XCEL FINAL EXAM CALIFORNIA LIFE
INSURANCE QUESTIONS WITH
COMPLETE ANSWERS
Lynn owns a life policy that guarantees the right to renew the policy each year,
regardless of health, but at an increased premium. What kind of policy is this? -
ANSWER-Renewable Term
What is the proper order of initial life insurance premiums, from lowest to highest? -
ANSWER-Modified Premium, Ordinary Life, Single Premium
An insurance policy written after 1988 that fails to pass the seven-pay test is known
as - ANSWER-A Modified Endowment Contract
Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty
for taking a loan against this policy prior to age 59 1/2? - ANSWER-10%
A life insurance policy that pays the face amount if the insured survives to a specified
period of time is called - ANSWER-Endowment Insurance
Tom is shopping for a policy that covers two people and would pay the face amount
ONLY when the first person dies. The type of life policy he is looking for is called a -
ANSWER-Joint Life Policy
Most U.S. life insurance companies belong to the - ANSWER-Medical Information
Bureau
The Medical Information Bureau consists of - ANSWER-Life And Health Insurance
Companies
Which of the following risk classifications charges the lowest premium? - ANSWER-
Preferred
What must an applicant do in order to authorize the release of an attending physician
report? - ANSWER-Sign a consent form
Which of the following is NOT a risk classification that an underwriter would use? -
ANSWER-Dividend Risk
How does a conditional receipt differ from a binding receipt? - ANSWER-Binding
receipts always provide insurance which starts from date of receipt
A report which is based on creditworthiness and personal characteristics that
influences an insurance applicant's eligibility for life and health insurance is called
a(n) - ANSWER-Consumer Report
, An applicant has revealed conditions that require more information. Which of the
following is needed next? - ANSWER-Attending physician's statement
The risk selection process is primarily given to which insurance company
department? - ANSWER-Underwriting
When an applicant applies for insurance, the process by which the insurer
determines whether to issue a policy is called - ANSWER-Underwriting
Moral hazard is described as the - ANSWER-Increased chance of a loss because of
an insured's dishonest tendencies
Which of the following would NOT be accomplished with the purchase of an
insurance policy? - ANSWER-Risk Is Eliminated
An insurer having a large number of similar exposure units is considered important
because - ANSWER-The greater the number insured, the more accurately the
insurer can predict losses and set appropriate premiums
Which of these statements correctly describes risk? - ANSWER-Pure risk is the only
insurable risk
Restoring an insured to the same condition as before a loss is known as - ANSWER-
Principle Of Indemnity
Which type of risk is gambling? - ANSWER-Speculative Risk
Which of the following refers to condition that may increase the chance of a loss? -
ANSWER-Hazard
Which of the following is a situation where there is a possibility of either a loss or a
gain? - ANSWER-Speculative Risk
Employer contributions to qualified plans are - ANSWER-Tax-Deductible by the
employer
How are Roth IRA'S treated for tax purposes? - ANSWER-Non-Deductible
Contributions And Tax-Free Distributions
Under a 10-year vesting schedule, what percentage of employer contributions must
be vested after 10 years of service? - ANSWER-100%
Retirement plans cannot favor highly compensated employs. The government
regulation that prevents this from happening is called - ANSWER-Non-Discrimination
Which statement is NOT true regarding Social Security benefits? - ANSWER-
Benefits are designed to replace the entire amount of the worker's earnings
Life insurance creates an immediate estate. This phrase means - ANSWER-When
the insured dies, a death benefit is paid
INSURANCE QUESTIONS WITH
COMPLETE ANSWERS
Lynn owns a life policy that guarantees the right to renew the policy each year,
regardless of health, but at an increased premium. What kind of policy is this? -
ANSWER-Renewable Term
What is the proper order of initial life insurance premiums, from lowest to highest? -
ANSWER-Modified Premium, Ordinary Life, Single Premium
An insurance policy written after 1988 that fails to pass the seven-pay test is known
as - ANSWER-A Modified Endowment Contract
Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty
for taking a loan against this policy prior to age 59 1/2? - ANSWER-10%
A life insurance policy that pays the face amount if the insured survives to a specified
period of time is called - ANSWER-Endowment Insurance
Tom is shopping for a policy that covers two people and would pay the face amount
ONLY when the first person dies. The type of life policy he is looking for is called a -
ANSWER-Joint Life Policy
Most U.S. life insurance companies belong to the - ANSWER-Medical Information
Bureau
The Medical Information Bureau consists of - ANSWER-Life And Health Insurance
Companies
Which of the following risk classifications charges the lowest premium? - ANSWER-
Preferred
What must an applicant do in order to authorize the release of an attending physician
report? - ANSWER-Sign a consent form
Which of the following is NOT a risk classification that an underwriter would use? -
ANSWER-Dividend Risk
How does a conditional receipt differ from a binding receipt? - ANSWER-Binding
receipts always provide insurance which starts from date of receipt
A report which is based on creditworthiness and personal characteristics that
influences an insurance applicant's eligibility for life and health insurance is called
a(n) - ANSWER-Consumer Report
, An applicant has revealed conditions that require more information. Which of the
following is needed next? - ANSWER-Attending physician's statement
The risk selection process is primarily given to which insurance company
department? - ANSWER-Underwriting
When an applicant applies for insurance, the process by which the insurer
determines whether to issue a policy is called - ANSWER-Underwriting
Moral hazard is described as the - ANSWER-Increased chance of a loss because of
an insured's dishonest tendencies
Which of the following would NOT be accomplished with the purchase of an
insurance policy? - ANSWER-Risk Is Eliminated
An insurer having a large number of similar exposure units is considered important
because - ANSWER-The greater the number insured, the more accurately the
insurer can predict losses and set appropriate premiums
Which of these statements correctly describes risk? - ANSWER-Pure risk is the only
insurable risk
Restoring an insured to the same condition as before a loss is known as - ANSWER-
Principle Of Indemnity
Which type of risk is gambling? - ANSWER-Speculative Risk
Which of the following refers to condition that may increase the chance of a loss? -
ANSWER-Hazard
Which of the following is a situation where there is a possibility of either a loss or a
gain? - ANSWER-Speculative Risk
Employer contributions to qualified plans are - ANSWER-Tax-Deductible by the
employer
How are Roth IRA'S treated for tax purposes? - ANSWER-Non-Deductible
Contributions And Tax-Free Distributions
Under a 10-year vesting schedule, what percentage of employer contributions must
be vested after 10 years of service? - ANSWER-100%
Retirement plans cannot favor highly compensated employs. The government
regulation that prevents this from happening is called - ANSWER-Non-Discrimination
Which statement is NOT true regarding Social Security benefits? - ANSWER-
Benefits are designed to replace the entire amount of the worker's earnings
Life insurance creates an immediate estate. This phrase means - ANSWER-When
the insured dies, a death benefit is paid
