Testing Flashcards
1
Q
In Florida, when agents recommend changes be made for existing coverage, the agent must follow established procedures. The name of this rule is called the
A
Florida Replacement Rule
2
Q
Which arrangement allows one to bypass insurable interest laws?
A
Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.
3
Q
At what point does an informal contract become binding?
A
When one party makes an offer and the other party accepts that offer
4
Q
Insurance policies are offered on a “take it or leave it” basis, which make them
A
Contracts of Adhesion
5
Q
Insurance policies are considered aleatory contracts because
A
Insurance contracts are aleatory. This means there is an element of chance and potential for unequal exchange of value or consideration for both parties. An aleatory contract is conditioned upon the occurrence of an event.
6
Q
Level term
A
also called level premium level term, has a level face amount and level premiums. Premiums
tend to be higher than annual renewable term because they are level throughout the policy period.
However, the premiums will increase at each renewal.
7
Q
Decreasing term:
A
Term life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection
8
Q
Increasing term:
A
Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
9
Q
Convertible term:
A
A term life policy has a provision that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability.
10
Q
Renewable term:
A
Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.
11
Q
Annual renewable term:
A
Term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
12
Q
Straight life:
A
This is basic whole life insurance with a level face amount and fixed premiums payable over the insured’s entire life. Premium payments made until death of insured or age 100 (maturity of policy).
13
Q
Limited Pay life:
A
This is whole life insurance where the insured is covered for his entire life, but premiums are paid for a limited time. As the premium payment period shortens, cash values increase faster and the fixed premiums are higher. For example, under a life paid-up at 65 policy, premiums are
only paid until the insured is 65 years old. With a 20-pay life policy, the insured only pays for 20 years. These policies are in effect until the insured’s death or they reach age 100.
14
Q
Graded whole life:
A
Under a typical graded premium life insurance policy, the premium increases yearly for a stated number of years, then remains level. Premiums continue to stay level for the remainder of the policy. For example, a policy can start out low in a graded whole life and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy.
15
Q
Graded whole life:
A
Under a typical graded premium life insurance policy, the premium increases yearly for a stated number of years, then remains level. Premiums continue to stay level for the remainder of the policy. For example, a policy can start out low in a graded whole life and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy.
16
Q
Family Plan Policies:
A
These are designed to insure all family members under one policy. Usually the family head is covered by permanent (whole life) insurance and the spouse/children are included on the same policy as level term life riders (family term riders) . The term coverage on the spouse and children are normally convertible to permanent coverage without evidence of insurability.
17
Q
Family Income Policies:
A
Whole life and decreasing term insurance (begins date of purchase). Provides monthly income to a beneficiary if death occurs during a specified period after date of purchase. If the insured dies after the specified period, only the face value is paid to the beneficiary since the decreasing term insurance expired.
18
Q
Family Maintenance Policy:
A
Whole life and level term (begins date of death). Provides income to a beneficiary for a selected period of time if an insured dies during that period. At the end of the income paying period, the beneficiary also receives the entire face amount of the policy. If an insured dies after the
end of the selected period, the beneficiary receives only the face value of the policy.
19
Q
Multiple protection policies:
A
Pays a benefit of double or triple the face amount if death occurs during a specified period. If death occurs after the period has expired, only the policy face amount is paid. The period may be for a specified number of years - 10, 15, or 20 years or to a specified age such as 65. These
policies are combinations of permanent insurance and level term insurance.
20
Q
Joint Life Policy:
A
A policy that covers two or more people. The age of the insureds are “averaged” and a single premium is charged. It uses permanent insurance (as opposed to term) and pays a death benefit when one of the insureds dies. The survivors then have the option of purchasing an individual policy without evidence of insurability. The premium for a joint life policy is less than the premium for
separate, multiple policies.
21
Q
Joint and survivor policy, or a
“survivorship life policy”
A
This plan also covers two lives, but the benefit is paid upon the death of the last surviving insured. Compared to the combined premium for separate life insurance policies on two individuals, the premium for a survivorship life policy is lower.
22
Q
Juvenile Insurance:
A
Life insurance which is written on the lives of a minor is called juvenile insurance. The adult applicant is usually the premium payor as well, until the child comes of age and is able to take over the payments. A payor provision is typically attached to juvenile policies. It provides that, in the event of death or disability of the adult premium payor, the premiums will be waived until the child
reaches a specified age (such as 18, 21, or 25).
23
Q
Credit life insurance:
A
Is designed to cover the life of a debtor and pay the amount due on a loan if the
debtor dies before the loan is repaid. It is normally issued in an amount not to exceed the
outstanding loan balance and is usually paid entirely by the borrower. A decreasing term policy is
most often used.
24
Q
Interest-Sensitive Whole Life:
A
Interest-sensitive life insurance is a type of whole life insurance where the cash value can increase beyond the stated guarantee if economic conditions warrant. This is also called current assumption whole life insurance. It also gives the insured the opportunity to either increase the face amount or use the extra cash value to lower future premiums. Premiums can vary to reflect the
insurer’s changing assumptions with regard to its death, investment, and expense factors. CAWL
(current assumption whole life) policies are almost always a MEC due to accelerated premiums
25
Adjustable life policies:
Are distinguished by their flexibility that comes from combining term and whole life insurance into a single plan. The policyowner determines how much face amount protection is needed and how much
premium the policyowner wants to pay
• Adjustable life insurance allows you to vary your coverage as your needs change without
requiring evidence of insurability
• Consequently, no new policy needs to be issued when changes are desired
• Adjustable life has all the usual features of level premium cash value life insurance
26
Universal life:
is a variation of whole life insurance, characterized by considerable flexibility.
• Changes may be made with relative ease by the policyowner with these flexible-premium
policies
• Unlike whole life (with its fixed premiums, fixed face amounts, and fixed cash value
accumulations) universal life allows its policyowners to determine the amount and frequency
of premium payments which will adjust the policy face amount
• Basic characteristics of a universal life policy are flexible premiums, flexible benefits, no minimum
death benefit, and cash value withdrawals
• Cash value accumulations are subject to a minimum interest guarantee
• Any surrender charges of a universal policy must be disclosed
27
What are the characteristics of MEC's?
If withdrawn prior to age 59 ½, there is a 10% penalty.
• Taxation only occurs when cash is distributed
• Funds withdrawn from a MEC are subject to last-in first-out (LIFO) tax treatment, which assumes that the
investment or earnings portion of the contract's values is withdrawn first (making these funds fully
taxable as ordinary income).
• Penalty taxes on premature distributions from a modified endowment contract (MEC) normally apply to
policy loans
28
What are the characteristics of MEC's?
If withdrawn prior to age 59 ½, there is a 10% penalty.
• Taxation only occurs when cash is distributed
• Funds withdrawn from a MEC are subject to last-in first-out (LIFO) tax treatment, which assumes that the
investment or earnings portion of the contract's values is withdrawn first (making these funds fully
taxable as ordinary income).
• Penalty taxes on premature distributions from a modified endowment contract (MEC) normally apply to
policy loans
29
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
There is a flexible premium payment because cash value can be used to lower future premiums.
30
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
31
Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT
partial withdrawal features beyond a surrender charge period
32
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
33
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
34
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
35
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Joint Life
36
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
37
What kind of life insurance product covers children under their parent's policy?
Term rider
38
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
39
A Return of Premium life insurance policy is
"Whole life and Increasing term". A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.
40
How are policyowner dividends treated in regards to income tax?
"Interest on accumulations is taxed". If the dividends exceed the total premium payments for the insurance policy, the excess dividends are considered taxable income.
41
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
42
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
43
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
44
The Common Disaster clause provides that if both the insured and the named beneficiary were to die in a common accident, which of the following is true?
The correct answer is "The estate taxes in the beneficiary's estate may be reduced". Under the Common Disaster clause, the estate taxes in the beneficiary's estate may be reduced.
45
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
Life settlement contract
46
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K's estate if P dies within a specified time
47
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received
48
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
Binding receipt
49
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation exclusion
50
On delivery of a policy, a signed statement of good health is typically requested if
The application was submitted without the initial premium
51
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has
The correct answer is "waived one of its legal rights". If an insurer accepts an application that contains unanswered questions and makes the application part of the life contract, the company has waived one of its legal rights.
52
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
53
What action should a producer take if the initial premium is NOT submitted with the application?
The correct answer is "Forward the application to the insurer without the initial premium". In this situation, the producer should submit the application to the insurance company without the premium. However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected.
54
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
exclusion for the medical condition
55
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Inspection report
56
What is the purpose of a Policy Summary?
It highlights the critical parts of the policy issued
57
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
applicant's physician
58
When an employee is terminated, which statement about a group term life conversion is true?
The correct answer is "Policy proceeds will be paid if the employee dies during the conversion period". An individual must apply for individual coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversion period.
59
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract
60
If an annuity is terminated prior to beginning of the income payment period, the contract owner receives
The contract surrender value at that time
61
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
Flexible Installment Deferred
62
Which of the following factors affects the amount of monthly disability benefits payable under Social Security?
The amount of the benefits available from other sources
63
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
64
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Correct. All withdrawals from a qualified retirement plan are taxable as current income. In addition, any withdrawals made before age 59 1/2 is subject to an additional tax penalty of 10% of the amount withdrawn.
65
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
The correct answer is "Distribution is subject to federal income tax withholding". A participant must complete a rollover to another qualified plan within 60 days or the distribution is considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsor must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.
66
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
In this situation, 80% "vested" means that 20% of the funds could be forfeited if Tom's employment is terminated.
67
What does a 401(k) plan generally provide its participants?
The correct answer is "Salary-deferral contributions". A 401(k) plan normally provides participants with a salary-deferral option for contributions to the plan.
68
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid
There is no federal tax withholding involved in a transfer of funds from one qualified plan into another. Rollovers, however, involve a 20% withholding. Once the rollover takes place to the new custodian, the remainder of the distribution is made.
69
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
70
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the
marital deduction
71
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
In this situation, the maximum allowable IRA contribution is $25,000.
72
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
A surviving spouse who inherits IRA benefits or benefits from the deceased spouse's qualified plan is eligible to establish a rollover IRA in the surviving spouse's own name.
73
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity, NOT A VARIABLE PLAN
74
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
The correct answer is "59 1/2". Traditional Individual Retirement Account (IRA) withdrawals are normally subject to a tax penalty if they are made before the owner reaches age 59 1/2.
75
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
76
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Life insurance is purchased to fund a buy-sell agreement in the event of the death of a major shareholder in a business.
77
Which of these is NOT a reason for a business to buy key person life insurance?
All of these are reasons for a business organization to purchase key person life insurance EXCEPT "A pension deficiency if the key employee dies".
78
In Florida, an element of an insurance transaction would be
The issuance of an insurance contract is considered to be an element of an insurance transaction.
79
Which entity approves the insurance policy forms used in Florida?
Office of Insurance Regulation (OIR)
80
In Florida, when agents recommend changes be made for existing coverage, the agent must follow established procedures. The name of this rule is called the
Florida Replacement Rule
81
What are the consequences for placing business with an unauthorized insurer?
First Degree Misdemeanor
82
Which of the following employer tasks does a Professional Employer Organization normally handle?
Administration tasks
83
A stock life insurance company that issues both participating and nonparticipating policies is doing business on
The correct answer is "a mixed plan". When a stock life insurance company issues both participating and nonparticipating policies, the company is doing business on a mixed plan.
84
As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?
The correct answer is "Coercion". A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.
85
How can an agent-in-charge have more than one location?
The correct answer is "Only if the agent-in-charge is present when insurance activity occurs". Multiple locations are allowed as long as the agent-in-charge is present when insurance activity occurs.
86
The Bureau of Unclaimed Property is overseen by the
The correct answer is "Chief Financial Officer". The Chief Financial Officer oversees the Bureau of Unclaimed Property.
87
In Florida, what is the maximum percentage of controlled business an agent may produce?
50%
88
How many days does an insurance company have to reject a reinstatement application before it is automatically reinstated?
45
89
In Florida, agents are allowed to engage in rebating if
offered to all insureds in the same actuarial class
90
A group plan was recently terminated. In Florida, how many days are covered individuals guaranteed coverage after a group plan's termination?
The correct answer is "31 days". If a group plan is terminated, covered persons are guaranteed coverage for 31 days after termination.
91
Which of the following areas of state regulation is NOT protected by the savings clause in ERISA?
Commerce
92
Which of the following is NOT considered rebating?
The correct answer is "Sharing commissions with an agent licensed in the same line of business". Sharing commissions with other licensed agents is not considered rebating.
93
What are adjustable rates for life policy loans in Florida based on?
Adjustable rates for life insurance policy loans in Florida are based on Moody's corporate bond index.
94
Which of the following professional organizations has its code of ethics incorporated into Florida law?
The correct answer is "National Association of Insurance and Financial Advisors (NAIFA)". The professional organization whose code of ethics is incorporated into Florida law, and whose responsibility is to establish the activities of agents is the National Association of Insurance and Financial Advisors.
95
Which of the following acts is an agent NOT authorized to do on behalf of an insurer?
Agents do not authorize payment of claims.
96
Which of the following documents must an agent submit to the replacing insurance company during the replacement of an existing life insurance policy?
The correct answer is "Notice to existing and replacing insurers of intention to replace". When replacing an existing life insurance policy, an agent must submit notice to existing insurer and replacing insurer of intentions.
97
A variable life insurance agent must be licensed and appointed as a life and variable contract agent, as well as a(n)
The correct answer is "broker dealer". An agent marketing variable life insurance must be licensed and appointed as a life and variable contract agent and a broker dealer.
98
Florida requires that an insurance agent must complete __ hours of continuing education on the subject of law and ethics every two years.
The correct answer is "5". Florida requires that an insurance agent must complete 5 hours of continuing education on the subject of law and ethics every two years.
99
According to Florida law, an additional lapse notice must be issued after the standard grace period has expired for policyowners age
The correct answer is "64 years or older". In Florida, insurers are required to issue an additional lapse notice after the applicable statutory grace period has expired for policyholders 64 years of age or older.
100
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
The correct answer is "P will still receive declared dividends". Even though premiums are waived because of the disability, the insured will continue to receive dividends just as if the insured were still making the payments themselves.
101
Which of these life insurance riders allows the applicant to have excess coverage?
Term riders allow an applicant to have excess life insurance coverage.
102
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
The correct answer is "Binding receipt". A binding receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.
103
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
In this situation, coverage will go into effect the date the agent delivers the policy, collects the initial premium, and obtains a good health statement from the insured.
104
If an agent would like to sell Variable annuities, which state examination must the agent pass?
An agent who wants to sell Variable annuities must be licensed by the state which includes examinations in Life and Variable contracts.
105
Which of the following policies combines investment choices with a form of Term coverage?
Variable Universal Life
106
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.
107
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?.
The correct answer is "Level". A level term policy pays the same benefit amount if death occurs at any point during the term. Level term policies may be renewable.
108
Which of the following actions is NOT possible with a Universal Life policy?
Policy's cash value may be used to pay premiums.
Premium payments may be made at unscheduled times.
Premiums may be applied as a credit against income tax.
Face amount may be adjusted. The correct answer is that premiums may be applied as a credit against income tax.
109
When an employee is terminated, which statement about a group term life conversion is true?
An individual must apply for individual permanent coverage within 31 days after the date of group coverage termination. An individual is covered under the group policy during the conversion period.
110
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
In this situation, the family would receive an income from the policy for 10 years. Family Income policies pay an income beginning at the insured's death and continues for a period specified from the date of policy issue.
111
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
A participant must complete a rollover to another qualified plan within 60 days or the distribution is considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsor must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.
112
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
The correct answer is "additional Whole Life coverage at specified times". A guaranteed insurability option in a Whole Life Policy permits the policyowner to purchase, without evidence of insurability, stated amounts of Whole Life insurance at specified times.
113
A Return of Premium life insurance policy is
The correct answer is "Whole life and Increasing term". A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums.
114
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
An inspection report may include information obtained by a telephone call to the proposed insured.
115
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
The correct answer is "Entire cash surrender value is taxable". This is incorrect. The total cash surrender value is NOT taxable. The interest gained is taxable.
116
All of the following are Nonforfeiture Options EXCEPT
Cash Surrender Option
Extended Term Option
Reduced Paid-Up Option
* Automatic Premium Loan Option *
117
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
Flexible Installment Deferred
118
Which of these is NOT a reason for a business to buy key person life insurance?
The correct answer is "A pension deficiency if the key employee dies". All of these are reasons for a business organization to purchase key person life insurance EXCEPT "The increased pension liability resulting from the key person's death".
119
Which of the following Dividend options results in taxable income to the policyowner?
Paid-up Additions
Cash
Accumulation at Interest
Reduced Premium
The correct answer is "Accumulation at Interest". While policy dividends are not taxable, any interest paid on them is taxable income in the year the interest is credited to the policy.
120
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
The correct answer is "Straight Life annuity". The Straight Life Annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.
121
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
A Family Maintenance Policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period.
122
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
A plan sponsor must withhold 20% of the distribution in federal taxes on a rollover. Once the rollover takes place to a new custodian, the remainder of the distribution is made.
123
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
124
How many days does an insurance company have to reject a reinstatement application before it is automatically reinstated?
The correct answer is "45". If the insurer takes no action within 45 days, the policy will be reinstated automatically.
125
If an annuity is terminated prior to beginning of the income payment period, the contract owner receives
The correct answer is "The contract surrender value at that time". If an annuity is terminated prior to beginning of the income payment period, the contract owner receives the contract surrender value at that time.
126
On delivery of a policy, a signed statement of good health is typically requested if
The correct answer is "The application was submitted without the initial premium". On delivery of a policy, a signed statement of good health is typically requested if the application was submitted without the initial premium.
127
Which life insurance rider typically appears on a Juvenile life insurance policy?
The correct answer is "Payor Benefit rider". A payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.
128
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
The correct answer is "Waiver of Premium". The Waiver of Premium is a rider on a life insurance policy that guarantees that the premium will be paid if the insured is disabled for a specified period of time.
129
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
The correct answer is "Level term". Life insurance written to cover a need for a specified period of time at the lowest premium is called level term insurance.
130
According to Florida law, group life insurance conversion privileges must NOT
The correct answer is "require evidence of insurability". Florida's insurance law that governs group life insurance conversion privileges provides that the individual policies do not require evidence of insurability.
131
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
In this situation, the applicant should purchase a Whole Life Policy with an Other Insured Rider.
132
In Florida, an element of an insurance transaction would be
ordering an MIB report
setting up the sales appointment
*** issuing an insurance contract
determining how much coverage is needed
133
A group plan was recently terminated. In Florida, how many days are covered individuals guaranteed coverage after a group plan's termination?
The correct answer is "31 days". If a group plan is terminated, covered persons are guaranteed coverage for 31 days after termination.
134
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
- Cash value has a minimum rate of accumulation
- If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index
* **** The premiums can be lowered or raised, based on investment performance
- Tied to an equity index such as the S&P 500
135
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
The correct answer is "Life Annuity with Period Certain". This situation involves a Life Annuity with Period Certain.
136
Which of the following professional organizations has its code of ethics incorporated into Florida law?
Financial Industry Regulatory Agency (FINRA)
National Association of Insurance Commissioners (NAIC)
**** National Association of Insurance and Financial Advisors (NAIFA)
The American College of Life Insurance
The correct answer is "National Association of Insurance and Financial Advisors (NAIFA)". The professional organization whose code of ethics is incorporated into Florida law, and whose responsibility is to establish the activities of agents is the National Association of Insurance and Financial Advisors.
137
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
The correct answer is "Insured's contingent beneficiary". Under the Uniform Simultaneous Death Act, if both insured and primary beneficiary are killed in the same accident and there is insufficient evidence to show who died first, policy proceeds will be paid as if the insured died last. In other words, the proceeds will be paid to the secondary or contingent beneficiary.
138
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
*** There is a flexible premium payment
There are no guaranteed minimum interest rates
Mortality charges do not impact the investment amount
Interest rates determine cash values
The correct answer is "There is a flexible premium payment". An Interest-Sensitive Whole Life policy is characterized by premiums that vary to reflect the insurer's changing assumptions regarding its death, investment, and expense factors.
139
According to Florida law, group life insurance conversion privileges must NOT
The correct answer is "require evidence of insurability". Florida's insurance law that governs group life insurance conversion privileges provides that the individual policies do not require evidence of insurability.
140
An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?
The correct answer is "Long term care". A long term care rider is triggered by the insured's inability to perform two or more activities of daily living.
141
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
The correct answer is "Risk classification". Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.
