Life Insurance Flashcards by Unknown Unknown

Where would policy proceeds be paid if both the insured and primary beneficiary were killed in the same accident?
Primary beneficiary’s estate
Contingent beneficiary
Insured’s estate
Children of the insured

Contingent Beneficiary

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Proceeds from a life insurance policy are protected from the beneficiaries creditors by which clause?
Protection clause
Creditor clause
Spendthrift trust clause
Beneficiary trust clause

Spendthrift trust clause

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What does the word “level” in Level Term describe?
The period of coverage
The face amount
The premium payments
The cash value

The face amount

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Which of these would be the BEST example of a limited pay life insurance policy?
Whole life policy that pays out its cash value over a 20 year period
Whole life policy with premiums paid up after 20 years
Term life policy that returns cash value after 20 years
Term life policy with premiums paid after 20 years

Whole life policy with premiums paid up after 20 years

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A securities license is required for a life insurance producer to sell:
Modified life insurance
Modified Endowment Contracts
Variable Life Insurance
Universal life insurance

Variable Life Insurance

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What is the primary feature of a viatical settlement?
No interest on policy loans
Reduced death prepayment
Longer contestable period
Lower premiums

Reduced death benefit prepayment

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Under a non-qualified annuity, interest is taxed after the:
Deposits have been made
Death of the annuitant
Distribution of payments
Exclusion ratio has been calculated

Exclusion ratio has been calculated

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A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a?
Waiver of premium rider
Payor rider
Automatic premium loan rider
Juvenile waiver rider

Payor Rider

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An endorsement found in an insurance plan which modifies the provisions of the policy is called a:
Attachment
Add-on
Rider
Supplement

Rider

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Phil is shopping for an annuity that guarantees he CANNOT outlive the benefits. Which of these benefit options would he choose?
Accelerated lifetime benefit
Guaranteed lifetime withdrawal benefit
Right of income rider
Guaranteed minimum accumulation benefit

Guaranteed lifetime withdrawal benefit

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Which of these annuities require premium payments that vary from year to year?
Flexible premium immediate annuity
Flexible premium deferred annuity
Fixed premium deferred annuity
Fixed premium immediate annuity

Flexible premium deferred annuity

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What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
Policy Summary
Buyer’s guide
Entire Contract
Entire Policy

Entire Contract

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Which of these is a method of determine the level of funds required for ongoing support in the event of the breadwinner’s death?
Financial loss value
Human Life Value
Assessment Value
Replacement value

Human Life Value

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A life insurance policy that has premiums fully paid up within a stated time period is called:
Stated payment insurance
Limited universal insurance
Stated modified insurance
Limited payment insurance

Limited payment insurance

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In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST:
Remit all past due premiums within the grace period
Provide evidence of insurability to the insurer
Resubmit a new life insurance application
Provide a valid reason for the lapse

Provide evidence of insurability to the insurer

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

Temporary Annuity Certain

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An alien insurer
Must be organized under Idaho insurance laws
In an insurer operating in the U.S. but headquartered outside the U.S.
Writes insurance on risks located only outside of Idaho
Is a company that was formed under the laws of another state

Is an insurer operating in the U.S. but headquartered outside of the U.S.

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Which of the following is NOT a federal requirement of a qualified plan?
Must benefit a broad cross-section of employees
Employees must be able to make unlimited contributions
Vesting schedule must be defined
Employer establishes the plan

Employees must be able to make unlimited contributions

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A whole life policy option where extended term insurance is selected is called an?
Dividend option
Settlement option
No forfeiture option
Interest only option

Nonforfeiture option

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Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?
Interest only
Reduced paid-up insurance
Extended term insurance
Cash surrender

Interest only

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How does life insurance create an immediate estate?
Cash value may be borrowed upon at any time
Nonforfeiture options are immediately available
The insured’s estate receives the death benefit
After the first premium is paid, the face amount may be available to the beneficiary

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

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A _____________ company is owned by its shareholders.

Stock

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Which of the following pertains to the analysis of an applicant’s personal information and determining whether insurance should be issued or declined?
Adverse calculation
Underwriting
Risk classification
Actuarial Determination

Underwriting

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Pat is insured with a life insurance policy and Karen is his primary beneficiary. They are both involved in an automobile accident where Pat dies instantly and Karen dies 5 days later. Which policy provision will protect the rights of the contingent beneficiary to receive the policy benefits?
Nonforfeiture clause
Common disaster clause
Spendthrift clause
Accident Indemnity Clause

Common disaster clause

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In what part of an insurance policy are policy benefits found: Declarations Entire contract Waivers Conditions

Declarations

Which of the following policies does NOT build cash value? Term Straight Life Endowment Variable Life

Term

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because: The MEC has tax deductible premiums The MEC is considered an illegal product The MEC tends to be an investment vehicle The MEC does not accumulate cash value

The MEC tends to be an investment vehicle

How often must the Director examine each domestic insurance company? Every year Every 2 years Every 3 years Every 5 years

Every 5 years

If a producer diverts funds from an insurer, he/she may be found guilty of Malfeasance Fraud Subrogation Misappropriation

Fraud

What will the beneficiary receive if an annuitant dies during the accumulation period? The greater of the accumulated cash value or the total premium paid The lesser of the accumulated cash value or the total premium paid The interest earned on the accumulated cash value Nothing

The greater of the accumulated cash value or the total premium paid

When a decreasing term policy is purchased, it contains a decreasing death benefit and: Increasing premiums Level premiums Decreasing premiums Variable premiums

Decreasing premiums

A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a? Automatic premium loan Nonforfeiture option Collateral assignment Irrevocable assignment

Collateral assignment

An interest-sensitive life insurance policyowner may be able to withdraw the policy’s cash value interest free. The provision that allows this is: Partial surrender Subrogation Automatic premium loan Accelerated death benefit

Partial surrender

When does a life insurance policy typically become effective? When the policy is issued When initial premium is collected and policy is issued When the application is completed and signed When the completed application is signed and initial premium is collected

When initial premium is collected and policy is issued

What kind of life insurance policy covers two or more people with the death benefit payable upon the last person’s death? Dual life insurance Joint life insurance Last survivor life insurance Shared Life Insurance

Last Survivor life insurance

Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE? Net death benefit will be reduced if the loan is not repaid No interest will be charged on the loan balance Term life policies are the only type of insurance that allows policy loans A loan can be taken out for up to the face amount of the policy

Net death benefit will be reduced if the loan is not repaid

An insurance producer is BEST defined as: A person appointed by more than one insurance company to issue policies A person who has a contract with an insurance company to represent it A person who places insurance with nonadmitted companies An employee of an insurance company who has the authority to underwrite insurance

A person who has a contract with an insurance company to represent it

What types of life insurance are normally used for key employee indemnification: Term, whole, and universal life insurance Increasing term insurance Joint, credit, and group life insurance Adjustable, permanent, and limited pay life insurance

Term, whole, and universal life insurance

Which of these riders will pay a death benefit if the insured’s spouse dies? Guaranteed insurability rider Family term insurance rider Family whole insurance rider Payor benefit rider

Family term insurance rider

Andy the insured had made a deliberate lie to the insured in order to obtain a lower premium. This action is considered an act of: Subrogation Misrepresentation Malfeasance Fraud

Fraud

An insured individual and the policy’s beneficiary die from the same accident. The common disaster provision states the insurer will continue as: The insured outlived the beneficiary The beneficiary outlived the insured No beneficiary was never named The insured and beneficiary died at the same time

The insured outlived the beneficiary

An unauthorized insurer may place insurance business in Idaho through an: Nonresident agent Unauthorized agent Limited lines agent Surplus lines agent

Surplus lines agent

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

Substandard risk

____________ life insurance is designed to pay the balance of a loan if the insured dies before the loan has been repaid. Accelerated Universal Settlement Credit

Credit

All of the following are examples of a Business Continuation Plan EXCEPT: Key person insurance Cross purchase agreement Stock redemption Plan Deferred Compensation

Deferred Compensation

Dorian exercised a nonforfeiture option by using his life policy’s cash value to purchase an extended term insurance option. When the term insurance expires: He has the option of resuming the original policy and paying the same premium The coverage can be extended with a lump sum payment All remaining cash values are paid to the producer The protection ends

The protection ends

A producer must notify the Director within __________ days of a felony conviction: 30 45 60 90

Tia the producer is recommending to a prospect that an existing life insurance policy be replaced with a new one from her insurer. If this transaction moves forward, which of the following does NOT need to be provided to the prospect at or before the policy is delivered? Notice regarding replacement Replacing insurer’s financial statements Buyers guide Policy summary

Replacing insurer’s financial statements

Craig purchased a life insurance policy for enabling his heirs to pay estate taxes. What is this called? Estate conservation Liquidity maintenance Survivor fund Human value protection

Estate conservation

A partial surrender is allowed in which of the following life policies? Adjustable whole life Universal life Decreasing term life Limited whole life

Universal life

The typical free-look period for life insurance policies sold in Idaho is ____ days? 7 10 15 20

20 days

In an insurance contract, the insurer is the only party legally obligated to perform. Because of this, an insurance contract is considered: Voidable Conditional Aleatory Unilateral

Unilateral

What is known as the immediate specific event causing loss and giving rise to risk? Peril Hazard Loss factor Liability

Peril

A life insurance policy that is subject to a contract interest rate is referred to as: Adjustable life Group life Term life Universal life

Universal life

Which type of annuity stops all payments upon the death of the annuitant? Life annuity Period certain annuity Cash refund annuity Joint and survivor annuity

Life annuity

Which of the following actions is REQUIRED by a producer who is replacing an existing life insurance policy? Keep replacement records on file for at least 10 years Notify the existing insurer of the proposed replacement Submit to the replacing insurer a list of the policies to be replaced Offer the insured a 60 day free-look period

Submit to the replacing insurer a list of the policies to be replaced

All of the following are examples of pure risk EXCEPT: Losing money at a casino Injured while playing football Falling at a casino and breaking a hip Jewelry stolen during a home robbery

Losing money at a casino

Pat owns a 20 pay life policy with a paid up dividend option. Which of the following statements is true? The policy may be paid up early by using accumulated cash values The policy may be paid up early by using policy dividends The policy’s premiums will increase after 20 years The policy’s cash values steadily decrease after 20 years

The policy may be paid up early by using policy dividends

Joe has a life insurance policy that has a face amount of 300,000. After a number of years, the policy’s cash value accumulates to 50,000 and the face amount becomes 350,000. What kind of policy is this? Increasing term life policy Nonparticipating policy Modified whole life policy Universal life policy

Universal life policy

According to Idaho law, group life insurance conversion privileges must NOT: Allow a new policy to be issued Allow a time period to convert group life coverage to an individual life policy Allow a rate increase Require evidence of insurability

Require evidence of insurability a

A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called an: Adjustable policy Limited pay policy Level term policy Variable universal policy

Limited pay policy

What is the primary reason for buying an annuity? Provide tax free income Provide a risky, yet high return investment Provide an instant estate Provide future economic security

Provide future economic security

All of the following activities require an insurance producer’s license EXCEPT: Underwriting Negotiating Selling Soliciting

Underwriting

All of these are considered sources of information that can assist an underwriter in determining whether or not to accept a risk EXCEPT: AGENT’S REPORT Medical information bureau Inspection reports National Association of Insurance Underwriter

National Association of Insurance Underwriters

Life insurance policies will normally pay for losses arising from: Commercial avaiation War Suicide Hazardous jobs

Commercial avaiation

A ROTH IRA owner must be at least what age in order to make tax-free withdrawals? 59.5 and owned account for min of 10 years 59.5 and owned account for min of 5 years 70.5 and owned account for a min of 10 years 70.5 and owned account for a min of 5 years

59.5 and owned account for min of 5 years

Which of the following is considered to be an alternative to a life settlement? Accelerated death benefit rider Waiver of premium rider Extended term option Decreasing term insurance

Accelerated death benefit rider

Donald is the primary insured of a life insurance policy and adds a children’s term rider. What is the advantage of adding this rider? Can be converted to permanent coverage without evidence of insurability Coverage can be different for each child Premiums on this rider are not required until the limiting age is reached Increases the policies overall cash value

Can be converted to permanent coverage without evidence of insurability

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called: Mutual insurer Reinsurer Reciprocal insurer Participating insurer

Reinsurer

The taxable portion of each annuity payment is calculated using what method? Exclusion ratio Taxable ratio Cost basis Tax basis

Exclusion ratio

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