TN LIFE EXAM REVIEW 2024 MARKING SCHEME

TN LIFE EXAM REVIEW 2024 MARKING SCHEME "Certain riders allow the insured to add people to the policy as additional insureds. Type of additional insured rider? - CORRECT ANSWER Family term rider"n "A waiver of premium rider can be added to a____ - CORRECT ANSWER term policy"n "Sometimes an insurer will cancel a life policy. What happens to all unearned premiums? - CORRECT ANSWER They will be returned"n “Steven provided misleading information on his license application. best fits the penalty the Commissioner might impose on Steven? - CORRECT ANSWER The insurance Commissioner may refuse to issue Steven a license"n "All of following are violations that may lead the insurance Commissioner to suspend or revoke a license EXCEPT: ** Improperly withholding or misappropriating any property received in the course of doing insurance business **Intentionally misrepresenting the terms of an insurance policy **Having been convicted of a misdemeanor **Having an insurance producer license denied, suspended, or revoked in another jurisdiction - CORRECT ANSWER **Having been convicted of a misdemeanor"n "An individual's license can be suspended or revoked if they do business with unlicensed individuals and - - CORRECT ANSWER Companies that are not authorized to transact the business of insurance in Tennessee"n "How many days does the Commissioner have to notify an individual that their application for a license is being denied? - CORRECT ANSWER 30 days"n "All of the following are duties of the Commissioner EXCEPT: ** The Commissioner may put a person in jail for violating insurance regulations **The Commissioner may conduct investigations **The Commissioner may be empowered to subpoena witnesses and examine them under oath **The Commissioner may choose to place a person on probation, suspend, revoke or refuse to issue or renew an individual's license - CORRECT ANSWER **The Commissioner may put a person in jail for violating insurance regulations The Commissioner may do all of the above except put a person in jail."n "Any action by the Commissioner to put on probation, suspend, revoke or deny the renewal of a license is governed by the _________ - CORRECT ANSWER Uniform Administrative Procedures Act"n "Who has the authority to enforce the insurance laws of Tennessee and impose any penalty or remedy authorized against any person who is under investigation for or charged with a violation of insurance laws or regulations? - CORRECT ANSWER The Commissioner"n "____________ is a person required to be licensed under the laws of this state to sell, solicit or negotiate insurance. - CORRECT ANSWER A Producer"n "_____________means a person, who sells, solicits or negotiates one or more forms of limited line credit insurance coverage to individuals through a master, corporate, group or individual policy. - CORRECT ANSWER Limited Lines Producerr"n "Kevin sold insurance for an insurance company not authorized to do business in Tennessee. Who is liable for any premiums paid for, or valid claims made on, all contracts of unlawfully sold insurance? - CORRECT ANSWER Kevin will be personally liable"n "Which of the following answers best describes the compensation an unlicensed individual may receive from an insurer or insurance producer for conducting insurance business for which a license is required? - CORRECT ANSWER The unlicensed individual may not receive any compensation for conducting the business of insurance if they are required to be licensed for that business"n "What is the term used to describe the commissions that may be paid to an unlicensed individual who was licensed at the time of the sale, solicitation or negotiation of insurance for which they are being paid? - CORRECT ANSWER Renewal or deferred commissions"n "Mary is an unlicensed individual. Joe is a licensed insurance producer. All of the following are true regarding referrals Mary makes to Joe EXCEPT: **Mary will only be paid for her referral if the customer purchases an insurance product from Joe **Mary may make a referral to Joe; provided that Mary does not discuss the specific insurance policy terms and conditions **If Mary is not employed by Joe, her compensation must be a fixed dollar amount not to exceed $25 per referral **If Mary is employed by Joe, her compensation must be a fixed nominal dollar amount - CORRECT ANSWER **Mary will only be paid for her referral if the customer purchases an insurance product from Joe Whether Mary works for Joe or not, the referral compensation shall not depend on whether the customer she refers purchases an insurance product from Joe."n "All money a producer receives for conducting insurance business shall be held in a__________. - CORRECT ANSWER Fiduciary Capacity"n "best describes the penalty the Commissioner will impose for mishandling any money that an insurance producer receives for soliciting, negotiating, or selling insurance? - CORRECT ANSWER The producers license may be denied, suspended or revoked"n "A producer______ whether or not they have an agency contract, agreement or an appointment with an insurer; or is appointed or employed by a health maintenance organization (HMO) and who engages in solicitation for membership in such organization. - CORRECT ANSWER will need a license"n "All of the following are requirements of an applicant for a license to be approved by the Commissioner EXCEPT: **The applicant must complete the minimum prelicensure education requirements **The applicant has passed the exam and paid the application fee **The applicant is at least 21 years of age **The applicant has not committed any acts that would be grounds for denial, suspension, or revocation of a license - CORRECT ANSWER **The applicant is at least 21 years of age The applicant need to be 18 years of age. All the other criteria are requirements for approval of the license application."n "David would like to appoint Mary as his insurance agent for the ABC Insurance Company. All of the following are true regarding that appointment EXCEPT: **David must file a notice of appointment within 15 days from the date the contract is executed **David must file with Mary's employer who will determine if Mary is eligible for appointment **David and Mary will be notified within 30 days if Mary is eligible for appointment **If David wishes to terminate the contract with Mary he must notify the Commissioner within 30 days of the effective date of termination - CORRECT ANSWER **David must file with Mary's employer who will determine if Mary is eligible for appointment David must file the notice appointment with the Commissioner, whose duty it is to determine if Mary is eligible for that appointment."n "Larry has applied for a nonresident producer license in Tennessee. The Commissioner must issue a license to Larry if all of the following conditions have been met EXCEPT: **The application and procedures for Larry's home state are different from the terms and procedures in Tennessee. **Larry is currently licensed and in good standing in the home state **Larry has paid a fee **Larry has submitted an application - CORRECT ANSWER **The application and procedures for Larry's home state are different from the terms and procedures in Tennessee. The terms of application and procedures for nonresident licensees in Larry's home state are similar to the terms and procedures in Tennessee."n "A nonresident producer has ___ to file a change of address and provide certification from the new resident state. - CORRECT ANSWER 30 days"n "A resident insurance producer in Tennessee has___to file a change of address and provide certification from the new resident state. - CORRECT ANSWER 30 days"n "All of the following people would be exempt from being required to have a license EXCEPT: **Steven who responds to requests from existing policyholders on existing policies and is not directly compensated based on premiums sales and does not transact insurance **Kevin who performs management services under a written contract for an admitted insurer and he is a wholly-owned subsidiary of the admitted insurer **Megan who is employed on a salary or hourly wage by a licensed person to perform accounting, clerical, stenographic, or similar office duties **Allison who only secures and forwards information required for the purposes of administrative services, group life insurance, group annuities, or group and blanket accident and health insurance and receives commissions for these services - CORRECT ANSWER **Allison who only secures and forwards information required for the purposes of administrative services, group life insurance, group annuities, or group and blanket accident and health insurance and receives commissions for these services Allison can only perform her job duties without a license if she does not receive a commission for that work."n "Peter wishes to be exempt from prelicensing education because he was previously licensed in another state for the same lines of authority. How long does he have after cancelling his previous license to be considered for the exemption? - CORRECT ANSWER 90 days"n "Molly is moving to Tennessee from another state where she was previously licensed for the same lines of authority she wishes to work under in Tennessee. She hopes to be exempt from prelicensing education and examinations. What is required besides a notice of the cancellation of her previous license? - CORRECT ANSWER Her prior state needs to issue a certification that states that at the time of cancellation, Molly was in good standing"n "Applicants must take 40 hours of prelicensing education (_______) - CORRECT ANSWER 20-Life; 20-Accient and Health"n "If an insured becomes permanently and totally disabled, a waiver of premium rider on his/her life insurance contract would allow coverage to remain in force, without payment of premiums, during the period of the disability. Which of the following is not true about a waiver of premium rider? **The premium charged for the waiver does not increase cash value of the policy. **The disability must always occur prior to age 75. **The premiums are waived retroactively after the insured has completed the required waiting period. - CORRECT ANSWER **The disability must always occur prior to age 75. The premium for the waiver of premium disability rider does not increase cash value of the policy. Premiums are waived retroactively when the waiting period has been met. Most insurance companies specify the disability that must occur before the insured is 60 or 65 years of age."n "Daniel has a disability income rider on his life policy. With a disability income rider__ - CORRECT ANSWER = The insurer pays Daniel a specified amount each month. = The income continues for the duration of the disability. = There is a waiting period before benefits are paid."n "Mrs. Olsen worries that her health may deteriorate in the future. She wants to provide adequate coverage for herself and her family. Which rider should she consider for her life policy? - CORRECT ANSWER Guaranteed insurability rider"n "The payor rider is sometimes added to a life insurance contract on a juvenile. The purpose of the rider is to make sure that the coverage on the juvenile does not lapse if the adult (the person responsible for paying premiums) becomes disabled or dies. Which of the following is not true about the payor rider? **There is no added premium for this rider. **The premiums can be waived until the juvenile reaches a specified age. **The premiums can be waived until the maturity date of the contract. **The insurance remains in force even if the premiums are not paid. - CORRECT ANSWER **There is no added premium for this rider. Payor rider is important if you are buying a policy on a juvenile (child). By taking this rider the 'payor' (person that is making the premium payments) makes sure that in case of his/her unfortunate death/ dismemberment, before the premium payment term ends, the premiums are waived and the policy remains in force."n "Tim has added an accidental death rider to his life insurance contract. He knows that he will be charged an additional premium for this coverage, but because he lives in a dangerous neighborhood, he thinks the coverage is a good idea. For which of the following will the insurer exclude the payment of benefits? - CORRECT ANSWER **Conducting an illegal activity **Acts of war **Flying an experimental aircraft"n "Term riders are available to help the insured to customize their life insurance contract to fit their individual needs. All of the following are common term riders EXCEPT: =Waiver of premium =Accelerated death benefit =Variable life =Return of premium - CORRECT ANSWER = Variable life Variable life is a type of life insurance contract - not a rider."n "A long-term care rider is a provision that can be added to a cash value life insurance policy. If the insured becomes confined to a nursing home, this rider would reimburse health care expenses. Certain optional benefits may also be provided such as - - CORRECT ANSWER = Hospice care = Adult day care = Cost of living expenses"n "April completed her insurance application on the 9th of August. She paid her initial premium on the 10th of August. The insurance company issued the policy on the 16th of August. Her agent delivered the policy on the 17th of August. The insurer has a 15-day free look provision. When does she need to return the policy if she decides she does not want to purchase it, and wants her premium refunded? - CORRECT ANSWER September 1st The free look period starts when the policy is delivered. If April decides against purchasing the policy, she must return it by September 1st. (15 days from when it was delivered) in order to get a full refund."n "As Howard was filling out his life insurance application, he questioned whom he should name as his primary and contingent (or secondary) beneficiaries. He decided to name his wife Helena as the primary beneficiary, and his son Collin as the contingent beneficiary. What is the most likely circumstance for Collin to receive the benefits of Howard's policy? - CORRECT ANSWER When Howard dies, Helena has already passed away"n "All life policies require some sort of beneficiary be named. Usually it is a person, but it can also be an estate, trust, charity, church, or a company. A beneficiary that can be changed at any time is a revocable beneficiary. An irrevocable beneficiary, however, cannot be changed so easily. All of the following statements are true about irrevocable beneficiaries EXCEPT: = The beneficiary cannot be changed without written consent. = The policyowner makes premium payments. = The policyowner retains the right to borrow against the policy. - CORRECT ANSWER = The policyowner retains the right to borrow against the policy."n "Another common life insurance provision is the __________________. If there is insufficient proof to show order of death when the insured and beneficiary die in the same accident, it is presumed that the insured died last, and the proceeds are payable to the named contingent beneficiary. - CORRECT ANSWER uniform simultaneous death act"n "Premium payments for life insurance are made in advance. Typically they are paid to the insurer's home office or to the agent. The premium payment mode defines the timing of the payments. Usually the payment mode with the best economy is - - CORRECT ANSWER Annually The less frequently the insurance company has to process premium payments, generally, the more economical the payments."n "A grace period is a component of every life insurance contract. The grace period is the amount of time, following the date that the premium is due, that the policy will remain in force. If the insured dies during the grace period, how will it affect the proceeds of the policy? - CORRECT ANSWER The benefits are paid to the beneficiary, minus the outstanding premium"n "To protect a policyholder from an inadvertent lapsing of a contract, the automatic premium loan (APL) provision may be added to a cash value life policy. Which of the following statements is not true about this provision? =It can be applied for at any time. = The policy will lapse if there is not enough cash value to cover the premium payment. =Reinstatement is not available if the policy lapses for lack of payment. = Outstanding loan amounts are deducted from the death benefit. - CORRECT ANSWER = It can be applied for at any time. Correct The APL provision usually must be requested at the time of the original policy application. The policy will lapse if there is insufficient cash to cover the premium payment and if the policy lapses for this reason, it cannot be reinstated. Any outstanding policy loans are deducted from the death benefit."n "Tom is an accountant and as such, likes to plan his income and expenses on a relatively finite basis. What is his best option for life insurance premiums? - CORRECT ANSWER Level premium The level premium option will provide Tom with the detail and guarantee he requires to do his monthly planning. A flexible premium allows the insured to choose how much to pay each month - within certain guidelines. Tom is probably most comfortable with a premium that does not change."n "The Clark family's insurance policy lapsed when Mr. Clark was out of work. The policy was not surrendered for its cash value. Under what conditions can the policy be reinstated? - CORRECT ANSWER = Proof of insurability may be required = All back premiums need to be paid = It has not been more than three years since the policy lapsed"n "The nonforfeiture option is designed to protect the policyholder from losing his/her entire investment if a policy is cancelled or surrendered. Which of the following is not a nonforfeiture option? = Non-participating = Cash surrender value = Reduced paid up insurance = Extended term insurance - CORRECT ANSWER = Non-participating"n "A participating life policy refunds a portion of the premiums paid to the insured. These refunds are in the form of an annual dividend. Dividends are determined by the difference between the gross premiums paid, and the loss experience of the insurer. It is the ____________________ that allows the policyholder to leave the dividends with the insurer to accumulate interest. - CORRECT ANSWER accumulation at interest option"n "When the policyholder sells, gives or pledges a policy as collateral, it is called - - CORRECT ANSWER Assignment"n "When setting up a policy, the policyholder chooses how he/she wants the benefits to be paid when the policy matures. Which of the following is not a settlement option available to most policyholders? = Fixed amount option =Fixed period option =Accelerated endowment option = Life income option - CORRECT ANSWER = Accelerated endowment option The accelerated endowment option is a dividend option."n "Karl's grandmother has been diagnosed as being in end-stage renal failure. The ______________ provision of her life policy will giver her access to funds for rent, food and necessary medical services. - CORRECT ANSWER accelerated benefits The accelerated benefits provision/rider allows the insured tax free access to policy death benefits when the insured is suffering from a terminal or severe chronic illness. These funds are commonly used for rent, food and medical services."n "If Karl's grandmother decides to exercise the accelerated benefit option of her life policy, what's responsibility of the insurer? - CORRECT ANSWER = Provide the policyholder with an illustration showing the effects on the death benefit = Notify policyholder that the recipient's eligibility for Medicaid could be affected"n "Naomi is the tertiary beneficiary on her uncle's life insurance policy. Under what circumstances would she collect the benefits of the plan? - CORRECT ANSWER When both the primary and secondary pre-decease the tertiary beneficiary"n "Ron and Jack are partners. The business assignment of their life insurance policies was made to protect___ - CORRECT ANSWER The financial interest that the lender has in the insured"n The collateral assignment is used when a check is to be paid jointly to both parties."n "When a minor child is the insured, which of the following is true about the payor rider? - CORRECT ANSWER If the premium payor dies, premiums are waived until the insured child is 25."n "Carly's grandfather wants to stop paying premiums on his life policy. If he wants coverage for the remainder of his life, which of the following policies would provide this coverage? - CORRECT ANSWER Reduced paid-up Reduced paid-up provides coverage for the remainder of his life without any more premium payments."n "The front page of all insurance policies must contain___ - CORRECT ANSWER Insuring clause"n "The____is a statement of the policy particulars, including what the insurance company is responsible for, what they will do, and how claims will be handled. - CORRECT ANSWER insuring clause"n "The 10-day free look period gives the insured the opportunity to look over a policy to decide if he/she is satisfied that it meets their requirements. When does the free look period begin? - CORRECT ANSWER When the policy is physically delivered"n "Dominic has decided to cash in his life policy. How soon must the cash surrender values become available to him? - CORRECT ANSWER 6 months"n "A clause that protects a beneficiary from creditors coming after the proceeds of a policy is called? - CORRECT ANSWER Spendthrift clause The spendthrift trust clause protects the beneficiary by leaving the proceeds with the insurer. A creditor of the beneficiary cannot make claims against money held by the insurer. This does not apply to lump sum proceeds."n "If Louise wants to provide her beneficiary with equal payments for a specific period of time using the proceeds of her life insurance, she would select? - CORRECT ANSWER Fixed period She'd choose the fixed period option. The insurer will come up with a figure that is consistent each month, and make it last for an exact period of time."n "Maggie's life policy has lapsed. There are several ways she can recover some of the value of her policy. Which of the following is NOT a non-forfeiture option? = One-year term = Reduced paid-up = Extended term = Cash surrender - CORRECT ANSWER = One-year term Of the selections, a one-year term is not a nonforfeiture option."n "Most life policies have exclusions. The most common exclusion in a life policy is __________. = flight on a commercial airline = suicide = flight on a private jet = illegal acts - CORRECT ANSWER Suicide suicide is always excluded in a life policy."n "The insurer can delay payment of a cash surrender for___ - CORRECT ANSWER 6 months"n "The war clause exclusion is enforced _____ - CORRECT ANSWER during wartime"n "Samuel is explaining the exclusions in a life insurance policy to his new client. Exclusion that would be found in a life policy? - CORRECT ANSWER = Hazardous occupation = War = Suicide"n "If the insured commits suicide within___of the policy, the insurance company will return the premiums paid to the beneficiary. - CORRECT ANSWER 2 years"n "Clarice is the owner of the life insurance policy on her husband Herb. Which of the following can she NOT do without Herb's consent? =Change the designated revocable beneficiary = Make a policy loan =Increase the amount of the insurance =Surrender the policy for its cash value - CORRECT ANSWER =Increase the amount of the insurance Clarice cannot increase the amount of the insurance without Herb's consent."n "Which of the following statements about the automatic premium loan provision of a whole life policy is NOT true? = Using the provision prevents the risk of inadvertent lapse = Its use causes dividends to be withheld = If premiums are missed, the automatic premium loan provision uses cash values = Using the provision preserves insurability - CORRECT ANSWER = Its use causes dividends to be withheld The automatic premium loan provision does not cause dividends to be withheld."n "What happens if an estate is named as a beneficiary on a life policy? - CORRECT ANSWER Proceeds are included in the gross estate."n "ennifer has a $200,000 life policy. Her husband is a 50% beneficiary. Her son and daughter are beneficiaries with 25% each. Before she dies, she takes out a $100,000 loan, which is not repaid. What does her daughter get upon her death? - CORRECT ANSWER $25,000 $200,000 minus the $100,000 loan results in her husband receiving $50,000 and her son and daughter receiving $25,000 each."n "true about the rejected business rule? - CORRECT ANSWER It is a circumstance where the agent's company refuses to write the policy."n "If Heather misstates her age at the time of policy issue, what action will the insurer take in response to such a misstatement when a claim is filed? - CORRECT ANSWER The amount payable to beneficiaries is equal to the amount that the premium would have purchased if her correct age had been known."n "With regard to life insurance settlement options - CORRECT ANSWER If the owner did not specify a settlement option, the beneficiary may select any option"n "Which of the following situations does NOT allow the policy owner complete control of the policy? =If the policy was purchased to cover an employee = If the policy owner has no insurable interest in the insured = If an irrevocable beneficiary has been named on the policy = If the spouse of the insured is the beneficiary for the policy - CORRECT ANSWER = If an irrevocable beneficiary has been named on the policy If the policy has an irrevocable beneficiary, this is a loss of some control of the policy. In the situation with an irrevocable beneficiary, the owner is not allowed to change the beneficiary, the owner cannot assign the policy and the owner cannot take a loan against the cash value."n "36 months after a policy was issued, the policy insured committed suicide. What is the insurance company's liability in this situation? - CORRECT ANSWER The face amount because the owner lived longer than the two years stipulated by the suicide clause."n "Besides a limited period of time after the discontinuance of premium payments, what else may be required in order to reinstate a lapsed policy? - CORRECT ANSWER = Payment of any outstanding loans, as well as payment of any back premiums = Proof that he/she is still insurable = Payment of interest on any past-due premium"n "Insurance companies do not have to pay claims or benefits immediately. How long can an insurance company delay payment of cash surrender values? - CORRECT ANSWER 6 months"n If Julie's father dies as a result of an accident, the face value is doubled as in "double indemnity""n "All of the following statements are true regarding the waiver of premium rider for a life insurance policy EXCEPT: = Premium payments are waived when the policyowner is disabled. = The policy is kept in force while premium payments are waived. = The rider is void after the policyowner reaches a certain age, such as 65. =All waived premiums must be repaid if the policyowner recovers from the disability. - CORRECT ANSWER =All waived premiums must be repaid if the policyowner recovers from the disability."n "The ____is not included in the insuring clause - CORRECT ANSWER Contingent beneficiary The beneficiary is incl in the beneficiary clause"n "A nonforfeiture option that provides continuing cash value buildup is called? - CORRECT ANSWER Reduced paid-up option"n "The ___________ is intended to protect the policyholder against unintentional lapses in coverage - CORRECT ANSWER grace period"n "The grace period gives the policyowner the ability to keep his or her policy from____ - CORRECT ANSWER lapsing"n "What happens if there is an outstanding policy loan upon the insured's death? - CORRECT ANSWER The loan, plus any interest due, is deducted from the death benefit."n "The reinstatement provision in a life policy _____________. - CORRECT ANSWER requires the policyowner to pay, with interest, all premiums that are in arrears in order for the policy to be reinstated"n "Which of the following is NOT a purpose of the entire contract provision? = The provision makes it clear that the contract is a three party agreement among the insured, the insurance company and the agent. = The provision describes that the contract cannot be changed after it has been issued. = The provision prohibits the insurance agent from altering any of the terms or conditions of the contract. = The provision protects the insured from any attempts by the insurer to alter the agreement by referencing other documents. - CORRECT ANSWER The provision makes it clear that the contract is a three party agreement among the insured, the insurance company and the agent. Correct The contract is a two party agreement, not a three party agreement."n "When Joshua took out a life policy, he overstated his age. What will the insurer's course of action be if it discovers the misstatement after the insured dies? - CORRECT ANSWER Pay an amount equivalent to that which the premium would have purchased at the correct age"n "A husband wants to name his wife as a beneficiary of his life policy, but wants to retain all of the rights of ownership. Which beneficiary designations would be most appropriate? - CORRECT ANSWER Revocable beneficiary If he names her as a revocable beneficiary, he would be able to change the beneficiary statement or anything else which has to do with the rights of ownership."n "Margaret may be late paying the premium on her life policy. What is the typical grace period on a life policy? - CORRECT ANSWER 30-31 days"n "All of the following are ways in which dividends may be used by the policyowner EXCEPT: = As stock in the company = Left to accumulate with interest = Used to buy additional paid-up insurance = Applied to reduce the premium - CORRECT ANSWER = As stock in the company Correct Dividends may not be used to buy stock in the company."n "All life insurance policies have which of the following standard provisions? =Waiver of premium =Legal action =Grace period =Guaranteed renewability - CORRECT ANSWER Grace period Of the choices given, the grace period is going to be in all policies"n "If a policy has been _____ , it is no longer a valid policy and cannot be reinstated. The default nonforfeiture option is the extended term option. - CORRECT ANSWER surrendered for its cash value"n "example of what type of clause ? "Subject to the provisions on the following pages of this contract, the insurance company will pay the death benefit to the named beneficiary. The death benefit will be paid on receipt of due proof of death of the insured and surrender of this policy." - CORRECT ANSWER insuring clause"n "At what point does an insurance policy become incontestable, even if fraud is evident? - CORRECT ANSWER 2 years"n "Mollie is purchasing a new life insurance policy. Under which circumstances would this new policy be considered a replacement? - CORRECT ANSWER = When existing life insurance is reduced in face amount = When existing life insurance is surrendered = When existing life insurance is continued as an extended term"n "Gary became disabled 10 months before he turned 65. His disability lasted 36 months. How long will the company waive his premiums under the waiver of premium clause? - CORRECT ANSWER 30 months With a 6-month waiting period, that leaves 30 months remaining for his premiums to be waived under the waiver of premium clause."n "Underwriting is the name of the process used by insurers to rate risk. Once the risk has been rated, it is classified. What is the classification for an individual that would pose the least amount of risk to the insurer? - CORRECT ANSWER Preferred"n "Once the insurer has looked at the facts pertaining to a life insurance applicant, the insurer will categorize the risk and calculate premiums based on? - CORRECT ANSWER The risk classification and mortality, interest earnings and expenses"n "greatest impact on the underwriting process for risk on an individual? - CORRECT ANSWER He/she is grossly overweight"n "All of the following are commonly used when investigating the insurability of an applicant EXCEPT: = An attending physician's statement = A credit report =Contacting the Medical Information Bureau (M.I.B.) = Talking to the neighborhood watch - CORRECT ANSWER = Talking to the neighborhood watch Insurers typically utilize the physician's statement, credit report and M.I.B. when determining insurability of an applicant. They do not talk to the neighborhood watch."n "The producer is responsible for field underwriting. Field underwriting is done when the producer is in front of the applicant. Which of the following is not expected from a producer as part of the field underwriting? =The producer should make sure the application is filled out completely. =The producer should note the applicant's physical appearance (weight, build, etc.:) = The producer should note how many children the applicant has in the house. =The producer should note the habits and lifestyle of the applicant. - CORRECT ANSWER = The producer should note how many children the applicant has in the house. The field underwriting gives the producer the opportunity to help assess the risk and reduce the chance of adverse selection. Observations made by the producer can aid the insurer in determination of insurability and risk."n "The main purpose of the Medical Information Bureau (M.I.B.) is to? - CORRECT ANSWER prevent misrepresentation and fraud"n "The agent's report, in which an agent can comment on the client, the situation and/or circumstances, or any other thing that the agent thinks is noteworthy, is located in which part of the application? - CORRECT ANSWER Part 3"n "For a life insurance policy, when can a statement of good health be required? - CORRECT ANSWER When the application is made and no initial premium is paid"n "Who completes a medical report when required by the insurance underwriters? - CORRECT ANSWER A physician or paramedic"n "Credit scores are used by insurers when determining insurability of a client. Which of the following regarding the Fair Credit Reporting Act (FCRA) is FALSE? = The FCRA is a federal law. = The FCRA was enacted in 1970. = The FCRA requires insurers to identify the source of the information provided to them in a credit report. = The FCRA requires insurers to explain the reason(s) behind any issued denials of coverage. - CORRECT ANSWER = The FCRA requires insurers to explain the reason(s) behind any issued denials of coverage. Specifications in the Fair Credit Reporting Act require that an insurance company identify the name of the company that provided them with a report. They cannot, however, tell the client what was in the report."n "Insurance companies investigate potential insureds before issuing a policy. In which report would the insurer have information about a prospective insured's lifestyle? - CORRECT ANSWER Inspection report"n "What kind of safeties or guarantees are provided by the Fair Credit Reporting Act? - CORRECT ANSWER It requires that the applicant for insurance be informed that a consumer report may be requested"n "Marcus is an applicant for a standard risk policy. When is he considered to be covered? - CORRECT ANSWER When the insurer mails the policy for delivery (which had the initial one month premium submitted with the application)"n "The M.I.B. (Medical Information Bureau) is a valuable tool in the insurance industry. True statement pertaining to the M.I.B.? - CORRECT ANSWER The medical information contained in the M.I.B. is gathered from insurance applications and claims."n "NOT true about the Fair Credit Reporting Act? = It is a state law. = It promotes accuracy, fairness and privacy in credit reporting. = You must be told if information in your file is used against you. = You have the right to know what is in your file. - CORRECT ANSWER = It is a state law. The Fair Credit Reporting Act is a federal law."n "What is included in Part 3 of the application? - CORRECT ANSWER Agent's report & agent's comments"n "The regulation of insurance at the state level was the result of? - CORRECT ANSWER McCarran-Ferguson Act"n "In ___, the McCarran- Ferguson Act resulted in mandates that insurance would be regulated by the states - CORRECT ANSWER 1945"n "How is a life insurance agent similar to a field underwriter? - CORRECT ANSWER He/she actually sees the applicant."n "When conducing business, a life insurance agent can use which titles? - CORRECT ANSWER Investment advisor, financial planner, or financial consultant"n "Insurance companies are required by the ___________ to notify an applicant, in writing, that an investigative consumer report may be made on him. - CORRECT ANSWER Fair Credit Reporting Act"n "The Fair Credit Reporting Act of ___ requires the written notification - CORRECT ANSWER 1970"n "What is the maximum benefit period of preliminary term for interim coverage? - CORRECT ANSWER 11 months maximum time without specifying any dollar amount"n "Which of the following is NOT part of the insurance underwriting process? = The selection of risks = The notifying of risks = The rating of risks = The classifying of risks - CORRECT ANSWER The notifying of risks Insurance underwriters are not involved with the notification of risks. They select and rate the risks, and then classify the risks."n "The part of the application that provides information about an applicant, such as financial condition, character, purpose of sale, and how long the agent has known the applicant, is_____ - CORRECT ANSWER The agent's report"n "Mrs. Selleck runs a Christmas store and needs $200,000 of permanent life insurance in June. Because her business is cyclical, she is "cash poor" until October. How can Mrs. Selleck obtain the insurance she needs? - CORRECT ANSWER Preliminary term for interim coverage. Typically, this coverage works for up to 11 months. A temporary insurance agreement has a maximum of $100,000 and 60 days."n "Under the Fair Credit Reporting Act, when an applicant has been denied insurance coverage because of information contained in a consumer report, the applicant is entitled to which of the following? = The right to obtain a copy of the consumer report directly from the insurer = The right to obtain disclosure of the source of the information in the consumer report = Delivery of the report to him personally by the agent - CORRECT ANSWER = The right to obtain disclosure of the source of the information in the consumer report The insurer may only give the applicant information regarding the source of the information in the consumer report."n "There are several types of whole life policies. Which of the following types of whole life policy offers flexible premium payments tied to interest rate fluctuations? =Continuous premium whole life =Limited payment whole life aka 20-pay life = Current assumption whole life = Economatic whole life - CORRECT ANSWER =Current assumption whole life Current assumption whole life offers flexible payments tied to interest rates. The premiums can be raised or lowered by the insurance company, usually annually."n "______, the most common type of whole life, has premium payments over the life of the insured - up to 100 years of age. - CORRECT ANSWER Continuous premium whole life"n "_______, the entire whole life policy is paid up at a specific age, have higher premiums because they are paid over a shorter period of time. - CORRECT ANSWER Limited payment whole life policy"n "A term rider is part of the _____whole life policy that uses dividends to purchase additional paid-up insurance. - CORRECT ANSWER Economatic"n "Continuous premium, limited premium and single premium are types of whole life policies. Which is an indication of a continuous premium method? =It has immediate cash value. =It is also called 20-pay life. = It has the lowest cost over the life of the insured. = It has the lowest annual premium. - CORRECT ANSWER = It has the lowest annual premium Correct It is a single premium whole life policy that has immediate cash value, and the lowest cost over the life of the insured. A limited pay whole life is also called 20-pay life. The continuous premium whole life has the lowest annual premium, and requires that payments be made for the longest period of time. The cash value grows slowly with a continuous premium policy."n "Samantha wants to purchase life insurance, but her funds are limited at this time. Her agent has recommended a whole life policy that starts out with a premium that is lower than usual. The premium increases every year for a specified number of years. This type of policy is called a? - CORRECT ANSWER Graded premium life policy aka graduated premium life insurance policy"n "As Samantha considers her options to purchase life insurance, she looks at the advantages of a graded premium life policy. Following NOT an advantage of such a policy? = In the beginning a greater amount of the premium is applied to the death benefit - less to the cash value. = The policy has a level death benefit as long as it remains in force. =Once the premiums level off, they remain level for the remaining term of the policy. = The initial premium is much lower than whole life insurance. - CORRECT ANSWER = In the beginning a greater amount of the premium is applied to the death benefit - less to the cash value."n "_______ is a life insurance policy that offers the same guarantees as traditional whole life insurance with a lower initial premium that remains level for the first five years of the policy. - CORRECT ANSWER Modified life"n "Charles and Rick have started an electronics business. Their business is young and their cash flow is tight. What is the primary advantage of them purchasing a modified premium whole life policy? - CORRECT ANSWER They are able to purchase a larger policy than traditional whole life. The primary advantage of modified premium whole life is that you get more for you money in the initial phase. Modified whole life is often used early in the life of a business, to supplement retirement, and to protect family and mortgage."n "A universal life plan differs from a whole life plan in all of the following ways EXCEPT: = A whole life plan displays a detailed list of all mortality, expense and interest payments in the premium calculation. = A universal life plan may have features that are not guaranteed. = The cost of life insurance may vary from year to year on a universal life contract. = The administrative expenses are a listed charge in universal life. - CORRECT ANSWER =A whole life plan displays a detailed list of all mortality, expense and interest payments in the premium calculation."n "The cash value in a whole life policy is held in the insurance company's? - CORRECT ANSWER General account"n "An agent wants to qualify to sell variable life plans. He must: - CORRECT ANSWER be licensed from both the state and Financial Industry Regulatory Authority (FINRA) formally (NASD), because variable plans are regulated as securities. Failure to do either could result in some very harsh penalties."n "Matthew has recently purchased a variable life insurance policy. In reading his prospectus, he sees that the various accounts have the same managers as some of the mutual funds he owns. Matthew should understand_____ - CORRECT ANSWER The insurance company maintains separate accounts for each investment and they are not co-mingled with other assets."n "Universal life policies are similar to whole life in that they ___________________. - CORRECT ANSWER both provide death protection and cash value Universal life policies offer flexibility, but benefits are not fixed and guaranteed as they are in the whole life policies. Whole life policies do not treat cash withdrawals as partial surrenders."n "A variable life plan must be a type of universal life because _______ - CORRECT ANSWER The accumulation accounts must be separated from general company assets."n "All of the following are true concerning Interest Sensitive Whole Life (ISWL) EXCEPT: = The death benefit is guaranteed as long as premiums are paid. = Policy loans are available. = The policyholder will always know the amount of cash value available. = The cash account accumulates tax free inside the policy. - CORRECT ANSWER = The policyholder will always know the amount of cash value available."n "One of the most common types of life insurance is the whole life insurance policy. What are typical characteristic of a whole life policy? - CORRECT ANSWER = The premiums remain level for the entire period that the policy is in force. = Whole life policies have a guaranteed cash value. = The face amount of the policy does not change while the policy is in force."n "Timothy has a plan that provides coverage for life, but the premiums are not due beyond age 65. It has guaranteed premium, accumulates cash value and the coverage will never decrease. Timothy has purchased: - CORRECT ANSWER A limited-pay life plan"n "Arnold has purchased an Adjustable Life plan. His agent has told him that he may do all of the following EXCEPT: = Pay varying premiums each year = Quit paying premiums after 7 years when they vanish. = Pay a minimum amount as long as he funds the mortality cost = Pay a higher premium if he wants to build cash faster - CORRECT ANSWER = Quit paying premiums after 7 years when they vanish."n "Term life insurance policies are used to provide temporary insurance protection - usually for a specific amount of time. If an insured provides evidence of insurability at the end of a term and qualifies for reduced premiums rates, the insured has a _____ - CORRECT ANSWER Reentry term policy"n "Which term life insurance policy? A ____ policy allows the insured to convert his/her temporary protection policy to a form of permanent protection without having to provide proof of insurability. - CORRECT ANSWER convertible term"n "Which term life insurance policy? It is the ____ that allows the insured to take out new coverage at a reduced rate, providing he/she can show proof of insurability. - CORRECT ANSWER Reentry term"n "Angelina purchased a policy with a face value of $100,000. She died 10 years later and the policy paid a death benefit of $50,000. Why? - CORRECT ANSWER Her policy was a decreasing term. Her policy was a 20-year decreasing term policy. Because the amount of benefit paid was half of the original face value after 10 years, we can see that it decreased 50% over 10 years."n "Helen and Mark have purchased a policy to cover both of their lives. They know that there are benefits and also disadvantages of such a policy. What is NOT something that would be regarded as a benefit of a joint policy? - CORRECT ANSWER Premiums and face value cannot be changed."n "Group life insurance has similar characteristics and also characteristics that are different from individual life policies. What is NOT a similarity that the two types of policies share? - CORRECT ANSWER Both Group & Individual life ins policies can deduct premium payments"n "Credit life insurance is a type of decreasing term insurance. It was designed to protect creditors in the event that the debtor dies. All of the following are true statements about credit life EXCEPT: = It can be written on both a group and an individual basis. = The insurance premiums are often financed in conjunction with the item purchased. = The number of insureds on the policy can range from 1-50. = The policy does not have a conversion option. - CORRECT ANSWER = The number of insureds on the policy can range from 1-50. Correct Credit life policy provisions include that a certain level of insureds must be maintained (usually 100+). If the number of insureds drops below the specified level, the insurer may not insure new debtors."n "Randall purchased a 20-year family maintenance policy when he was 30 years old. He died at age 40. How many years will benefits be paid to his beneficiaries? - CORRECT ANSWER 20 years"n "Combinations plans are intended to be representative of the needs of the insured. One such plan is called the ___________________________. It combines ordinary life and level term insurance. It provides monthly income for a stated period of 10, 15, or 20 years, or to an age - as selected by the insured. - CORRECT ANSWER Family maintenance policy"n "What combination plans? The_____, not commonly sold, combines whole life and decreasing term. - CORRECT ANSWER family income policy"n "What combination plans? The______, consists of whole life on the breadwinner, and convertible term on the spouse and children. - CORRECT ANSWER family protection policy"n "Valerie is looking at types of insurance to enhance her retirement. Which of the following should she NOT consider in planning her retirement? = Term insurance = Endowment = Whole life = Limited pay life - CORRECT ANSWER = Term insurance Term is not considered a retirement plan policy. Term is used to cover a need for a fixed period of time. There is no cash value at the end of the term."n "____ life insurance is for a comparatively small amount and has frequent premium payments. - CORRECT ANSWER Industrial"n "The cash values of a whole life policy are affected by the interest rates. What determines these interest rates? - CORRECT ANSWER A formula set by the insurer"n "A____is a policy that is paid up early and endows at the age of 100. The premiums are only paid for 20 years and nothing happens until it endows at 100. - CORRECT ANSWER 20-pay life"n "Type of permanent plan that has a "corridor"? - CORRECT ANSWER Universal life option 1"n "Universal Life option has a corridor, which is _____ - CORRECT ANSWER an additional amount of pure life insurance in the form of decreasing term, which is used to increase the policy's death benefit so the policy does not exceed a certain maximum ratio of cash value to death benefit set by the IRS."n "Mr. Watson wants to purchase a policy that will provide the greatest amount of death protection and some cash accumulation at the best value for his periodic premium dollar. What policy should he choose? - CORRECT ANSWER Straight whole life Because Mr. Watson will get the most value for his dollar with a straight whole life policy."n "How Limited pay life policies differ from straight whole life policies? - CORRECT ANSWER With a limited pay life policy, the premium-paying period is shorter"n "A family maintenance policy uses a _________ rider, rather than a ____________ rider, which is used in a family income policy. - CORRECT ANSWER level term, decreasing term"n "When constructing an adjustable life policy, which of the following is used as the base policy? - CORRECT ANSWER Whole life An adjustable life policy is a whole life base with a term rider."n "The_____life policy takes 30 years to pay, and it endows at the age of 100. - CORRECT ANSWER 30 year limited pay"n "What type of policy does Shelly have if the cash value in Shelly's policy increased to a point where the corridor was applied? - CORRECT ANSWER Universal life option 1"n "What policy is sold in proportioned units to cover an insured, as well as the insured's spouse and children? - CORRECT ANSWER Family plan"n "Which of the following is a business plan where each of the partners agree to buy the interest of a deceased partner? - CORRECT ANSWER Cross purchase plan"n "Difference between entity plan and cross purchase plan? - CORRECT ANSWER In an entity plan, the partnership itself agrees to buy the deceased partner's share of the business. With a cross purchase plan, each partner agrees to buy out the others interest in the business."n "With a universal life policy, which of the following is NOT a true statement? = The death benefit can be modified. = Cash values can be allotted toward premium payments. = Premiums can be increased or decreased. = With changes, a new policy needs to be issued immediately. - CORRECT ANSWER = With changes, a new policy needs to be issued immediately."n "is a conversion permitted in an industrial life insurance policy? - CORRECT ANSWER Of two or more policies into a single ordinary policy"n "Clark has a universal life policy. What are the reserves usually invested in with this type of policy? - CORRECT ANSWER Long-term securities"n "Harriet owns a 30-pay life policy that she purchased at the age of 30. When will the cash value equal the face amount of the policy? - CORRECT ANSWER When Harriet turns 100"n "Which policy has premiums payable for 60 years, insurance protection for 60 years and endows at age 100? - CORRECT ANSWER Straight whole life policy issued at age 40."n "A variable life insurance policy has what characteristics? - CORRECT ANSWER Provides permanent protection; it has fixed level premiums and a guaranteed minimum death benefit just like ordinary whole life, but differs in that it offers higher interest rates, defending the policyowner against the effects of inflation. Premiums are paid at regular intervals. If the policyowner does not pay a premium after the policy grace period, the policy will lapse. The policy cash value is not guaranteed."n "True regarding a graded premium whole life policy - CORRECT ANSWER Premiums start low, increasing each year during the early years of the contract and then remain constant for life."n "True about level term? - CORRECT ANSWER = Level term remains at a level face amount. = The premiums increase at renewal. = There is no requirement to prove insurability at renewal."n "_______insurance policies involve premiums that are paid until age 100, followed by payment of the face amount as an endowment upon reaching 100. - CORRECT ANSWER Straight whole life"n "What is the main difference between traditional life insurance and variable? - CORRECT ANSWER Cash values With traditional life insurance, cash values are located in the company general account. With variable life policy, the cash values are in a "separate account" which requires a securities license to sell."n "Universal life policies are different from other whole life insurance policies because? - CORRECT ANSWER Premium schedules In a universal life policy, premium schedules can be flexible."n "The _____ policy starts with a low premium that increases over the life of the policy. - CORRECT ANSWER Modified whole life"n "If Mr. Baker requests price quotes for identical amounts of insurance for four different types of policies, what policy would have the higher initial premium? = A one- year renewable and convertible policy = A participating whole life policy = A nonparticipating whole life policy = A ten-year term policy - CORRECT ANSWER = A participating whole life policy The participating whole life policy would be the most expensive from an initial premium standpoint. Participating policies tend to have higher premiums because insurers incorporate a deliberate overcharge as a safety margin. Whole life insurance is more expensive than term insurance because of living benefits. A one-year renewable and convertible policy would get more expensive each time the policy is renewed, but initially it is less expensive."n "The following groups of people fall under a rule that puts them in a specific set of special circumstances. Those people are: persons holding a CLU designation for a life line of authority, persons holding a CIC designation for life and health lines of authority, persons holding a Certified Employee Benefit Specialists, and persons holding a Registered Health Underwriter. What special circumstance applies to all these groups of people? - CORRECT ANSWER All of the people listed above are exempt from the pre-licensing education requirements for the specified lines of authority because they are deemed by the Commissioner to be equivalent to pre-licensing education."n "The Commissioner may issue a temporary insurance producer license for a period ______ - CORRECT ANSWER not to exceed 180 days"n "Insurance law states that temporary licenses can be issued without requiring an examination for all of the following cases EXCEPT: = To any family members of an insurance producer who dies or becomes disabled in order to allow time for the sale of the business, train another producer, or until the producer recovers = To an employee of an insurance producer agency, upon the death of agency's designated insurance producer = To the designee of an insurance producer entering the armed forces of the United States of America = Any other person in an extenuating circumstance where public interest will be best served by granting a temporary license - CORRECT ANSWER = To any family members of an insurance producer who dies or becomes disabled in order to allow time for the sale of the business, train another producer, or until the producer recovers"n "Which of the following is not a requirement in order to renew any insurance producer license? =Paying a fee = Submitting a renewal form = Passing an examination =Completing continuing education requirements - CORRECT ANSWER = Passing an examination An examination is not necessary for renewals unless the time limit for renewing a license has lapsed."n "Producer licenses need to be renewed at the end of___ - CORRECT ANSWER 24 months"n "An insurance producer who allows the license to lapse has within ___ from the due date of the renewal fee to reinstate their license without passing an examination. - CORRECT ANSWER 12 months"n "Which of the following statements is false regarding license renewal and maintenance? =Producers who are late to renew their license will be made to pay double the unpaid renewal fee = Producers who are late to renew due to extenuating circumstances may request a waiver of the license renewal procedures =Producers who are late to renew may request a waiver of examination requirements or any other sanction imposed for failure to comply with the renewal procedures =Producers who change their address must notify the Commissioner within 90 days of the change - CORRECT ANSWER =Producers who change their address must notify the Commissioner within 90 days of the change Correct A producer must inform the Commissioner of a change of address within 30 days in order to avoid disciplinary action such as suspension or revocation."n "Which of the following people are not required to be licensed as insurance producers? = Kelly an employee of an insurer who receives commissions on policies sold = Luis a director of an insurer whose activities are executive that relate directly to the transaction of insurance =Monica an employee who acts as a supervisor assisting insurance producers with technical advice that does not involve the transaction of insurance = Lucy who receives commissions limited to advertising with transaction of insurance for an insurer - CORRECT ANSWER =Monica an employee who acts as a supervisor assisting insurance producers with technical advice that does not involve the transaction of insurance Correct Kelly receives commissions on policies sold, which requires a license. Luis's would be exempt only if his activities related indirectly to the transaction of insurance. Lucy cannot receive commissions, even if her duties are limited to advertising. Monica's duties do not require a license so long as they do not involve the transaction of insurance."n "How many hours of continuing education are required to renew a producer license and how often must the producer meet these requirements? - CORRECT ANSWER 24 hours every 24 months"n "During each continuing education requirement time period, __ hours must have a concentration in ethics. - CORRECT ANSWER 3"n "Which of the following statements is false regarding continuing education requirements? = Certificates of completion for courses previously submitted and approved for credit are approved for unlimited retake = The Commissioner may extend the time for continuing education requirements for reasons of poor health, military service, or other reasonable and just causes =Insurance producers who have been continuously licensed since January 1, 1994, are not required to complete continuing education requirements =An insurance producer that is a business entity is not requir