Final Exam - California Life Only Question and answer
(Verified answers)
1. According to the California Insurance Code, what is "insurance"? - ANSWER>>A contract
2. Which of these statements correctly describes risk? - ANSWER>>Pure risk is the only
insurable risk
3. Only pure risks are insurable
4. Which of the following does NOT have to be included on life insurance policy
illustrations? - ANSWER>>Statement that all values and benefits are guaranteed
5. An agent's attempt to stop the replacement of an existing life insurance policy is known
as - ANSWER>>conservation
6. If a material warranty violation on the part of the insured is found, what recourse does
an insurer have? - ANSWER>>Rescind the policy
7. Which of the following pieces of information is NOT gathered during the personal
financial planning process? - ANSWER>>An individual's civic organization memberships
8. Which of the following does the California Insurance Code NOT require an insurance
policy to specify? - ANSWER>>Insurer's financial rating
9. What is an "insurance broker" according to California Insurance Code? - ANSWER>>A
person compensated for transacting insurance on behalf of another person with an
insurer
10. The objective of underwriting is to - ANSWER>>avoid selecting a disproportionate
number of bad risks
11. An annuitant would like to determine the amount of an annuity distribution that is
exempt from taxation. What is used to calculate this? - ANSWER>>Exclusion ratio
12. A worker is entitled to Social Security disability benefits if all of the following are true,
EXCEPT for: - ANSWER>>worker cannot perform his or her current job, but is actively
seeking other employment
13. How are death benefits that are received by a beneficiary normally treated for tax
purposes? - ANSWER>>Exempt from federal income taxes
14. Which of the following statements correctly describes a contract of indemnity? -
ANSWER>>One party is restored to the same financial position the party was in before the
loss occurred
15. How is a life insurance policy dividend legally defined? - ANSWER>>A return of excess
premium and not taxable
16. When handling premiums for an insured, an agent is acting in which capacity? -
ANSWER>>Fiduciary
, 17. What does the term "illustration" mean when used in the phrase "life insurance policy
illustration", according to the California Insurance Code? - ANSWER>>Presentation of
policy features that includes non-guaranteed elements
18. John and Mary have a handicapped child that is financially dependent upon them. The
death of one of the parents would not be financially disastrous, however the death of
both likely would be. Which policy would be best suited for them? - ANSWER>>Second-
to-die policy
19. Jim is applying to become an insurance agent and has a past misdemeanor conviction
that was later expunged due to California Penal Code 1203.4. Which of the following
statements is correct? - ANSWER>>Jim must still disclose the conviction on his insurance
license application
20. Which of the following best describes the statement "The more times an event is
repeated, the more predictable the outcome becomes"? - ANSWER>>Law of large numbers
21. Bob and Tom are partners in a business. If one of them were to die, which of the
following would guarantee a market for each of their share of the business? -
ANSWER>>Buy-Sell agreement
22. What is the price of insurance for each exposure unit? - ANSWER>>Rate
23. Any changes in background information that occur after a producer application has
been submitted or a license has been issued MUST be reported to the Insurance
Commissioner within - ANSWER>>30 days
24. Section 1729.2 of the California Insurance Code requires insurances producer application
and licensees to notify the insurance commissioner in writing, within 30 days of changes
in background information after an application has been submitted or a license has been
issued.
25. "Life insurance creates an immediate estate". This phrase means: - ANSWER>>when the
insured dies, a death benefit is paid
26. According to the California Insurance Code, what term is used to describe a fact so
important it could affect the policy premium? - ANSWER>>Materiality
27. Materiality is relevant information that would probably influence an insurer's
assessment of a proposed contract.
28. An individual who transacts life, disability, or life and accident and health insurance on
behalf of an insurer is called a(n): - ANSWER>>life agent
29. One important function of an insurance company is to identify and sell to potential
customers. Which of these BEST describes this function? - ANSWER>>Marketing
30. In a modified endowment contract, the penalty tax imposed on premature withdrawals
is - ANSWER>>10%
(Verified answers)
1. According to the California Insurance Code, what is "insurance"? - ANSWER>>A contract
2. Which of these statements correctly describes risk? - ANSWER>>Pure risk is the only
insurable risk
3. Only pure risks are insurable
4. Which of the following does NOT have to be included on life insurance policy
illustrations? - ANSWER>>Statement that all values and benefits are guaranteed
5. An agent's attempt to stop the replacement of an existing life insurance policy is known
as - ANSWER>>conservation
6. If a material warranty violation on the part of the insured is found, what recourse does
an insurer have? - ANSWER>>Rescind the policy
7. Which of the following pieces of information is NOT gathered during the personal
financial planning process? - ANSWER>>An individual's civic organization memberships
8. Which of the following does the California Insurance Code NOT require an insurance
policy to specify? - ANSWER>>Insurer's financial rating
9. What is an "insurance broker" according to California Insurance Code? - ANSWER>>A
person compensated for transacting insurance on behalf of another person with an
insurer
10. The objective of underwriting is to - ANSWER>>avoid selecting a disproportionate
number of bad risks
11. An annuitant would like to determine the amount of an annuity distribution that is
exempt from taxation. What is used to calculate this? - ANSWER>>Exclusion ratio
12. A worker is entitled to Social Security disability benefits if all of the following are true,
EXCEPT for: - ANSWER>>worker cannot perform his or her current job, but is actively
seeking other employment
13. How are death benefits that are received by a beneficiary normally treated for tax
purposes? - ANSWER>>Exempt from federal income taxes
14. Which of the following statements correctly describes a contract of indemnity? -
ANSWER>>One party is restored to the same financial position the party was in before the
loss occurred
15. How is a life insurance policy dividend legally defined? - ANSWER>>A return of excess
premium and not taxable
16. When handling premiums for an insured, an agent is acting in which capacity? -
ANSWER>>Fiduciary
, 17. What does the term "illustration" mean when used in the phrase "life insurance policy
illustration", according to the California Insurance Code? - ANSWER>>Presentation of
policy features that includes non-guaranteed elements
18. John and Mary have a handicapped child that is financially dependent upon them. The
death of one of the parents would not be financially disastrous, however the death of
both likely would be. Which policy would be best suited for them? - ANSWER>>Second-
to-die policy
19. Jim is applying to become an insurance agent and has a past misdemeanor conviction
that was later expunged due to California Penal Code 1203.4. Which of the following
statements is correct? - ANSWER>>Jim must still disclose the conviction on his insurance
license application
20. Which of the following best describes the statement "The more times an event is
repeated, the more predictable the outcome becomes"? - ANSWER>>Law of large numbers
21. Bob and Tom are partners in a business. If one of them were to die, which of the
following would guarantee a market for each of their share of the business? -
ANSWER>>Buy-Sell agreement
22. What is the price of insurance for each exposure unit? - ANSWER>>Rate
23. Any changes in background information that occur after a producer application has
been submitted or a license has been issued MUST be reported to the Insurance
Commissioner within - ANSWER>>30 days
24. Section 1729.2 of the California Insurance Code requires insurances producer application
and licensees to notify the insurance commissioner in writing, within 30 days of changes
in background information after an application has been submitted or a license has been
issued.
25. "Life insurance creates an immediate estate". This phrase means: - ANSWER>>when the
insured dies, a death benefit is paid
26. According to the California Insurance Code, what term is used to describe a fact so
important it could affect the policy premium? - ANSWER>>Materiality
27. Materiality is relevant information that would probably influence an insurer's
assessment of a proposed contract.
28. An individual who transacts life, disability, or life and accident and health insurance on
behalf of an insurer is called a(n): - ANSWER>>life agent
29. One important function of an insurance company is to identify and sell to potential
customers. Which of these BEST describes this function? - ANSWER>>Marketing
30. In a modified endowment contract, the penalty tax imposed on premature withdrawals
is - ANSWER>>10%
