USAA Practice Test Questions with Correct Answers

USAA Practice Test Questions with Correct Answers What type of reinsurance contract involves two companies automatically sharing their risk exposure? - Answer-treaty A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a - Answer-risk retention group What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained? - Answer-Fair Credit Reporting Act The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called: - Answer-reserves A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as: - Answer-fraternal benefit society If a contract of adhesion contains questionable language, to whom would the interpretation be in favor of? - Answer-insured What is a warranty? - Answer-is a statement guaranteed to be true A policy of adhesion can only be modified by whom? - Answer-insurance company Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? - Answer-Legal Purpose (Insurable Interest) Which of these is considered a statement that is assured to be true in every respect? - Answer-warranty Which of these is NOT a type of agent authority? - Answer-principal The Consideration clause of an insurance contract includes: - Answer-the schedule and amount of premium payments What is the consideration given by an insurer in the Consideration clause of the life policy? - Answer-Promise to pay a death benefit to a named beneficiary Who makes the legally enforceable promises in a unilateral insurance policy? - Answer- insurance company All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: - Answer-bilateral At what point does an informal contact become binding? - Answer-When one party makes an offer and the other party accepts that offer. Which of these arrangements allows one to bypass insurable interest laws? - Answer- Investor-Originated Life Insurance Taking receipt of premiums and holding them for the insurance company is an example of - Answer-fiduciary responsibility Life and health insurance policies are: - Answer-unilateral contracts What type of life insurance gives the greatest amount of coverage for a limited period of time? - Answer-Term life Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? - Answer-Variable Universal Life T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? - Answer-renewable Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan? - Answer- Variable universal life D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed? - Answer- Level term A policy that becomes a Modified Endowment Contract (MEC) - Answer-will lose many of its tax advantages Term insurance has which of the following characteristics? - Answer-Expires at the end of the policy period What type of life policy covers two people and pays upon death of the last insured? - Answer-survivorship A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision? - Answer-Payor provision G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income? - Answer-10 years A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? - Answer-20-Pay Life accumulates cash value faster than Straight Life Which statement is TRUE regarding a Variable Whole Life Policy? - Answer-A minimum guaranteed Death benefit is provided N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase? - Answer-30 Pay Life Which of the following policies is characterized by flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan? - Answer- Variable universal life All of these are characteristics of an Adjustable Life policy EXCEPT - Answer-face amount can be adjusted using policy dividends K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary? - Answer-$20,000 death benefit