default who receives the death benefit?

Answer 38

The insured's estate

Question 39

What is a way to provide additional life insurance protection for a temporary period of time without having to acquire an additional life policy?

Answer 39

Add a term rider to new or existing policy

Question 40

Which of the following is inaccurate about Missouri's required provisions for a group life policy? A. 2-year incontestable provision B. Individual policy conversion after 5 years C. 31- day grace period D. Funeral benefit up to $1,000 if there is no designated beneficiary

Answer 40

D. In the absence of a designated beneficiary, the insurer may meet its policy liability under the policy by paying any family member specifies in the policy a funeral expense benefit up to $2,000.

Question 41

A client purchases a life insurance policy and receives the policy from the insurer 45 days after the application. Upon receipt if the policy, the client typically has _____ days to review and return the policy to receive a full refund for any reason

Answer 41

10 The standard Free Look or Right to Examination allows the insures to return the policy for any reason within 10 days after policy delivery

Question 42

What is an insurer permitted to do during the underwriting process when a proposed insured tests positive for HIV?

Answer 42

Insurers may refuse to issue a policy to individuals that have tested positive for HIV

Question 43

Which of the following is included in Part 1 of a Life Insurance Application? A. Present health B. Name and occupation C. Hospitalizations and surgeries D. Family health history

Answer 43

B. name and occuption

Question 44

Which of the following beneficiary designations prevents a policy owner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent? A. incontestable B. Class C. Named D. Irrevocable

Answer 44

B irrevocable

Question 45

Each insurer must maintain a register of all producers it has appointed and notify the Director within how many days of the appointment? A 30 B never C 15 D 60

Answer 45

A. 30 days

Question 46

What can the insurer legally do if it discovers unanswered questions on the application after a policy has been issued and delivered?

Answer 46

Nothing, the insurer has waived it's rights interpreted as if the question has not been asked

Question 47

Which of the following is NOT a dividend option? A. Paid-up Additions B. Accumulate at interest C. Reduced paid up D. Paid in cash

Answer 47

C. Reduced paid up. Reduced paid up is a non fortifier options

Question 48

How many working days after receiving all necessary documentation does an insurer have to advise the claimant that the claim has been accepted or denied? A. 30 B. 10 C. 15 D. 45

Answer 48

15

Question 49

When does a Missouri resident producer license renew?

Answer 49

Every 2 years on their birthday

Question 50

The non forfeiture option that provides equal to the policy's face amount for a specified number of year and days is?

Answer 50

Extended term

Question 51

An insured has a $25,000 annual renewable term life policy, originally purchased on her birthday April 1st of last year. She forgot to pay the $250 renewable premium, and dies in an accident on April 15. The beneficiary will receive? A. $24,750 B. $25,000 less the premium due C. Nothing D. $25,250

Answer 51

$25,00 less the premium due.

Question 52

In a whole life policy, cash value must be made available to borrow against after _____ years. A. 5 B. 3 C. 2 D. 4

Answer 52

B. 3

Question 53

The directory may conduct an examination of any insurer whenever it is necessary or at least every ______ years.

Answer 53

5

Question 54

A producer's license will not be revoked for which of the following? A. Convicted of a crime of moral turpitude B. Licenses suspended in another state C. Unknowingly accepting business from an unlicensed individual

Answer 54

C

Question 55

In Missouri how often are Variable death benefits determined A. 2 years B. 3 years C. once every year

Answer 55

c

Question 56

If an underwriter obtains Medical Information Bureau (MIB) codes inconsistent with the information provided on the application, the underwriter must:

Answer 56

Conduct further investigation to obtain more information prior to making a decision

Question 57

Part 1 of a life insurance application consists of all of the following information, except: A. occupation B. Gender C. Place of residence D. Medical status of immediate family members

Answer 57

D

Question 58

Which of the following personal uses of life insurance is specifically designed to benefit the policy owner while the insured is still alive? A. Estate conservation B. Cash accumulation C. Estate creation D. Charitable bequests

Answer 58

B Cash accumulation

Question 59

Which of the following is Not a qualification for obtaining an insurance producer license? A. Not committing a prohibited act B. Passing a licensing exam C. Paying at least $200 D. Being at least 18 years old

Answer 59

C. paying at least $200 the license fee is $100

Question 60

How is Universal Life insurance policy different from other types of life insurance? A. It provides a death benefit B. It does not provide a death benefit C. It includes interest and mortality charges in the basic policy D. It separately identifies interest credits and mortality charges

Answer 60

D

Question 61

If disciplinary action against a producer resulted in monetary relief of $200 or less, the producer's record will be expunged after_____ years.

Answer 61

5

Question 62

Which of the following is defined as an unfair practice and could be considered fraudulent? A. Policy replacement B. Cancellation C. Defamation

Answer 62

C

Question 63

Which of the following statements about producer licenses is true? A. And individual initiating sales over the telephone is exempt from licensing B. Resident and non resident producer licenses renew every 3 years. C. Resident producer licenses are issued for 2 years

Answer 63

c

Question 64

Within how many working days must the insurer advise the claimant that the claim is accepted or denied

Answer 64

15

Question 65

Define a Surplus lines broker

Answer 65

A broker who places risks with authorized but non admitted carriers

Question 66

What must a producer provide when replacing a life insurance policy? A. A premium invoice B. A list of all insurance policies purchased by the applicant C. A notice Regarding Replacement signed by the producer and applicant.

Answer 66

C

Question 67

How often is the financial examination of every licensed insurer in Missouri required to be conducted? A. Annually B. Biennially C. At least once every 5 years

Answer 67

C

Question 68

Which of the following is not an unfair property and casualty claim settlement practice? A. Failure to complete a claim investigation within 15 days if reasonable to do so B. Deny a claim because the insured would not give access to the claim adjuster C. Require the first-party claimant to sign a release extending beyond the claim

Answer 68

A. It is an unfair property and casualty claim settlement practice to fail to complete a claim investigation within 30 days when it is reasonable to do so

Question 69

In Missouri, the insurer must keep a copy of all replacement documents for what period of time? A. 5 years B. 90 days C. 2 years D. 7 years

Answer 69

A. 5 years

Question 70

Group life insurance contracts must contain a grace period provision of how many days? A. 14 B. 60 C. 31 D. 90

Answer 70

C. 31 days

Question 71

In personal insurance transactions, producers must do all of the following EXCEPT: A. Inform the insured if the insurer needs information before renewal or policy change B. Use professional designations to instill confidence about advising senior clients C. Inform the applicant if coverage cannot be secured within 30 days of application

Answer 71

B. It is an unethical and dishonest business practice to use a professional designation implying special certification in advising senior clients as a sales tactic

Question 72

In Missouri, a life insurance policy loan interest rate can be up to________ APR? A. 11% B. 3% C. 8% D. 5%

Answer 72

C. 8% A policy loan's interest rate must be either an 8% APR or an adjustable maximum interest rate determines once every 3 to 12 months

Question 73

Which of the following is not true about a nonresident producer? A. The department may check the NAIC Producer Database B. A letter from the homes state's regulatory authority is valid if received within 6 months of approval of a nonresident license C. A nonresident producer must be licensed for the same line of insurance in the home state. D. The home state is not obligated to insure nonresident producers licensed in Missouri

Answer 73

D. The home state must award nonresident producer licenses to Missouri residents on the same basis

Question 74

An order to refrain from engaging in unlawful conduct or activity defines which of the following? A. Unlawful discrimination B. Unfair trade practice C. Defamation D. Cease and desist

Answer 74

D. If a person receives a cease and desist order, they must refrain from all activity in the insurance business

Question 75

The purpose of the Missouri Life and Health Insurance Guaranty Association Act is to: A. Issue policies that have at least $100,000 in benefits B. Protect policy owners in the event an insurer becomes insolvent C. Remain solvent D. Pay no more than $1,000,000 for any one life

Answer 75

B. Protect policy owners in the event an insurer becomes insolvent Insolvent- unable to pay debts owed

Question 76

The third-party claimant is which of the following? A. The insured making the claim against their own policy B. A family member submitting a claim on behalf of the claimant C. The legal representation of any claimant involved D. Anyone making a claim against the insured

Answer 76

D. Anyone making a claim against the insured The third-party claimant is anyone making a claim against the insured. This would occur in a liability claim, such as when the insured is the cause of an automobile accident.

Question 77

In Missouri, an insurer must conduct investigations after receiving notice of a claim within: A. 45 days B. 5 days C. 60 days D. 30 days

Answer 77

D. 30 days

Question 78

If a producer offers any special favor in dividends or other benefits to an insured, the producer is guilty of which of the following marketing practices? A. Defamation B. Twisting C. Intimidation D. Rebating

Answer 78

D. Rebating Rebating is giving the insured a rebate of premium, special favors in benefits, or other inducement not otherwise specified in the policy.

Question 79

Which of the following would not be required to qualify a person as an insurance producer? A. Successfully pass the insurance exam B. Pay the $200 licensing fee C. 18 years old D. Have not committed any act causing license suspension

Answer 79

B. Pay the $200 licensing fee The licensing fee is $100

Question 79

Making a false statement about the benefits or the nature of an insurance policy is what unfair trade practice? A. Twisting B. Misrepresentation C. Defamation D. Unfair discrimination

Answer 79

B. Misrepresentation Making any false statement about the benefits or true nature of an insurance policy is misrepresentation

Question 80

What type of insurer is placed under an order of liquidation by the court? A. An insolvent insurer B. An impaired insurer C. A member insurer D. An admitted insurer

Answer 80

A. An insolvent insurer

Question 81

All of the following persons would be exempt from taking the Missouri licensing exam, EXCEPT: A. An individual currently licensed in Kansas B. An individual applying for a limited lines producer license C. An individual who fails to appear for an exam as schedules D. An individual with Nebraska license that expired 60 days ago

Answer 81

C. An individual who fails to appear to an exam

Question 82

An example of _______ is charging a lower rate to one individual who lives in a certain geographical location in which others are charged the correct higher rate. A. Unfair discrimination B. Rebating C. Boycott D. Twisting

Answer 82

A Unfair discrimination

Question 83

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies and Alice names Dale as the new primary beneficiary. Alice dies, so who receives the policy proceeds? A. Claire B. Alice's estate C. Dale D. Bill's estate

Answer 83

C. Dale Dale is now the primary

Question 84

Which of the following organizations' members include state and territorial insurance commissioners or regulators? A. National Association of Insurance Commissioners (NAIC) B. Financial Industry Regulatory Authority (FINRA) C. Securities and Exchange Commission (SEC) D. Federal Insurance Office (FIO)

Answer 84

A.

Question 85

In a legal sense, premium functions as the insured's ________. A. Tender B. Consideration C. Credit D. Fee

Answer 85

B. Consideration The premium paid by the insured represents their consideration-- a required element of a legal contract

Question 86

According to Missouri's suicide exclusion, under what circumstances would the insurer be required to refund the premiums

Answer 86

The insurer must refund all premiums if the insured dies by suicide within 1 year of the policy issue date