Life Insurance Essentials: Exam Questions and Guaranteed A+ Answers for Licensing Success

Life Insurance Essentials: Exam Questions and Guaranteed A+ Answers for Licensing Success A full lines Producer renewing a two year license must have a. 24 Hours of Continuing education b. 10 Hours of Continuing education. c. 15 Hours of Continuing education. d. 30 Hours of Continuing education - ANS 24 Hours of Continuing Education If the Commissioner finds you guilty of violating Producer Licensing Law, all of the following may occur EXCEPT a. You may be jailed for up to 365 days. b. You may have your license revoked or suspended. c. A hearing will be held, should you request it. d. You may be fined up to $10,000. - ANS You may be jailed for up to 365 days. The Commissioner cannot jail anyone; only a Judge has that power. Under Rule 48, all of the following may trigger Accelerated Death Benefits EXCEPT a. Permanent institutionalization b. A medical condition that will drastically shorten the insured's life. c. Terminal illness. d. Total disability - ANS Total Disability Which of the following statements is NOT true concerning Life Insurance Solicitation statutes and regulations? a. They require that prospective clients be given a Life Insurance Buyer's Guide prepared by the NAIC. b. They require life insurance policies contain an unconditional right to return the policy within 10 days from policy delivery for a full refund. c. They require a Policy Summary containing generic insurance information. d. They are written by the legislature and/or promulgated by the Commissioner. - ANS They require a Policy Summary containing generic insurance information. The policy summary contains specific information regarding the insurance information Which of the following is allowed under Rule 39, AIDS Underwriting? Select one: a. Using the fact that an individual has sought AIDS counseling as an underwriting criteria. b. Requiring AIDS testing as part of the underwriting process. c. Informing the MIB of the presence of HIV antibodies. d. Providing lower benefi ts for AIDS-related losses than other claims. - ANS Requiring AIDS testing as part of the underwriting process. The primary difference between Viatical Settlements and Accelerated Death benefits is that a. Viaticals are not regulated by the Department of Insurance. b. Viaticals can be used to fund retirement, whereas Accelerated Death Benefits cannot. c. Viaticals require an extra premium, whereas Accelerated Death Benefits do not. d. Viaticals are funded by a third party, whereas in an Accelerated Death Benefit, the proceeds come from the company that issued the original policy. - ANS Vaticals are funded by a third party, whereas in an Accelerated Death Benefit, the proceeds come from the company that issued the original policy. Which of the following is the intent of the Replacement regulation? a. To protect existing insurers from having policies replaced by producers representing companies with inferior life insurance policies. b. To assure that the client is given enough information to make a decision in his or her own best interest c. To determine the penalties if producers or companies fail to comply with the Replacement regulation. d. To limit the number of times replacement may occur. - ANS To assure that the client is given enough information to make a decision in his or her own best interest. Joe sells his policy to a Viatical Company. All of the following are true EXCEPT a. Joe will assign ownership of his policy to the Viatical company. b. Joe will receive the face amount of his life insurance policy from the Viatical company. c. Joe has been diagnosed with a terminal illness d. Joe must be mentally competent - ANS Joe will receive the face amount of his life insurance policy from the Viatical company. All of the following are benefits which can be paid under an Accelerated Death benefit EXCEPT a. Terminal Illness b. Nursing Home c. Total Disability d. Dread Disease - ANS Total Disability Viatical Settlement Contracts can also be referred to as a. Section 403(b) Annuities b. Accelerated Death Benefits. c. Viators. d. Living Benefit Agreements - ANS Living Benefit Agreements The insurance company or its producer must provide a prospective life insurance purchaser with a Buyer's Guide and a Policy Summary in which of the following types of life insurance sales? a. Credit Life b. Whole Life c. Group Life d. Variable Life - ANS Whole Life Linda is purchasing a new Universal Life policy. Replacement would be involved in all of the following situations EXCEPT a. Linda will borrow 35% of the cash value of her existing Whole Life policy to purchase the new Universal Life policy. b. Linda will terminate an existing Term to Age 65 policy. c. Linda will allow a one-year Term policy to expire d. Linda will place an existing Whole Life policy on Extended Term. - ANS Linda will allow a one-year Term policy to expire Producer Bart makes a sales presentation to Betty for a Universal Life policy. While completing the application, Bart learns that Betty is insured under a life policy. Bart must give Betty the Important Notice Regarding the Replacement of Life Insurance and a copy of the Sales Proposal used in the presentation under all of the following situations EXCEPT a. Betty will convert her existing Convertible Term policy to Whole Life. b. Betty says that coming up with the initial premium for the UL will not be a problem as she will borrow all the cash value out of her existing policy to pay it. c. Betty tells Bart that she will exchange her original policy for a reduced paid-up policy. d. Betty decides to follow Bart's recommendation that she continue her Whole Life as extended term insurance. - ANS Betty will convert her existing Convertible Term policy to Whole Life. Under Indiana Law a. Accelerated Death Benefi ts must be taken as a lump sum. b. Accelerated Death Benefits which have been paid act as a lien against the death benefit c. Companies must waive further premium after the payment of Accelerated Death Benefits. d. There are no restrictions on the discount rates for Accelerated Death Benefits. - ANS Accelerated Death Benefits which have been paid act as a lien against the death benefit Under a Viatical Settlement agreement, the insured person is known as the a. Viatical b. Third party c. Viator d. Beneficiary - ANS Viator Which of the following is the purpose of the Life Insurance Solicitation (Life Insurance Disclosure) regulation? a. To protect policyowners in the event of a life insurance company insolvency. b. To standardize the provisions of new forms of life insurance products sold in the state. c. To ensure purchasers of life insurance are given enough information to evaluate a policy's cost relative to similar life insurance policies. d. To govern the activities of producers and companies with respect to the replacement of existing life insurance and annuities. - ANS To ensure purchasers of life insurance are given enough information to evaluate a policy's cost relative to similar life insurance policies. In order to qualify for Accelerated Death Benefits, the insured must be in what kind of circumstance? - ANS 1. Terminally ill 2. Extraordinary Medical Intervention (organ transplant, artificial life support, etc.) 3. Permanently Institutionalized 4. Limits the Insured's life span (Heart disease, cancer, renal failure) 5. Any other condition approved by the Commissioner Explain the conversion summary for the State of Indiana for Group insurance policies - ANS 31 Days: Normal Conversion Period 15 Days: Extension 60 Days: Maximum Conversion Period What is risk? What is a pure risk? - ANS Risk is the uncertainty of that loss. A pure risk is one that exists rather or not you buy the policy. What are the two types of major insurance companies? What is the difference? - ANS Stock & Mutual Companies Stock companies are entities created for the benefit of the stockholders. Profits of their investments are called Dividends. Dividends are subject to tax Mutual companies have no owners but are organized for the benefit of the policy owners. Dividends (unneeded premium) are returned to the policy owners. No tax on dividends. What are the five elements of a contract? - ANS 1. Offer: A concise statement that is answered by Yes or No. In life insurance, an application is only an offer if it comes with the first premium. 2. Acceptance: Mirror image of the offer. The company must issue and deliver the policy by the agent. 3. Consideration: The exchange of something of value. Company offers promises and applicant gives premium. 4. Capacity: Ability to enter into the contract 5. Purpose: Reason for existence. In life, the applicant must have insurable interest and consent in the life of the proposed insured. What is the difference between warranties and representations? - ANS Warranties are statements that are absolutely true Representations are true to the best knowledge and belief of the applicant. When does coverage begin on a life insurance policy? - ANS When the first premium is paid. What are the responsibilities of the agent at the time of application? - ANS You have to make sure that the purchase is in the best interest of the insured What are the responsibilities of the agent at the time of delivery? - ANS You have to make sure that your insured understands the policy. You must provide a policy summary with specific information about the cost and benefits provided in the policy. What are the different types of insurance contracts? - ANS 1. Valued Contracts: They have a pre-determined, face amount. When Joe dies, his family will receive the death benefit placed on the contract. 2. Reimbursement/indemnity contracts: Exist to make you whole. Brings you back to where you were before something bad happened to you. 3. Service contracts: The carrier/company provides the service. What are the three classifications of risks? - ANS Preferred: Least Risk. Insurance companies like! Standard: Average Risk Substandard: Greatest Risk. Insurance companies hate! What is adverse selection? - ANS The tendency of people to buy insurance when they're getting ready to use it. What are the three elements of a premium? - ANS Risk + Expenses - Interest = Gross Premium A final factor in determining premium, is how often the insured will pay. The more often you pay, the higher your premium. It's called premium mode.