Questions and Answers
What is a guaranteed insurability rider?
It allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability.
What percentage of a company's employees must take part in a noncontributory group life plan?
100%
What is the purpose of the paid-up addition option in life insurance?
To purchase a smaller amount of the same type of insurance as the original policy.
All of the following entities regulate variable life policies EXCEPT:
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What determines the cash value of a variable life policy?
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All of the following benefits are available under Social Security EXCEPT:
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What does a policy assignment do?
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What is the rider in a whole life policy called that allows the company to forgo collecting the premium if the insured is disabled?
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What happens when a policy is surrendered for its cash value?
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A life insurance policy has a legal purpose if which of the following elements exist?
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What is the main purpose of the Seven-pay Test?
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How will the payable death benefit be affected if an insured withdraws a portion of the face amount in the form of accelerated benefits due to a terminal illness?
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What is the benefit of choosing extended term as a nonforfeiture option?
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What will the insurer do if an insured committed suicide one year after his life insurance policy was issued?
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All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT:
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What type of life insurance policy is described if the agent informed the insured that cash values could change based on company investments?
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Which settlement option in life insurance is known as straight life?
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What is the number of credits required for fully insured status for Social Security disability benefits?
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Which component decreases in decreasing term insurance?
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Which provision allows an insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
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Social Security was created to provide all of the following benefits EXCEPT:
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What is the life insurance policy clause that prevents the insurer from denying payment of a death claim after a specified time?
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When selecting the extended term nonforfeiture option, what face amount is the cash value used to purchase?
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What is the required number of participants in a contributory group plan?
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Which of the following is NOT true regarding a Variable Universal Life policy?
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When the insured names his wife as the beneficiary and selects the life income settlement option, what factors determine the amount of payments?
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Which life insurance settlement option guarantees payments for the lifetime of the recipient, and specifies a guaranteed period for continued payments to a designated beneficiary?
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What is the advantage of reinstating a policy instead of applying for a new one?
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Who must be registered to sell variable annuities?
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A Return of Premium term life policy is written as what type of term coverage?
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What determines the length of time that benefits will be received under the Fixed-Amount settlement option?
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Who is the owner and beneficiary on a Key Person Life Insurance policy?
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Which statement is true about the premium on the children's rider in a life insurance policy?
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What requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
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What happens if a life insurance policy has an irrevocable beneficiary designation?
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Which product requires a securities license?
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What insurance policy would be suitable for a client wanting protection and savings until retirement at age 65?
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Under what circumstances would an insurer pay accelerated benefits?
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In a direct rollover, how is the money transferred from one plan to a new one?
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What is a rider attached to a life insurance policy that provides coverage on the insured's family members called?
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When would a 20-pay whole life policy endow?
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What type of annuity would an individual likely purchase to match the performance of the Standard and Poor's 500 Index?
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What must a domestic insurer issuing variable contracts establish?
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What happens if an insured continually uses the automatic premium loan option?
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Under the extended term nonforfeiture option, the policy's cash value is converted to what?
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Suicide is excluded for a specific period of years and covered thereafter.
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Which rider provides an amount of insurance on every family member when attached to a permanent life insurance policy?
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All of the following statements about the continuing education requirement are true EXCEPT:
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What is it called when an individual obtains an insurance license primarily for writing insurance on themselves or family members?
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If a licensed agent in Texas receives a criminal conviction, that information must be reported to whom?
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What best describes the practice of devising an intimidation strategy to corner the insurance market?
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Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act?
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Which insurers are owned by stockholders who have the usual rights of ownership?
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Mentioning the Guaranty Association in advertisements is considered unfair trade practice.
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Which of the following may a participating insurance policy do?
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Within what time period may viatical settlements be rescinded after the viator receives the proceeds?
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How many years must an agent renew an insurance license?
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What must an individual do to become a Texas insurance agent?
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Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
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What does the term "illustration" refer to in a life insurance policy?
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The written examination requirement will be waived for an agent licensed before examinations were required.
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What describes the behavior of an insurer that delays processing a straightforward claim?
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How many days does an agent have to contest a Cease and Desist Order issued by the Commissioner of Insurance?
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What must a replacing insurer do during the replacement of life insurance?
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Which of the following is NOT required on an illustration used in the sale of a life insurance policy?
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What might lead to a death benefit claim being denied if an insured misrepresents their medical history?
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Which of the following are considered dividend options except:
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What type of insurance policy only requires a payment of premium at its inception?
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What is the minimum interest rate on an equity indexed annuity often based on?
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Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
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Which of the following is not considered the consideration in a policy?
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Which of the following products requires a securities license?
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The ownership provision entitles the policyowner to do all of the following EXCEPT:
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All of the following are true about variable products except:
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Who bears all of the investment risk in a fixed annuity?
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Which of the following statements is NOT the consideration in a policy?
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What is an eligibility requirement for all Social Security Disability Income benefits?
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Who can make a fully deductible contribution to a traditional IRA?
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What will happen to the life insurance premiums if a father becomes disabled and has a policy on his 15-year-old daughter with a Payor Benefit rider?
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What is the Ownership provision entitling the policyowner to do all of the following EXCEPT?
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What is true about variable products?
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What enables an insured to reactivate a lapsed life insurance policy?
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What will happen if an employee does not convert a Group Life policy within a specified time after quitting?
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What principle has an insurer violated if it neglects to pay a legitimate claim?
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Which information will be stated in the consideration clause of a life insurance policy?
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In case the primary beneficiary predeceases the insured, who will the death benefit proceeds be paid to?
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What can an insurance company do if an insured conceals information during the application process?
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As a field underwriter, what task cannot a producer perform?
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What should be included in a policy for an individual wishing to secure additional future coverage?
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Which is true about a spouse term rider?
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Another name for a substandard risk classification is what?
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If a customer states they will replace existing life insurance policies, what should the agent do next?
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Which of the following is NOT true regarding a Certificate of Authority?
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If a policyowner surrenders his life insurance policy that has been in force for 5 years within 60 days after the premium due date, what will the insurer be required to pay?
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Which of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT:
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Which of the following is TRUE for both equity indexed annuities and fixed annuities?
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What option is utilized when the insurer accumulates dividends at interest and uses them to pay the policy up early?
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An employer has sponsored a qualified retirement plan for its employees where contributions happen upon profit realization. What is this called?
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Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?
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For conversion from a terminated group life policy to an individual policy of the same coverage, how many years must a person have been insured under the group plan?
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Study Notes
Life Insurance Key Concepts
- Seven-pay Test: Evaluates if a policy is classified as a Modified Endowment Contract (MEC).
- Accelerated Benefits Impact: Withdrawal of accelerated benefits for terminal illness reduces the payable death benefit.
- Extended Term Nonforfeiture Option: Provides maximum insurance protection by converting cash value to term insurance.
- Suicide Clause: If an insured commits suicide within one year of policy issuance, premiums are refunded rather than paying the death benefit.
Tax and Insurance Regulations
- Qualified Plan Tax Advantages: Not all distributions are tax-free; some amounts may be taxable at retirement.
- Social Security Disability Benefits: Requires 40 credits for fully insured status.
- Life Insurance Policy Clauses: Incontestability clause protects against claim denial after a stated period.
Policy Features and Riders
- Interest-sensitive Whole Life: Cash values may vary based on company investments and expense factors.
- Face Amount in Decreasing Term Insurance: The face amount diminishes over time.
- Payor Benefit Rider: Waives premiums for a minor insured when a parent becomes disabled or dies.
- Family Term Rider: Offers insurance coverage for all family members as a part of the policy.
Distributions and Settlement Options
- Life Income Settlement Option: Also known as "straight life," it ensures payments throughout the recipient's life.
- Fixed Amount Settlement Determination: The length of benefit payments correlates with the size of each installment.
- Life Income with Period Certain: Guarantees lifetime payments while also ensuring payments continue to a beneficiary if the recipient passes away.
Annuities and Investment Risks
- Equity Indexed Annuities: Offers performance linked to the S&P 500 Index, providing a return that keeps pace with inflation.
- Investment Risk in Fixed Annuities: The insurance company assumes all investment risks.
General Guidelines and Regulatory Compliance
- Controlled Business: When an agent writes insurance primarily on themselves or their family.
- Financing Education and Licensing: Agents must comply with continuing education and may face licensure renewal every two years.
- Replacement of Life Insurance Policies: Insurers must gather information on existing policies being replaced and provide notices to applicants.
Claims and Benefits Management
- Automatic Premium Loan Option: If utilized repeatedly, can lead to policy termination once cash value is exhausted.
- Claims Delay: Insurers may violate unfair claims settlement practices by excessively delaying proper claims processing.
Assignments and Ownership Provisions
- Policy Assignments: Transfers policy ownership and rights to another individual.
- Ownership Provision: Grants the policyowner rights such as changing beneficiaries but not setting premium rates.
Benefit and Coverage Limits
- Viatical Settlements: Can be rescinded within 15 days after receiving the proceeds.
- Group Life Conversion: Requires five years under the group plan to convert to an individual policy upon termination.
Rule Exceptions and Clarifications
- Unfair Claims Settlement Practices: Actions deemed acceptable include denying unsubstantiated claims.
- Securities License Requirement: Variable products like Variable Annuities necessitate a securities license for selling.
Coverage Conditions
- Cash Value Surrender: Coverage ends with a cash surrender, and policies cannot typically be reinstated after surrendering.
- Legal Purpose of Life Insurance: Must demonstrate insurable interest and consent for validity of the policy.
This summary encapsulates essential information regarding life insurance policies, their benefits, regulations, and rider details.
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Test your knowledge on vital aspects of life insurance with these flashcards focused on key concepts and definitions. This quiz covers important topics such as the Seven-pay Test and the effects of accelerated benefits on death benefits. Perfect for anyone looking to deepen their understanding of life insurance policies.