Life insurance questions for exam with complete solutions

Life insurance questions for exam with complete solutions A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policyowner on receipt of the cash value? $16,000 was received tax-free and $4,000 as ordinary income After an applicant reads and signs an insurance application, he/she should be conscious of the fact that a false statement could lead to loss of coverage What does a fixed life annuity offer protection against? Savings depletion due to longevity Which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate? The premium to purchase the coverage comes from the policy's cash value In the event of premium default, which life insurance provision will use the cash value to keep the policy in force? Automatic premium loan Which of these factors does NOT influence an individual's need for life insurance? Self-maintenance expenses What must be given to a life insurance applicant when the agent receives an application and the initial premium? Conditional receipt The maximum prison sentence given under federal law for unfair and deceptive insurance practices is 15 years An employee welfare plan exempt from ERISA regulations would be church plans The highest mortality rate belongs to which group? Age 70 males The free look period provided in a life insurance policy is usually 10 days Life insurance premiums are computed on what three factors? Mortality, interest, expenses When does the owner's contractual rights begin under an individual annuity contract? Time of purchase Which of the co-annuitants listed below would receive the largest monthly benefit payments in a joint and 100% survivor annuity? Ages 71 and 73 Which report contains information regarding an individual's general reputation and credit standing? Consumer report An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true? Applicant has a right to receive a copy of the report A life insurance guaranteed insurability rider gives the insured the right, without proving insurability, to periodically purchase additional insurance A life insurance policy that contains an accelerated (living) benefit rider will provide funds if the insured is expected to be confined to a nursing home for life Proceeds of a life settlement contract could be subject to the claims of Creditors Laura added a children's rider to her life insurance policy. What type of coverage was added? Level term What is an insurance contract that identifies individuals by relationship to a specific organization? Group insurance A cease and desist order issued by the Commissioner against a producer prohibits a specific practice listed in the order An accelerated (living) benefit rider in a life insurance policy may provide funds to an insured who Is expected to remain in a nursing home for life Which of the following is generally a form of group credit life insurance? Decreasing term insurance