1. An insurer is found to be unable to meet
their financial obligations. They are
considered to be:
A. Unauthorized
B. Non-admitted
C. Insolvent
D. Bankrupt
2. If one party is found guilty of
unintentional concealment the injured party is entitled to which course of
action?
A. Rescission of the contract
B. A $250 administrative penalty
C. Double the amount of the damages
D. None, since the concealment was
unintentional
3. Which of the following is the difference
between a defined contribution plan and a defined benefit pension plan?
A. The party making the contribution.
B. The party receiving the benefit
distribution.
C. The tax penalties for early distribution.
D. None of these are different between the two
plans.
4. All of the following
records are required to be maintained by a life-only agent, except:
A. Production records of all policies sold by
the agent.
B. Printed material in general use which has
been distributed by the insurer.
C. All correspondence between the agent and the
policyowner.
D. A copy of the outline of coverage.
5. What is usually required
when answers on the non-medical application reveal conditions that require more
information?
A. A physical exam
B. An agent’s supplementary report
C. An attending physician’s report (APR)
D. An Investigative Consumer Report
6. What is required when information contained
within medical records requires more explanation?
A. A physical exam
A. A physical exam
B. An agent’s supplementary report
C. An attending physician’s report (APR)
D. An Investigative Consumer Report
7. Which of the following is
the best description of a life insurance policy dividend?
A. It is a stockowner’s share of the profits of
the company.
B. It is the distribution of excess divisible
funds accumulated by the insurer on participating policies.
C. It is the distribution of profits paid to
policyowners on the insurer’s non-participating policies.
D. It is the distribution of excess profits
paid to policyowners which are guaranteed but may be taxable.
8. The complete transfer of all rights and
privileges in an insurance policy to another person, or entity, is called:
A. A partial
assignment
B. A collateral
assignment
C. An absolute
assignment
D. A contingent
assignment
9. A worker qualifies for Social Security
benefits by achieving which status?
A. Currently Insured
B. Medicare Insured
C. Fully Insured
D. PIA Insured
10. A worker has worked and paid FICA taxes for
at least 6 of the last 13 calendar quarters.
If he dies right now, his family would get benefits since he has
achieved which status?
A. Currently Insured
B. Medicare Insured
C. Fully Insured
D. Survivors Insured
11. Social Security provides protection against
the financial consequences of all of the following, except:
A. Disability
B. Premature death
C. Poor investments
D. Retirement
12. Which of the following statements is false?
A. Only Surplus Lines Brokers may place
business with non-admitted insurers.
B. An agent is inactive when licensed, but
currently not appointed.
C. Life, annuities, and disability are three of
the 20 classes of insurance found within the California Insurance code.
D. The McCarran-Ferguson Act established
insurance would be mainly under state, not federal, regulation.
13. In which qualified plans
do employers make specific contributions to an employee’s retirement account?
A. Keogh or HR-10 plans
B. Defined contribution plans
C. Individual Retirement Accounts (IRA)
D. Defined benefit plans
14. If no other method of payment is
pre-selected, which of the following is the automatic or default mode of
settlement for life insurance policy proceeds?
A. Lump-sum
B. Interest-only option
C. Life income
D. A paid-up policy
15. The process whereby a mutual insurer changes
into a stock insurer is called:
A. Capitalization
B. A merger
C. A reorganization
D. Demutualization
16. From the perspective of the insurance
industry, which of the following would describe any situation that presents the
possibility of a loss?
A. A risk potential
B. A loss exposure
C. A covered loss
D. Indemnification
17. An insured buys a $50,000 life insurance policy. Up until the time of his death he has paid approximately $10,000 in premium payments. This best illustrates which insurance concept?
A. Adhesion
B. Subrogation
C. Aleatory
C. Aleatory
D. Utmost good faith
18. A policyowner stops paying the premium on
their 30-pay life policy (a type of whole life) and converts the cash value to
extended term insurance. Which of the
following statements is not true?
A. After the conversion no further premium
payments need to be made.
B. The extended term policy will have the same
face value as the 30-pay life policy.
C. The extended term policy will have the same
loan value as the original policy.
D. The extended term policy will only stay in
force for a specified period of time and will then end.
19. The insurance
component of a Universal Life policy is essentially what type of insurance?
A. Annual renewal term
B. Convertible term
C. Increasing term
D. Variable life
20. The mode of premium payments selected by the
policyowner will each have a different effect on the amount of premium paid in
total. Which of the following statements
is true?
A. The insurer’s calculations are based on the
assumption that payment will be made at the end of the policy year. If it is made sooner a discount will be
applied.
B. The total premium is less if it is paid
quarterly rather than semi-annually.
C. The total premium will be greater if paid
semi-annually rather than annually.
D. The total amount paid is the same regardless
of the payment mode selected.
21. If an insurer is found guilty of unfair trade
practices while issuing, renewing, and servicing a policy, they could be
prosecuted for how many violations of the code?
A. 0
B. 1
C. 2
D. 3
22. Under Social Security, how long does a
marriage need to last for a spouse to be eligible to receive benefits?
A. 3 months
B. 9 months
C. 3 years
D. 10 years
B. 9 months
C. 3 years
D. 10 years
23. Under the Social Security
Retirement program, who is least likely qualified for benefits?
A. Ex-wives or husbands, 62 years of age or
older
B. Disabled children, even if 18 or older
C. Grandchildren
D. Wives or Husbands younger than 62, if they
are caring for their child who is under 16 or disabled.
24. In a Contributory Group insurance plan, the
plan can be describes as:
A. When an employer pays a portion of the
premiums.
B. When the employees pay all of the premiums.
C. When the members pay a portion of the
premiums.
D. All of the above.
25. Winners of a lottery can be paid over time
with which insurance product?
A. A cash value life insurance plan
B. A 401k
C. A term life plan
D. An annuity
A. A cash value life insurance plan
B. A 401k
C. A term life plan
D. An annuity
26. In group insurance, which of the following
actions is the responsibility of the master policy holder?
A. Sending the employees’ applications to the
insurance company
B. Paying the premiums
C. Benefit selection
D. All of the above
27. The cash value, tax deferred growth, and the ability to take policy loans
are all examples of a policy’s:
A.
Policy provisions
B.
Death benefits
C.
Non-forfeiture options
D.
Living benefits
28. The probationary period in
a group insurance plan effects:
A. All employees
equally
B. Those employees
who join the group after the effective date of coverage
C. Only those with
pre-existing health conditions when they joined the group
D. Those with
criminal records
29. What material information
can the applicant be allowed not to disclose in applying for life insurance?
A. Information the other party already knows,
or should know
B. All information must be formally disclosed
C. All material information must be disclosed
D. Information that can later be verified by
reputable outside sources such as the MIB
30. Which of the following
statements about life insurance company departments is incorrect?
A. The underwriting department evaluates and
selects the risks.
B. The actuarial department sets the rates.
C. The claims adjustors settle the claims.
D. The sales and marketing department evaluates
and selects the risks.
31. A qualified plan may not do which of the following?
A. Provide tax deferred
growth
B. Favor shareholders and
top executives
C. Maintain fully funded
accounts
D. Report to the IRS
32. Which of the following statements about
agents is false?
A. Life only agents must maintain records for at
least 5 years.
B. An agent who submits an application to an
insurer they are not appointed with, can be appointed within 14 days after the
acceptance of the application to validate the agency relationship.
C. An agent who refuses to submit books and
records to the commissioner is guilty of a felony.
D. Agents may not solicit or advertise for a non-admitted
insurer.
33. An agent is attempting to replace a life
insurance contract. She has the client
sign the replacement disclosure notice along with all the other required forms. The agent submits copies of the replacement
notice to which of the following?
A. The applicant & the insurer being
replaced.
B. The applicant
& the replacing insurer.
C. Both
insurers.
D. The
applicant and both insurers.
34. Christina
has two options for her $10,000. She’s
deciding between investing in a single premium fixed annuity, or long-term CDs
at her bank. Both options will pay a 4%
annual rate of return. After 15 years,
which will give her a better return?
A. Both will be equal
B. The annuity will be worth more since it grows
tax deferred
C. The certificate of deposit will be worth more
since the insurance company who sold the annuity will have to pay it’s agent a
commission
D. The annuity will be worth less since the
annuity has surrender charges
35. The statement for a universal life, or a
variable universal life policy, reports account activity. After the flexible premium is added, the
insurer:
A. Deducts the cost of the insurance (mortality
cost) and expenses, and adds any interest (or subtracts any losses)
B. Credits the separate account with fixed interest
gains minus expenses
C. Adds funds to its loss reserves
D. Reports the payment to the SEC, which
regulates policies with separate accounts
36. Statistics and the law of
large numbers are used to predict future losses. All of the statements below are false,
except:
A. Mortality predicts the odds of death and
disability for each age group
B. The mortality table illustrates birth to the
age of 120.
C. Morbidity predicts the chances of dying at a
given age
D. Mortality tables are based on differences in
age, gender, nationality, and other characteristics.
37. Which of the following statements about life
insurance and taxation is not true?
A. As a personal expense, premiums for individual
life insurance are not tax deductible.
B. Policy loans are not income taxable since it
is a debt against the client’s cash value.
C. As a business expense, premiums for group term
life insurance are not tax deductible.
D. Failing the IRS’s 7-Pay Test by
over-contributing to a cash value policy changes the policy into a Modified
Endowment Contract (MEC). This makes any
policy loans a taxable event.
38. When is insurable interest required to exist
with a life insurance policy?
A. At the time the
policy is written and at the time of death
B. At the time of
death
C. At the time the
policy is written, but not necessarily at the time of death.
D. At all times when
the policy is in force.
39. Sven represents the Mutual of San Diego
Insurance Company. Sven performs many
appropriate practices which are not specifically written into his agent’s
contract with his insurer, but are still legal.
He is exercising his ____ authority.
A. Express
B. Implied
C. Apparent
D. Fiduciary
40. Agents must uphold their
fiduciary duty. Select the best example
of fulfilling this duty from the choices below.
A. Reviewing the
clients needs for insurance
B. Forwarding the
client’s premium check to the insurer the next business day
C. Returning phone
calls
D. Getting a client
the proper claims forms
41. Twin brothers apply for insurance. Andrew buys 20 year renewable term
insurance. Barry buys whole life. They are both paying the same premium. Both are standard risks. Which statement below is false?
A. The whole life
policy will have a higher death benefit should the insured die in the first 20
years.
B. The term policy
will have a premium increase in 20 years while the whole life premium will
remain level.
C. If Barry stops
paying his premium, his cash value could be used to pay the premiums. If Andrew stops, his policy will lapse after
the grace period.
D. Barry will have
more cash value than Andrew.
42. What mathematical rule
says that as the number of individual, but similar / homogeneous, exposure
units increases, the accuracy of the prediction of future losses will also
increase?
A. Mortality
B. Needs analysis
C. Materiality
D. The law of large
numbers
43. Which of the following is
not a step in transacting insurance?
A. Execution of the
contract
B. Negotiations
C. Solicitation
D. Establishing a
list of warm prospects
44. The partial transfer of policy ownership
rights and privileges in a policy to a bank or lender is called:
A. A lienholder
assignment
B. A collateral
assignment
C. An absolute
assignment
D. A contingent
assignment
45. Which Federal Act is designed to protect
group plan participants and beneficiaries, establish retirement plan equality,
and requires stringent reporting including annual reports?
A. HIPAA
B. COBRA
C. TEFRA
D. ERISA
46. The purpose of the California Life and Health
Guarantee Association is:
A. To protect life
policyholders when the insurer becomes insolvent
B. To protect life
policyholders, within limits, when member insurers become insolvent
C. To help small
insurers compete with much larger insurers
D. To guarantee
promises made by the sales force of member insurers.
47. Premium financing involves the process of
borrowing money to pay the premiums for an insurance policy. If an agent or broker receives a commission
or fee for arranging such an agreement, they must do which of the following?
A. Disclose to the
client all commissions and fees received
B. Rebate a portion
of the fee to the client
C. Disclose to the
client the fees received for arranging the financing agreement.
D. None of the
above. Additional fees may not be
charged.
48. An agent or broker who arranges premium
financing agreements must maintain records of this activity for how many years?
A. 1
B. 3
C. 5
D. 7
49. In group insurance, the
master policy is issued to the ______, while certificates of insurance are
issued to the ________.
A. Employer,
employees
B. Employee,
employers
C. Employer, plan
administrators
D. Employee, plan
sponsors
50. Emerald Light is an insurance agency which
represents the JLA Insurance Corporation.
Emerald Light may name JLA in its ads as long as it clearly states their
relationship in any of the following ways, except:
A. Emerald Light, representing JLA Insurance
Corporation
B. Emerald Light, placing business through JLA
Insurance Corporation
C. Emerald Light,
using the services of JLA Insurance Corporation
D. Emerald Light,
underwriting for JLA Insurance Corporation
51. The payor benefit on a juvenile policy
provides that if the payor dies or becomes disabled before the insured juvenile
reaches the age specified on the policy:
A. The face amount of
the policy will be multiplied
B. The insurer will
make the premium payments until the insured juvenile reaches the specified age
C. The insurer will
make all the premium payments
D. The insured’s
estate will make the premium payments for the juvenile
52. The minimum participation required
for a contributory group plan is:
A. 50% of eligible
employees
B. 75% of eligible
employees
C. 80% of eligible
employees
D. 100% of eligible
employees
53. A client signs the claims
forms for what is truly a fraudulent claim.
If caught, what additional crime will he be charged with committing:
A. Perjury
B. Forgery
C. Misrepresentation
D. Concealment
54. An agent replacing a policy must submit all
of the following to their insurer, except:
A. A signed statement
as to whether or not the agent knows a replacement is involved in the
transaction
B. A signed statement
by the applicant as to whether or not replacement of existing insurance will occur
C. A copy of the
signed replacement notice, whenever a replacement is involved
D. A copy of all
printed communications and brochures used during the sales presentation
55. Which
non-forfeiture is default when the policyowner neglects to select an option?
A. Extended Term
B. Reduced Paid-up
C. Cash Surrender
D. Purchase Paid-up Additions
B. Reduced Paid-up
C. Cash Surrender
D. Purchase Paid-up Additions
56. Considering whether an applicant is
qualified to become a licensee, a plea of nolo contendere is considered:
A. Innocent
B. A Conviction
C. Inconclusive
D. Not-guilty
57. License numbers must be included by the
licensee on which of the following?
A. Business cards
B. Advertisements whether printed or on the
internet
C. Written price quotes
D. All of the above
58. Every insurance product is design to address
a potential risk. Which of the
following statements is incorrect?
A. Key Person Insurance protects an employer
against lost earnings due to the death of a key employee.
B. Term insurance benefits those with lower
incomes but high insurance needs.
C. Annuities protect those worried about
outliving their financial resources.
D. Convertible life allows insureds to change a
permanent plan to a temporary plan if their needs were to change.
59. If you apply for a variable annuity and you
do not request that your premium immediately be put into the underlying
investments, and you return the policy to the insurer within the cancellation
period, what are you entitled to receive back?
A. 100% of the premium paid.
B. The full amount of the premium minus the
surrender charge.
C. The value of the policy on the day it was
received by the insurer.
D. None of it.
You cancelled the contract.
60. If you are an eligible employee and you want
to be covered by the group insurance plan, what must you do to get this
coverage without having to prove insurability?
A. Nothing – this is a participating plan and
you are automatically covered.
B. Authorize your doctor to send the insurer
your medical records.
C. You must enroll for the insurance during the
eligibility period.
D. Whenever you make the first premium payment
(valuable consideration) you can then enroll for the plan.
61. Which statement about life insurance riders
is false?
A. Often accidental death benefit riders
require death within 90 days of the accident for the increased death benefit to
be paid out.
B. The waiver of cost of insurance pays for a
term or any cash value policy if the insured is disabled for six months or
longer.
C. The accelerated death benefit pays a portion
of death benefit prior to death due to a serious or critical illness of the
insured.
D. The premiums for riders such as waiver of
premium added to a cash value policy pay for the rider’s benefits, but does not
add to its cash value.
62. Which of the following can never be
disclosed on the actual life insurance policy?
A. The financial rating of the insurer
B. The policy period
C. The risk being insured against
D. The parties between whom the contract has
been made
63. An agent advertises on the internet. He must include all of the following in the
advertisement or website, except:
A. The agent’s true and / or fictitious name
B. The agent’s license number
C. The agent’s business address in the state
D. The agent’s business telephone number
64. Which of the following life insurances pays
only upon the death of the first insured?
A. Family policy
B. Joint life
C. Survivorship life
D. Juvenile life
65. Which of the following life insurances pays
only upon the death of the second insured?
A. Family policy
B. Joint life
C. Survivorship life
D. Juvenile life
66. An insurer’s violation of insurance
transaction rules can result in imprisonment for any of the following lengths,
except:
A. 1 year
B. 2 years
C. 5 years
D. 7 years
67. A premium loan under the APL will
automatically be made:
A. At the beginning of the grace period
B. At the end of the grace period
C. On the premium due date
D. Upon reinstatement
68. Which of the following is a qualified
retirement plan?
A. A Deferred Compensation Plan
B. An Executive Bonus Plan
C. A Tax Sheltered Annuity (TSA)
D. A Split
69. A Universal Life plan with a current
interest rate is replaced with a Universal Life plan where the insured can
choose from a variety of stock and/or bond investments is which of the
following?
A. Flexible Premium Variable Life
B. Adjustable Life
C. Variable Life
D. Variable Annuities
70. An insurer organized under the laws of the
State of California
A. Foreign insurer
B. Domestic insurer
C. Alien insurer
D. Non-admitted insurer
71. An insured and his primary beneficiary die
together in the same car accident. It’s
impossible to determine who died first.
There is a living contingent beneficiary. Under the common disaster clause, who will
ultimately receive the life proceeds?
A. The estate of the insured
B. The estate of the primary beneficiary
C. The contingent beneficiary
D. The life agent
72. Renewable term insurance can be described
as:
A. A level death benefit with a level premium
B. A level death benefit with an increase
premium
C. An increasing death benefit with an
increasing premium
D. A decreasing death benefit with a level
premium
73. Since insurance policies are purchased "as-is" or
"take-it-or-leave-it", there is a burden on insurers to write clear,
unambiguous contracts. This concept is called:
A. Adhesion
B. Unilateral
C. Conditional
D. Aleatory
74.
Insurance is a unique kind of contract.
Unlike many contracts, they involved the unknown or unequal exchange of
value between the insurer and the insured.
This legal concept is called:
A. Adhesion
B. Unilateral
C. Conditional
D. Aleatory
75. All of the following
are exempt from Replacement Laws except:
A. Converting from a term
plan into a whole life plan
B. Purchasing a credit
life policy through one’s credit union
C. Buying a new policy
with the intent to eliminate or decrease current coverage
D. Changing jobs and
signing up for the new employer’s group plan after leaving another job with
benefits
76. While the insurer has
complete control of the wording of an insurance contract, the insured has no
control of the wording. In other words,
terms of the policy are not negotiated.
The policy is bought “as-is”.
This is the legal concept of:
A. Aleatory
B. Adhesion
C. Conditional
D. Unilateral
A. Aleatory
B. Adhesion
C. Conditional
D. Unilateral
77. Risk can be defined
as:
A. The unexpected
reduction of value
B. The unknown or unequal
exchange of value
C. The transfer of loss
D. The uncertainty of loss
ANSWERS: BONUS EXAM
1. C.
An insurer must be in a financial condition to be able to pay claims and
other obligations when due. When an
insurer cannot, they are labeled insolvent.
2. A.
As with misrepresentation, whether intentional or not, concealment of
material information results in rescission of the contract.
3. C.
Defined benefit plans do not usually allow early withdrawals. Defined contribution plans do allow for early
withdrawal of funds but there is a tax penalty for withdrawal before age 59½.
4. B.
From the list of eleven categories of records to be maintained, section
10508 of the CIC specifically excludes “printed material in general use
distributed by the insurer, either directly or indirectly through its life
agents” from the requirement.
5. A.
The question assumes that medical conditions are revealed. For test purposes the better answer is a
physical exam. The applicant has revealed
a condition or history which needs to be explored. An Investigative Consumer Report is intended
to obtain information about a person’s character, reputation, or lifestyle.
6. C.
An APS allows the attending physician to better explain conditions
revealed within the medical records which the insurer requires more information
to properly underwrite.
7. B.
Policy dividends are paid by mutual insurers on their participating
policies. The federal government
identifies a policy dividend as a partial refund of an overcharge. Dividends are not, and can not be, guaranteed
and they are not taxable.
8. C.
An absolute assignment would transfer 100% of all ownership rights to
another person.
9. C.
By paying the FICA tax for forty quarters or credits (10 years) the
workers gains benefits under the Social Security status of fully insured.
10. A.
An eligible surviving spouse and dependant children will receive
benefits if the worker has worked at least 6 of the last 13 full quarters which
ended with the calendar quarter in which the covered person died, became
eligible for retirement, or became disabled.
11. C. A
(poor) investment is a speculative risk and is uninsurable. The other three are pure risks and are
covered by Social Security.
12. C.
Annuities are combined with the life class of insurance. Life, annuities, and disability are contained
within two classes of insurance.
13. B.
While an IRA could be used in an employer plan (a SEP IRA for example)
the better answer here is the “defined” contribution plan. It is funded with “specific”
contributions. (FYI – a SEP IRA is a
defined contribution plan.)
14. A.
If no pre-selection was made by the policyowner or the beneficiary
within 30 days of the insurer accepting the claim, the automatic mode of
settlement is in cash in a single lump-sum payment.
15. D.
By definition that is what the process is called. It takes a majority vote of the board of
directors as well as the current policyowners.
16. B.
The exposure to the uncertain possibility of a loss is known as a “loss
exposure”.
17. C.
Since the amount paid for an insurance policy is unknown the day it is
purchased, it’s an aleatory contract. If
the insured doesn’t make a claim, they over-pay. If they make a claim they might receive more
than they paid in premiums. The exchange
of consideration between the insured and insurer is unknown and unequal.
18. C.
The extended term non-forfeiture option of a cash value policy is term
insurance. It has no cash value and,
therefore, would have no loan value.
19. A.
Because the mortality cost of a Universal life policy increases yearly
it’s essentially Annual Renewable Term with an attached cash accumulation
account to make it cash value.
20. C. The
cheapest for the year is the single annualized payment. The more payments the annual payment is
broken into the more expensive the premium is for the year.
21. D.
The penalties would apply per violation (issuing – renewing –
servicing).
22. B. A spouse is eligible for benefits under
Social Security once the marriage reaches 9 months. For an ex-spouse, the marriage needs to last
10 years to maintain benefits despite the divorce.
23. C.
Explanation: Social Security is
designed to help members of the immediate family, and unmarried ex-spouses, but
not grandchildren.
24. D. A
group policy is contributory any time an employee/member pays any premium into
the plan, including all of the premium.
25. D.
Annuities are used to pay-out lotto winners over time when they choose
an option other than lump sum.
26. D.
The master policy holder, often the employer, is responsible for all
areas of administration.
27. D.
These are all Living Benefits of a cash value policy that can be used
while the policyowner is still alive, up until time of death when the death
benefit is paid out.
28. B.
Probationary periods affect those employees that start after the policy
began. Previous employees are
“grandfathered-in” and don’t have to wait.
29. A.
Parties to a contract must disclose material information the other needs
to know, but don’t already know.
30. D.
The sales force identifies potential clients. Final selection is up to underwriting.
31. B. To be a qualified tax-deferred account, an
investment must follow certain IRS guidelines.
Included in that is not overly favoring shareholders and top employees
versus all the general employees.
32. C.
Refusal to send records is a misdemeanor.
33. B.
The replacing insurer submits a copy of the replacement disclosure along
with a copy of the proposed policy to the existing insurer. So technically, the agent only gives copies
of the notice to the applicant and the insurer they represent, not the other
company.
34. B.
Annuities can compound faster since they allow for tax deferred
growth. She would have to pay taxes
based upon the interest in the CDs each year.
35. A.
There are four total components that affect the value of an universal
cash account. After the premium is
added, the mortality cost and other expenses are deducted, and interest, if
any, is added
36. B.
Mortality predicts death.
Morbidity predicts disability and illness. Age, gender and other factors can be
used. The use of nationality would be
discriminatory.
37. C.
The premiums for employee group term life policies are considered a
necessary business expense and are tax deductible to the employer.
38. C.
Unlike property insurance, insurable interest is only required when the
policy begins.
39. B.
Implied authority is legitimate authority not written into a
contract. Often includes common business
practices.
40. B.
While all options are a positive activity, taking possession of the
client’s funds or property is the best example of a fiduciary responsibility.
41. A.
Since term traditionally has a lower premium for the same coverage,
Andrew can get a higher death benefit on his term plan than Barry does for his
whole life policy for the same dollar amount.
42. D. The law of large numbers dictates that the
larger the sample, the more accurate the results of the prediction.
43. D.
Deciding who to talk to later is not an actual part of the process of
transacting (selling) insurance.
44. B. A
collateral assignment would transfer just enough control to a lender to ensure
the re-payment of a loan after a death.
If the loan is re-paid before death, control reverts back to the
original owners.
45. D.
The Employee Retirement Income Security Act protects pension plan
(retirement plan) participants & beneficiaries.
46. B.
The Guarantee Associations may loan money to insolvent member insurers
or assist in other ways. If an insolvent
insurer is liquidated by the commissioner and the Association has to pay claims
there are limits to what claims are paid.
47. C.
While an agent does not have to disclose his or her sales commission, if
they receive an additional compensation for arranging a premium financing
agreement, that fee must be disclosed to the client in advance.
48. B.
While many insurance records must be kept for 5 or more years, premium
financing activity records must be kept for at least 3 years.
49. A.
The master policy goes to the employer.
Certificates of insurance/coverage go to the group members (employees).
50. D.
An agency is not an underwriter.
The other options describe an agency selling for an insurer.
51. B.
The payor benefit will pay the premiums for the juvenile until an age
such as 21 or 25.
52. B.
At least 75% of eligible employees must choose to enroll in the plan or
the plan could be cancelled by the insurer.
53. A.
Perjury is the willful act of swearing a false oath, or affirmation to tell the truth, whether spoken
or in writing, concerning matters material to a legal proceeding
54. D.
Communications published by the insurer would not be submitted back to
the insurer. Any comparisons made by the
agent should be submitted.
55. A.
If a client does not select a non-forfeiture option, the Extended Term
option is default. This way the policy
maintains the same death benefit for the beneficiary as before, though for
fewer years.
56. B. Nolo contendere (Latin for “no contest”)
is considered a conviction.
57. D.
It’s a practice to include license numbers on any advertisement or
document directed towards clients, prospects, or the public. However, license numbers must be included on
the three items above.
58. D. A
convertible life plan changes a temporary policy into a permanent policy
without evidence of insurability.
59. A.
The policy was returned during the free look period, a.k.a.,
“cancellation period,” or “right to return period.” The premium would automatically have been
temporarily invested in a money market account or a fixed income account and,
therefore, 100% of the premium paid would have been refunded.
60. C.
After an employee becomes eligible for the plan they must enroll during
the eligibility period or the open enrollment period to avoid being required to
prove insurability.
61. B. The
waiver of cost of insurance is used exclusively for universal life since they
have flexible premiums payments. The
rider can’t waive the entire premium since future premiums would be
unknown. It will waive the mortality
cost portion of the insurance since it is known. Policies with level premiums such as term and
whole life can offer waiver of premium riders.
62. A.
While important, financial ratings of insurance companies tend to change
over time. Printing the rating on the
actual policy would make it misleading.
The other options would not change, at least not without the
policyowner’s knowledge and consent.
63. D.
While it’s wise to have a phone number in an advertisement, it’s not a
legal requirement.
64. B.
Joint life covers two lives on one policy. As an example it often covers a husband and
wife and is a “first-to-die” policy. It
pays the death benefit out upon the first death and then cancels.
65. C.
Survivorship Life, sometimes called Joint and Last Survivor, covers two
lives on one policy. It often covers a
husband and wife and is a “second-to-die” policy. It pays the death benefit out upon the
second/last death. While Joint Life is
sometimes loosely used to describe any policy covering two people whether it
pays upon the first or second death, in the context of this question,
Survivorship Life is the best answer.
66. D.
Currently, maximum penalties of imprisonment for insurance violations
range from one to five years.
67. B.
The automatic premium loan provision is designed to prevent the policy
from lapsing by paying the premium at the end of the grace period.
68. C.
All of the answers, except TSA’s, are non-qualified since they can be
used as employee “perks”. They do not
count as tax-advantaged (qualified) retirement plans.
69. A.
Flexible Premium Variable Life is another name for Variable Universal
Life, a Universal Life policy where the cash value is invested into securities.
70. B.
An insurer domiciled within California
71. C.
The common disaster clause protects the interest of the contingent
beneficiary when order of death cannot be determined. Otherwise, the estate/family of the primary
beneficiary might try to claim the money.
The law assumes the primary beneficiary dies first, so the death benefit
should then go to the second generation of beneficiary.
72. B. A
renewable policy will renew for the same death benefit, but because the insured
is older the premium will increase to reflect the older attained age. The increase cannot be from any other rating
factor not already accounted for previously.
73. A.
Since clients don't negotiate with insurers when they buy insurance,
they buy it "as-is." If an insurer forgets to address an issue
in their contracts, or writes a confusing contract, they are likely to lose any
resulting lawsuits.
74. D.
Aleatory contracts involve the unequal, or yet-to-be-determined,
exchange of value between the insurer and the client. In other words, it is unknown how much
premiums will be paid before a claim (benefit) is paid, if paid at all. Those who overpay pay for the one’s that
underpay in premiums.
75. C.
Replacement Laws were created to make sure the replacement of individual
policies (mainly switching companies) was in the clients’ best interest, not
just so an agent can get paid again.
Converting coverages with the same insurer, buying credit / mortgage
insurances, and receiving group insurances are usually exempt from such laws.
76. B. A
contract of adhesion is a contract where one party has more power than the
other. It is not written after
negotiations between the two opposing partners.
It would be impractical and very expensive for every insurance policy to
be uniquely written for every single client, and could lead to discrimination
and violations of state laws if some clients negotiated better policies than
others.
77. D.
Risk is simply the possibility of facing a loss which may or may not
occur. Loss is the reduction of value.
