PRIMERICA LIFE INSURANCE EXAM LATEST UPDATE 2024 GRADED A+

PRIMERICA LIFE INSURANCE EXAM LATEST UPDATE 2024 GRADED A+ An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? a. mutual b. reciprocal c. nonprofit service organization d. stock - CORRECT ANSWER-A. mutual funds not paid out after paying claims and other operating costs are returned to the policy owners in the form of a dividend. if all funds are paid out, no dividends are paid Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? a. retention b. reduction c. transfer d. avoidance - CORRECT ANSWER-B. reduction the insured's change in lifestyle and habits would likely reduce the chances of health problems In insurance, an offer is usually made when a. an applicant submits an application to the insurer b. the insurer approves the application and receives the initial premium c. the agent hands the policy to the policyholder d. an agent explains a policy to a potential applicant - CORRECT ANSWER-A. an applicant submits an application to the insurer in insurance, the offer is usually made by the applicant in the form of an application. acceptance takes place when an insurer's underwriter approves the application and issues a policy The causes of loss insured against in an insurance policy are known as a. perils b. losses c. risks d. hazards - CORRECT ANSWER-A. perils perils are the causes of loss insured against in an insurance policy What documentation grants express authority to an agent? a. agents contract with the principal b. agents insurance license c. fiduciary contract d. state provisions - CORRECT ANSWER-A. agents contract with the principal the principal grants authority to an agent through the agent's contract Which of the following best describes an insurance company that has been formed under the laws of this state? a. domestic b. sovereign c. alien d. foreign - CORRECT ANSWER-A. domestic a company is domestic when doing business within the state in which it is incorporated Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? a. medical history b. sex c. age d. race - CORRECT ANSWER-D. race age, medical history, and sex provide sound statistical date for determining the probability of loss. Race, religion, sexual orientation, etc. are the factors that cannot be used because there is not sound statistical data to show that they effect the probability of loss; therefore, they are considered to be discriminatory In insurance transactions, fiduciary responsibility means a. handling insurer funds in a trust capacity b. maintaining good credit record c. being liable with respect to payment of claims d. commingling premiums with agents personal funds - CORRECT ANSWER-A. handling insurer funds in a trust capacity an agents fiduciary responsibility includes handling insurer funds in a trust capacity The authority granted to an agent through the agent's contract is referred to as a. absolute authority b. express authority c. apparent authority d. implied authority - CORRECT ANSWER-B. express authority express powers are written into the contract between the insurer and the agent Insurance policies are not drawn up though negotiations, and an insured has little to say about its provisions. what contract characteristic does this describe? a. unilateral b. conditional c. personal d. adhesion - CORRECT ANSWER-D. adhesion a contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as its written Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? a. reciprocal b. fraternal c. stock d. mutual - CORRECT ANSWER-C. stock only stock insurance companies are owned and controlled by stockholders Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? a. subrogation b. warranty c. aleatory d. adhesion - CORRECT ANSWER-C. aleatory an insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? a. legal purpose b. contract of adhesion c. acceptance d. consideration - CORRECT ANSWER-D. consideration consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application Which of the following would qualify as a competent party in an insurance contract? a. the applicant is intoxicated at the time of application b. the applicant is 12 year old student c. the applicant is under the influence of a mind-impairing medication at the time of application d. the applicant has a prior felony conviction - CORRECT ANSWER-D. the applicant has a prior felony conviction when an insurer and insured enter into a contract, both parties must be legal of age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12 year old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a. representation b. adhesion c. consideration d. good health - CORRECT ANSWER-C. consideration the binding force in any contract is consideration. consideration on the part of the insureds the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the even of loss Which of the following is a primary source of information used for insurance underwriting? a. application b. applicant interviews c. medical records. d. private investigations - CORRECT ANSWER-A. application the application contains most of the information used for underwriting purposes. this is why its completeness and accurarcy are so critical Which of the following is the best reason to purchase life insurance rather than annuities? a. to liquidate a sum of money over a period of year b. to create regular income payments c. to liquidate a sum money over a lifetime d. to create an estate - CORRECT ANSWER-D. to create an estate with insurance, the death creates an immediate estate should the insured die A producer is helping a married couple determine the financial needs of their children in the event of one or both should die prematurely. This is a personal use of life insurance known as a. survivorship insurance b. juvenile protection provision c. survivorship protection d. life planning - CORRECT ANSWER-C. survivorship protection life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection A producer agent must do all of the following when delivering a new policy to the insured EXCEPT a. disclose commissions earned from the sale of the policy b. explain the policy provisions, riders, and exclusions c. collect any premium due d. explain the rating procedures if the policy is rated differently than applied for - CORRECT ANSWER-A. disclose commissions earned fro the sale of the policy a producer must explain policy provisions, exclusions, and riders at the time of the delivery, as well as the rating procedures especially if the policy is rated differently than applied for. The producer must also collect any due premium and have the insured sign the statement go continued good health If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about a. which individual will pay the premium b. whether an insurable interest exists between the individuals c. the gender of applicant d. the type of policy requested - CORRECT ANSWER-B. whether an insurable interest exists between the individuals an insurable interest must exist at the time of the policy is issued. Some relationships are automatically presumed to qualify as an insurable interest. ex: spouses, parents, children, and certain business relationships When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by a. a physician of the applicant's choice and at his expense b. a home office underwriter c. a paramedic or examining physician at the insurer's expense d. the agent - CORRECT ANSWER-C. a paramedic or examining physician at the insurer's expense the applicant may be allowed to select the physician or paramedic facility to perform the examination. The insurer pays the cost of such an examination The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called a. expenses b. legal reserve c. dividend accumulation d. premium tax - CORRECT ANSWER-A. expenses loading is another term for expenses. Net premium (mortality minus interest earned) plus expenses (or loading) equal the gross premium Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? a. needs approach b. blackout approach c. lump-sum approach d. human life value approach - CORRECT ANSWER-D. human life value approach human life value approach is determined by the loss of the income that would result with the death of the insured, after making adjustments for expenses, inflation, etc. Which of the following is NOT required for a producer to tell a prospect? a. how the insurer would use any outside information regarding the applicant b. an explanation of products that the insurer is selling c. what requirements the producer needed to meet to obtain the insurance license d. from what outside sources the insurer would seek information, regarding the insured - CORRECT ANSWER-C. what requirements the producer needed to meet to obtain the insurance license agents are required to inform prospects of the products they are selling, as well as their information collecting practices Which of the following statements concerning buy-sell agreements is true? a. premium paid are deductible as a business expense b. benefits received are considered income taxable c. buy-sell agreements pay in the event of a medical emergency d. buy-sell agreements are normally funded with a life insurance expectancy - CORRECT ANSWER-D. buy-sell agreements are normally funded with life insurance expectancy a buy-sell agreements is simply a contract that establishes what willl be done with a business in the event that an owner dies. Buysell agreements are normally funded with a life insurance policy Who may complete a paramedical report? a. an underwriter b. a nursing assistant c. a registered nurse d. a spouse - CORRECT ANSWER-C. a registered nurse paramedical reports are completed by paramedics or registered nurses. Full medical expectations are reserved for those wanting higher coverage or for those who have more complex medical history The term "illustrations" in a life insurance policy refers to a. a presentation of non guaranteed elements of a policy b. a depiction of policy benefits and guarantees c. pictures accompanying a policy d. charts and graphs - CORRECT ANSWER-A. a presentation of non guaranteed elements of a policy the term "illustrations" means presentation of depiction that includes non guaranteed elements of a policy of individual of group life insurance over a period of years Which is generally true regarding insureds who have been classified as preferred risks? a. they can borrow higher amounts off of their policies b. they can decide when to pay their monthly premiums c. they keep a higher percentage of any interest earned on their policies d. their premiums are lower - CORRECT ANSWER-D. their premiums are lower the preferred risk classification indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits. These individuals qualify to lower premiums than those in other categories All of the following are requirements for life insurance illustrations EXCEPT? a. they may only be used as approved b. they must identify non guaranteed values c. they must differentiate between guaranteed and projected amounts d. they must be part of the contract - CORRECT ANSWER-D. they must be part of the contract an illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list non guaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a. term insurance only b. permanent insurance only c. universal life insurance only d. any form of life insurance - CORRECT ANSWER-D.any form of life insurance any form of life insurance may be used to fund a buy-sell agreement An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured and matures at the insured's age 100 is called? a. Modified Endowment Contract (MEG) b. level term life c. graded premium whole life d. single premium whole life - CORRECT ANSWER-D. single premium whole life single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a. ordinary life b. joint life c. decreasing term d. whole life - CORRECT ANSWER-B. joint life a joint life policy covering 2 lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death An individual has just borrowed $10,000 from his bank on a 5- year installment loan requiring monthly payments. What type of the life insurance policy would be best suited to this situation? a. universal life b. whole life c. decreasing term d. variable life - CORRECT ANSWER-C. decreasing term a decreasing term policy's face amount decreases as the amount of debt is reduced Which of the following are generally NOT considered when underwriting group insurance? a. the group's past claim experience b. the site of the group c. the insured's medical history d. the nature of the group - CORRECT ANSWER-C. the insured's medical history group life insurance is written on a group, not individual basis. Each individual completes an application that identifies the participant and the beneficiary. Then, the group is judged based on its nature and past claim experience. Generally, medical questions are not necessary What are the 2 components of a universal policy? a. insurance and investments b. mortality cost and interest c. separate account and policy loans d. insurance and cash account - CORRECT ANSWER-D. insurance and cash account a universal life policy has 2 components: an insurance components and cash account. The insurance component of a universal life policy is always renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher An adjustable life policyowner can change which of the following features? a. the coverage period b. the mortality expense c. the investment account d. the insured - CORRECT ANSWER-A. the coverage period typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing premium, changing the premium paying-period, increasing or decreasing the fat amount of coverage, or changing the period of protection Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a. for 20 years or until death, whichever occurs first b. until the policyowner reaches age 65 c. for 20 years d. until the policyowner's age 100, when policy matures - CORRECT ANSWER-A. for 20 years or until death, whichever occurs first under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy a. required a premium increase each renewal b. built cash value c. required proof of insurability ever year d. decreased death benefit each renewal - CORRECT ANSWERA. required a premium increase each renewal annually renewable term policies premiums are adjusted each year to the insured's attained age, however, the policy may be guaranteed renewable. Death benefits remain level, and switch any term policy, there are no cash values Both Universal Life and Variable Universal Life have a a. flexible premium b. level fixed premium c. decreasing premium d. increasing premium - CORRECT ANSWER-A. flexible premium variable universal life, like universal life itself, has a flexible premium that can be increased or decrease as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? a. half the amount b. lower c. higher d. as high - CORRECT ANSWER-B. lower survivorship life is much the same as joint life in that it insures 2 or more lives for a premium that is based on a joint age. the major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, residing in a lower premium thant that which is typically charged for a joint life What policy would be classified as a traditional level premium contract? - CORRECT ANSWER-straight whole life The ownership provision entitles the policyowner to do all of the following EXCEPT? premium rates b. receive a policy loan c. assign the policy d. designate a beneficiary - CORRECT ANSWER-A. set premium rates the insurer sets premium rates based upon underwriting considerations A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called a. accelerated benefit rider b. living need rider c. payor rider d. cost of living rider - CORRECT ANSWER-D. cost of living rider a "cost of living rider" adjusts the face amount of a policy to maintain the relationship of the face amount and increase in the cost of living Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? a. cash surrender b. reduced paid-up c. paid-up options d. extended term - CORRECT ANSWER-A. cash surrender once the cash surrender value is paid, the contract is over Which of the following is true about the premium on the children's rider in a life insurance policy? a. it decreases when an adopted child is added to the policy b. it remains the same no matter how many children are added to the policy c. it decreases when the oldest child remains the age of 21 d. it increases when a newborn baby is added to the policy - CORRECT ANSWER-B. it remains the same no matter how many children are added to the policy the premium does not change on the inclusion of additional children, it is based on an average number of children The automatic premium loan provision is activated at the end of the a. grace period b. free-look period c. elimination period d. policy period - CORRECT ANSWER-A. grace period provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? a. the Entire Contract Provision b. The Consideration Clause c. Agreement Rights d. Owner's Rights - CORRECT ANSWER-D. owner's rights policy owners can learn about their ownership rights by referring to the policy The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? a. the proceeds will be split evenly between the 2 beneficiaries b. the policyowner can specify the way the proceeds are split in the policy c. the way proceeds are split between beneficiaries is decided by which type of policy is chosen D. life insurance policies may have only one beneficiary - CORRECT ANSWER-B. the policyowner can specifiy the way the proceeds are split in the policy the owner of a life policy may name any individual as a beneficiary for the policy proceeds. The owner may name more than one individual, in which case the individual beneficiaries will split the benefit by the percentage specified in the policy An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a. pay nothing, there was a misrepresentation on the application b. pay the full death benefit and refund excess premium c. pay a reduced death benefit d. pay the full death benefit - CORRECT ANSWER-C. pay a reduced death benefit the incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, is does not apply to statements relating to age, sex, and identity After a back injury, an insured is disabled for a year. His insurance policy carries a disability income death benefit rider. Which of the following benefits will he receive? a. monthly premium waiver and monthly income b. percentage of medical costs paid by the insurer c. payments for life d. yearly premium waiver and income - CORRECT ANSWERA.monthly premium waiver and monthly income the disability income death benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the a. complete contract b. entire contract c. total contract d. aleatory contract - CORRECT ANSWER-D. entire contract the policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence than the contract and the attached application in a test of the contracts validity. This is a mandatory provision in life insurance If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? a. the death benefit will be larger b. the death benefit will be smaller c. the death benefit will be forfeited d. the death benefit will be the same as the original face amount - CORRECT ANSWER-B. the death benefit will be smaller if an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earning lost by the insurance company in the interest income J applied for a life insurance policy on January 10th. the policy was issued January 31. J's agent was vacationing at the time the policy was issued, so j did not receive the policy until February 18. j decides that he does not want the policy. when would j need to return to the insurer in order to receive a full refund of premium paid? a. February 28th, or 10 days after the time the policy is delivered b. the time varies from one policy to another c. it was already to late when j received the policy because the 10-day free-look period has expired d. anytime, because the agent did not deliver the policy promptly - CORRECT ANSWER-A. February 28th, or 10 days after the time the policy is delivered the 10-day free-look period begins when the policy is delivered What limits the amount that a policyowner may borrow from a whole life insurance policy? a. cash value b. premiums paid c. amount stated in the policy d. face amount - CORRECT ANSWER-A. cash value the amount available to the policyowner for a loan is the policy owner's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest An insured receives an annual life insurance dividend check. What term best describes this arrangement? a. accumulation at interest b. cash option c. reduction of premium d. annual dividend premium - CORRECT ANSWER-B. cash option the cash option allows, an insurer to send the policyholder an annual, nontaxable dividend check An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an automobile accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as an attachment? a. $0 b. $100,000 c. $200,000 d. $100,000 plus the total of paid premiums - CORRECT ANSWER-C. $200,000 the beneficiary would most likely receive 2x the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies When an annuity is written, whose life expectancy is taken into account? a. annuitant b. beneficiary c. life expectancy is not a factor when writing an annuity d. owner - CORRECT ANSWER-A. annuitant the annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be Which of the following is a true comparison between annuities and life insurance? a. both annuities and life insurance use mortality tables b. annuities serve the same function as life insurance c. both provide a lifetime of income d. neither annuities or life insurance subject to income taxes - CORRECT ANSWER-A. both annuities and life insurance use mortality tables annuities are not life insurance, they do not pay a face amount upon the death of the annuitant. In most cases, the payment phase stops upon the death of the annuitant. Annuities use mortality tables, which reflect a longer life expectancy than the tables used in life insruance Annuities can be used to fund which of the following? a. variable life insurance b. group life insurance c. estate creation d. retirement plans - CORRECT ANSWER-D. retirement plans since annuities are a popular means to provide retirement plans, they are often used to fund qualified retirement plans Which of the following is a feature of a single premium immediate annuity? a. it is purchased through periodic payments b. income payments start at age 65 c. it is also referred to as a deferred annuity d. income payments start within one year - CORRECT ANSWER-D. income payments start within one year A Single Premium Immediate annuity is paid in a single premium. The annuity payments begin within a year of the date of the purchase. A deferred annuity can be punched with either a lump sum or through periodic payments, but the benefit is not paid until after one year or more has lapsed Which of the following would most directly affect the purchasing power of death benefits paid on a fixed annuity? a. company investment performance b. guaranteed minimum payout c. economic inflation d. interest rations - CORRECT ANSWER-C. economic inflation in times of inflation, benefits have less purchasing power. Since costs increase as a result of inflation, more money is required to purchase something that had previously cost less. Likewise, in the event of deflation, the purchasing power of benefits increase. The other options listed would affect the amount of money available to the annuity owner, but they would not actually affect the purchasing power of benefits paid Which of the following is NOT true regarding the annuitant? a. the annuitant receives the annuity benefits b. the annuitant must be a natural person c. the annuitant cannot be the same person as the annuity owner d. the annuitants life expectancy is taken into consideration for the annuity - CORRECT ANSWER-C. the annuitant cannot be the same person as the annuity owner while they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written> since the annuitants's life expectancy is taken into consideration, the annuitant must be a natural person When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is this money placed? a. the insurance company's general account b. forwarded to an investor c. each contract's separate account d. the annuity owner's account - CORRECT ANSWER-A. the insurance company's general account fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio.The company makes conservative investments to insure a guaranteed rate to the annuity owners An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? a. payment for 15 years b. payments for 20 years c. payments for life d. nothing - CORRECT ANSWER-A. payments for 15 years with any period certain, death of the annuitant within the state period will provide payments to the beneficiary only for the remainder of the period certain The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called a. joint life annuity b. life income with period certain c. life income with refund d. joint and survivorship - CORRECT ANSWER-B. life income with period certain if the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the period certain The annuity purchased with multiple payments, whose benefit is paid more than one year after the purchase is know as which type of annuity? ble premium immediate annuity b. single premium deferred annuity c. flexible premium deferred annuity d. single premium immediate annuity - CORRECT ANSWER-C. flexible premium deferred annuity the flexible premium deferred annuity (FPDA) is purchased with multiple payments, such as a portion of each paycheck. The benefit payment begin sometime after a one year from the date of purchase Which of the following will NOT be an appropriate use of a deferred annuity? a. creating an estate b. accumulating retirement funds c. accumulating funds in an IRA d. funding a child's college education - CORRECT ANSWER-A. creating an estate Which of the following products requires a securities license? a. variable annuity b. fixed annuity c. equity indexed annuity d. deferred annuity - CORRECT ANSWER-A. variable annuity a variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities All of the following statements are true regarding installments for a fixed period annually settlement option EXCEPT: a. it will pay the benefit only for a designated period of time b. the payments are not guaranteed for life c. the insurer determines the amount for each payment d. it is a life contingency option - CORRECT ANSWER-D. it is a life contingency option under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option for a specific amount of time only, and there are no life contingencies What type of annuity can be purchased with a single premium and provides benefits payments immediately? a. fixed b. immediate c. single premium d. deferred - CORRECT ANSWER-B. immediate with an immediate annuity, distribution starts within 1 year of purchase Which of the following are NOT fundable by annuities? a. death benefits b. cash accumulation for any reason c. a person's retirement d. estate liquidation - CORRECT ANSWER-A. death benefits annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance Which of the following is TRUE of a qualified plan? a. it may allow unlimited contributions b. it has a tax benefit for both employer and employee c. it does not need to have a vesting schedule d. it may discriminate in favor of highly paid employees - CORRECT ANSWER-B. it has a tax benefit for both employer and employee a qualified plan is approved by the IRS, which then gives both the employee and employer benefits deductibility of contributions and tax deferral of growth What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary? a. capital gains tax on distributions and no penalty b. capital gains tax on distributions plus 10% penalty c. income tax on distributions and no penalty d. income tax on distributions plus 10% penalty - CORRECT ANSWER-C. income tax on distributions and no penalty if the beneficiary chooses to leave the money in the tax-deferred account until the calendar year in which the power would have attained age 70 1/2 the distributions would be subject to income taxation at the rate at the time of withdrawal Death benefits payable to a beneficiary under a life insurance policy are generally a. subject to income taxation by the federal government b. exempt from income taxation if under $7,000 c. exempt from income taxation if over $7,000 d. not subject to income taxation by the federal government - CORRECT ANSWER-D. not subject to income taxation by the federal government when premiums are paid with after tax dollars, the death benefit is generally not subject to federal income taxation What is the main purpose of the Seven-pay test? a. it requires level premium payments for 7 years b. it ensures that the policy benefits are paid out in 7 years c. it guarantees interest minimum d. it determines if the insurance policy is an MEC - CORRECT ANSWER-D. it determines if the insurance policy is an MEC the seven pay test determines whether an insurance policy is "over funded" or if its a modified endowment contract. In other words, the cumulative premiums paid during the first seven years of a policy must not exceed the total amount of the net level premiums that would be required to pay the policy up using guaranteed mortality costs and interest If a company has a simplified employee pension plan, what type of plan is it? a. the same as an IRA, with the same contribution limits b. an undefined contribution plan for large business c. a qualified plan for a small business d. the same as a 401(k) plan - CORRECT ANSWER-C. a qualified plan for a small business a Simplified Employee Pension (SEP) is a type of qualified plan suited for the small employer for self employed. A SEP is an employer sponsored IRA with an expanded contribution rate up to 25% of compensation or a specified maximum contribution amount If taken as a lump sum, life insurance proceeds to beneficiaries are passed a. part tax-free and part taxable b. without interest c. free of federal income taxation d. tax-deductible - CORRECT ANSWER-C. free of federal income taxation life insurance proceeds to beneficiaries are passed free of federal income taxation if taken as a lump sum distribution. If the proceeds are taken as other than lump sum, part of the proceeds will be tax free and part will be taxable. When paid in installements, part of the proceeds contains principal and some interest, so the interest portion is subject to federal income taxation When must an IRA be completely distributed when a beneficiary is not named? a. due date of beneficiary tax return including extensions b. december 31 of the year following the year of the owners death c. due date of the deceased owners first tax return including extensions d. december 31 of the year that contains the 5th anniversary of the owners death - CORRECT ANSWER-D. December 31 of the year that contains he 5th anniversary of the owner's death if the owner dies before distributions have begun, the entire interest must be distributed in full on or before December 31 of the calendar year that contains the 5th anniversary of the owners death, unless the owner named a beneficiary In life insurance policies, cash value increases a. are only taxed when the owner reaches age 65 b. grow tax deferred c. are income taxable immediately d. are taxed annually - CORRECT ANSWER-B. grow tax deferred generally life insurance cash values are only income taxed if the policy is surrendered totally or partially and the cash value exceeds the premiums paid According to agency law, the producer always represents the a. insurance company b. client c. public d. state insurance department - CORRECT ANSWER-A. insurance company under agency law, producers legally represent the insurance company with which they are contracted A producer in another state wants to become a producer in Louisiana. The other state gives the same privileges to Louisiana producers wanting to be licensed in that state as it does to its own producers. Louisiana, therefore, extends the licensing privileges to the prospective producer of the other state. What is this called? a. fair exchange b. controlled business c. subrogation d. reciprocity - CORRECT ANSWER-D. reciprocity reciprocity occurs when the state in which the person resides accords the same privilege to residents of Louisiana A producer has been notified by the Commissioner to stop using an unapproved trade name. How many days does the producer have to change the trade name before facing a fine? a. 5 business days b. 10 days c. 30 days d. the name must be changed immediately - CORRECT ANSWER-B. 10 days a producer who contributes to use a unapproved trade name for 10 or more days after being notified will face a fine of up to $5,000 A Louisiana insurance company ran and advertisement in June 2008. When could the company discard the file on this document? a. June 2013 b. June 2012 c. June 2011 d. June 2009 - CORRECT ANSWER-B. June 2012 in Louisiana, insurance companies are required to keep files of all advertisements used for 4 years, or until he next examination by the Department Existing and replacing life insurers are required to keep copies of all summaries, notices, and statements used in sales transactions until the conclusion of their next examination by the insurance department, or for a period of at least a. 1 year b. 2 years c. 3 years d. 5 years - CORRECT ANSWER-D. 5 years Louisiana Insurance laws require insurers to keep such records for a minimum of 5 years If a company wants to appoint a producer, which entity must it notify? a. the NAIC b. the governor c. the appointment board d. the commissioner - CORRECT ANSWER-D. the commissioner when a company appoints a producer, it must first apply for the appointment with the commissioner. the Commissioner then has 30 days to make sure that the producer is fit to transact insurance with that company An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? a. a legal advertising strategy b. unfair discrimination ation d. illegal - CORRECT ANSWER-D. illegal it is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fear trade or create a monopoly Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a. unfair trade practices law b. the guaranty association c. consumer privacy act d. the fair credit reporting act - CORRECT ANSWER-D. the fair credit reporting act the purpose of the fair credit reporting act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers ABC insurance company wishes to begin transacting business in Louisiana. Before it can do so, it must do which of the following? a. receive permission from the governor of louisiana b. receive a letter of clearance from ABC's home state c. obtain approval of each of its corporate officer and executives d. obtain a certificate of authority - CORRECT ANSWER-D. obtain a certificate of authority All insurers, regardless of the state in which they are chartered, must obtain a certificate of authority from the louisiana insurance department before they can transact insurance in the state a temporary license is good for a. 30 days b. 60 days c. 90 days d. 180 days - CORRECT ANSWER-D.180 days a temporary license is good for 180 days A temporary license may be issued without examination to all of the following EXCEPT: a. the surviving spouse of a deceased producer b. the spouse of a retired producer c. the legal guardian of a disabled producer d. the designee of a producer entering active service in the US navy - CORRECT ANSWER-B. the spouse of a retired producer there is no provision for a temporary license to be issued to conduct the business of a retired producer Which would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? a. disclosure rule b. replacement rule c. reinstatement rule d. conversion rule - CORRECT ANSWER-B. replacement rule anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company If authorized to write life and property and casually insurance, how many hours of continuing education instruction are producers required to complete every 2 years? a. 10 b. 12 c. 14 d. 24 - CORRECT ANSWER-D. 24 producers in louisiana are required to complete 24 hours of continuing education every 2 years, regardless of the number of lines for which the producer is licensed What is the main justification for the existence of the state insurance department? a. to protect producers from the national association of insurance commission b. to protect the state from harmful practices of companies and producers c. to protect the public d. to protect companies from malicious lawsuits - CORRECT ANSWER-C. to protect the public the state insurance department exists to protect the public Any payment to a producer from an insurer that is contingent on the sale of an insurance policy or contract is called a a. charge fee b. service fee c. commission d. regular fee - CORRECT ANSWER-C. commission producers are normally compensated by commissions where a percentage of the premium is paid to the producer by the insurance company Which type of assignment would be used for a loan? a. collateral b. absolute c. modified d. permanent - CORRECT ANSWER-A. collateral If a policyowner returns a policy 7 days after the policy is delivered, the insurer will a. refund a prorated portion of the premium paid b. refund premium paid minus expenses c. refund nothing because the insured was covered for 7 days d. refund the full premium paid - CORRECT ANSWER-D. refund the full premium paid If an insured dies during the grace period, the insurer will pay a. the full face amount b. the face amount minus premium due c. the face amount minus a surrender charge d. nothing, the contract is null and void - CORRECT ANSWER-B. the face amount minus premium due Which of the following is NOT a requirement of the reinstatement provision? a. submit the reinstatement application within 3-years of the policy lapsing b. proof insurability c. pay back any loans d. pay backs premium at current attained age - CORRECT ANSWER-D. pay backs premium at current attained age If an insured dies 3 years after the policy was issued an understated his age on the application, what will the insurer do? a. adjust the death benefit b. pay the full death benefit c. adjust the premium d. pay no death benefit and return the premium paid - CORRECT ANSWER-A. adjust the death benefit What is the name of the first beneficiary listed in a policy? a. primary b. secondary c. tertiary d. contingent - CORRECT ANSWER-A. primary Which dividend option would be taxable? a. reduction of premium b. paid-up additions c. cash d. accumulate at interest - CORRECT ANSWER-D. accumulate at interest Which nonforfeiture options prohibits reinstatement of the policy? a. cash b. extended term c. reduced paid up d. interest only - CORRECT ANSWER-A. cash Which of the following riders functions like a waiver of premium rider but is found on juvenile policies? a. cost of living b. guaranteed insurability c. disability income d. payor benefit - CORRECT ANSWER-D. payor benefit If the insured elects a partial payment from the accelerated benefit, the death benefit of the life policy will a. stay the same regardless how much is taken out b. increase gradually to the original face amount c. be reduced by the accelerated payment amount d. be forfeitures because it is taken out early - CORRECT ANSWER- C. be reduced by the accelerated payment amount Which of the following riders allows for increases to the face amount at specified times with no proof of insurability? a. spouse term b. waiver of premium c. return of premium d. guaranteed insurability - CORRECT ANSWER-D. guaranteed insurability All of the following riders would increase the death benefit amount EXCEPT: a. accidental death b. waiver of premium c. guaranteed insurability d. term rider - CORRECT ANSWER-B. waiver of premium When someone other than the insured is the owner of a life insurance policy, this is called a. contingent b. reinsurance c. third-party ownership d. co-ownership - CORRECT ANSWER-C. third-party ownership Which of the following is not a requirement of group life conversion? a. application must be made within 31 days of termination b. the company may exclude term insurance c. proof of insurability is required d. premiums will increase based on attained age - CORRECT ANSWER-C. proof of insurability is required When a group plan is contributory., what percentage of employees must participate in the plan? a. 50% b. 75% c. 100% d. the percentage depends upon the size of the group - CORRECT ANSWER-B. 75% Buying a policy to offset a financial loss in the event of a valuable employees death is called a. key person life insurance b. deferred compensation plan c. buy-sell agreements d. split-dollar insurance plan - CORRECT ANSWER-A. key person life insurance All of the following requirements are correct about qualified retirement plans EXCEPT: a. they must be in writing b. they must be permanent c. they do not qualify for special federal tax treatment d. they must not discriminate in favor of highly compensated employees - CORRECT ANSWER-C. they do not qualify for special federal tax treatment A 10% penalty must be paid on withdrawals made from a qualified plan before age a. 40 b. 70 1/2 c. 59 1/2 d. 65 - CORRECT ANSWER-C. 59 1/2 Which of the following does not allow contributions beyond 70 1/2? a. roth IRAs b. traditional IRAs c. fixed annuities d. interest sensitive whole life - CORRECT ANSWER-B. traditional IRAs A whole life policy in which the cash value builds faster than a 7- pay whole life policy is a a. modified endowment contract b. universal life contract c. immediate annuity contract d. limited-pay contract - CORRECT ANSWER-A. modified endowment contract Death benefits paid to a beneficiary are a. taxed as ordinary income b. subject to inheritance tax c. subject to federal income tax d. tax-free - CORRECT ANSWER-D. tax-free If the cash value exceeds the premiums paid in a whole life policy, what are the tax consequences if the policy is surrendered? a. the portion that exceeds the premiums paid is taxable b. the total amount received when the policy is surrendered is taxable c. the interest earned is taxable d. the cash value is tax-free - CORRECT ANSWER-A. the portion that exceeds the premiums paid is taxable Dividends paid by a participating life insurance policy are a. taxed as long term capital gains b. received tax-free c. taxed as ordinary income d. taxed as capital gains distributions - CORRECT ANSWER-B. received tax-free Which of the following is not true about qualified retirement plans? a. qualified plans received favorable tax treatment b. contributions made by employers are tax deductible c. qualified plans can only be offered to company officers d. contributions accumulate tax free until paid out - CORRECT ANSWER-C. qualified plans an only be offered to company officers All of the following will reduce the death benefit amount EXCEPT: a. long term care b. accelerated death benefits c. waiver of premium d. unpaid policy loans - CORRECT ANSWER-C. waiver of premium What does the viator receive when selling this policy to a vatical provider? full face amount of the policy b. the death benefit minus the fees charged by the viatical provider c. a percentage of the policy's face value d. the cash surrender value of the policy - CORRECT ANSWERC. a percentage of the policy's face value Underwriting is a process of a. selection and issue of policies b. evaluation and classification of risks c. selection, reporting and rejection of risks d. risk selection and classification - CORRECT ANSWER-D. risk selection and classification A statement which is the absolute truth is a. warranty b. representation c. misrepresentation d. fraud - CORRECT ANSWER-a. warranty This document says that the coverage will be effective either on the date of the application or the date of the application or the date of the medical exam, whichever occurs last a. interim term receipt b. physician receipt c. conditional receipt d. binding receipt - CORRECT ANSWER-C. conditional receipt Which of the following statements describes an insurable interest? a. the policy owner must expect to benefit from the insureds death b. the policyowner must expect to suffer a loss when the insured dies c. the beneficiary, by definition, has an insurable interest in the insured d. the insured must have a personal or business relationship with the beneficiary - CORRECT ANSWER-B. the policywner must expect to suffer a loss when the insured dies The statements made by an applicant on an application for life insurance are considered to be a. warranties b. affirmations c. representations d. declarations - CORRECT ANSWER-C. representations In the formations of a legal contract, each party must give something of value. Under contract law, this is referred to as a. indemnity b. adhesion c. agreement d. consideration - CORRECT ANSWER-D. consideration One of the main purposes of the USA PATRIOT Act was to establish new standards for banks brokers-dealers and other financial institutions including insurers, concerning a. insurance fraud b. anti-money laundering c. falsified financial records d. false death claims - CORRECT ANSWER-B. anti-money laundering Which of the following is NOT a characteristic of term life insurance? a. provides temporary protection b. pays a death benefit if the insured dies during a stated period c. is the least expensive form of life insurance d. builds cash value - CORRECT ANSWER-D. builds cash value Which policy would be most appropriate for protecting the balance of a loan or mortgage? a. level term b. decreasing term c. universal life d. variable life - CORRECT ANSWER-B. decreasing term How long does coverage continue for a limited-pay whole life policy? a. 20 years on a 20-pay policy b. 65 years on a life paid at 65 policy c. death or age 100 d. 10 years on a 10 pay policy - CORRECT ANSWER-C. death or age 100 An insured purchased a $100,000 whole life policy. After a period of years, the cash value of the policy has grown to $42,000. If the insured dies at this time, how much will the beneficiary receive? a. $100,000 b. $142,000 c. $42,000 d. $58,000 - CORRECT ANSWER-A. $100,000 Which of the following is not correct about universal life? a. the policyowner may increase or decrease the face amount b. the insurance portion is whole life insruance c. these policies allow for partial withdrawals or surrenders d. there are two death benefit options. Option A and Option B - CORRECT ANSWER-B. the insurance portion is whole life insurance A policy that insures 2 or more lives and pays on the death of the last insured is a. joint life b. group life c. survivorship life d. family protection ife - CORRECT ANSWER-C. survivorship life Which type of policy builds cash value that is placed in a separate account where it is invested in stocks, bonds and other securities? a. variable life b. universal life c. index life d. term life - CORRECT ANSWER-A. variable life All of the following about a fixed annuity is true EXCEPT: a. the interest rate is guaranteed b. the premium is instead in the insurers general account c. it does not protect against inflation d. the owner assumes the investment risk - CORRECT ANSWER-D. the owner assumes the investment risk An immediate annuity has no accumulation period, which means it can only be purchased with a a. level premium b. flexible premium c. single premium d. variable premium - CORRECT ANSWER-C. single premium Which of the following is NOT true about variable annuities? a. a producer must hold a securities and an insurance license to see them b. there is no guarantee of annuity values or benefit amounts c. premiums are invested in conservative investments such as real estate and mortgages d. premiums are held in a separate account - CORRECT ANSWER-C. premiums are invested in conservative investments such as real estate or mortgages If the annuitant should die during the accumulation phase, what will the beneficiary receive? a. benefit amount minus the payment due b. cash value only c. premiums paid or cash value, whichever is greater d. only refund of premiums paid - CORRECT ANSWER-C. premium paid or cash value, whichever is greater A participating insurance policy may do which of the following? a. require 80% participation b. pay dividends to the policyowner c. provide group coverage d. pay dividends to the stockholder - CORRECT ANSWER-B. pay dividends to the policyowner A tax-sheltered annuity is a special tax-favored retirement plan available to a. anyone b. certain age groups only c. certain groups depending on factors such as race, gender, and age d. certain groups of employees only - CORRECT ANSWER-D. certain groups of employees only An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a. one of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies b. the surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficaries were alive c. the beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid overtime d. the beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies - CORRECT ANSWER-B. the surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a.$0 b. $50,000 (50% of the policy value) c. $100,000 d. $300,000 (triple the amount of the policy value) - CORRECT ANSWER-C. $100,000 Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT a. an agent offers the use of his lake house to person and inducement to buy b. an agent offers to share his commission with a policyholder c. an agent offers tickets to a baseball hame as an inducement to buy insurance d. an agent misrepresents policy benefits to convince a policyowner to replace policies - CORRECT ANSWER-D. an agent misrepresents policy benefits to convince a policyowner to replace policies An insured is dissatisfied with her insurance policy and wants to negotiate certain provisions of the contract. What entity would her producer represent? a. the insurer b. the commissioner of insurance c. the government d. the insured - CORRECT ANSWER-A. the insurer All of the following entities regulate variable life policies EXCEPT: a. the SEC b. the insurance department c. the guaranty association d. federal government - CORRECT ANSWER-C. the guaranty association In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a. the amount of the insurance b. the type of investment c. the length of the coverage d. the premium - CORRECT ANSWER-B. the type of investment What type of annuity promises to pay a beneficiary, in a lump sum, the difference between the amount paid into the contract and the benefits received prior to the annuitants death? a. cash refund annuity b. installment refund annuity c. joint and survivor annuity d. pure life annuity - CORRECT ANSWER-A.cash refund annuity Which is true about a spouse term rider? a. the rider is usually level term insurance b. coverage is allowed for an unlimited time c. the rider is decreasing term insurance d. coverage is allowed up to age 75 - CORRECT ANSWER-A. the rider is usually level term insurance If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may a. increase medical requirements on existing members b. require evidence of insurability c. require a higher premium d. prolong the open enrollment period - CORRECT ANSWER-B. require evidence of insurability Which of the following types of agent authority is also called "perceived authority" a. express b. implied c. fiduciary d. apparent - CORRECT ANSWER-D. apparent Who might receive dividends from a mutual insurer? a. stockholders b. agents c. policyholders d. subscribers - CORRECT ANSWER-C. policyholders A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? a. the insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums b. the insureds premiums will be waived until she is 21 c. the premiums will become tax deductible until the insureds 18th birthday d. since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected - CORRECT ANSWER-B. the insureds premiums will be waived until she is 21 The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is know as the a. incontestability clause b. reinstatement clause c. insuring clause d. misstatement of age clause - CORRECT ANSWER-A. incontestability clause mortality - interest + expense= a. gross premiums b. benefits budget c. operating expenses d. net premium - CORRECT ANSWER-A. gross premium What would be considered a disadvantage of owning a fixed annuity? a. decrease in purchasing power of the benefit in times of inflation b. investment risks being carried by he annuity owners c. interest rate dependence on stock performance d. guaranteed minimum interest rate - CORRECT ANSWER-A. decrease in purchasing power of the benefit in times of inflation All of the following statements are true regarding tax-qualified annuities EXCEPT: a. annuity earnings are tax deferred b. they must be approved by the IRS c. withdrawals are taxed d. employers contributions are not tax deductible - CORRECT ANSWER-D. employers contributions are not tax deductible An insured has continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? a. paid-up option b. one-year term c. reduction of premium d. accumulation at interest - CORRECT ANSWER-A. paid-up option A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a. survivorship insurance b. juvenile protection provision c. survivor protection d. life planning - CORRECT ANSWER-C. survivor protection life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. this is known as survivor protection An agent offers his client free tickets to a sporting even in exchange for the purchase of an insurance policy. the agent is guilty of a. rebating b. coercion c. twisting d. controlled business - CORRECT ANSWER-A. rebating when producers give or promise anything of value that is not specified in the policy, they are guilty of rebating Which of the following statements about group life is correct? a. the cost of coverage is based on the ratio of men and women in the group b. the premiums are higher than in an individual policy because there is no medical exam c. the group sponsor receives a certificate of insurance d. the ploy can be converted to an individual term insurance policy - CORRECT ANSWER-A. the cost of coverage is based on the ratio of men and women in the group When would a 20-pay whole life policy endow? a) After 20 payments b) In 20 years c) When the insured reaches age 100 d) At the insured's age 65 - CORRECT ANSWER-C. when the insured reaches age 100 a limited-pay whole life policy, just like st