Questions and Answers
Who might receive dividends from a mutual insurer?
Policyholders
What is the purpose of a disclosure statement in life insurance policies?
To explain features and benefits of a proposed policy to the consumer.
What is reinsurance?
An agreement between a ceding insurer and an assuming insurer.
The requirement that agents not commingle insurance monies with their own funds is known as?
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How will a life insurance beneficiary designation naming a spouse be changed by divorce?
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If a former spouse of the policyowner is designated as the life insurance policy beneficiary, the beneficiary designation will be void at the time the policyowner's marriage is legally dissolved.
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Which of the following is among the regulations set forth by the Florida Replacement Rule?
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Licensed life insurance agents are expected to be familiar with which of the following laws?
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Pertaining to insurance, what is the definition of a fiduciary responsibility?
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An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
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Which of the following is an example of a producer being involved in an unfair trade practice of rebating?
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An agent transacts business for Insurer A and Insurer B, both selling life insurance, and for Insurer C, selling health insurance. How many appointments must the agent hold?
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Which of the following authorities grants and revokes licenses?
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In order to maintain an insurance license, an agent will need to satisfy Florida's continuing education requirement of?
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If an employer decides to change its life insurance policy to a similar one with a different insurer, which of the following describes the extent that replacement regulations will be exercised?
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If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate?
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Who does the secondary notice provision protect?
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An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies, 'Yes,' which of the following best describes the agent's next step?
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In life policies issued in this state, insurers are permitted to charge interest during the policy grace period for the number of days elapsing before the premium is paid. What is the maximum annual interest rate?
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All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT?
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Nonforfeiture values guarantee which of the following for the policyowner?
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What is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called?
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Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy?
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Who is a third-party owner?
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Which policy component contains the company's promise to pay?
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What unique characteristic describes investigative consumer reports in comparison to consumer reports?
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What helps prevent a universal life policy from lapsing?
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All of the following are Nonforfeiture options EXCEPT:
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If an employee terminates her group coverage, which statement is INCORRECT?
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Which is NOT true about beneficiary designations?
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All of the following are requirements for life insurance illustrations EXCEPT:
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What happens when a policy is surrendered for its cash value?
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What is the term for the provision which states that both the policy and a copy of the application form the contract?
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Under the Fair Credit Reporting Act, what must the reporting agency do if the consumer challenges the accuracy of their report?
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What is true regarding the accumulation at interest option?
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What kind of policy allows withdrawals or partial surrenders?
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What type of policy does an insured most likely have if they withdraw a portion of their cash value but are charged a fee?
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In the case of a common disaster, what provision does a life insurance policy likely contain?
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What does 'level' refer to in level term insurance?
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What is the death protection component of Universal Life Insurance?
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What are the two types of assignments?
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Which premium payment mode incurs the lowest overall payment?
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What type of insurance would be used for a Return of Premium rider?
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If an insured surrenders their policy and the cash surrender value is $18,000 with $15,000 paid in premiums, what part is income taxable?
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What constitutes a material misrepresentation?
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To sell variable life insurance policies, what must an agent NOT have?
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Which entity is responsible for agent licensing and administrative supervision?
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What type of coverage is required when an agent has to solicit additional insurance from another authorized insurer?
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When a group policy terminates, how many years must an individual be insured to have a right to an individual policy?
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Who does the secondary addressee provision protect?
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What violation has an insurer committed if they do not respond to a proof of loss form in a reasonable time?
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When replacing life insurance, what must a replacing insurer do?
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If an insurer meets state requirements to do business, it is considered to be what?
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Who is required to be licensed as an insurance producer?
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Study Notes
Nonforfeiture Values
- Guarantee that the cash value of permanent life insurance policies will not be lost.
- Provide rights to the cash value even if the policy lapses or is surrendered.
Blackout Period in Social Security
- Defined as the time between when the youngest child turns 16 and before the surviving spouse reaches age 60.
- No benefits are paid during this interval.
Flexible Life Policies
- Allow policyowners to skip premium payments if there is sufficient cash value.
- Policyowners can adjust premium amounts throughout the life of the policy.
Third-Party Owners
- A third-party owner refers to an individual or entity that is not the insured but has rights under the insurance contract.
Insuring Clause
- Contains the insurer's promise to pay benefits under the life insurance policy.
Investigative Consumer Reports
- Unique characteristic is that data comes from the consumer's associates, friends, and neighbors.
- Used to provide information regarding the consumer's character and reputation.
Target Premium
- A recommended amount to be paid to keep a universal life policy in force and cover insurance costs.
Nonforfeiture Options
- Include cash surrender, extended term, and reduced paid-up options.
- Interest only is a settlement option and is not classified as a nonforfeiture option.
Conversion of Group Coverage
- Upon termination of group coverage, the insured generally cannot convert to term insurance but to permanent individual coverage.
Beneficiary Designations
- Beneficiaries do not need to have insurable interest in the insured for the payment of policy proceeds.
Life Insurance Illustrations
- Must clearly indicate that they are not part of the contract.
- Cannot be altered by an agent.
Fair Credit Reporting Act
- Requires insurance companies to provide the applicant's consumer reporting company's name and address if denied coverage based on a report.
Cash Surrender of Policy
- Coverage ends and cannot be reinstated once the policy is surrendered for cash value.
Entire Contract Provision
- States that the policy and a copy of the application form constitute the entire contract between the policyowner and insurer.
Response to Consumer Complaints
- Reporting agencies must respond to complaints regarding inaccuracies in consumer reports.
Tax on Accumulation at Interest
- Interest credited under this option is taxable, regardless of whether it is withdrawn.
Universal Life Policy Withdrawals
- Allows for partial surrenders or withdrawals from the cash value as long as terms are met.
Common Disaster Provision
- Assumes the primary beneficiary died first in a common disaster if they die within a specified period after the insured.
Level Term Insurance
- Maintains a level face amount and consistent premiums throughout the policy's term.
Universal Life Insurance Component
- The death protection component is always provided through annually renewable term insurance.
Assignment Types
- Absolute assignments transfer full policy rights, while collateral assignments transfer some benefits.
Premium Payment Modes
- Annual premiums incur the lowest overall payment because they do not include service fees.
Return of Premium Rider
- Incorporated in increasing term insurance, ensures return of premiums paid if death occurs before a specified age.
Taxable Surrender Value
- Taxed on the amount above the premiums paid; for example, if $15,000 was paid and cash value is $18,000, $3,000 is taxable.
Material Misrepresentation
- A statement that could alter the insurer's underwriting decision upon discovery.
Licensing Requirements for Agents
- Agents need to be registered with FINRA and licensed in their state to sell variable life products; SEC registration is not required for agents.
Insurance Producer Licensing
- Individuals soliciting insurance must obtain a license; simply advertising does not require one.
Mutual Insurer Dividends
- Policyholders may receive dividends, as mutual insurers are owned by policyholders; dividends are not taxable.
Disclosure Statements
- Designed to explain policy features and benefits, aiding consumers in informed decision-making.
Reinsurance Agreement
- Involves a ceding insurer (the originating company) and an assuming insurer (the one providing coverage).
Fiduciary Responsibility
- Agents must not commingle personal funds with premiums collected for insurance transactions.
Beneficiary Designation and Divorce
- A designation naming a spouse is voided upon legal dissolution of marriage.
Florida Replacement Rule
- Regulations exist to protect consumers during the replacement of life insurance policies, ensuring proper disclosure and procedures are followed.### Florida Replacement Rule
- Agents must provide a written comparison and summary when replacing life insurance contracts upon request.
Insurance Laws Familiarity
- Licensed agents should be knowledgeable about all insurance laws and regulations, not just specific ones.
Fiduciary Responsibility in Insurance
- Agents must promptly forward premiums to the insurance companies they represent, acting in a position of trust.
False Advertising
- Inaccurate portrayal of insurance policy benefits in brochures constitutes false advertising, which is illegal.
Unfair Trade Practice - Rebating
- Offering to waive the first premium as an inducement is considered rebating, which is illegal and includes any unapproved inducement.
Agent Appointments
- Agents must hold a separate appointment for each insurer they represent, requiring three appointments for Insurer A, B, and C if involved.
License Authority
- The Department of Financial Services is responsible for granting and revoking insurance licenses.
Continuing Education Requirement
- Florida mandates 24 hours of continuing education within every 2-year period to maintain an insurance license.
Replacement Regulations for Group Policies
- Replacement regulations do not apply when changing life insurance policy under a group plan covering employees or members of an association.
Grace Period and Interest Rate
- During the grace period, if a claim arises, an insurer may deduct overdue premiums and charge a maximum of 8% interest.
Secondary Notice Provision
- This provision protects elderly insureds from policy lapses due to nonpayment; insurers must notify both the policyowner and a designated secondary addressee before lapse.
Replacement Notice Requirement
- If a client confirms they are replacing existing life insurance, the agent must provide a signed Notice Regarding Replacement.
Interest Charges During Grace Period
- Insurers may charge interest during the grace period, with the maximum annual rate not exceeding 8%.
Rebates and Dividends
- Dividends from mutual insurers are not classified as rebates, as they are explicitly stated in the policies.
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Test your knowledge of nonforfeiture values and their guarantee for policyowners in this flashcard quiz. Understand the implications of permanent life insurance policies and Social Security concepts. Perfect for students studying insurance principles.
