Life Insurance Missed Questions

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:

The Guaranty Association Signup and view all the answers

What determines the cash value of a variable life policy?

The performance of the policy portfolio. Signup and view all the answers

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

Welfare benefits Signup and view all the answers

What does a policy assignment do?

It transfers rights of ownership from the owner to another person. Signup and view all the answers

What is the rider in a whole life policy called that allows the company to forgo collecting the premium if the insured is disabled?

Waiver of premium. Signup and view all the answers

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated. Signup and view all the answers

A life insurance policy has a legal purpose if which of the following elements exist?

Insurable interest and consent Signup and view all the answers

What is the main purpose of the Seven-pay Test?

It determines if the insurance policy is a MEC. Signup and view all the answers

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?

The death benefit will be smaller. Signup and view all the answers

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection. Signup and view all the answers

What will the insurer do if an insured committed suicide one year after his life insurance policy was issued?

Refund the premiums paid. Signup and view all the answers

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT:

At distribution, all amounts received by the employee are tax free. Signup and view all the answers

What type of life insurance policy is described if the agent informed the insured that cash values could change based on company investments?

Interest-sensitive Whole Life. Signup and view all the answers

Which settlement option in life insurance is known as straight life?

Life income. Signup and view all the answers

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?

Face amount. Signup and view all the answers

Which provision allows an insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit. Signup and view all the answers

Social Security was created to provide all of the following benefits EXCEPT:

Unemployment income Signup and view all the answers

What is the life insurance policy clause that prevents the insurer from denying payment of a death claim after a specified time?

Incontestability clause. Signup and view all the answers

When selecting the extended term nonforfeiture option, what face amount is the cash value used to purchase?

Equal to the original policy for as long as the cash values will purchase. Signup and view all the answers

What is the required number of participants in a contributory group plan?

75%. Signup and view all the answers

Which of the following is NOT true regarding a Variable Universal Life policy?

The death benefit is fixed. Signup and view all the answers

When the insured names his wife as the beneficiary and selects the life income settlement option, what factors determine the amount of payments?

All factors except the insured's age at death. Signup and view all the answers

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?

Life income with period certain. Signup and view all the answers

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination. Signup and view all the answers

Who must be registered to sell variable annuities?

FINRA. Signup and view all the answers

A Return of Premium term life policy is written as what type of term coverage?

Increasing. Signup and view all the answers

What determines the length of time that benefits will be received under the Fixed-Amount settlement option?

Size of each installment. Signup and view all the answers

Who is the owner and beneficiary on a Key Person Life Insurance policy?

The employer is the owner and beneficiary. Signup and view all the answers

Which statement is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy. Signup and view all the answers

What requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

Fair Credit Reporting Act. Signup and view all the answers

What happens if a life insurance policy has an irrevocable beneficiary designation?

The beneficiary can only be changed with written permission of the beneficiary. Signup and view all the answers

Which product requires a securities license?

Variable Annuity. Signup and view all the answers

What insurance policy would be suitable for a client wanting protection and savings until retirement at age 65?

Limited Pay Whole Life. Signup and view all the answers

Under what circumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment. Signup and view all the answers

In a direct rollover, how is the money transferred from one plan to a new one?

From trustee to trustee. Signup and view all the answers

What is a rider attached to a life insurance policy that provides coverage on the insured's family members called?

Other-Insured Rider. Signup and view all the answers

When would a 20-pay whole life policy endow?

When the insured reaches age 100. Signup and view all the answers

What type of annuity would an individual likely purchase to match the performance of the Standard and Poor's 500 Index?

Equity Indexed Annuity. Signup and view all the answers

What must a domestic insurer issuing variable contracts establish?

Separate accounts. Signup and view all the answers

What happens if an insured continually uses the automatic premium loan option?

The policy will terminate when the cash value is reduced to nothing. Signup and view all the answers

Under the extended term nonforfeiture option, the policy's cash value is converted to what?

The same face amount as in the whole life policy. Signup and view all the answers

Suicide is excluded for a specific period of years and covered thereafter.

True Signup and view all the answers

Which rider provides an amount of insurance on every family member when attached to a permanent life insurance policy?

Family term rider. Signup and view all the answers

All of the following statements about the continuing education requirement are true EXCEPT:

Continuing education is optional. Signup and view all the answers

What is it called when an individual obtains an insurance license primarily for writing insurance on themselves or family members?

Controlled business. Signup and view all the answers

If a licensed agent in Texas receives a criminal conviction, that information must be reported to whom?

Department of Insurance. Signup and view all the answers

What best describes the practice of devising an intimidation strategy to corner the insurance market?

Illegal. Signup and view all the answers

Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act?

Denying an unsubstantiated claim. Signup and view all the answers

Which insurers are owned by stockholders who have the usual rights of ownership?

Stock. Signup and view all the answers

Mentioning the Guaranty Association in advertisements is considered unfair trade practice.

True Signup and view all the answers

Which of the following may a participating insurance policy do?

Pay dividends to the policyowner. Signup and view all the answers

Within what time period may viatical settlements be rescinded after the viator receives the proceeds?

15 days. Signup and view all the answers

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?

Have passed a licensing exam within the 12 months before applying. Signup and view all the answers

Circulating deceptive sales material to the public is what type of Unfair Trade Practice?

False advertising. Signup and view all the answers

What does the term "illustration" refer to in a life insurance policy?

A presentation of nonguaranteed elements of a policy. Signup and view all the answers

The written examination requirement will be waived for an agent licensed before examinations were required.

True Signup and view all the answers

What describes the behavior of an insurer that delays processing a straightforward claim?

Unfair claims settlement practice. Signup and view all the answers

How many days does an agent have to contest a Cease and Desist Order issued by the Commissioner of Insurance?

30 days. Signup and view all the answers

What must a replacing insurer do during the replacement of life insurance?

Obtain a list of all life insurance policies that will be replaced. Signup and view all the answers

Which of the following is NOT required on an illustration used in the sale of a life insurance policy?

The name of the primary and secondary beneficiaries. Signup and view all the answers

What might lead to a death benefit claim being denied if an insured misrepresents their medical history?

Material Misrepresentation - It affects policy issuance. Signup and view all the answers

Which of the following are considered dividend options except:

Fixed period installments. Signup and view all the answers

What type of insurance policy only requires a payment of premium at its inception?

IDK Signup and view all the answers

What is the minimum interest rate on an equity indexed annuity often based on?

IDK Signup and view all the answers

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

IDK Signup and view all the answers

Which of the following is not considered the consideration in a policy?

IDK Signup and view all the answers

Which of the following products requires a securities license?

IDK Signup and view all the answers

The ownership provision entitles the policyowner to do all of the following EXCEPT:

IDK Signup and view all the answers

All of the following are true about variable products except:

The premiums are invested in the insurer's general account. Signup and view all the answers

Who bears all of the investment risk in a fixed annuity?

The insurance company. Signup and view all the answers

Which of the following statements is NOT the consideration in a policy?

The application given to a prospective insured. Signup and view all the answers

What is an eligibility requirement for all Social Security Disability Income benefits?

Have attained fully insured status. Signup and view all the answers

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income. Signup and view all the answers

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?

The insured's premiums will be waived until she is 21. Signup and view all the answers

What is the Ownership provision entitling the policyowner to do all of the following EXCEPT?

Set premium rates. Signup and view all the answers

What is true about variable products?

IDK Signup and view all the answers

What enables an insured to reactivate a lapsed life insurance policy?

Reinstatement provision. Signup and view all the answers

What will happen if an employee does not convert a Group Life policy within a specified time after quitting?

The insurer will pay the full death benefit from the group policy to the beneficiary. Signup and view all the answers

What principle has an insurer violated if it neglects to pay a legitimate claim?

Consideration. Signup and view all the answers

Which information will be stated in the consideration clause of a life insurance policy?

The amount of premium payment. Signup and view all the answers

In case the primary beneficiary predeceases the insured, who will the death benefit proceeds be paid to?

The contingent beneficiary. Signup and view all the answers

What can an insurance company do if an insured conceals information during the application process?

Pay the death benefit. Signup and view all the answers

As a field underwriter, what task cannot a producer perform?

Issue the policy that is requested. Signup and view all the answers

What should be included in a policy for an individual wishing to secure additional future coverage?

Guaranteed insurability option. Signup and view all the answers

Which is true about a spouse term rider?

The rider is usually level term insurance. Signup and view all the answers

Another name for a substandard risk classification is what?

Rated. Signup and view all the answers

If a customer states they will replace existing life insurance policies, what should the agent do next?

The agent must provide a replacement notice to the applicant. Signup and view all the answers

Which of the following is NOT true regarding a Certificate of Authority?

It is issued to group insurance participants. Signup and view all the answers

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?

A cash surrender value. Signup and view all the answers

Which of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT:

Dividends from a mutual insurer. Signup and view all the answers

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate. Signup and view all the answers

What option is utilized when the insurer accumulates dividends at interest and uses them to pay the policy up early?

Paid-up option. Signup and view all the answers

An employer has sponsored a qualified retirement plan for its employees where contributions happen upon profit realization. What is this called?

Profit sharing plan. Signup and view all the answers

Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?

Medical background. Signup and view all the answers

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?

IDK Signup and view all the answers

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.