Life Ii

Front 1

Annuities may be purchased with all of the following EXCEPT:

* A) a schedule of flexible payments.
* B) a single lump-sum payment.
* C) a single payment that may be deferred for 5 years.
* D) a schedule of fixed payments.

Back 1

C

Annuities may be purchased with a single lump-sum, a scheduled payment, or a flexible payment.

Front 2

All of the following benefits are available under Social Security EXCEPT:

* A) death benefits.
* B) disability benefits.
* C) old-age or retirement benefits.
* D) welfare benefits.

Back 2

D

Social Security provides death benefits, old-age or retirement benefits, and disability benefits to eligible workers. Security is an entitlement program, not a welfare program.

Front 3

Lawrence signed an application for a life insurance policy on September 2, and took a required medical exam on September 4. He gave the agent a check for the initial premium and received a conditional receipt at the time of application. The policy was issued as originally applied for and the agent delivered the policy to him on October 15. The earliest effective date for Lawrence's insurance policy would be:

* A) December 31.
* B) October 15.
* C) September 2.
* D) September 4.

Back 3

D

The conditional receipt explains to the applicant that the policy will be issued subject to the approval of the insurance company. If the policy is eventually issued as originally applied for, typically the earliest effective date is the date the applicant has completed all of their requirments. In this instance the applicant was required to complete a medical exam as part of their requirements, so the earliest effective date would be the date the medical exam was completed. The date the policy is actually delivered to the insured is immaterial.

Front 4

Which of the following statements regarding the estate tax treatment of life insurance owned by the insured at the insured's death is NOT correct?

* A) The insured could keep death benefit proceeds out of his estate by making another party the owner of the policy.
* B) Life insurance death benefit proceeds are included in the insured's estate for estate valuation purposes.
* C) Life insurance that is owned by the insured will avoid estate tax inclusion as long as ownership is transferred to another party at least one year before the insured's death.
* D) An irrevocable life insurance trust is a common device used to keep life insurance out of the insured's estate.

Back 4

C

Life insurance owned by the insured is included, at its full death benefit amount, in the insured's estate at death for estate valuation purposes. An insured can avoid this by transferring existing policies to another party (e.g., an irrevocable life insurance trust) at least three years before the insured's death.

Front 5

A life insurance policy may pay death benefits before the insured dies for all of the following reasons EXCEPT:

* A) eligibility for long-term care.
* B) financial difficulties.
* C) catastrophic illness.
* D) terminal illness.

Back 5

B

Front 6

Michelle, age 31, just purchased a $50,000 variable life insurance policy. With regard to her policy, which of the following statements is NOT correct?

* A) She directs the insurer as to how her cash values are to be invested.
* B) Her premium payments will be fixed and level for the duration of the contract.
* C) At her death, her beneficiary may receive more or less than $50,000 in proceeds.
* D) The cash value growth of her policy will depend on how the investments supporting those values perform.

Back 6

C

A variable life insurance policy invests its cash values in securities at the owner's direction. There are no guarantees as to the cash value growth or accumulation. Although the death benefit may fluctuate in response to the cash values, a minimum death benefit--the policy's face amount--is guaranteed. Premiums are fixed and payable over the life of the policy.

Front 7

A contract between one party who will buy the death benefit of a life insurance policy from the policyholder is called:

* A) a variable product.
* B) a reinsurance transaction.
* C) a conversion privilege.
* D) a viatical settlement.

Back 7

D

A viatical settlement contract is a written agreement whereby the insured (referred to as the viator) sells all or a portion of a life insurance policy to a viatical settlement provider. Except as may be required in the course of conduct of the Division of Insurance's responsibilities, a viatical settlement provider, representative, or broker may not disclose to another person the identity of a viator or insured of an insurance policy that is the subject of a viatical settlement contract. The director may also adopt regulations to administer viatical settlements, including requirements for licensing, reporting and record retention, and privacy protection.

Front 8

Sally, age 66, has accumulated 50 credits from working during the past 15 years. For Social Security purposes, this means that Sally is:

* A) eligible for partial retirement and survivor benefits.
* B) partially insured.
* C) ineligible for full retirement and survivor benefits.
* D) fully insured.

Back 8

D

Sally is fully insured if she has accumulated the required number of credits, which in most cases is 40 (representing approximately 10 years of work). Because she is fully insured, Sally is eligible for full retirement and survivor benefits.

Front 9

Cash value life insurance must permit policyowners to take a policy loan up to the full loan value of the policy after the policy has been in force for:

* A) four years.
* B) three years.
* C) two years.
* D) one year.

Back 9

B

After a whole life or endowment policy has been in force for 3 full years with all premiums due paid, the insurer shall advance an amount up to but not exceeding the loan value of the policy to the policyholder. The insurer may defer granting the loan for up to 6 months after application (delay clause).

Front 10

An agent in the XYZ Insurance Company, equipped with business cards, sample XYZ policies, and an XYZ rate book, informs a prospect that XYZ has given him unlimited binding authority. The prospect assumes this is true. Given the prospect's assumption, which of the following terms correctly defines the agent's authority in this case?

* A) Binding authority.
* B) Implied authority.
* C) Apparent authority.
* D) Express authority.

Back 10

C

Apparent authority is what a third party (such as a member of the public) assumes an agent has, on the basis of the actions or words of the principal. By supplying the agent with business cards, sample policies, and rate books, the insurance company has given the impression that it supports the words and actions of its agent.

Front 11

Universal life is distinguished from whole life insurance in that:

* A) policy loans can be taken from the policy.
* B) no withdrawals can be made from the policy's cash value account.
* C) complete withdrawals of the cash value can be taken.
* D) partial withdrawals can be taken from the cash value account.

Back 11

D

A factor that distinguishes universal life from whole life is that partial withdrawals can be made from the policy's cash value account. Whole life insurance allows a policyowner to tap cash values only through a policy loan or a complete cash surrender of the policy's cash values, in which case the policy terminates.

Front 12

An individual life insurance policy must include all of the following EXCEPT:

* A) a table showing the annual loan values of the policy for at least 30 years.
* B) an entire contract provision.
* C) an incontestability provision.
* D) a one-month grace period.

Back 12

A

Individual life insurance policies must include a table that shows, for at least 20 years, the annual loan values and options available under the policies upon default in premium payments. They must also contain a one-month grace period, an incontestability provision, and an entire contract provision.

Front 13

The free-look provision states that all individual life insurance policies must include a notice stating that the unsatisfied policyowner is permitted to return the policy within how long for a refund of the premium?

* A) 10 days.
* B) 2 weeks.
* C) 90 days.
* D) 1 year.

Back 13

A

All individual life insurance policies must include a free-look provision stating that the policyowner, if not satisfied for any reason, may return the policy within 10 days of delivery for a full refund of the premium.

Front 14

Since the obligations of the insurance company hinge on certain acts of the policyowner, the beneficiary, or both, the insurance contract is termed:

* A) aleatory.
* B) unilateral.
* C) conditional.
* D) bilateral.

Back 14

C

Insurance is a conditional contract because the obligations of the insurance company hinge on the performance of certain acts by the owner and the beneficiary, such as the payment of premiums and furnishing proof of loss.

Front 15

All of the following are required provisions of group life insurance policies EXCEPT:

* A) misstatement of age.
* B) individual policy contract.
* C) incontestability.
* D) grace period.

Back 15

B

Grace period, misstatement of age, and incontestability are all required provisions, as well as provisions for the entire contract, evidence of individual insurability, individual certificates (rather than individual policies), and assignment.

Front 16

Annuity buyers who want their product to be supported by the insurers' general accounts would mostlikely be looking for interest returns that:

* A) will keep pace with inflation.
* B) can go up but can never go down.
* C) are guaranteed never to be less than the rate specified in the contract.
* D) can compete with equity investment returns.

Back 16

C

Life insurance and annuity policies that are supported by the insurer's general account include a provision that guarantees interest returns to never be less than the rate specified in the contract.

Front 17

The annuitant of an annuity can be compared to which of the following with respect to a life insurance policy?

* A) Beneficiary.
* B) Policyowner.
* C) Insured.
* D) Creditor.

Back 17

C

The annuitant can be compared to an insured in a life insurance policy. The annuitant is the person by whose life the contract is measured. Just as life insurance policyowners are often the insureds, annuity owners are often the annuitants.

Front 18

A commercial insurer can take all of the following forms EXCEPT:

* A) stock insurance company.
* B) individual benefit society.
* C) fraternal benefit society.
* D) mutual insurance company.

Back 18

B

A commercial insurer is classified by its form of ownership and can be a stock insurance company, mutual insurance company, or fraternal benefit society.