MI Life Producer Final Exam Graded A+
A distribution from a qualified retirement plan before age 59' is generally subject to: -
ANSWER-both ordinary income taxation and a 10 percent premature distribution
penalty tax//In addition to ordinary income taxation, plan distributions made before the
participant turns age 59' may also be subject to a 10 percent premature distribution tax
penalty.
A family life insurance policy provides: - ANSWER-whole life on the primary insured and
term life insurance coverage on the spouse and each child to age 21//Under a family life
insurance policy, an entire family has life insurance coverage under a single policy. A
family policy generally offers whole life insurance coverage on the principal insured and
term coverage for the spouse and children under age 21.
A life insurance policy cannot be backdated more than how long before the original
application was made? - ANSWER-six months//A life insurance policy cannot be
backdated more than six months before the original application was made.
A life insurance policy matures or endows when its guaranteed cash value equals its
face amount. With an endowment contract, when does the policy endow? - ANSWER-
well before age 120, usually at age 65//Endowment contracts are a special form of life
insurance in which cash values grow rapidly. As a result, the policy endows well before
age 120.
A life insurance policy that offers coverage for a specified, limited period with no cash
value building up is called a: - ANSWER-term life insurance policy//A term life insurance
policy protects the insured for a specified, limited period and does not build any cash
value. The policy pays death benefits only if the insured dies during the term of
coverage.
A life insurance policyowner who has named a beneficiary irrevocably must observe all
the following restrictions, EXCEPT: - ANSWER-not designating a new beneficiary if the
irrevocable beneficiary dies before the insured//If the irrevocable beneficiary dies before
the insured, then the policyowner may designate a new beneficiary.
A life insurer is permitted to employ which of the following persons to administer funds
held in the insurer's separate account? - ANSWER-a person convicted of moving traffic
violations//A person who has been convicted of a crime involving embezzlement, theft,
or misappropriation of funds or securities cannot be employed to handle the funds of a
life insurer's separate account. However, such a person may be employed with prior
written approval from the Director.
A married couple is insured under a joint life policy. The first spouse dies. What can the
surviving spouse do with the policy? - ANSWER-The surviving spouse may convert the
policy without proving insurability.//When the first spouse dies in a joint life policy, the
,surviving spouse has a conversion right that allows him or her to buy an individual policy
with the same or lesser face amount. The surviving insured does not have to prove
insurability.
A permanent life insurance policy that requires premiums only to age 65, at which point
the policy is considered paid-up, is basically a: - ANSWER-limited payment whole life
policy//Limited payment whole life insurance premiums can be paid for 10, 15, or 20
years or, as is common, to a specified age, such as age 65.
A plan whereby a group of two or more employers from the same industry form a trust
to provide group life insurance benefits to their members is called a(n): - ANSWER-
multiple employer trust//A plan whereby a group of two or more employers from the
same industry form a trust to provide group life insurance benefits to their members is
called a multiple employer trust (MET).
A policy owner of a lapsed policy can take the reduced paid-up nonforfeiture option
unless the lapsed policy was which of the following? - ANSWER-universal life
policy//Unlike other permanent policies, universal life policies normally do not contain
the standard nonforfeiture options for policy lapses because universal life insurance
remains in force as long as the cash value allows the insurer to make a monthly
deduction to cover the policy's insurance and operational costs.
A policyowner repeatedly declines the opportunity to increase her disability income
policy benefits through its benefit increase rider. She suffers a loss that would have
been covered under the rider. May she sue the insurance company to increase the
policy benefit? - ANSWER-No, because the policyowner waived her right to exercise the
rider benefit when the opportunity to do so was available to her.//By waiving her right to
increase policy benefits when the opportunity to do so was present, the insured is
estopped from exercising the right later on.
A producer can be licensed in all of the following lines of insurance EXCEPT: -
ANSWER-personal trust//Producers may receive a license in life, accident and health or
sickness, property, casualty, variable life and variable annuity, personal lines, and credit
insurance.
A producer owes a fiduciary duty to: - ANSWER-both the insurer and the
customer//Producers have a fiduciary duty to their customers as well as their insurance
company, and must act in good faith and with integrity in their dealings with both.
A type of life insurance that covers two people and pays the death benefit only upon the
second insured's death is called - ANSWER-survivorship life//Commonly used in estate
planning, survivorship life insurance policies insure two people but pays the death
benefit only when the second insured dies.
A variable annuity owner has a subaccount with a current net asset value (NAV) of $15.
If the VA owner makes a $1,000 premium payment, how many accumulation units will
,be acquired? - ANSWER-66.6 units//The owner would buy additional accumulation units
at $15 per unit, which is now the current value. A $1,000 payment would buy 66.6 units.
Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply
for a nonresident license in Michigan. Which of the following conditions must she
satisfy? - ANSWER-She must show her Ohio license to be in good standing.//A person
who is not a Michigan resident may be licensed as an insurance producer in Michigan if
the person is a licensed producer in good standing in his or her home state.
ABC Insurance Company diligently maintains files of advertisements it uses to market
its health insurance policies. How long is it required to keep them before it can purge
them? - ANSWER-until the Director's next examination or four years, whichever occurs
last//Every insurer must keep a file of every advertisement used to market its health
insurance policies. The insurer must maintain this file for at least four years or until the
Director's next examination of the insurer, whichever occurs last.
ABC Life Insurance has been chosen to underwrite group life insurance for the Big
State Alumni Association. In underwriting the risk posed by the group, ABC can perform
all of the following EXCEPT: - ANSWER-exclude members based on their risk
profile//The insurer cannot exclude one member from coverage based on that person's
risk potential.
Acme Insurance and Apogee Insurance agree to offer different premium rates for
persons of equal risk within a particular class. They also agree to limit benefits paid to
insureds within this class if the insureds live in certain counties of Michigan. What type
of activity are Acme and Apogee engaging in? - ANSWER-unfair and prohibited
business practices//Acme and Apogee are agreeing to an unreasonable restraint of
trade in the insurance business of Michigan. Furthermore, they are engaging in unfair
discrimination by charging persons of the same class and substantially equal risk
different premium rates and by paying different benefits to persons in this class.
Acme Insurers recently started an advertising campaign in Michigan for its new life
insurance policies. Which statement is TRUE? - ANSWER-Acme can compare its
products to competitors only if such comparisons are fair and complete.//An ad cannot
make unfair or incomplete comparisons of policies or benefits offered by other insurers.
Actuaries calculate net single premiums based on which of the following? - ANSWER-
mortality and interest assumptions//The net premium, which is the insurer's estimated
cost to provide the policy's benefits without accounting for its expenses, uses the factors
of mortality and interest but excludes the expense load factor.
Adam is a licensed insurance counselor in Michigan. Which statement best describes
his authority? - ANSWER-He provides advice regarding insurance policies and charges
a fee for such advice.//A counselor provides advice regarding the values, terms, and
provisions of insurance policies and receives a fee for his or her services
, After taking a policy loan, Bob decides not to repay it. What is the result of that
decision? - ANSWER-The unpaid policy loan interest incurs interest, and the death
benefit is reduced dollar-for-dollar by the amount of the unpaid loan (plus accrued
interest).//The loan incurs interest charges at the same rate as the loan. In addition, the
death benefit is reduced by the loan amount at the insured's death.
After the Director issued a cease and desist order, Agent Smith continued to offer illegal
inducements to insurance prospects in violation of the order. Which penalty can the
Director impose? - ANSWER-a fine of up to $10,000 and license revocation//If a
producer knowingly violates a cease and desist order, the Director can order that the
producer be fined up to $10,000 for each violation (up to $50,000 total), have his or her
license suspended or revoked, or be subject to a combination of these disciplinary
measures.
Agent Tom just sold a Medicare supplement policy to his client, Matilda. Which of the
following acts would violate his fiduciary duties? - ANSWER-having Matilda make the
check for the premium payable to Agent Tom//Producers cannot accept premium
payments for a Medicare supplement policy that are made payable to the agent instead
of the insurer. Producers must immediately give applicants a written receipt when they
receive a premium payment for a Medicare supplement policy.
Agents must act in the best interests of applicants and insureds. What does this require
them to do? - ANSWER-give all important information about a proposed policy//Agents
must act in the applicant's or insured's best interests at all times. This means that
agents must give all important information about a proposed policy. Also, they cannot
misrepresent the terms or conditions of a proposed policy.
Alan and his wife are expecting their first child. Alan wants the most death protection
that he can get for the smallest amount of premium, at least while he's starting his
family. Ideally, he would like to be able to upgrade his coverage to a whole life policy at
some point. Which of the following products would you recommend? - ANSWER-ten-
year convertible term life policy//A 10-year convertible term life policy gives the client
relatively inexpensive insurance to get started and the opportunity to convert to a whole
life policy anytime within the 10-year period.
Alana let her life insurance policy lapse three months ago and now wants to reinstate
the policy. Which action is she NOT required to take to reinstate the policy? - ANSWER-
pay the next year's premium in advance//To reinstate a lapsed party, a person must
submit an application, pay all past due premiums plus interest, and provide evidence of
insurability.
Alex sold an insurance policy before his license lapsed and earned a commission on the
sale. Is he entitled to a commission if the policy is renewed? - ANSWER-Yes, because
he was licensed when the policy was sold.//Commission earned on the renewal of a
policy can be paid to a person for selling, soliciting, or negotiating the policy if the
A distribution from a qualified retirement plan before age 59' is generally subject to: -
ANSWER-both ordinary income taxation and a 10 percent premature distribution
penalty tax//In addition to ordinary income taxation, plan distributions made before the
participant turns age 59' may also be subject to a 10 percent premature distribution tax
penalty.
A family life insurance policy provides: - ANSWER-whole life on the primary insured and
term life insurance coverage on the spouse and each child to age 21//Under a family life
insurance policy, an entire family has life insurance coverage under a single policy. A
family policy generally offers whole life insurance coverage on the principal insured and
term coverage for the spouse and children under age 21.
A life insurance policy cannot be backdated more than how long before the original
application was made? - ANSWER-six months//A life insurance policy cannot be
backdated more than six months before the original application was made.
A life insurance policy matures or endows when its guaranteed cash value equals its
face amount. With an endowment contract, when does the policy endow? - ANSWER-
well before age 120, usually at age 65//Endowment contracts are a special form of life
insurance in which cash values grow rapidly. As a result, the policy endows well before
age 120.
A life insurance policy that offers coverage for a specified, limited period with no cash
value building up is called a: - ANSWER-term life insurance policy//A term life insurance
policy protects the insured for a specified, limited period and does not build any cash
value. The policy pays death benefits only if the insured dies during the term of
coverage.
A life insurance policyowner who has named a beneficiary irrevocably must observe all
the following restrictions, EXCEPT: - ANSWER-not designating a new beneficiary if the
irrevocable beneficiary dies before the insured//If the irrevocable beneficiary dies before
the insured, then the policyowner may designate a new beneficiary.
A life insurer is permitted to employ which of the following persons to administer funds
held in the insurer's separate account? - ANSWER-a person convicted of moving traffic
violations//A person who has been convicted of a crime involving embezzlement, theft,
or misappropriation of funds or securities cannot be employed to handle the funds of a
life insurer's separate account. However, such a person may be employed with prior
written approval from the Director.
A married couple is insured under a joint life policy. The first spouse dies. What can the
surviving spouse do with the policy? - ANSWER-The surviving spouse may convert the
policy without proving insurability.//When the first spouse dies in a joint life policy, the
,surviving spouse has a conversion right that allows him or her to buy an individual policy
with the same or lesser face amount. The surviving insured does not have to prove
insurability.
A permanent life insurance policy that requires premiums only to age 65, at which point
the policy is considered paid-up, is basically a: - ANSWER-limited payment whole life
policy//Limited payment whole life insurance premiums can be paid for 10, 15, or 20
years or, as is common, to a specified age, such as age 65.
A plan whereby a group of two or more employers from the same industry form a trust
to provide group life insurance benefits to their members is called a(n): - ANSWER-
multiple employer trust//A plan whereby a group of two or more employers from the
same industry form a trust to provide group life insurance benefits to their members is
called a multiple employer trust (MET).
A policy owner of a lapsed policy can take the reduced paid-up nonforfeiture option
unless the lapsed policy was which of the following? - ANSWER-universal life
policy//Unlike other permanent policies, universal life policies normally do not contain
the standard nonforfeiture options for policy lapses because universal life insurance
remains in force as long as the cash value allows the insurer to make a monthly
deduction to cover the policy's insurance and operational costs.
A policyowner repeatedly declines the opportunity to increase her disability income
policy benefits through its benefit increase rider. She suffers a loss that would have
been covered under the rider. May she sue the insurance company to increase the
policy benefit? - ANSWER-No, because the policyowner waived her right to exercise the
rider benefit when the opportunity to do so was available to her.//By waiving her right to
increase policy benefits when the opportunity to do so was present, the insured is
estopped from exercising the right later on.
A producer can be licensed in all of the following lines of insurance EXCEPT: -
ANSWER-personal trust//Producers may receive a license in life, accident and health or
sickness, property, casualty, variable life and variable annuity, personal lines, and credit
insurance.
A producer owes a fiduciary duty to: - ANSWER-both the insurer and the
customer//Producers have a fiduciary duty to their customers as well as their insurance
company, and must act in good faith and with integrity in their dealings with both.
A type of life insurance that covers two people and pays the death benefit only upon the
second insured's death is called - ANSWER-survivorship life//Commonly used in estate
planning, survivorship life insurance policies insure two people but pays the death
benefit only when the second insured dies.
A variable annuity owner has a subaccount with a current net asset value (NAV) of $15.
If the VA owner makes a $1,000 premium payment, how many accumulation units will
,be acquired? - ANSWER-66.6 units//The owner would buy additional accumulation units
at $15 per unit, which is now the current value. A $1,000 payment would buy 66.6 units.
Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply
for a nonresident license in Michigan. Which of the following conditions must she
satisfy? - ANSWER-She must show her Ohio license to be in good standing.//A person
who is not a Michigan resident may be licensed as an insurance producer in Michigan if
the person is a licensed producer in good standing in his or her home state.
ABC Insurance Company diligently maintains files of advertisements it uses to market
its health insurance policies. How long is it required to keep them before it can purge
them? - ANSWER-until the Director's next examination or four years, whichever occurs
last//Every insurer must keep a file of every advertisement used to market its health
insurance policies. The insurer must maintain this file for at least four years or until the
Director's next examination of the insurer, whichever occurs last.
ABC Life Insurance has been chosen to underwrite group life insurance for the Big
State Alumni Association. In underwriting the risk posed by the group, ABC can perform
all of the following EXCEPT: - ANSWER-exclude members based on their risk
profile//The insurer cannot exclude one member from coverage based on that person's
risk potential.
Acme Insurance and Apogee Insurance agree to offer different premium rates for
persons of equal risk within a particular class. They also agree to limit benefits paid to
insureds within this class if the insureds live in certain counties of Michigan. What type
of activity are Acme and Apogee engaging in? - ANSWER-unfair and prohibited
business practices//Acme and Apogee are agreeing to an unreasonable restraint of
trade in the insurance business of Michigan. Furthermore, they are engaging in unfair
discrimination by charging persons of the same class and substantially equal risk
different premium rates and by paying different benefits to persons in this class.
Acme Insurers recently started an advertising campaign in Michigan for its new life
insurance policies. Which statement is TRUE? - ANSWER-Acme can compare its
products to competitors only if such comparisons are fair and complete.//An ad cannot
make unfair or incomplete comparisons of policies or benefits offered by other insurers.
Actuaries calculate net single premiums based on which of the following? - ANSWER-
mortality and interest assumptions//The net premium, which is the insurer's estimated
cost to provide the policy's benefits without accounting for its expenses, uses the factors
of mortality and interest but excludes the expense load factor.
Adam is a licensed insurance counselor in Michigan. Which statement best describes
his authority? - ANSWER-He provides advice regarding insurance policies and charges
a fee for such advice.//A counselor provides advice regarding the values, terms, and
provisions of insurance policies and receives a fee for his or her services
, After taking a policy loan, Bob decides not to repay it. What is the result of that
decision? - ANSWER-The unpaid policy loan interest incurs interest, and the death
benefit is reduced dollar-for-dollar by the amount of the unpaid loan (plus accrued
interest).//The loan incurs interest charges at the same rate as the loan. In addition, the
death benefit is reduced by the loan amount at the insured's death.
After the Director issued a cease and desist order, Agent Smith continued to offer illegal
inducements to insurance prospects in violation of the order. Which penalty can the
Director impose? - ANSWER-a fine of up to $10,000 and license revocation//If a
producer knowingly violates a cease and desist order, the Director can order that the
producer be fined up to $10,000 for each violation (up to $50,000 total), have his or her
license suspended or revoked, or be subject to a combination of these disciplinary
measures.
Agent Tom just sold a Medicare supplement policy to his client, Matilda. Which of the
following acts would violate his fiduciary duties? - ANSWER-having Matilda make the
check for the premium payable to Agent Tom//Producers cannot accept premium
payments for a Medicare supplement policy that are made payable to the agent instead
of the insurer. Producers must immediately give applicants a written receipt when they
receive a premium payment for a Medicare supplement policy.
Agents must act in the best interests of applicants and insureds. What does this require
them to do? - ANSWER-give all important information about a proposed policy//Agents
must act in the applicant's or insured's best interests at all times. This means that
agents must give all important information about a proposed policy. Also, they cannot
misrepresent the terms or conditions of a proposed policy.
Alan and his wife are expecting their first child. Alan wants the most death protection
that he can get for the smallest amount of premium, at least while he's starting his
family. Ideally, he would like to be able to upgrade his coverage to a whole life policy at
some point. Which of the following products would you recommend? - ANSWER-ten-
year convertible term life policy//A 10-year convertible term life policy gives the client
relatively inexpensive insurance to get started and the opportunity to convert to a whole
life policy anytime within the 10-year period.
Alana let her life insurance policy lapse three months ago and now wants to reinstate
the policy. Which action is she NOT required to take to reinstate the policy? - ANSWER-
pay the next year's premium in advance//To reinstate a lapsed party, a person must
submit an application, pay all past due premiums plus interest, and provide evidence of
insurability.
Alex sold an insurance policy before his license lapsed and earned a commission on the
sale. Is he entitled to a commission if the policy is renewed? - ANSWER-Yes, because
he was licensed when the policy was sold.//Commission earned on the renewal of a
policy can be paid to a person for selling, soliciting, or negotiating the policy if the
