Webce Insurance Test Questions With Verified Answers Latest 2023/2024

Agent Thompson received a letter from the Department of Insurance asking her to provide proof of completing the continuing education requirements. Within how many days must Agent Thompson respond to the Department's inquiry? 20 30 10 45 - Answer- 10 days Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Pennsylvania. Which of the following conditions must she satisfy? She must move to Pennsylvania. She must surrender her Ohio license. She must be sponsored by a producer licensed in Pennsylvania. She must show her Ohio license is in good standing. - Answer- She must show her Ohio license is in good standing The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? using life insurance to fund future cash needs using life insurance as a speculative investment on another person's life overusing life insurance designating an ineligible person as the policy beneficiary - Answer- using life insurance as a speculative interest on another person's life Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them? group life insurance industrial life insurance ordinary term insurance ordinary whole life insurance - Answer- industrial life insurance Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? the policy's cash value her ability to borrow an interest-free loan from the cash value policy dividends payment of premiums on Sylvia's behalf in the event of emergencies - Answer- the policy's cash value Carl is a policyowner who prefers to pay premiums monthly rather than annually. How will Carl's insurance company adjust his premium to accommodate this request? The insurer divides the annual premium by 12 and then adds a modest charge. The insurer simply divides the annual premium by 12. The insurer divides the annual premium by 12 and then reduces the premium amount to reflect the fact that premiums will be paid throughout the year. The insurer divides the annual premium by 12 and then adds a modest charge in the first policy year after which premiums equal the annual premium divided by 12. - Answer- The insurer divides the annual premium by 12 and then adds a modest charge All of the following statements about key person life insurance are correct, EXCEPT: The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. Key person, or key employee, life insurance is an example of third-party ownership. Life insurance used as key person life is normally owned by the business rather than the insured. - Answer- XXX Upon the insured employee's death, the employee's surviving family receives the policy benefit XXX The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance are generally called: field underwriting fiduciary process agency development due diligence - Answer- field underwriting How is increasing term life insurance normally sold? as an endorsement as a permanent insurance policy as a stand-alone term life insurance policy as a rider attached to a permanent life insurance policy - Answer- as a rider attached to a permanent insurance policy Andrea bought a $300,000 term-to-age-55 policy. All the following statements about her policy are correct EXCEPT: The policy provides $300,000 of coverage until Andrea reaches age 55. The policy will generate a cash value that is payable at age 55. It is possible that Andrea could convert the term policy to a life insurance policy that provides coverage for Andrea's entire life even if she becomes uninsurable. The premium for the policy stays the same until the policy expires. - Answer- XXX The policy will generate a cash value that is payable at age 55 XXX The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner: reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability convert the term policy to a permanent life insurance policy renew the policy with a higher face amount without having to provide evidence of insurability renew the policy at lower current rates rather than guaranteed renewal rates - Answerrenew the policy at lower current rates rather than guaranteed renewal rates Term life insurance is well suited for all the following needs EXCEPT: mortgage protection a source of emergency cash for any financial need inexpensive protection until the policyowner can afford permanent life insurance protection while the family children are living at home or attending college - AnswerXXX a source of emergency cash for any financial need XXX Premium rates will vary unpredictably depending on the insurer's actual experience in which one of the following types of whole life insurance? straight whole life current assumption whole life limited pay whole life graded premium whole life - Answer- current assumption whole life Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own? 10-pay whole life single premium whole life graded premium whole life modified premium whole life - Answer- graded premium whole life Which one of the following statements about variable life insurance is correct? Variable life policyowners can invest all of their premiums in the insurer's general account. Subaccounts are managed within the insurer's general account. Variable life policyowners can choose flexible premium payment schedules. With a variable life insurance policy, the policyowner assumes most of the investment risk. - Answer- With a variable life insurance policy, the policyowner assumes most of the investment risk. Which of the following statements best explains the basic level premium concept of ordinary whole life insurance? The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age. Funds are withdrawn from the policy's cash value in the later years to pay the rising cost of pure insurance. The death benefit is decreased to offset the rising cost of insurance with age. The insurer averages the cost of pure insurance over the insured's life expectancy so that the mortality charge remains level. - Answer- the steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age All the following statements about ordinary (straight) whole life insurance are correct EXCEPT: The insured pays premiums for his or her entire life. Premiums remain level. The death benefit increases during the early policy years and then levels off. It has a steadily increasing cash value. - Answer- XXX the death benefit increases during the early policy years and then levels off XXX Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following statements is most correct? Barb and Jill will pay approximately the same monthly premium amount every year, and their policies will mature at about the same time. Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time. Jill will pay a higher monthly premium than Barb, and their policies will mature at about the same time. Barb and Jill will pay approximately the same monthly premium amount every year, but Barb's policy will mature before Jill's. - Answer- barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time Unlike traditional fixed interest UL policies, many variable universal life policies offer a third death benefit option, which provides a guaranteed minimum death benefit equal to: he policy's net amount at risk plus its cash value the policy's net amount at risk plus its cash value minus the sum of premiums paid the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid the policy's net amount at risk plus its cash value plus the sum of premiums paid - Answer- the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid In a front-end loaded universal life contract, when does the insurer deduct a charge to cover the costs of administering the policy? from the cash value after the premium has been deposited to it from the premium payment before it is credited to the policy's cash value once, when the first premium is paid at the start of each policy year - Answer- from the premium payment before it is credited to the policy's cash value Jack bought a life insurance policy that will provide a lump-sum death benefit plus a tenyear stream of income should he die before a specified date. Five years after purchasing the policy, before the specified date, Jack died and the policy began paying a monthly benefit to his family for ten years. What type of policy did Jack buy? ten-year family maintenance policy ten-year family income policy survivorship life insurance policy ten-year family protection policy - Answer- ten-year family maintenance policy All of the following statements regarding joint life insurance and survivorship life insurance are correct EXCEPT: Joint life insurance lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death. Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds. Joint life insurance is especially popular in the estate planning market. Survivorship life insurance pays the death benefit upon the death of the second insured. - Answer- XXX joint life insurance is especially popular in the estate planning market XXX How does a family income policy differ from a family maintenance policy? A family income policy combines whole life insurance with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with level term insurance, while a family maintenance policy combines whole life and decreasing term. - Answer- A family income policy combines whole life with decreasing term insurance, while a family maintenance policy combines whole life and level term insurance Endowment contracts are NOT considered life insurance (for tax purposes) because: They never mature. They endow before age 120. They do not pay a death benefit if the insured dies before the contract matures. They do not build cash values. - Answer- they endow before age 120 Which statement is correct if a group offers noncontributory group life insurance? The employer must pay most of the premiums. The employees must pay part of the premiums. The plan must cover at least 75 percent of eligible group members. The plan must cover 100 percent of eligible group members. - Answer- the plan must cover 100% of eligible group members All the following statements about standard policy exclusions are correct EXCEPT: Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. The war exclusion usually excludes paying the death benefit only if the death directly resulted from war. The war and commission of a felony exclusions are required by law. If a policy excludes a risk from coverage, the insurer will not pay the policy's benefit if death results from that risk. - Answer- XXX the war and commission of a felony exclusions are required by law XXX Which of the following most accurately describes who can be a life insurance policy beneficiary? The beneficiary must have an insurable interest in the insured. The beneficiary can be anyone as long as it is a natural person. The beneficiary must be a blood relative of the insured. It can be virtually any person or entity the policyowner chooses. - Answer- it can be virtually any person or entity the policyowner chooses Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's daughter from a previous marriage, Sue, is not a beneficiary. Reggie and Mary are in a car accident in which Reggie dies instantly and Mary survives for three days before dying from accident-related injuries. Under the policy's common disaster clause, to whom will the policy's death benefit be paid? Sue Reggie's estate Mary Carl - Answer- Carl Which of the following most correctly describes the option(s) available with a universal life insurance policy the owner no longer wishes to maintain? surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions surrender the policy for its cash value, convert it to extended term insurance, or convert it to paid-up whole life insurance surrender the policy for its cash value or convert it to extended term insurance surrender the policy for its cash value or convert it to paid-up whole life insurance - Answer- surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions If a permanent life insurance policy lapses and the owner does NOT select a nonforfeiture option, the insurer will automatically: suspend coverage until the policyowner either reinstates or surrenders the policy apply the extended term insurance option surrender the policy and pay out the cash value apply the reduced paid-up option - Answer- apply the extended term insurance option All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT: If the lapsed policy was a participating policy, the paid-up policy remains eligible for dividends. The paid-up policy will not build any more cash value. A policyowner of a lapsed policy can take the reduced paid-up option regardless of whether the lapsed policy was issued on a standard or substandard (rated) basis. A paid-up policy under the reduced paid-up insurance option requires no further premiums nor can any be paid. - Answer- XXX the paid-up policy will not build any more cash value XXX The automatic premium loan (APL) provision does which of the following? prevents a life insurance policy from lapsing if the policyowner fails to pay a premium provides cash for emergencies and opportunities provides liquidity if the insured wants to increase a policy's face amount improves the policyowner's credit rating - Answer- prevents a life insurance policy from lapsing if the policyowner fails to pay a premium With a variable life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy - Answer75-90% of the cash value, less any outstanding debt against the policy With a traditional whole life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy - Answer100% of the cash value, less any outstanding debt against the policy If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium? It increases. It fluctuates up and down thereafter. It stays level. It goes down. - Answer- it goes down Regarding policy dividends, which type of insurance is used with the so-called fifth dividend option? one-year term life insurance extended-term insurance one-year permanent insurance renewable term insurance - Answer- one-year term life insurance Which of the following correctly describes the two basic categories of life insurance settlement options? period certain and refund straight life and survivorship fixed period and fixed amount those without a life contingency and those with a life contingency - Answer- those without a life contingency and those without a life contingency A rider that waives all monthly deductions from a UL policy's cash value but credits nothing to the cash value if the insured becomes totally disabled is called a: waiver of cost of insurance rider waiver of monthly deductions rider waiver of premium rider waiver of stipulated premium rider - Answer- waiver of monthly deductions rider Under the payor benefit rider of a juvenile life insurance policy, which of the following happens if the payor becomes disabled before the maximum age specified in the rider? Premiums are waived until the payor recovers or the insured child reaches a certain age (e.g., 21 or 25), whichever occurs first. The juvenile policy becomes paid-up. Premiums are waived until the payor recovers. Premiums are waived until the insured child reaches a certain age. - Answer- premiums are waived until the payor recovers or the insured child reaches a certain age (e.g., 21 or 25), whichever occurs first Which of the following explains why a traditional waiver of premium rider does not work with a universal life insurance policy? Premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies. Expense and mortality charges for a universal life policy are unbundled from the premium, whereas for traditional life insurance policies they are bundled into the premium. Premium payments can be occasionally missed with a universal life insurance policy, whereas they cannot be skipped with a traditional life insurance policy. Universal life insurance policies have more administrative expenses than traditional life insurance policies. - Answer- premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies All the following statements about family term riders with life insurance are correct EXCEPT: Spouses are provided more coverage than children under a family term rider. A family term rider essentially combines the coverages of another insured rider and a children's term rider into a single rider. The policyowner can add or drop family members on a family term rider but must prove insurability if adding insureds other than newborn children. Children covered by this rider can convert their coverage to permanent coverage at age 21 without proof of insurability. - Answer- XXX spouses are provided more coverage than children under a family term rider XXX Under the integrated long-term care option, the beneficiary receives the remainder of the face amount as the death benefit at the insured's death. In this way, the long-term care integrated option is similar to which of the following? an accelerated benefits rider a disability income benefit rider term life insurance a family term rider - Answer- an accelerated benefits rider Under the integrated long-term care option, what percentage of the base policy's face amount can be used for long-term care expenses? up to 50 percent, depending on the insurer up to 75 percent, depending on the insurer up to 25 percent, depending on the insurer up to 100 percent, depending on the insurer - Answer- up to 75%, depending on the insurer Which statement regarding life insurance accelerated benefits is correct? An accelerated benefit rider pays out part or all of the policy's face value while the insured is still living. The insured must use these funds only for medical care. There is a cost, in the form of additional premium, in having the accelerated benefit rider or provision in the policy. Accelerated benefits are payable anytime the insured requires hospitalization. - Answer- an accelerated benefit rider pays out part of the policy's face value while the insured is still living All the following statements regarding the disclosure that must be made with accelerated benefits riders are correct EXCEPT: The disclosure must provide a brief description of accelerated benefits and definitions of conditions triggering payment of benefits. Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested. The disclosure must explain the effect paying accelerated benefits will have on the policy's cash value, death benefit, premium, and policy loans. Some states require that the disclosure must note that receiving accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits. - Answer- XXX insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested XXX The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider? guaranteed insurability rider accidental death benefit rider cost-of-living rider return of premium rider - Answer- accidental death benefit rider Policyowners can buy additional permanent life insurance in the future without proof of insurability under which type of rider? guaranteed insurability rider accidental death benefit rider term rider cost-of-living rider - Answer- guaranteed insurability rider Which of the following statements regarding the life insurance return of premium rider is correct? Interest is included in the returned premium amount. It pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term.. The rider is available only with whole life insurance policies. If the insured dies during the policy term, the policy face amount is paid to the beneficiary as well as the sum or premiums paid. - Answer- it pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term After a viatical settlement agreement is signed, which party owns the life insurance policy? the viatical settlement provider the insured the viatical settlement broker the viator - Answer- the viatical settlement provider Which of the following statements about the tax treatment of funds received through a qualified viatical settlement is correct? The insured pays state income tax but no federal income tax. The insured pays capital gains tax but no federal or state income tax. The insured pays no federal income tax but may have to pay state income tax. The insured pays no taxes in any form. - Answer- the insured pays no federal income tax but may have to pay state income tax Mary inherited $10 million several years ago. She has just bought a life insurance policy to help preserve her estate. All of the following statements regarding this are correct EXCEPT: The policy's death benefit can be used to pay Mary's estate settlement costs. The policy's death benefit can help eliminate the need to sell assets to pay estate taxes when Mary dies. To keep policy proceeds out of her estate, Mary should make sure she is the owner. The policy's death benefit can be used to pay Mary's debts when she dies. - AnswerXXX to keep the policy's proceeds out of the estate, mary should make sure she is the owner XXX Joanna has a $500,000 permanent life insurance policy that she no longer wants to keep in force. In order to enter into a viatical settlement, what must Joanna prove? She has a financial need to sell her policy. She is her family's breadwinner. She will use the funds to pay for medical expenses. She is terminally or chronically ill. - Answer- she is terminally or chronically ill John would like to buy life insurance to provide for his family in case he dies prematurely. Using the needs approach to answer this question, his producer will gather all the following pieces of information, EXCEPT: risk profile assets and liabilities economic value current income - Answer- XXX economic value XXX The charge-free withdrawals provision of a deferred annuity contract does which of the following? It exempts deferred annuity withdrawals from surrender charges and all taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge. It exempts deferred annuity withdrawals from surrender charges and penalty taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It permits annuity contract owners to withdraw a specified percentage of the accumulated value on a one-time basis without imposing a surrender charge. - Answerit permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge Which of the following would be most appropriate for Haley, 55, if her primary objective is to ensure having an income she cannot outlive? life insurance CDs mutual funds an annuity - Answer- an annuity The purpose for a long-term care rider with a deferred annuity contract is to: allow the deferred annuity to be annuitized earlier than age 65 if the annuitant requires long-term care allow tax-free withdrawals from the deferred annuity if the annuitant requires long-term care allow withdrawals from the deferred annuity without a surrender charge if the annuitant is confined to a nursing home allow the annuity owner to assign the deferred annuity to a nursing home - Answerallow withdrawals from the deferred annuity without a surrender charge if the annuitant is confined to a nursing home All the following are parties to an annuity contract EXCEPT: the beneficiary the owner the agent the annuitant - Answer- XXX the agent XXX Kelly owns a deferred annuity. What options does she have for using the funds accumulating in her contract before the annuitization date? Those values must be left intact in the contract for future annuitization. Those values must be fully withdrawn before annuitization. These values can only be partially withdrawn in an emergency before annuitization. They can be withdrawn, partially or in full, before the contract annuitizes. - Answerthey can be withdrawn, partially or in full, before the contract annuitizes Once annuitized income payments begin, which of the following statements is correct? The annuitant can change the settlement option at any time during the first two years only. The annuitant can change the settlement option before the first payment is distributed. The annuitant can change the settlement option at any time. The settlement option cannot be changed. - Answer- the settlement option cannot be changed Under which settlement option is an income paid until the second of two annuitants dies, at which point no further payments are made to anyone? life income with period certain option joint and survivor option joint and survivor with period certain option joint life option - Answer- joint and survivor option When can the owner of a deferred annuity select a settlement option? any time prior to annuitization any time before or after annuitization only when the contract is annuitized The choice of settlement option is built into the contract; the owner chooses a contract with the preferred settlement option. - Answer- any time prior to annuitization Which of the following is most designed to discourage deferred annuity contract owners from surrendering their annuity and moving the money to a new annuity when rates are rising? market-value adjusted annuities traditional fixed annuities a variable annuity an indexed annuity - Answer- market value adjusted annuities If a market-value adjusted annuity (MVA) is surrendered before the end of the contract term at a time when current market interest rates are lower than they were when the annuity was issued, the insurer will: maintain the same interest rate on the withdrawn funds and reduce the normal surrender charge maintain the same interest rate on the withdrawn funds and charge the normal surrender charge decrease the interest rate on the withdrawn funds and charge the normal surrender charge increase the interest rate on the withdrawn funds and charge the normal surrender charge - Answer- increase the interest rates on the withdrawn funds and charge the normal surrender charge The death benefit of a fixed deferred annuity equals: the sum of periodic income payments projected to the annuitant's life expectancy the contract's accumulated value when death occurs the face amount stipulated in the deferred annuity contract. the sum of premiums paid into the annuity - Answer- the contract's accumulated value when death occurs All of the following statements regarding the annuity purchase rate (APR) are correct EXCEPT: For any settlement option involving a life contingency, the APR (and thus the payment amount) is lower for women than men. At any age, the APR is the same for every annuity settlement option. The APR is the amount of periodic income provided for every $1,000 of annuitized principal. The APR varies by age, gender, and settlement option. - Answer- XXX at any age, the APR is the same amount for every annuity settlement XXX A two-tiered fixed annuity is designed to credit a higher rate of interest to: annuity owners who make automatic premium payments of a minimum amount into the annuity annuity owners who annuitize the contract annuity owners who maintain their annuity beyond its surrender charge period annuity owners who surrender the annuity and roll over the funds to a new deferred annuity - Answer- annuity owners who annuitize the contract When does a fixed deferred annuity contract provide a death benefit? never; only life insurance policies have death benefits only if the annuitant dies after the contract is annuitized only if the contract owner or annuitant dies during the accumulation period only if the owner purchased a death benefit rider with the annuity - Answer- only if the contract owner or annuitant dies during the accumulation period At the end of a contract period, market-value adjusted annuity owners can do all of the following, EXCEPT: renew the contract withdraw funds annuitize the contract extend the contract term with a higher guaranteed rate - Answer- extend the contact term with a higher guarantee rate Structured settlements most commonly use: immediate fixed annuities deferred fixed annuities immediate variable annuities deferred variable annuities - Answer- immediate fixed annuities What are policies that do NOT meet the IRS's definition of life insurance generally called? FIFO policies modified endowment contracts (MECs) LIFO policies nonqualified life insurance policies - Answer- modified endowment contracts (MECs) All of the following statements about policy loans from a non-MEC life insurance policy are correct EXCEPT: Policy loans are fully taxable if not repaid. Policy loans are loans made by the insurer, which uses the policy's cash value as collateral. Policy loans accrue interest. Any unpaid loan amounts reduce the amount of the death benefit. - Answer- XXX policy loans are fully taxable if not repaid XXX The premiums that a company pays for corporate-owned life insurance (COLI) on the lives of its employees are generally: not tax deductible tax deductible up to an IRS limit per employee that is changed annually tax deductible up to a corporate limit set by the IRS annually taxable to the corporation - Answer- not tax deductible In addition to ordinary income taxation, what else is a distribution from a modified endowment contract (MEC) before age 59½ subject to? 20 percent premature distribution tax penalty on the policy's full death benefit 10 percent premature distribution tax penalty on the policy's full death benefit 10 percent premature distribution tax penalty on the withdrawn amount 20 percent premature distribution tax penalty on the withdrawn amount - Answer- 10% premature distribution tax penalty on the withdrawn amount Under which of the following circumstances might life insurance policy dividends represent a taxable event? when the insured uses them to buy additional insurance the interest earned on dividends left with the insurer to accumulate interest when paid in cash to the policyowner when used to reduce future premiums - Answer- the interest earned on dividends left with the insurer to accumulate interest