Life Insurance Missed Questions
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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:

<p>The Guaranty Association</p> Signup and view all the answers

What determines the cash value of a variable life policy?

<p>The performance of the policy portfolio.</p> Signup and view all the answers

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

<p>Welfare benefits</p> Signup and view all the answers

What does a policy assignment do?

<p>It transfers rights of ownership from the owner to another person.</p> 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?

<p>Waiver of premium.</p> Signup and view all the answers

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

<p>Coverage ends and the policy cannot be reinstated.</p> Signup and view all the answers

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

<p>Insurable interest and consent</p> Signup and view all the answers

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

<p>It determines if the insurance policy is a MEC.</p> 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?

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

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

<p>It has the highest amount of insurance protection.</p> 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?

<p>Refund the premiums paid.</p> Signup and view all the answers

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

<p>At distribution, all amounts received by the employee are tax free.</p> 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?

<p>Interest-sensitive Whole Life.</p> Signup and view all the answers

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

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

What is the number of credits required for fully insured status for Social Security disability benefits?

<ol start="40"> <li></li> </ol> Signup and view all the answers

Which component decreases in decreasing term insurance?

<p>Face amount.</p> 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?

<p>Payor Benefit.</p> Signup and view all the answers

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

<p>Unemployment income</p> 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?

<p>Incontestability clause.</p> Signup and view all the answers

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

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

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

<p>75%.</p> Signup and view all the answers

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

<p>The death benefit is fixed.</p> 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?

<p>All factors except the insured's age at death.</p> 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?

<p>Life income with period certain.</p> Signup and view all the answers

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

<p>The original age is used for premium determination.</p> Signup and view all the answers

Who must be registered to sell variable annuities?

<p>FINRA.</p> Signup and view all the answers

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

<p>Increasing.</p> Signup and view all the answers

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

<p>Size of each installment.</p> Signup and view all the answers

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

<p>The employer is the owner and beneficiary.</p> Signup and view all the answers

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

<p>It remains the same no matter how many children are added to the policy.</p> 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?

<p>Fair Credit Reporting Act.</p> Signup and view all the answers

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

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

Which product requires a securities license?

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

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

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

Under what circumstances would an insurer pay accelerated benefits?

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

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

<p>From trustee to trustee.</p> 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?

<p>Other-Insured Rider.</p> Signup and view all the answers

When would a 20-pay whole life policy endow?

<p>When the insured reaches age 100.</p> 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?

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

What must a domestic insurer issuing variable contracts establish?

<p>Separate accounts.</p> Signup and view all the answers

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

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

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

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

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

<p>True</p> 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?

<p>Family term rider.</p> Signup and view all the answers

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

<p>Continuing education is optional.</p> 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?

<p>Controlled business.</p> Signup and view all the answers

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

<p>Department of Insurance.</p> Signup and view all the answers

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

<p>Illegal.</p> Signup and view all the answers

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

<p>Denying an unsubstantiated claim.</p> Signup and view all the answers

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

<p>Stock.</p> Signup and view all the answers

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

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

Which of the following may a participating insurance policy do?

<p>Pay dividends to the policyowner.</p> Signup and view all the answers

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

<p>15 days.</p> Signup and view all the answers

How many years must an agent renew an insurance license?

<ol start="2"> <li></li> </ol> Signup and view all the answers

What must an individual do to become a Texas insurance agent?

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

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

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

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

<p>A presentation of nonguaranteed elements of a policy.</p> Signup and view all the answers

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

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

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

<p>Unfair claims settlement practice.</p> 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?

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

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

<p>Obtain a list of all life insurance policies that will be replaced.</p> 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?

<p>The name of the primary and secondary beneficiaries.</p> Signup and view all the answers

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

<p>Material Misrepresentation - It affects policy issuance.</p> Signup and view all the answers

Which of the following are considered dividend options except:

<p>Fixed period installments.</p> Signup and view all the answers

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

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

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

<p>IDK</p> 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?

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

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

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

Which of the following products requires a securities license?

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

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

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

All of the following are true about variable products except:

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

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

<p>The insurance company.</p> Signup and view all the answers

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

<p>The application given to a prospective insured.</p> Signup and view all the answers

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

<p>Have attained fully insured status.</p> Signup and view all the answers

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

<p>An individual not covered by an employer-sponsored plan who has earned income.</p> 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?

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

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

<p>Set premium rates.</p> Signup and view all the answers

What is true about variable products?

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

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

<p>Reinstatement provision.</p> 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?

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

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

<p>Consideration.</p> Signup and view all the answers

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

<p>The amount of premium payment.</p> Signup and view all the answers

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

<p>The contingent beneficiary.</p> Signup and view all the answers

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

<p>Pay the death benefit.</p> Signup and view all the answers

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

<p>Issue the policy that is requested.</p> Signup and view all the answers

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

<p>Guaranteed insurability option.</p> Signup and view all the answers

Which is true about a spouse term rider?

<p>The rider is usually level term insurance.</p> Signup and view all the answers

Another name for a substandard risk classification is what?

<p>Rated.</p> Signup and view all the answers

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

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

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

<p>It is issued to group insurance participants.</p> 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?

<p>A cash surrender value.</p> 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:

<p>Dividends from a mutual insurer.</p> Signup and view all the answers

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

<p>They have a guaranteed minimum interest rate.</p> 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?

<p>Paid-up option.</p> 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?

<p>Profit sharing plan.</p> 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?

<p>Medical background.</p> 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?

<p>IDK</p> 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.

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