Questions and Answers
For how long are all of the premiums necessary under a 20-pay life policy paid?
20 years or until death, whichever occurs first
What does a man discover about his $100,000 Annually Renewable Term Life policy?
Both Universal Life and Variable Universal Life have a?
What would the premium be like in a survivorship life policy compared to a joint life policy?
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What policy is classified as a traditional level premium contract?
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The ownership provision entitles the policyowner to do all of the following EXCEPT?
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What rider adjusts the face amount based on a specific index, such as the Consumer Price Index?
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Under which nonforfeiture option does the company pay the surrender value and have no further obligations?
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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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When is the automatic premium loan provision activated?
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Which explains the policyowner's rights to change beneficiaries and receive proceeds?
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What will the insurance producer say about naming two beneficiaries?
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What will the company do if an insured misrepresents their age?
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What benefits will an insured with a disability income death benefit rider receive?
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What provision states that the policy and application form the contract?
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How does withdrawing a portion of the accelerated benefits affect death benefits?
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When does the 10-day free-look period begin?
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What limits the amount a policyowner may borrow from a whole life insurance policy?
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What term describes an insured receiving an annual life insurance dividend check?
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What amount would a beneficiary receive if the insured had an accidental death rider?
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Whose life expectancy is taken into account when an annuity is written?
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Which statement is true regarding a comparison between annuities and life insurance?
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Annuities can be used to fund which of the following?
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What is a feature of a single premium immediate annuity?
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Which factor most directly affects the purchasing power of death benefits paid on a fixed annuity?
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Which statement is NOT true regarding the annuitant?
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When a fixed annuity owner pays a monthly annuity premium, where is the money placed?
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What would a beneficiary receive if the annuitant dies 5 years into a 20 year period certain?
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What type of life annuity guarantees payment for a minimum number of years?
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Which type of annuity is purchased with multiple payments and benefits are paid more than one year after purchase?
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Which of the following will NOT be an appropriate use of a deferred annuity?
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Which product requires a securities license?
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Which statement is NOT true regarding installments for a fixed period?
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What type of annuity can be purchased with a single premium for immediate payments?
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Which of the following are NOT fundable by annuities?
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From what type of insurer did the insured purchase the policy?
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Annuities provide death benefits.
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Which method of dealing with risk does this scenario describe?
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Which of the following is TRUE of a qualified plan? (Select all that apply)
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In insurance, an offer is usually made when?
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What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
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Death benefits payable to a beneficiary under a life insurance policy are generally:
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The causes of loss insured against in an insurance policy are known as?
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What is the main purpose of the Seven-pay test?
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What documentation grants express authority to an agent?
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If a company has a simplified employee pension plan, what type of plan is it?
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Which of the following best describes an insurance company that has been formed under the laws of this state?
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If taken as a lump sum, life insurance proceeds to beneficiaries are passed:
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Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance?
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In insurance transactions, fiduciary responsibility means?
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When must an IRA be completely distributed when a beneficiary is not named?
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In life insurance policies, cash value increases:
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The authority granted to an agent through the agent's contract is referred to as?
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According to agency law, the producer always represents the:
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Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
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What is it called when Louisiana extends the licensing privileges to a prospective producer of another state?
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Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?
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Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
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How many days does a producer have to change an unapproved trade name before facing a fine?
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When could an insurance company discard the file on an advertisement used for 4 years?
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When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
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Insurers are required to keep copies of all summaries, notices, and statements used in sales transactions for at least:
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Which of the following would qualify as a competent party in an insurance contract?
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An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
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If a company wants to appoint a producer, which entity must it notify?
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Which of the following is a primary source of information used for insurance underwriting?
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Which of the following best describes the practice of using intimidation to corner a large portion of the insurance market?
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Which of the following is the best reason to purchase life insurance rather than annuities?
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Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
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Before ABC Insurance Company can begin transacting business in Louisiana, it must obtain:
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A producer is helping a married couple determine the financial needs of their children in the event of one or both should die prematurely. This is a personal use of life insurance known as?
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A producer agent must do all of the following when delivering a new policy to the insured EXCEPT?
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How long is a temporary license valid?
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If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about?
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A temporary license may be issued without examination to all of the following EXCEPT:
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When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by?
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Which applies if an agent knows an applicant is cashing in an old policy to purchase new insurance?
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The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called?
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If authorized to write life and property and casualty insurance, how many hours of continuing education must producers complete every 2 years?
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What is the main justification for the existence of the State Insurance Department?
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Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
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Which of the following is NOT required for a producer to tell a prospect?
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Any payment to a producer from an insurer that is contingent on the sale of an insurance policy is called a:
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Which type of assignment would be used for a loan?
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Which of the following statements concerning buy-sell agreements is true?
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Who may complete a paramedical report?
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If a policyowner returns a policy 7 days after delivery, what will the insurer do?
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The term 'illustrations' in a life insurance policy refers to?
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If an insured dies during the grace period, the insurer will pay:
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Which of the following is NOT a requirement of the reinstatement provision?
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Which is generally true regarding insureds who have been classified as preferred risks?
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If an insured dies 3 years after the policy was issued and understated his age on the application, what will the insurer do?
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All of the following are requirements for life insurance illustrations EXCEPT?
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What is the name of the first beneficiary listed in a policy?
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Partners in a business enter into a buy-sell agreement to purchase life insurance. What type of insurance policy may be used to fund this agreement?
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An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured and matures at the insured's age 100 is called?
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Twin brothers are starting a new business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
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An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
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Which of the following are generally NOT considered when underwriting group insurance?
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What are the 2 components of a universal policy?
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An adjustable life policy owner can change which of the following features?
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Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid?
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Study Notes
Life Insurance Fundamentals
- Mutual Insurers: Provide dividends based on excess funds; if no funds are available, dividends are not paid.
- Risk Management Strategies: Risk reduction involves lifestyle changes to lessen health problem likelihood.
- Offer in Insurance: Made by an applicant through their application; acceptance occurs once the insurer approves it.
- Perils: Defined as the causes of loss covered by an insurance policy.
Insurance Authority and Classifications
- Agent Authority: Express authority is granted through a contract with the principal, specifying agents' powers.
- Domestic Insurers: Defined as companies doing business in the state where they are incorporated.
- Underwriter Considerations: Factors like medical history, sex, and age affect insurance premium rates; race should not be considered due to discrimination laws.
Fiduciary Responsibility and Insurance Contracts
- Fiduciary Responsibility: Agents manage insurer funds in a trust capacity.
- Characteristics of Contracts: Adhesion contracts are unilaterally prepared by insurers, allowing the insured minimal negotiation power.
Insurance Types and Concepts
- Stock Companies: Owned by stockholders who hold ownership rights, including voting.
- Aleatory Contracts: Require a small premium for significant risk coverage.
- Legal Consideration: In life insurance, it includes the premium payment and application representations.
Insurable Interest and Competent Parties
- Insurable Interest: Essential at the policy's issuance; particularly important in relationships like spousal and parental.
- Competent Parties: Both parties must be of legal age and mentally competent; past felony convictions do not disqualify individuals.
Claims and Underwriting
- Consideration Principle: Essential for binding contracts; insurers must honor claims when premiums are paid and terms adhered to.
- Primary Underwriting Source: The application provides most of the pertinent underwriting information.
Life Insurance Needs and Financial Planning
- Purpose of Life Insurance: Primarily to create an estate that offers financial security upon the insured's death.
- Survivorship Protection: Life insurance can ensure adequate funds for dependents in the insured's absence.
Policy Delivery and Regulations
- Policy Delivery Requirements: Agents must explain policy features, collect premiums, and clarify any discrepancies in ratings.
- Illustrations in Policies: Serve as presentations of non-guaranteed elements and cannot be altered by agents.
Insurance Types Explained
- Buy-Sell Agreements: Usually funded by life insurance policies; provide financial means for surviving partners or owners.
- Paramedical Reports: Completed by registered nurses or paramedics; critical for assessments in life insurance applications.
Policy Structures and Features
- Universal Life Policies: Feature both insurance protection and an investment cash account.
- Joint Life Policies: Cost-effective for insuring two lives but only pay out upon the first death.
- Decreasing Term Insurance: Best suited for decreasing debts, as the benefit decreases with the amount owed.
Insurance Premium and Coverage
- Premium Structures: Generally lower for preferred risks; premiums adjust annually based on the insured's age, particularly for term policies.
- Survivorship Life Policies: Offer lower premiums compared to joint life, as benefits are paid upon the last insured's death.
Policy Variants and Coverage Details
- Single Premium Whole Life: Requires one-time premium payment, ensuring coverage until maturity at age 100.
- Annually Renewable Term Life: Increases premiums with the insured's age at each renewal.
- Flexible Premiums: Found in universal and variable universal life policies allowing modifications based on the policyowner's decisions.### Life Insurance and Riders
- Death benefit for joint life policies is delayed until the last death, resulting in lower premiums compared to traditional policies.
- A straight whole life policy is deemed a traditional level premium contract.
- Ownership provisions grant policyowners rights to assign the policy, receive loans, and designate beneficiaries, but do not allow setting premium rates.
- A cost of living rider adjusts the face amount of a policy based on the Consumer Price Index.
- Cash surrender is a nonforfeiture option where the insurer pays the surrender value and has no further obligations to the policyowner.
Premium and Coverage Details
- The premium on a children's rider remains constant regardless of the number of children added.
- An automatic premium loan provision is triggered at the end of the grace period if there is sufficient cash value.
- The owner’s rights allow for changes to beneficiaries and policy options, as outlined in the policy.
Benefit Distribution and Claims
- In a scenario involving misrepresentation of age, the insurer pays a reduced death benefit if the actual age is discovered after a claim.
- A disability income death benefit rider waives premiums and provides monthly income during the disability period.
- The entire contract provision includes the policy and application, defining it as the complete agreement between policyowner and insurer.
Annuities and Their Features
- Accelerated benefits from a terminal illness reduce the death benefit payable.
- A single premium immediate annuity provides income payments starting within a year, funded by a one-time premium.
- Fixed annuity payments are based on the general account of the insurance company, which guarantees a minimum interest rate.
Retirement Plans and Taxes
- Annuities are commonly used to fund retirement plans, accumulating funds over time.
- Qualified plans offer tax benefits for both employers and employees and are regulated by the IRS.
- Traditional IRA distributions are subject to income tax but do not incur penalties if left in the tax-deferred account.
Taxation of Life Insurance Proceeds
- Life insurance death benefits are generally not subject to federal income tax when received in a lump sum.
- The Seven-pay test determines if a policy is a modified endowment contract (MEC) based on premium contributions over the first seven years.
Simplified Employee Pension (SEP)
- A Simplified Employee Pension is a qualified plan suited for small businesses, allowing for higher contribution limits compared to traditional IRAs.### Tax Return Due Date
- The deceased owner's first tax return is due on December 31 of the year containing the 5th anniversary of their death.
- If the owner dies before distributions begin, the entire interest must be fully distributed by the same due date unless a beneficiary is named.
Life Insurance Cash Value Growth
- Cash values in life insurance policies grow tax-deferred.
- Income tax applies only if the policy is completely or partially surrendered and the cash value exceeds the premiums paid.
Agency Law Representation
- Under agency law, producers legally represent the insurance company they are contracted with.
Reciprocity in Licensing
- Reciprocity allows states to extend licensing privileges to producers from other states with similar privileges granted to their own producers.
Unapproved Trade Name Compliance
- Producers have 10 days to cease the use of an unapproved trade name after notification by the Commissioner, or face fines up to $5,000.
Advertisement Record Keeping
- Louisiana insurance companies must retain advertisement files for a minimum of 4 years or until the next examination, whichever is longer.
Record Retention for Insurance Transactions
- Insurers must keep copies of summaries, notices, and statements from sales transactions for at least 5 years or until the conclusion of the next examination.
Producer Appointment Notification
- Companies looking to appoint a producer must notify the Commissioner and have 30 days for their decision on the producer's fit to transact insurance.
Intimidation Practices
- Intimidation strategies in insurance practices are illegal if they aim to restrict trade or create monopolies.
Consumer Protection Legislation
- The Fair Credit Reporting Act protects consumers from the dissemination of inaccurate or outdated personal and financial information.
Conducting Business in Louisiana
- To begin operations in Louisiana, insurance companies must secure a certificate of authority from the state's insurance department.
Temporary License Validity
- A temporary license is valid for 180 days.
Temporary License Issuance Exceptions
- Temporary licenses cannot be issued to the spouse of a retired producer for conducting business.
Replacement Rule in Insurance
- The replacement rule requires a replacement form when a new policy is issued to replace or modify existing insurance.
Continuing Education Requirements
- Louisiana producers must complete 24 hours of continuing education every two years, irrespective of licensing lines.
Purpose of State Insurance Department
- The primary function of the state insurance department is consumer protection.
Producer Compensation
- Commissions are payments to producers contingent upon the sale of insurance policies or contracts.
Assignment Types
- A collateral assignment is typically used for loans.
Policy Return and Refund
- If a policy is returned within 7 days of delivery, the insurer must refund the full premium paid.
Death During Grace Period
- If an insured dies during the grace period, the insurer pays the face amount minus any premium due.
Reinstatement Provision Requirements
- The reinstatement provision does not require repayment of premiums at current attained age.
Impact of Age Misstatement
- If an insured who understated their age dies three years post-issue, the insurer will adjust the death benefit accordingly.
Beneficiary Classification
- The first beneficiary listed in a policy is referred to as the primary beneficiary.
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