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Life Insurance Test Flashcards
52 Questions
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Life Insurance Test Flashcards

Created by
@WellRunHydrogen

Questions and Answers

Which of the following best describes annually renewable term insurance?

  • It is a term policy that cannot be renewed
  • It is level term insurance (correct)
  • It is a universal life policy
  • It is a whole life policy

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

    Other-insured rider

    Which option for Universal life allows the beneficiary to collect both death benefit and cash value when he dies?

    Option B

    Example of apparent authority?

    <p>Accepting late premiums after grace period</p> Signup and view all the answers

    Corporations are never legal annuitants.

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

    How many days does a licensee have to inform the commissioner of a change of address?

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

    When a man decides to purchase a $100,000 annually renewable term insurance life policy for additional protection until his children finish college, this policy

    <p>required a premium increase at each renewal</p> Signup and view all the answers

    What is true about the cash surrender nonforfeiture option?

    <p>Funds exceeding the premium paid are taxable as ordinary income.</p> Signup and view all the answers

    A projection of insurance needs based on the capitalization of an applicant's future earnings is called?

    <p>Human life value approach</p> Signup and view all the answers

    Which of the following would be considered illegal inducements in insurance marketing?

    <p>Offering a discount for referring friends</p> Signup and view all the answers

    Cameron is purchasing a permanent life insurance policy with a face value of $25,000. He should include a

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

    What does the nonforfeiture option guarantee if a prospective deferred annuity owner surrenders the annuity?

    <p>Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.</p> Signup and view all the answers

    What dividend option allows an insured to use the policy dividends to pay off her policy sooner?

    <p>Paid up option</p> Signup and view all the answers

    Benefits are paid to the borrowers beneficiary except:

    <p>The creditor is the beneficiary</p> Signup and view all the answers

    If Randy transfers his life insurance policy to his son Andy two years before his death, which of the following is true?

    <p>The entire face value of the policy will be included in Randy's taxable estate.</p> Signup and view all the answers

    What life insurance policy provision states that both the policy and a copy of the application form the contract?

    <p>Entire contract</p> Signup and view all the answers

    Which is the best reason to purchase life insurance rather than annuities?

    <p>To create an estate</p> Signup and view all the answers

    The death benefit under the Universal Life Option B

    <p>Gradually increases each year by the amount that the cash value increases.</p> Signup and view all the answers

    The commissioner may waive pre-licensing requirements for examinations for someone who has been a licensed insurance producer in the preceding 12 months.

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

    What rider provides Abigail's father a refund of all premiums upon his death in addition to the face amount?

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

    What will happen if an employee quits and doesn't convert his Group Life policy to an individual policy?

    <p>The insurer will pay the full Death Benefit to the beneficiary.</p> Signup and view all the answers

    What element of an insurance contract is described by an insured paying a small premium while the insurer promises to pay a high percentage of all medical costs?

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

    Which type of life insurance policy has a cash value element?

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

    What is true regarding a modified guaranteed annuity?

    <p>The owner is guaranteed a fixed interest rate over a specified period of time.</p> Signup and view all the answers

    Taking defensive driving courses or installing deadbolt locks are examples of?

    <p>Risk Reduction</p> Signup and view all the answers

    Which policies would be considered illegal inducements to purchase insurance?

    <p>Confirming future dividends in a life insurance proposal.</p> Signup and view all the answers

    If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days?

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

    Which of the following policies would have an IRS required corridor between the cash value and the death benefit?

    <p>Option A</p> Signup and view all the answers

    An insured stated on her application that she had never had a heart attack but actually had. What will explain the reason a death benefit claim is denied?

    <p>Material misrepresentation</p> Signup and view all the answers

    Under a 20-pay whole life policy, for the policy to pay the death benefit, premiums must be paid for?

    <p>20 years or until the insured's death</p> Signup and view all the answers

    What company produces evaluations of insurer financial status often used by the Insurance Department?

    <p>AM Best &amp; Company</p> Signup and view all the answers

    What qualifications must an agent hold to sell variable life insurance policies?

    <p>Both state and federal licensing.</p> Signup and view all the answers

    Which concept is associated with 'exclusion ratio'?

    <p>Annuity payments</p> Signup and view all the answers

    All of the following statements about Credit Life insurance are true except benefits are paid to the borrower's beneficiary.

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

    Rebating is not an unfair trade practice.

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

    What is the agent's appointment fee?

    <p>$5</p> Signup and view all the answers

    An insured decides to surrender his Whole Life policy. At policy surrender, how much of the cash surrender value would be taxable?

    <p>$3,000</p> Signup and view all the answers

    Adverse selection is best described as?

    <p>Risks with higher probability of loss seeking insurance more often than other risks.</p> Signup and view all the answers

    If an employee wants to enter the group outside of the open enrollment period, the insurer may require?

    <p>Evidence of insurability</p> Signup and view all the answers

    Which of the following is not a government insurance program?

    <p>Federal Deposit Insurance Corporation (FDIC)</p> Signup and view all the answers

    An advertisement emphasizing a company's financial stability while being financially unstable is best described as?

    <p>False financial statement</p> Signup and view all the answers

    What rider allows an insurer to forgo collecting premiums if the insured is disabled?

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

    What kind of insurance policy requires the insured to pay premiums for a specified number of years?

    <p>Limited-pay Life</p> Signup and view all the answers

    If an insured conceals information during the application process and dies, what can the insurer do?

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

    How many policies are necessary for a cross purchase agreement between 3 people?

    <p>6</p> Signup and view all the answers

    Which best describes fixed period settlement option?

    <p>Both the principal and interest will be liquidated over a selected period of time.</p> Signup and view all the answers

    Cost of Group Life coverage is based on the ratio of men and women.

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

    If an applicant paid a premium and received a conditional receipt, when is the policy's effective date?

    <p>Date of medical exam</p> Signup and view all the answers

    Which of the following are examples of risk retention?

    <p>Self-insuring risks</p> Signup and view all the answers

    Which of the following is NOT consideration on the part of an insured?

    <p>Promise to submit timely claims</p> Signup and view all the answers

    Which individual could qualify for a temporary insurance license?

    <p>The designee of a producer that is called to active service with the Navy.</p> Signup and view all the answers

    M, who is not licensed as an insurance agent, works part-time in her father's insurance agency. What may she NOT do?

    <p>Collect premium for in-force policies and explain coverages to clients that have existing policies written by her father.</p> Signup and view all the answers

    Study Notes

    Life Insurance Overview

    • Annually renewable term insurance is a type of level term insurance.
    • An "other-insured rider" provides coverage for family members under a life insurance policy.
    • Universal life option B enables beneficiaries to receive both the death benefit and cash value upon death.

    Policy Provisions and Riders

    • Apparent authority examples include accepting late premiums after a grace period.
    • Corporations cannot act as legal annuitants in a life insurance policy.
    • Policy dividends can be used to expedite paid-up options in a whole life policy.

    Insurance Needs and Licensing

    • Human life value approach calculates future earnings impact due to the death of the insured.
    • Licensees must report address changes to the commissioner within 30 days.

    Policy Costs and Taxation

    • Cash surrender value exceeding premiums paid is taxable as ordinary income.
    • Full death benefits are paid on group life policies even if conversion to individual policies is delayed post-employment.
    • Income taxable upon policy surrender is the excess cash value over premiums paid.

    Insurance Concepts

    • Misrepresentation may result in death benefit claims being denied, particularly if it is material.
    • Adverse selection occurs when higher-risk individuals seek insurance more frequently.
    • Annuity contracts may feature practices like "exclusion ratios" which pertain to payment calculations.

    Policy Types and Features

    • Permanent life insurance features a cash value element which is ideal for applicant needs.
    • Modified guaranteed annuities offer fixed interest rates for specific periods.
    • A limited-pay life policy allows for premium payments only for a designated period.

    Special Conditions and Options

    • Riders like "return of premium" provide beneficiaries with refunds of premiums paid upon the insured's death.
    • The "waiver of premium" rider suspends premium payments if the insured becomes disabled.
    • The life income joint and survivor option guarantees income for multiple recipients for their lifetimes.

    Compliance and Regulations

    • Insurers must file notice of appointment for producers within 15 days.
    • Nonresident producers must obtain specific licenses to operate outside their appointed state.
    • Agents may face a $5 appointment fee to initiate conduct in the insurance space.

    Understanding Annuities and Group Life

    • Annuity accumulation periods dictate the growth of the investment before annuitization.
    • Group life insurance contributions adjust based on demographic ratios within the group.

    Ethics and Fair Practices

    • Practices like confirming future dividends or providing false financial statements can lead to unfair trade practices.
    • Rebating is prohibited and can involve undue advantages being given to clients for policy purchases.

    Miscellaneous Provisions

    • Policy stipulations like the entire contract clause affirm that all documents, including applications, form the binding agreement.
    • The entirety of an inherited life insurance policy can be included in the taxable estate of the deceased.

    Education and Training

    • Agents are required to complete 24 credit hours for continuing education; failure to comply results in license suspension.
    • Temporary insurance licenses can be granted to individuals in situations such as military deployment.

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    Description

    Challenge your knowledge with these life insurance flashcards. Covering key concepts like renewable term insurance and riders, this quiz will help you reinforce your understanding of life insurance policies. Perfect for students or professionals preparing for examinations in finance or insurance.

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