Primerica Practice Exam Test A (75 Questions all with correct Answers)

1. An annuity that is purchased with a lump sum premium and whose benefits begin after 12 months is called a: A. Single premium immediate annuity. B. Single premium deferred annuity. C. Level premium variable annuity. D. Flexible premium fixed annuity. - Answer- Single premium deferred annuity 2. A technique used to determine the amount of life insurance needed by focusing on the projected earning potential of an insured is called the: A. Needs approach. B. Future income option. C. Human life value approach. D. Life income approach. - Answer- Human life value approach 3. When replacing a policy the producer must present the applicant with a Notice Regarding Replacement of Life Insurance: A. At the policy delivery date. B. 7 days after the initial meeting. C. On the date the underwriter approves the policy. D. At the time of taking the application. - Answer- At the time of taking the application 4. The possibility of a financial loss incurred by a life insurance company for the premature death of an insured is known as a: A. Peril. B. Risk. C. Hazard. D. Loss. - Answer- Risk 5. The Medical Information Bureau (MIB) is a nonprofit trade association that maintains: A. Motorist information on applicants for life and health insurance. B. Medical information on applicants for life and health insurance, C. Maternity information on female applicants for life and health insurance. D. Classifications of risk for previous policies. - Answer- medical information on applicants for life and health insurance 6. A person who signs a fraudulent claim form may be found guilty of: A. Rebating. B. Perjury. C. Misdemeanor. D. Misrepresentation. - Answer- perjury 7. Which policy is a combination of annual renewable term insurance and interest-sensitive cash value? A. Universal life B. Adjustable life C. Renewable term life D. Interest-sensitive whole life - Answer- universal life 8. The right to a full refund of premiums for insureds age 60 or older is: A. 10 days. B. 14 days. C. 20 days. D. 30 days. - Answer- 30 days 9. The premium modes can be best described as the: A. Amount of premium payment. B. Method of premium payment. C. Frequency of premium payment. D. Calculation of premium payment. - Answer- Frequency of premium payment 10. Intentionally omitting a history of heart problems on an application is: A. Prudent. B. Misrepresentation. C. Consideration. D. Concealment. - Answer- Concealment 11. A tax-sheltered annuity (TSA) is a qualified plan available for: A. Employees of corporations. B. Self-employed persons. C. Nonprofit organizations. D. Group life insurance. - Answer- nonprofit organizations 12. The intent of replacement regulations is to protect the: A. Producer. B. Agency. C. Policyowner. D. Insurance company. - Answer- Policy owner 13. Which provision allows a lapsed policy to be put back in force? A. Replacement B. Incontestability C. Grace period D. Reinstatement - Answer- Reinstatement 14. According to the California Department of Insurance, an insurer whose articles of incorporation are registered in Oslo, Norway is considered a/an: A. Domestic insurer. B. Foreign insurer. C. Alien insurer. D. Admitted insurer. - Answer- Alien insurer 15. Mortality is defined as the A. Probability of a disability. B. Rate of death. C. Rate of annuitization. D. Probability of an illness. - Answer- Rate of death 16. Which of the following is NOT a characteristic of group life insurance? A. A group may exist for the purpose of purchasing insurance. B. The insurance is written as a master policy. C. Members receive a certificate of insurance. D. Conversion rights without cvidence of insurability must be offered. - Answer- A group may exist for the purpose of purchasing insurance 17. When a producer collects the initial premium and issues a conditional receipt, the receipt A. May allow life insurance companies to start coverage before policy delivery. B. Guarantees that a policy will be issued. C. Allows the application to be completed during the initial interview. D. Waives the contestable period if all questions on the application are answered. - Answer- may allow life insurance companies to start coverage before policy delivery 18. The law of large numbers allows an insurance company to predict the expected losses among A. The insureds of a particular insurer. B. Members of a group of individuals with similar risks. C. Individual with similar health conditions. D. Members of a fraternal benefit society. - Answer- members of a group of individuals with similar risks 19. If an insurer's legal reserve funds are found to be less than the minimum required by law, the insurer is considered A. Insolvent. B. Solvent. C. Unauthorized. D. Fraudulent. - Answer- Insolvent 20. Which type of policy would be suitable to protect the balance of a home mortgage? A. Universal life B. Level term C. Whole life D. Decreasing term - Answer- Decreasing term 21. When must insurable interest exist? A. At the time of application B. When death proceeds become payable C. When policy ownership is transferred D. If cash values are borrowed - Answer- At the time of application 22. The rider that provides for partial payment of the death benefit in advance to help with nursing or convalescent home expenses is the A. Disability income. B. Long-term care. C. Guaranteed insurability. D. Cost of living. - Answer- long term care 23. Which annuity payout options guarantees the return of all the principal invested in the contract? A. Life annuity with period certain B. Joint and survivorship life annuity C. Straight life annuity D. Refund life annuity - Answer- refund life annuity 24. Which of the following statements is NOT true about participating policies? A. They pay dividends to policyowners. B. They have an intentional overcharge of premium. C. They pay dividends to stockholders. D. They are commonly issued by mutual insurers. - Answer- they pay dividends to stockholders 25. Insurance contracts are based upon a doctrine which requires all parties to the contract to be honest. This is known as the doctrine of A. Indemnity. B. Utmost good faith. C. Reasonable expectations. D. Legal purpose. - Answer- utmost good faith 26. According to the California Insurance Code, life-only producers must keep records of their transactions for at least A. 12 months. B. 3 years. C. 5 years. D. 7 years. - Answer- 5 years 27. Which of these is NOT an element of a legal contract? A. Offer and Acceptance B. Consideration C. Competent Parties D. Unilateral - Answer- Unilateral 28. Which statement is INCORRECT about a fixed annuity? A. Premiums are invested in the general account. B. Interest rates are guaranteed. C. Income payments vary from month to month. D. Insurer assumes the investment risk. - Answer- income payments vary month to month 29. In a group policy, the employer receives A. Entire contract. B. Executive contract. C. Master contract. D. Explanation of benefits. - Answer- master contract 30. The risk of a loss to an insurance company is also referred to as a/an A. Exposure. B. Hazard. C. Peril. D. Adverse selection. - Answer- exposure 31. With a modified premium whole life contract, premium payments are A. The same for the life of the contract. B. Higher in the early years of the contract. C. Lower in the early years of the contract. D. Variable during the life of the contract - Answer- lower in the early years of the contract 32. If a misstatement of age is discovered during the processing of a life insurance claim, the insurer will A. Rescind the policy. B. Adjust the death benefit. C. Automatically pay the death benefit. D. Return all premiums paid. - Answer- adjust the death benefit 33. The pay-in time for deferred annuities is known as the A. Annuity period. B. Accumulation period. C. Installment period. D. Payment period. - Answer- accumulation period 34. Statements made by an applicant on an application for insurance are considered to be A. Absolute. B. Representations. C. Warranties. D. Implied. - Answer- representations 35. The cause of a loss is known as a/an A. Peril. B. Exposure. C. Hazard. D. Indemnity. - Answer- peril 36. When a producer, broker, or solicitor handles premiums for an insurer, they are acting in which of the following capacities? A. Managing General Agent (MGA) B. Legal representative with power of attorney C. Natural person under the code D. Fiduciary - Answer- fiduciary 37. What is the risk classification for those who are insurable but have a higher than average risk? A. Standard B. Preferred C. Substandard D. Declined - Answer- substandard 38. The option that pays a specified amount to the annuitant with no remaining value payable to a beneficiary is A. Fixed period. B. Fixed amount. C. Life only. D. Period certain. - Answer- life only 39. Money borrowed from a life insurance policy's cash value is A. Taxed on a last-in first-out basis. B. Taxed if the insured is terminally ill. C. Fully taxable. D. Not taxable. - Answer- not taxable 40. An insured who submits a fraudulent claim to an insurer is an example of a/an A. Moral hazard. B. Morale hazard. C. Peril. D. Adverse selection. - Answer- moral hazard 41. Selling which of the following polices would require a license issued by FINRA? A. Variable universal life B. Convertible term C. Universal life D. Interest sensitive whole life - Answer- variable universal life 42. The transfer of a possible financial loss to another party refers to A. Insurance. B. Peril. C. Indemnity. D. Risk. - Answer- insurance 43. The type of whole life insurance where premiums are payable over the whole life of the A. Limited pay whole life. B. Convertible life. C. Ordinary (straight) life. D. Single premium whole life. - Answer- Ordinary straight life 44. Which of the following is NOT a risk management technique? A. Avoidance B. Retention C. Exposure D. Transfer - Answer- exposure 45. Social Security benefits do NOT include A. Survivor. B. Retirement. C. Disability Income. D. Workers Compensation. - Answer- workers compensation 46. To be insurable, a risk must NOT be A. Due to chance. B. Definite and measurable. C. Catastrophic. D. Predictable. - Answer- catastrophic 47. A life insurance death benefit paid in a lump sum to a beneficiary is A. Not subject to any taxes. B. Not subject to estate taxes. C. Subject to federal taxes only. D. Subject to federal, state, and estate taxes. - Answer- not subject to any taxes 48. Two business partners own life insurance on each other. If one partner dies which contract will allow the surviving partner to use the death benefit to purchase the deceased's business interests? A. Buy-sell agreement B. Key employee life insurance C. Survivorship life insurance D. Joint and survivorship annuity - Answer- buy-sell agreement 49. The type of policy that can be changed from one that does not have cash value to one that does is a A. Convertible term policy. B. Variable annuity. C. Whole life policy. D. Renewable term policy. - Answer- convertible term policy 50. Which document describes the specific features and elements of a policy? A. Policy summary B. Illustrations C. Personal contract D. Conditional receipt - Answer- policy summary 51. The attempt that an insurer makes to keep its existing insurance policy in force after receipt of a notice of replacement from another company is called A. Conservation. B. Estoppel. C. Controlled business. D. Twisting. - Answer- conservation 52. A private and civil wrong for which a remedy may be sought through legal action is known as a A. Legal purpose. B. Tort. C. Warranty. D. Contract. - Answer- tort 53. If an annuitant dies before the annuitization period, what proceeds will the beneficiary receive? A. Accumulation value minus the surrender charge B. Premiums paid into the annuity account C. Accumulation value or the premiums paid, whichever is greater D. The surrender value of the annuity transact - Answer- accumulation value or the premiums paid, whichever is greater 54. Life-only agents may transact all of the following types of insurance EXCEPT A. 24-hour care coverage. B. Disability income. C. Annuities. D. Endowments. - Answer- 24/hour care coverage 55. Which of the following is NOT a characteristic of the Accelerated Benefit (living needs) A. Provides carly payment of a portion B. Insured must be diagnosed C. Reduces the amount of the policy proceeds of the death benefit with a terminal illness D. Charged for living needs - Answer- Charged for living needs 56. If the cash value exceeds the premiums paid in a whole life policy, what are the tax consequences if the policy is surrendered. A. The portion that exceeds the premiums paid is taxable. B. The total amount received is taxable. C. The interest carned is taxable. D. The cash value is tax-free, - Answer- the portion that exceeds the premiums paid is taxable 57. When one party prepares the contract and the other party either accepts or rejects the contract, it is a(n) A. Unilateral contract. B. Aleatory contract. C. Contract of adhesion. D. Personal contract. - Answer- contract of adhesion 58. Which of the following policies could be expected to have the lowest premium? A. 15-pay life B. 20-pay life C. 30-pay life D. Straight life - Answer- straight life 59. Which rider may increase the value of the policy due to an increase in the Consumer Price Index (CPI)? A. Cost of living B. Waiver of premium C. Guaranteed insurability D. Disability income - Answer- cost of living 60. When completing an application for life insurance, a producer should do which of the following? A. Bind the applicant's coverage B. Complete the Medical Information Bureau report C. Witness the applicant's signature D. Give the applicant a statement of good health - Answer- with ed's the applicants signature 61. Which of the following characterizes a speculative risk? A. Having a financial interest in an applicant B. Having the possibility for loss or gain C. Transferring the risk of loss to another party D. Showing human carelessness or irresponsibility - Answer- having the possibility for loss of gain 62. Which policy provision includes the application and the first premium from the insured and the promise to pay from the insurer? A, Consent B. Conditional receipt C. Conformity D. Consideration - Answer- Consideration 63. The guaranteed insurability rider allows the policyowner to purchase additional insurance at the insured's A. Original age. B. Issue age. C. Attained age. D. Average age. - Answer- attained age 64. A life policy that covers two lives and provides for payment of the death benefit upon the death of the first insured is called A. Universal life. B. Survivorship life. C. Joint life. D. Adjustable life. - Answer- joint life 65. Whose signature is required to make changes to a written application for a life insurance policy? A. Producer B. Company Regional Vice President C. Applicant D. Executive Officer of the insurance company - Answer- applicant 66. A producer who knowingly misrepresents material information for the purpose of inducing surrender a life insurance policy or annuity has committed an illegal practice known as A. Concealment. B. Misrepresentation. C. Twisting. D. Fraud, - Answer- twisting 67. Underwriting is the process of: A. Writing policy forms to conform to Department guidelines. B. Comparing different policies for an applicant. C. Determining personal insurance needs. D. Determining the company's risk regarding a proposed insured. - Answer- determining the company's risk regarding a proposed insured 68. An arrangement where the employer insurance on an employee is known as a and employee agree to purchase and fund life A. Buy-sell agreement. B. Key person. C. Deferred compensation funding. D. Split Dollar Plans, - Answer- split dollar plans 69. Which of the following is TRUE about a joint and survivor life annuity? A. The benefit will increase when the first annuitant dies. B. Benefits stop when the first annuitant dies. C. D. Income stops upon the death of the last annuinant - Answer- income stops upon the death of the last annuitant 70. A contract's agreement for life insurance is composed of a(n) A. Consideration and acceptance. B. Offer and acceptance. C. Opportunity and advantage. D. Acceptance and payment. - Answer- offer and acceptance 71. Term limit on liability refers to the A. Death benefit of a life insurance policy. B. Number of policy renewals. C. Incontestability provision. D. Business overhead expenses. - Answer- death be if it of a life insurance policy 72. A policy that combines whole life on the breadwinner and term on the spouse and children is called a A. Family policy. B. Current assumption policy. C. Family income policy. D. Family maintenance policy. - Answer- family policy 73. Which nonforfeiture values maintains the original face value of the contract but sacrifices the length of the contract? A. Reduced paid-up B. Fixed amount C. Cash D. Extended term - Answer- extended term 74. Which method of handling risk is self-insurance? A. Avoidance B. Retention C. Transfer D. Sharing - Answer- retention 75. When must insurable interest exist? A. At the time of application B. At the time of policy delivery C. When policy ownership is transferred D. When cash values are borrowed - Answer- at t