Which of these statements is incorrect? Regarding the federal income tax treatment of life insurance?
a) premiums are normally not tax deductible.
b) cash dividends are normally not taxed.
c) entire cash surrender value is taxable
d) proceeds received are tax free if there is a named beneficiary.
Which provision prevents an insurer from changing the terms of the contract with the policy owner by referring to documents not found within the policy itself?
a) policy exclusion
b) incontestable
c) entire contract provision
d) assignment
The amount of monthly disability benefits payable under Security Social Security is affected by which of the following factors
a) Insured’s tax bracket
b) amount of the benefits available from other service
c) nature of the disability
d) insurance education level
What point does an informal agreement become a binding contract?
a) when one party makes an invitation and the other makes an offer
b) When an offer is made by one party and the other party rejects the offer and makes a counter offer.
c) When one party makes an offer and the other party accepts the offer
d) when consideration is provided by one of the parties to the contract.
How long does an insurance company appointment remain in force?
a) one year
b) two years
c) three years
d) until terminated
Which of the following statements about non-contributory employees group life insurance is false?
a) minimum number of employees is required to participate.
b) all eligible employees must be covered. .
c) no Evidence of Insurability required
d) must have conversion rates.
The percentage of individuals primary insurance amount PIA determines the benefits paid in which of the following programs
a) Social Security Disability Income
b) Medicare Supplements
c) Medicaid
d) Cobra
At the age of 45, an individual withdraws $50,000 from his qualified profit sharing plan, and then deposits this amount into a personal savings account. This action would result in _____ .
a) only income tax on the amount withdrawn
b) income tax and a 10% penalty assessed upon funds drawn from the qualified plan
c) continued tax free accumulations in the bank savings account
d) only a 10% penalty on the withdrawal of funds
Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?
a) the insured be the agent and be insured
b) the insured
c) the agent
d) he Commissioner of Insurance
What is the excise tax rate the IRS imposes on individuals age 70 and a half or older who do not take the required minimum distributions from their qualified retirement plan?
A) 30%
B) 40%
C) 50%
D) 60%.
Which statement is correct regarding the premium payment schedule for those for Whole Life policies?
a) premiums are payable through the insured’s lifetime/ coverage lasts until death of the insured.
b) Premiums are payable for a set period of coverage, and which expires at that point.
c) premiums are payable until age 65. Coverage lasts the lifetime
d) a single premium is paid at the time of application and coverage lasts until retirement.
F needs life insurance that provides coverage only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
A) level term policy
B) whole life policy
C) limited pay policy
D) decreasing term policy
Which of the following is not a required provision in a group like policies?
A) freelook
B) incontestable
C) conversion
D) right to loan
A policy owner may generate taxable income from which of the following dividend options.
A) non forfeiture
B) cash
C) accumulation of interest
D) reduce premium
An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with an
A) extra premium
B) concealment clause
C) extended contestable period
D) exclusion for the medical condition.
S buys a $10,000 whole life policy and 2003 and pays a premium of $100. S dies five years later in 2008, and the insurer pays the beneficiary $10,500. What kind of rider was included on the policy
a) accelerated death benefit rider
b) return of premium rider
c) family income rider or
d) term rider
A temporary agent's license issued by the Commissioner of Insurance is valid for up to how many days?
A) 60
B) 90
C) 120
D) 180
A variable annuity has which of the following characteristics?
a) underlying equity investments
b) only available with single premium
c) offers a fixed interest rate
d) does not require an insurance license.
S age 40, is looking to buy a life insurance policy that will allow for increases or decreases in coverage as his needs change. The best policy suited for S would be
a) straight life.
b) Universal Life
c) an endowment
d) modified Whole Life
A sole proprietor may use this plan only if the employees of his business are included.
a) SEP Plan
b) Keough Pension Plan
c) Individual Retirement Account IRA
d) Simple Plan
A policy that becomes a modified endowment contract MEC will
a) no longer allow for policy loans
b) must be placed in an irrevocable trust
c) can never be reinstated after lapse
d) will lose many of its tax advantages.
P owns a $25,000 life policy that pays the face amount to him if he lives to age 70 or to his beneficiary if he dies before age 70. What kind of policy does P own?
a) straight life
b) modified life
c) whole life paid up at age 70
d) endowment at age 70
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks, which of these policies does S own?
a) endowment
b) variable term life
c) variable whole life
d) joint life
A(n) ____ of benefits of a health policy transfers payments to someone other than the policy on
a) assignment
b) transfer
c) allocation
d) designation
Which of these is an element of a variable life policy?
a) fixed level premium.
b) insured assumes the investment risk
c) no investment risk to the policy owner
d) rated returns or guarantee.
A ____ rider may be used to include coverage for children under their parents life insurance policies.
a) payor
b) term
c) conversion
d) parent
Which of the following best describes a hospital indemnity policy?
a) coverage that reimburses an insured for surge and expenses.
b) coverage that pays a stated amount per day of covered hospitalization.
c) coverage that replaces lost income due to hospital specialization.
d) coverage that pays for hospital room and board
A 45 year old woman won $100,000 In a scratch off lottery ticket. She purchased that annuity that will pay her $1,500 per month beginning at age 60. Which of these annuities did this woman purchase?
a) immediate variable annuity.
b) immediate annuity.
c) Deferred fixed annuity
d) variable annuity
Which of these provisions is not required in life insurance policies?
a) free look
b) grace period
c) extended term
d) entire contract
A disability elimination period is best described as a
a) time deductible
b) dollar deductible.
c) eligibility period
d) probation period
Which of these policies can an individual use their medical flexible spending account to pay for?
a) vitamins and supplements
b) prescription drugs
c) household expenditures
d) cosmetic procedures
The automatic premium loan provision is designed to
a) provide a source of revenue to the insurance company
b) avoid a policy lapse
c) allow a policy owner to request a policy loan
d) allow a policy owner to take out additional cover without Evidence of Insurability
D owns a whole life policy that was purchased 10 years ago. If the premium payments suddenly stopped in D takes no additional action which nonforfeiture option will the insurer likely proceed with?
a) extended term
b) loan provision
c) reduced paid up
d) cash surrender
Which of the following is not included in a life insurance illustration?
a) underwriting classification upon which the illustration is based
b) insurers name
c) amount of death benefit
d) company's mortality table
A cost of living rider gives the insured
a) tax incentives
b) monthly income
c) decreasing premiums
d) additional death benefits
An evidence of Coverage form may be issued by a health maintenance organization HMO after being approved by the
a) Attorney General will
b) NAIC
c) commissioner
d) National HMO Association
Which of these non forfeiture options continue a buildup of cash value?
a) waiver of premium
b) extended term
What is considered to be a characteristic of an immediate annuity?
a) benefit payments start within one payment period of purchase.
b) benefit payments start within five years of initial purpose
c) normally tied to a specific equity or stock index
d) periodical contributions begin immediately
Which of these retirement plans can be started by an employee even if another plan is in existence?
a) Individual Retirement Account (Ira)
b) defined Plan
c) Keogh plan
d) 403 B plan
Information obtained from a phone conversation to the proposed insured can be found in which of these?
a) Agent’s report
b) MIB REport
c) Inspection report
d) attending physician’s report
which of the following actions is not possible with a universal life?
a) Policy’s cash value may be used to pay premiums
b) Premium payments can be made at scheduled times
c) Premiums may be applied as a credit against income tax
d) Face amount may be adjusted
A contract owner terminates an annuity before the income payment period begins the owner will then receive what?
a) half the current surrender value
b) the current contract surrender value
c) premiums paud to date
d) nothing
what is being delivered during a policy
a) A binding receipt to the proposed insured
b) insurance contract to the proposed insured
c) Application and initial premium to the insurer
d) Summary sheet and disclosure materials to the proposed insured
If a 10 year term life policy contains a renewability provision, the policy will renew
a) along witha decrease in premium
b) at the option of the insurer
c) only with evidence of insurability
d) without evidence of insurability
The individual most likely to buy a Medicare Supplement policy would be who?
a) Unemployed 64 year old female
b) 62 year old male covered my medicaid
c) 64 year old male covered by Medicare
d) uninsured 60 year old male
The cash value in a what kind of life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest and expense factors.
a) universal
b) graded
c) term
d) endowment
kay is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value. A beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a what?
a) installment refund annuity
b) Joint refund annuity
c) straight refund annuity
d) Equal value annuity
Life insurance that covers an insurance whole life with level premiums paid over a limited time is called What?
a) adjustable life
b) Renewable term
c) Limited pay life
d) Joint Life
k owns a whole life policy. if K wants an increasing death benefit to protect against inflation, which dividend options should she choose?
a) paid-up additional insurance
b) cash option
c) Reduced premiums
d) Accumulate with interest
P as an employee who quits her job and wants to convert her group health coverage to an individual policy after the Cobra expiration benefits, which of the following statements is true?
a) she does need to provide evidence of insurability
b) she does not need to provide evidence of insurability
c) she will have up to 6 months to convert an individual policy
d) She will be paying eactly the same premium for the individual plan as she did the group plan
What kind of policy is considered to be overfunded as stated by the IRS guidelines?
a) Modified whole life
b) Modified Endowment Contract
c) variable universal life
d) Interest-sensitive whole life
A provision in a policy that pays the policy owner an amount that does not surpass the guaranteed cash value is called the:
a) Policy loan provision
b) Automatic benefits provision
c) Accelerated Benefits provision
d) Consideration clause
What kind of insurance product covers children under their parents policy?
a) Family maintenance rider
b) Term rider
c) Family income rider
d) Payor benefit
P is looking to purchase a life insurance policy that will pay a stated amount monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should he purchase?
a) Family benefit policy
b) Family maintenance policy
c) Family income policy
d) Family survivor policy
All our true statements regarding the underwriting process except
a) signed consent from the applicant must be provided in order to test for AIDS and HIV virus
b) a AIDS and HIV virus exams can be conducted in a discriminatory fashion.
c) the cost of any examination is paid for by the insurer, or
d) The original application is the primary source of information used in the underwriting process.
What type of reinsurance contract involve two companies automatically sharing their risk exposure
a) Armitage
b) facilitative
c) excess
d) treaty
Which of these is not considered to be the cost connected with an individual's death?
a) funeral expense
b) tax liability
c) business expenses
d) probate costs
A physician opens up a new practice and qualifies for $7,000 a month disability income policy. What rider would the position add if he wants the ability to increase his policy benefit as his practice and income grow?
a) extended term rider
b) cost of living adjustment rider
c) guaranteed insurability option rider
d) waiver of premium rider
T was treated for an ailment two months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly after. How will the insurer likely consider this condition?
a) the insurer will require a higher deductible for any claims resulting from this condition
b) the insurer is required to initially cover this pre existing condition.
c) the insurer will permanently exclude the condition from the policy
d) the insurer will likely treat it as a pre existing condition which may not be covered for one year.
Under a graded premium policy the premiums are:
a) higher during the policies early years
b) are lower during the policies early years.
c) are constant throughout the length of the policy
d) can be adjusted by the insured.
A new general property and casualty licensee must complete at least how many hours of continuing education within 24 months of initial licensure.
a) 12
b) 16
c) 20
d) 24
A prepaid application for individual disability income insurance was recently submitted to the insurer when the insurer received the Medical Information Bureau report. The report showed that the applicant has suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company not take?
a) send the additional premium back to the applicant
b) sent a notice to the applicant that the coverage was declined
c) send a notice to the MIB that the applicant was declined
d) sent a notice to the agent that the applicant was declined
P is insured on a participating life policy. Which statement is true if peace premiums were waived due to a disability is the answer
a) p cannot borrow against the policy's cash value while disabled.
b) P will have to pay income tax on the amount of premiums waived.
c) P will still receive declared dividends or
d) P cannot assign ownership of the policy while premiums are being waived
With which health policy clause stipulates that an insurance company must attach a copy of the application to ensure that it is part of the contract.
a) consideration
b) entire contract
c) free look or
d) Insuring
k is an agent who takes an application for individual life insurance policy and accepts a check from the client. He submits the application and check to the insurance company. However, the check was never signed by the applicant if the applicant is approved. When will coverage become effective?
a) the day for sales appointment was made?
b) the date the application was submitted to the insurance company
c) the date of the application
d) the date the agent delivered the policy, collected the initial premium and attained a good health statement from the insured.
A universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned cost of insurance and:
a) inherent risks
b) commission rate
c) inflation factor
d) expense charges
Jay is a subscriber to a plan which contracts with doctors and hospitals. To provide medical benefits at a predetermined price. What type of plan does J belong to?
a) multiple employer welfare arrangement
b) multiple employer trusts
c) health maintenance organ organization
d) co-op arrangement
Which of these statements concerning an individual disability income policy is true?
a) premiums are normally tax deductible.
b) age of the insured determines the amount of the benefits.
c) normally includes an elimination period
d) benefits are normally taxable
