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Questions and Answers
What is a guaranteed insurability rider?
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?
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?
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:
All of the following entities regulate variable life policies EXCEPT:
What determines the cash value of a variable life policy?
What determines the cash value of a variable life policy?
All of the following benefits are available under Social Security EXCEPT:
All of the following benefits are available under Social Security EXCEPT:
What does a policy assignment do?
What does a policy assignment do?
What is the rider in a whole life policy called that allows the company to forgo collecting the premium if the insured is disabled?
What is the rider in a whole life policy called that allows the company to forgo collecting the premium if the insured is disabled?
What happens when a policy is surrendered for its cash value?
What happens when a policy is surrendered for its cash value?
A life insurance policy has a legal purpose if which of the following elements exist?
A life insurance policy has a legal purpose if which of the following elements exist?
What is the main purpose of the Seven-pay Test?
What is the main purpose of the Seven-pay Test?
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?
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?
What is the benefit of choosing extended term as a nonforfeiture option?
What is the benefit of choosing extended term as a nonforfeiture option?
What will the insurer do if an insured committed suicide one year after his life insurance policy was issued?
What will the insurer do if an insured committed suicide one year after his life insurance policy was issued?
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT:
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT:
What type of life insurance policy is described if the agent informed the insured that cash values could change based on company investments?
What type of life insurance policy is described if the agent informed the insured that cash values could change based on company investments?
Which settlement option in life insurance is known as straight life?
Which settlement option in life insurance is known as straight life?
What is the number of credits required for fully insured status for Social Security disability benefits?
What is the number of credits required for fully insured status for Social Security disability benefits?
Which component decreases in decreasing term insurance?
Which component decreases in decreasing term insurance?
Which provision allows an insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Which provision allows an insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Social Security was created to provide all of the following benefits EXCEPT:
Social Security was created to provide all of the following benefits EXCEPT:
What is the life insurance policy clause that prevents the insurer from denying payment of a death claim after a specified time?
What is the life insurance policy clause that prevents the insurer from denying payment of a death claim after a specified time?
When selecting the extended term nonforfeiture option, what face amount is the cash value used to purchase?
When selecting the extended term nonforfeiture option, what face amount is the cash value used to purchase?
What is the required number of participants in a contributory group plan?
What is the required number of participants in a contributory group plan?
Which of the following is NOT true regarding a Variable Universal Life policy?
Which of the following is NOT true regarding a Variable Universal Life policy?
When the insured names his wife as the beneficiary and selects the life income settlement option, what factors determine the amount of payments?
When the insured names his wife as the beneficiary and selects the life income settlement option, what factors determine the amount of payments?
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?
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?
What is the advantage of reinstating a policy instead of applying for a new one?
What is the advantage of reinstating a policy instead of applying for a new one?
Who must be registered to sell variable annuities?
Who must be registered to sell variable annuities?
A Return of Premium term life policy is written as what type of term coverage?
A Return of Premium term life policy is written as what type of term coverage?
What determines the length of time that benefits will be received under the Fixed-Amount settlement option?
What determines the length of time that benefits will be received under the Fixed-Amount settlement option?
Who is the owner and beneficiary on a Key Person Life Insurance policy?
Who is the owner and beneficiary on a Key Person Life Insurance policy?
Which statement is true about the premium on the children's rider in a life insurance policy?
Which statement is true about the premium on the children's rider in a life insurance policy?
What requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
What requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
What happens if a life insurance policy has an irrevocable beneficiary designation?
What happens if a life insurance policy has an irrevocable beneficiary designation?
Which product requires a securities license?
Which product requires a securities license?
What insurance policy would be suitable for a client wanting protection and savings until retirement at age 65?
What insurance policy would be suitable for a client wanting protection and savings until retirement at age 65?
Under what circumstances would an insurer pay accelerated benefits?
Under what circumstances would an insurer pay accelerated benefits?
In a direct rollover, how is the money transferred from one plan to a new one?
In a direct rollover, how is the money transferred from one plan to a new one?
What is a rider attached to a life insurance policy that provides coverage on the insured's family members called?
What is a rider attached to a life insurance policy that provides coverage on the insured's family members called?
When would a 20-pay whole life policy endow?
When would a 20-pay whole life policy endow?
What type of annuity would an individual likely purchase to match the performance of the Standard and Poor's 500 Index?
What type of annuity would an individual likely purchase to match the performance of the Standard and Poor's 500 Index?
What must a domestic insurer issuing variable contracts establish?
What must a domestic insurer issuing variable contracts establish?
What happens if an insured continually uses the automatic premium loan option?
What happens if an insured continually uses the automatic premium loan option?
Under the extended term nonforfeiture option, the policy's cash value is converted to what?
Under the extended term nonforfeiture option, the policy's cash value is converted to what?
Suicide is excluded for a specific period of years and covered thereafter.
Suicide is excluded for a specific period of years and covered thereafter.
Which rider provides an amount of insurance on every family member when attached to a permanent life insurance policy?
Which rider provides an amount of insurance on every family member when attached to a permanent life insurance policy?
All of the following statements about the continuing education requirement are true EXCEPT:
All of the following statements about the continuing education requirement are true EXCEPT:
What is it called when an individual obtains an insurance license primarily for writing insurance on themselves or family members?
What is it called when an individual obtains an insurance license primarily for writing insurance on themselves or family members?
If a licensed agent in Texas receives a criminal conviction, that information must be reported to whom?
If a licensed agent in Texas receives a criminal conviction, that information must be reported to whom?
What best describes the practice of devising an intimidation strategy to corner the insurance market?
What best describes the practice of devising an intimidation strategy to corner the insurance market?
Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act?
Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act?
Which insurers are owned by stockholders who have the usual rights of ownership?
Which insurers are owned by stockholders who have the usual rights of ownership?
Mentioning the Guaranty Association in advertisements is considered unfair trade practice.
Mentioning the Guaranty Association in advertisements is considered unfair trade practice.
Which of the following may a participating insurance policy do?
Which of the following may a participating insurance policy do?
Within what time period may viatical settlements be rescinded after the viator receives the proceeds?
Within what time period may viatical settlements be rescinded after the viator receives the proceeds?
How many years must an agent renew an insurance license?
How many years must an agent renew an insurance license?
What must an individual do to become a Texas insurance agent?
What must an individual do to become a Texas insurance agent?
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
What does the term "illustration" refer to in a life insurance policy?
What does the term "illustration" refer to in a life insurance policy?
The written examination requirement will be waived for an agent licensed before examinations were required.
The written examination requirement will be waived for an agent licensed before examinations were required.
What describes the behavior of an insurer that delays processing a straightforward claim?
What describes the behavior of an insurer that delays processing a straightforward claim?
How many days does an agent have to contest a Cease and Desist Order issued by the Commissioner of Insurance?
How many days does an agent have to contest a Cease and Desist Order issued by the Commissioner of Insurance?
What must a replacing insurer do during the replacement of life insurance?
What must a replacing insurer do during the replacement of life insurance?
Which of the following is NOT required on an illustration used in the sale of a life insurance policy?
Which of the following is NOT required on an illustration used in the sale of a life insurance policy?
What might lead to a death benefit claim being denied if an insured misrepresents their medical history?
What might lead to a death benefit claim being denied if an insured misrepresents their medical history?
Which of the following are considered dividend options except:
Which of the following are considered dividend options except:
What type of insurance policy only requires a payment of premium at its inception?
What type of insurance policy only requires a payment of premium at its inception?
What is the minimum interest rate on an equity indexed annuity often based on?
What is the minimum interest rate on an equity indexed annuity often based on?
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Which of the following is not considered the consideration in a policy?
Which of the following is not considered the consideration in a policy?
Which of the following products requires a securities license?
Which of the following products requires a securities license?
The ownership provision entitles the policyowner to do all of the following EXCEPT:
The ownership provision entitles the policyowner to do all of the following EXCEPT:
All of the following are true about variable products except:
All of the following are true about variable products except:
Who bears all of the investment risk in a fixed annuity?
Who bears all of the investment risk in a fixed annuity?
Which of the following statements is NOT the consideration in a policy?
Which of the following statements is NOT the consideration in a policy?
What is an eligibility requirement for all Social Security Disability Income benefits?
What is an eligibility requirement for all Social Security Disability Income benefits?
Who can make a fully deductible contribution to a traditional IRA?
Who can make a fully deductible contribution to a traditional IRA?
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?
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?
What is the Ownership provision entitling the policyowner to do all of the following EXCEPT?
What is the Ownership provision entitling the policyowner to do all of the following EXCEPT?
What is true about variable products?
What is true about variable products?
What enables an insured to reactivate a lapsed life insurance policy?
What enables an insured to reactivate a lapsed life insurance policy?
What will happen if an employee does not convert a Group Life policy within a specified time after quitting?
What will happen if an employee does not convert a Group Life policy within a specified time after quitting?
What principle has an insurer violated if it neglects to pay a legitimate claim?
What principle has an insurer violated if it neglects to pay a legitimate claim?
Which information will be stated in the consideration clause of a life insurance policy?
Which information will be stated in the consideration clause of a life insurance policy?
In case the primary beneficiary predeceases the insured, who will the death benefit proceeds be paid to?
In case the primary beneficiary predeceases the insured, who will the death benefit proceeds be paid to?
What can an insurance company do if an insured conceals information during the application process?
What can an insurance company do if an insured conceals information during the application process?
As a field underwriter, what task cannot a producer perform?
As a field underwriter, what task cannot a producer perform?
What should be included in a policy for an individual wishing to secure additional future coverage?
What should be included in a policy for an individual wishing to secure additional future coverage?
Which is true about a spouse term rider?
Which is true about a spouse term rider?
Another name for a substandard risk classification is what?
Another name for a substandard risk classification is what?
If a customer states they will replace existing life insurance policies, what should the agent do next?
If a customer states they will replace existing life insurance policies, what should the agent do next?
Which of the following is NOT true regarding a Certificate of Authority?
Which of the following is NOT true regarding a Certificate of Authority?
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?
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?
Which of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT:
Which of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT:
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
What option is utilized when the insurer accumulates dividends at interest and uses them to pay the policy up early?
What option is utilized when the insurer accumulates dividends at interest and uses them to pay the policy up early?
An employer has sponsored a qualified retirement plan for its employees where contributions happen upon profit realization. What is this called?
An employer has sponsored a qualified retirement plan for its employees where contributions happen upon profit realization. What is this called?
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?
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?
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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