Exam 7

Question 1

E7Q1. The purpose of laws regarding the replacement of life and annuity contracts includes all of the following, except:

Answer 1

To protect the interests of life insurers and their agents

Question 2

E7Q2. All of the following would fall under the category of an “adverse underwriting decision,” except:

Answer 2

Failure of the agent to submit the application to an insurance company

Question 3

E7Q3. In order to obtain group insurance without providing evidence of insurability, what do eligible individuals generally have to do?

Answer 3

Enroll within a specified eligibility period

Question 4

E7Q4. An agent who acts as an insurance agent, broker, solicitor, life-only agent, or bail agent, acts in which capacity when handling premiums or return premiums for an insured?

Answer 4

Fiduciary

Question 5

E7Q5. In order to determine the amount of premium an insured will pay, the insurer multiplies the rate by:

Answer 5

The number of exposure units

Question 6

E7Q6. Viatical settlements are accomplished through the use of:

Answer 6

Absolute assignment

Question 7

E7Q7. The conversion privilege allows a person to change coverage from:

Answer 7

A group policy to an individual policy

Question 8

E7Q8. All of the following statements about qualified pension plans are true, except:

Answer 8

Employer contributions are taxable to employees in the year they are contributed

Question 9

E7Q9. What is the written instrument called in which the insurance contract is set forth?

Answer 9

The policy

Question 10

E7Q10. Which non-forfeiture option uses cash surrender values to purchase paid-up term insurance for the full face amount of the policy?

Answer 10

Extended term insurance

Question 11

E7Q11. What is the difference between a defined contribution plan and a defined benefit plan?

Answer 11

The penalties for early distribution

Question 12

E7Q12. A life-only agent’s records must include all of the following, except:

Answer 12

Printed material in general use which has been distributed by the insurer

Question 13

E7Q13. A worker dies while he is credited with six quarters of the last 13 quarter period. What status does the worker have under social security?

Answer 13

Currently insured

Question 14

E7Q14. A return of premium rider is a rider that:

Answer 14

Provides for the periodic return of the percentage of the premiums that have been paid if the insured becomes and remains disabled

Question 15

E7Q15. An agent’s appointment with an insurer will be discontinued if all of the following circumstances exist, except:

Answer 15

Another insurer submits an employment application

Question 16

E7Q16. Social Security provides protection against the financial consequences of all of the following, except:

Answer 16

Poor investment

Question 17

E7Q17. Which retirement plan utilizes non-deductible contribution?

Answer 17

Roth IRAs

Question 18

E7Q18. All of the occurrences listed below are examples of an insurable event as defined by the CA Insurance Code, except:

Answer 18

An insured suffers a financial loss in the state of lottery

Question 19

E7Q19. The social security normal retirement age depends upon:

Answer 19

The worker’s year of birth

Question 20

E7Q20. The complete transfer by the existing owner of all rights in an insurance policy to another person is:

Answer 20

Absolute assignment

Question 21

E7Q21. Which retirement plan was designed for employees of public school systems?

Answer 21

TSA

Question 22

E7Q22. Which settlement options allows only the death benefit earnings to be paid to the beneficiary?

Answer 22

Interest option

Question 23

E7Q23. All of the following apply to the life insurance cost-of-living rider, except:

Answer 23

The face value of the policy raises or lowers as the cost of living index increases or decreases

Question 24

E7Q24. The social security blackout period ends when the surviving spouse reaches the age of:

Answer 24

60

Question 25

E7Q25. Retirement benefits under social security are available only for workers who are:

Answer 25

Fully insured

Question 26

E7Q26. In which plans do employers make specific contributions to an employee's retirement account?

Answer 26

Defined contribution plans

Question 27

E7Q27. In a seven year vesting schedule, what percentage of employer contributions must be vested after seven years of service?

Answer 27

100%

Question 28

E7Q28. A representation in an insurance contract qualifies as which of the following?

Answer 28

An implied warranty

Question 29

E7Q29. A policy holder stops making payments on a 20-pay life policy and converts the cash surrender value to extended term insurance. All of the following statements are true, except:

Answer 29

The term policy will have the same loan value as the original policy

Question 30

E7Q30. Which non-forfeiture option uses an existing policy's cash value to purchase a paid-up policy with a lower face value than the original policy?

Answer 30

Reduced paid-up insurance option

Question 31

E7Q31. What is required when an applicant reveals conditions that require more information?

Answer 31

Physical examination

Question 32

E7Q32. Which risk classification carries the lowest premium?

Answer 32

Preferred

Question 33

E7Q33. Which statement best describes a life insurance policy dividend?

Answer 33

It is the distribution of excess of funds accumulated by he insurer on participating policies

Question 34

E7Q34. If a person was in violation of Section 770 of the CA Insurance Code, what action would the Insurance Commissioner most likely take if the violation dealt with loans on the security of real or personal property?

Answer 34

Issue a cease and desist order for a violation of more than one transaction

Question 35

E7Q35. If no other method of payment is selected, which of the following is the automatic mode of settlement for life insurance policy proceeds?

Answer 35

Lump-sum settlement in cash.

Question 36

E7Q36. The process whereby a mutual insurer becomes a stock company is called:

Answer 36

Demutualization

Question 37

E7Q37. Any situation that presents the possibility of a loss is known as:

Answer 37

A loss exposure

Question 38

E7Q38. Which settlement option allows only the death benefit earnings to be paid to the beneficiary?

Answer 38

Interest option

Question 39

E7Q39. An agent acting as an insurance agent, broker, solicitor, life-only agent, or bail agent acts in which capacity when handling premiums or return premiums for an insured?

Answer 39

Fiduciary

Question 40

E7Q40. According to the state law, what size print must be used for the licensee's license number on all price quotes, business cards, and printed material?

Answer 40

The same size print as the licensee's phone number, fax number or address

Question 41

E7Q41. Which non-forfeiture option uses cash surrender values to purchase paid-up term insurance for the full face amount of the policy?

Answer 41

Extended term insurance

Question 42

E7Q42. According to Employee Retirement Income Security Act of 1974 (ERISA) fiduciary standards, benefit plans are operated for:

Answer 42

Plan participants and beneficiaries

Question 43

E7Q43. Life insurance settlement options include all of the following, except:

Answer 43

Extended term option

Question 44

E7Q44. A life insurance application is important for all of the following reasons, except:

Answer 44

The beneficiary must sign the application before the insurer will issue the policy

Question 45

E7Q45. The price of insurance for each exposure unit is called the:

Answer 45

Rate

Question 46

E7Q46. To authorize the release of an attending physician's report, the applicant must:

Answer 46

Sign a consent form

Question 47

E7Q47. Yearly probabilities of death are shown in:

Answer 47

Mortality tables

Question 48

E7Q48. Members of the Medical Information Bureau are required to report:

Answer 48

Medical impairments found during the underwriting process

Question 49

E7Q49. When referring to an insurance contract, when must a representation be made?

Answer 49

Either at the time of or before policy issuance

Question 50

E7Q50. Frank and Ernest are 25 year old identical twins. They are both in excellent health. Both buy life policies that have $500 annual premiums. Frank buys a 5-year renewable term policy. Ernest buys a whole life policy. Which statement is not true?

Answer 50

Ernest's whole life policy will have a larger death benefit if he dies during the first five years

Question 51

E7Q51. The request for an attending physician's report must be accompanied by a copy of the:

Answer 51

Signed authorization

Question 52

E7Q52. Which life insurance classification carries the highest premium?

Answer 52

Substandard

Question 53

E7Q53. A group insurance plan is contributory when the:

Answer 53

Employee pays part of the premium

Question 54

E7Q54. Whose benefits are affected by the blackout period?

Answer 54

The surviving spouse

Question 55

E7Q55. Which of the following is not an option for the use of policy dividends?

Answer 55

Fund the addition of monthly income payments

Question 56

E7Q56. Who are owners/members of the Medical Information Bureau?

Answer 56

Life insurance companies

Question 57

E7Q57. After the deductible, what portion does a patient pay for covered expenses under Medicare Part B?

Answer 57

20%

Question 58

E7Q58. Which of the following functions is best defined as an insurance company's identifying and selling to potential customers?

Answer 58

Marketing

Question 59

E7Q59. What is it called when an insurer uses higher rates based solely on religion, race, or ethnic group?

Answer 59

Unfair discrimination

Question 60

E7Q60. A policy owner has the right to change all of the following, except:

Answer 60

The dividend schedule

Question 61

E7Q61. When must insurance records for insurance agents and insurance brokers be made available to the Insurance Commissioner?

Answer 61

At all times

Question 62

E7Q62. In a reinsurance agreement, the insurance company that transfers its loss exposure to another insurer is called:

Answer 62

Primary insurer

Question 63

E7Q63. Which type of insurance policy provides a death benefit that matches the projected outstanding debt on an individual's home?

Answer 63

Mortgage protection

Question 64

E7Q64. What do we call the process whereby insurers decide which customers to insure, and what coverage to offer?

Answer 64

Underwriting

Question 65

E7Q65. Which of the following is the best definition of premium?

Answer 65

Money the insured pays the insurer to obtain the benefits in the policy

Question 66

E7Q66. If an insurer pays an insured $25,000 in lost wages, $45,000 for physicians visits and hospital costs, and $15,000 for physical therapy treatments, and later discovers that the claim was fraudulent, the insured may be fined as much as:

Answer 66

$170,000

Question 67

E7Q67. What rule is used to determine the importance of a representation?

Answer 67

The materiality of concealment

Question 68

E7Q68. An agent must submit all of the following to the insurer, except:

Answer 68

A copy of all printed communications used for the presentation

Question 69

E7Q69. What is the difference between a conditional premium receipt and a binding premium receipt?

Answer 69

Only a binding receipt always provides insurance that is effective from the date the receipt is given

Question 70

E7Q70. After a life insurance policy has been in effect for two years, what prevents it from being rescinded by the insurer?

Answer 70

The incontestability clause