Dohrn Insurance Flashcards
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Questions and Answers

What is the advantage of buying an Equity Index Life Policy?

The cash value is guaranteed and in good years, interest exceeds a fixed product.

What is the disadvantage of a fixed annuity?

Reduced purchasing power against inflation.

Which of the following Whole Life policies would probably have the most expensive premium?

  • Modified Whole Life
  • Regular Whole Life
  • Limited Pay Whole Life
  • Single Premium Whole Life (correct)

    • What type of policy does S have if it has a minimum rate of interest but also a capped maximum rate of return?

    <p>Equity Indexed Life Policy.</p> Signup and view all the answers

    What units does V purchase after paying money into a variable annuity?

    <p>Accumulation Units.</p> Signup and view all the answers

    What does a convertible option on a term policy allow the insured to do?

    <p>Convert regardless of insurability.</p> Signup and view all the answers

    True or False: At least once a year, the owner must consult the insured if they want to make changes to the policy.

    <p>False</p> Signup and view all the answers

    What is the most limited form of Limited Pay Whole Life?

    <p>Single Premium Whole Life.</p> Signup and view all the answers

    Under a life policy's Settlement Options, the beneficiary cannot do which of the following?

    <p>Receive the policy proceeds under the Life Income option for two years and then convert to the Interest Only Option.</p> Signup and view all the answers

    What is the plan of life insurance whose death benefit can be based on the investment of cash values in the stock market known as?

    <p>Variable Life.</p> Signup and view all the answers

    What does Joint Life insurance cover, and when does it pay out?

    <p>Covers two or more insureds under one policy and pays death upon first to die.</p> Signup and view all the answers

    If an insured is found to be a substandard risk, which of the following actions will the insurer most likely take?

    <p>Rate the policy and charge a high premium</p> Signup and view all the answers

    J has a policy that requires that he meet certain conditions in order for the contract to be enforceable. J has a(an):

    <p>Unilateral Contract</p> Signup and view all the answers

    Which type of annuity payments are allowed during the pay-in period?

    <p>All of the Above (Level, flexible, and single)</p> Signup and view all the answers

    Joint Life premiums are:

    <p>based off a joint average age</p> Signup and view all the answers

    Standard Issues is an example of:

    <p>Risk Classification</p> Signup and view all the answers

    Which of T's ownership rights under a life policy would allow him to transfer ownership of a policy to a living trust?

    <p>Absolute Assignment</p> Signup and view all the answers

    J has a life policy with the Accidental Death and Dismemberment rider. Her policy will pay:

    <p>Capital Sum</p> Signup and view all the answers

    If an insured is covered by a Group Life policy and they are terminated, the insured will:

    <p>be allowed to convert to a permanent policy regardless of insurability</p> Signup and view all the answers

    H and W should consider:

    <p>Joint Life</p> Signup and view all the answers

    K's annuity will be accredited:

    <p>A high rate of return but it will be capped at a certain percentage.</p> Signup and view all the answers

    Whole Life insurance where premiums are due for a specified number of years that is shorter than one's entire life is called:

    <p>Limited Pay</p> Signup and view all the answers

    The age limit for contributing money into an IRA is:

    <p>age 70 1/2</p> Signup and view all the answers

    Insurable interest in a third-party ownership situation must exist at:

    <p>inception</p> Signup and view all the answers

    The entire contract provision of a life policy states which of the following?

    <p>The policy and the application are considered to be all one agreement</p> Signup and view all the answers

    The primary difference between a viatical settlement and a life settlement is:

    <p>One situation requires an insured to be terminally ill and the other does not.</p> Signup and view all the answers

    If insurance Company X places funds into a producer D's Premium Fund Trust Account to refund to an insured, by which of the following dates must these funds be credited to the account of the insured?

    <p>16-Apr</p> Signup and view all the answers

    If a producer receives a hearing notice from the director relating to a license revocation, when will the hearing actually take place?

    <p>Between July 21 and July 31</p> Signup and view all the answers

    The Director verifies the status of all out-of-state producers via:

    <p>the national producer database at NIPR.COM</p> Signup and view all the answers

    What refund is the insured entitled to if a producer earned a fee and a commission, but the insured canceled the policy after 45 days?

    <p>$250 — half</p> Signup and view all the answers

    Who is appointed by and serves at the pleasure of the Governor?

    <p>The Director</p> Signup and view all the answers

    What is NOT required to be on an illustration?

    <p>Notice Regarding Replacement form</p> Signup and view all the answers

    If a producer is found to have failed to maintain the proper surety bond, what could be the result of this failure?

    <p>It could result in the revocation or denial of the producer's license.</p> Signup and view all the answers

    V purchased a policy that does not require an agent to purchase nor deliver the policy. When must V receive a buyer's guide?

    <p>At policy delivery</p> Signup and view all the answers

    What is the regulation that requires a producer to sign their name on an insurance application?

    <p>The Disclosure Rule</p> Signup and view all the answers

    How many days from the filing of a duplicate copy of a written examination report does the producer have to request a hearing?

    <p>14 days</p> Signup and view all the answers

    The cost for the death benefit under a Universal Life contract is based on:

    <p>Term Insurance</p> Signup and view all the answers

    Misstatement of age:

    <p>is a form of misstatement but is not considered material and this will not void a policy if found by the insurer</p> Signup and view all the answers

    Is a fixed interest rate part of a Variable Life Policy?

    <p>False</p> Signup and view all the answers

    The most limited form of Limited Pay Whole Life is:

    <p>Single Premium Whole Life</p> Signup and view all the answers

    The Suicide Clause is known as a(an):

    <p>Temporary Exclusion</p> Signup and view all the answers

    What part of a life contract allows the insured to customize a policy?

    <p>Rider</p> Signup and view all the answers

    Which type of policy may pay a policyholder a dividend when there is a surplus?

    <p>Mutual</p> Signup and view all the answers

    Another name for a lump sum funded annuity is?

    <p>Single Premium</p> Signup and view all the answers

    An insured commits suicide after the suicide clause expires. Which of the following is true?

    <p>The face amount of the policy will be paid.</p> Signup and view all the answers

    Which of the following is true about a long term care rider?

    <p>If the insured uses the LTC rider benefit, it will be deducted from the proceeds when the insured dies.</p> Signup and view all the answers

    Which of the following is true about the convertible option on a term policy?

    <p>The insured's rates will increase.</p> Signup and view all the answers

    If an insurer is approved to sell auto insurance that provides a $100 refund after one year if the insured is accident-free during the year, why is this NOT rebating?

    <p>Because the refund is part of the contract that was approved for sale by the Director.</p> Signup and view all the answers

    A producer who places insurance with an insurer without an agent contract requires that the producer must post what?

    <p>a surety bond in favor of the people of Illinois.</p> Signup and view all the answers

    How long must insurers keep copies of all advertising materials?

    <p>4 years</p> Signup and view all the answers

    An insurance commission may be paid to all of the following persons, EXCEPT:

    <p>An attorney licensed to practice law</p> Signup and view all the answers

    The civil fine amount that may be imposed for not complying with a lawful subpoena of the Director is:

    <p>2000</p> Signup and view all the answers

    Which activities of a producer will not likely lead to a suspension, revocation or denial of license?

    <p>the producer pleads guilty to misdemeanor shoplifting.</p> Signup and view all the answers

    Under Regulation 919, what is the length of time an insurance company is required to keep detailed claims records?

    <p>The current and past two years.</p> Signup and view all the answers

    A producer uses sign language to explain an insurance policy to a prospect who is hearing impaired. Has the producer broken any insurance rules or regulations?

    <p>Yes, the producer is guilty of misrepresentation.</p> Signup and view all the answers

    People working with insurers who belong to the following organizations are exempt from licensing, EXCEPT:

    <p>The president of a life insurance company who is paid commission directly from the sale of an insurance policy.</p> Signup and view all the answers

    Once a producer has been notified that her license has been suspended by the Director, how many days does she have to request a hearing?

    <p>30 days</p> Signup and view all the answers

    H has told his client that in order to procure an annuity, he must see the client's financial statements but his client refuses. Under Life Solicitation Rule, must H comply?

    <p>H has no obligation since the client did not cooperate.</p> Signup and view all the answers

    What is the most likely reason for a producer's license termination?

    <p>The producer failed to complete the required continuing education in a timely fashion.</p> Signup and view all the answers

    The Guaranty Association protects insured and/or beneficiaries against:

    <p>Insurer Bankruptcy/Financial Insolvency</p> Signup and view all the answers

    How many total course hours are required for life insurance prelicensing?

    <p>20</p> Signup and view all the answers

    Which of the following advertising concepts would violate the misrepresentation statute if an insurer engaged in such a practice?

    <p>A carrier advertises that their life insurance policies are the highest rated by the State Department of Insurance.</p> Signup and view all the answers

    How many days prior notice of cancellation must a surety provide to the principal of the bond?

    <p>30 days</p> Signup and view all the answers

    What result could occur if a producer fails to maintain the proper surety bond?

    <p>It could result in the revocation or denial of the producer's license.</p> Signup and view all the answers

    Which statement pertains to the Illinois producer ethics requirement?

    <p>Each producer must complete a 3 credit hour ethics class within each two year renewal period.</p> Signup and view all the answers

    Selling insurance without a license without misappropriating premium funds is a:

    <p>Class A misdemeanor</p> Signup and view all the answers

    The subject of a market conduct examination for non-financial matters may request a hearing within how many days after receiving the examination report?

    <p>10 days</p> Signup and view all the answers

    D moved to Illinois from another state where D held a producer license that was revoked. What outcome is likely if D applies for a producer license in Illinois?

    <p>It is unlikely D will receive a producer license because any person who commits an act which would lead to a license revocation in Illinois is not qualified.</p> Signup and view all the answers

    Deferred or renewal commissions may be paid under which of the following conditions?

    <p>If the producer was licensed at the time of sale they are entitled to receive deferred compensation even if not licensed at the time renewal commissions are paid.</p> Signup and view all the answers

    Which of the following is a prohibited investment option into which to place Premium Fund Trust Account monies?

    <p>A brokerage account in which options futures are traded.</p> Signup and view all the answers

    If an insurance company issues deceptive statements about its assets, this action is:

    <p>an unfair trade practice.</p> Signup and view all the answers

    What is the greatest level of criminal prosecution that can result from producer rebating?

    <p>Both the offer and the acceptance of a rebate is a Class B misdemeanor.</p> Signup and view all the answers

    Once a producer has a felony conviction entered officially against him, what action is most likely to be taken pertaining to his producer license?

    <p>The producer will have his license revoked.</p> Signup and view all the answers

    Which of the following circumstances may lead to the renewal of a producer license without the requirement of completing continuing education requirements?

    <p>The producer is called up to military duty and secures a military waiver.</p> Signup and view all the answers

    What is the fee for a temporary producer license?

    <p>$50</p> Signup and view all the answers

    Which of the following statements pertaining to a Premium Fund Trust Account is accurate when a producer handles the premium funds of more than one insurance company?

    <p>Co-mingling the premium funds of more than one insurer into a single account is only allowed with the written consent of each company whose funds will be placed into the single PFTA.</p> Signup and view all the answers

    The best definition of a 'fiduciary' is:

    <p>any licensed person who collects money in the course of their employment.</p> Signup and view all the answers

    Which of the following life insurance products offers guaranteed income while the insured is alive?

    <p>Fixed Annuity</p> Signup and view all the answers

    An example of a fixed interest sensitive insurance product with flexible premiums is:

    <p>Universal Life</p> Signup and view all the answers

    J is interested in receiving her annuity benefits over the next twenty years only. What should she select?

    <p>Period Certain Annuity</p> Signup and view all the answers

    If a whole life policy has a loan outstanding and the insured dies before it is paid, what occurs?

    <p>The death benefit is paid to the beneficiary with the loan and interest deducted.</p> Signup and view all the answers

    What is the advantage of buying an Equity Index Life Policy?

    <p>The cash value is guaranteed and in good years, interest exceeds a fixed product.</p> Signup and view all the answers

    Of the following types of Annuities, which type guarantees payment for a specified minimum period and will keep paying for the entire lifetime of the Annuitant?

    <p>Life Annuity with Period Certain</p> Signup and view all the answers

    C, who is currently a college student, wants a short term, inexpensive temporary policy with a level death benefit. What should C buy?

    <p>Annual Renewable Term</p> Signup and view all the answers

    R has a Variable Universal Life policy and has several years of great interest rates. What effect will a good rate of growth have on R's death benefit?

    <p>The death benefit will increase.</p> Signup and view all the answers

    At annuitization, which settlement option will give the highest possible fixed income?

    <p>Life Annuity</p> Signup and view all the answers

    A married couple wants to purchase a Survivorship life policy for their estate planning. Will the underwriter likely approve the policy?

    <p>Yes, since the policy is last to die, only one insured generally has to be insurable.</p> Signup and view all the answers

    A term life policy has the return of premium (ROP) rider. The returned premium is income and fully taxable.

    <p>False</p> Signup and view all the answers

    Variable Whole Life requires a fixed and level premium.

    <p>True</p> Signup and view all the answers

    An annuitant is deferring their income payments until a later date. What are the tax considerations during the accumulation period?

    <p>The principal and interest grows tax deferred until annuitization.</p> Signup and view all the answers

    Which of the following is a short term strategy for funding an annuity?

    <p>Single Premium</p> Signup and view all the answers

    What is the advantage to buying an Equity Index Life Policy?

    <p>The cash value is guaranteed and in good years, interest exceeds a fixed product.</p> Signup and view all the answers

    G purchased a level term policy with a rider that pays back all of the premiums if G outlives his policy. What is the name of G's rider?

    <p>Return of Premium Rider</p> Signup and view all the answers

    Why does the cost of insurance component increase every year in a Universal Life Policy?

    <p>Because the insurance component in the policy is based on Annual Renewable Term Insurance.</p> Signup and view all the answers

    A prospective insured is seeking a life insurance policy that allows flexible premium payments as well as the potential interest rate that can keep pace or even exceed the inflation rate. Which policy should be recommended?

    <p>Variable Universal Life</p> Signup and view all the answers

    Why does the cost of insurance component increase every year in a Universal Life Policy?

    <p>Because the insurance component in the policy is based on Annual Renewable Term Insurance.</p> Signup and view all the answers

    Which of the following statements regarding Interest Sensitive Whole Life is CORRECT?

    <p>The policy's cash value is determined by actual investment returns.</p> Signup and view all the answers

    Study Notes

    Insurance Contracts and Policies

    • A unilateral contract requires one party to fulfill certain conditions for enforceability.
    • Joint Life premiums are calculated based on the joint average age of all insured individuals.
    • Absolute Assignment allows the owner of a life policy to transfer ownership to a living trust or another entity.
    • The entire contract provision specifies that both the policy and application jointly form the complete agreement.

    Annuities and Riders

    • Different types of annuity payments (level, flexible, single) are allowed during the pay-in period.
    • For an Index annuity linked to the S&P 500, returns are capped despite high performance.
    • A period certain annuity provides benefits over a fixed term, ensuring income for specified years.
    • Fixed Annuities guarantee income while the insured is alive, while Universal Life cost is based on Term Insurance.

    Life Insurance Coverage and Benefits

    • An insured under a Group Life policy can convert to a permanent policy without proving insurability after termination.
    • If accidental death leads to partial loss of eyesight, the policy pays a capital sum.
    • Survivorship life policies ensure coverage for estate planning, usually requiring only one insured to be in good health.

    Insurance Regulation and Compliance

    • The Illinois Director verifies the producer's licensing status using the national producer database.
    • Producers must maintain surety bonds; failure can result in license revocation.
    • The civil fine for not complying with a subpoena from the Director is $2,000.

    Producing and Licensing

    • Producers must complete 20 hours of prelicensing courses for life insurance.
    • A producer facing license suspension has 30 days to request a hearing post-notice.
    • Renewal of a producer license might be exempt from continuing education if the producer is on active military duty.

    Sales and Marketing Practices

    • Extra fees for service are not allowed in Premium Fund Trust Accounts.
    • Misrepresentation during policy sales can lead to disciplinary actions.
    • Refunds from accident-free auto insurance are legal if part of the approved contract.

    Investment and Financial Considerations

    • A brokerage account trading in options futures is a prohibited investment for Premium Fund Trust Accounts.
    • The return of premium rider guarantees refund of premium if the policyholder outlives the term.
    • Equity Indexed Life policies combine minimum interest rates with capped maximum returns.

    Policy Features and Options

    • Life policies may offer riders to customize coverage, including the return of premiums if outlived.
    • Variable Whole Life requires level premiums but allows for investment growth.
    • Interest Sensitive Whole Life can yield interest rates higher than the guaranteed minimum.

    Claims and Payouts

    • If a whole life policy has an outstanding loan, the death benefit is the total minus the loan and interest deducted.
    • The Suicide Clause is a temporary exclusion period for payouts.
    • Dependent on the settlement option chosen, beneficiaries may have restrictions on claim actions.

    General Principles

    • Insurable interest must exist at the inception of ownership in third-party ownership.
    • Advertising deceptive claims regarding an insurer's financial status is an unfair trade practice.
    • A conviction for a felony generally results in revocation of an insurance producer license.

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    This quiz features essential study questions related to Dohrn Insurance. Each flashcard covers key concepts such as types of contracts, annuities, and premium calculations. Perfect for anyone preparing for insurance exams or seeking to improve their knowledge in the field.

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