North Carolina XCEL Testing Life & Health Insurance Exam

North Carolina XCEL Testing Life & Health Insurance Exam Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated -Answer: 1970 - Fair Credit Reporting Act What type of reinsurance contract involves two companies automatically sharing their risk exposure? -Answer: Treaty What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained? -Answer: Fair Credit Re- porting Act Who elects the governing body of a mutual insurance company? -Answer: policyholders The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called -Answer: reserves A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a -Answer: risk retention group What year was the McCarran-Ferguson Act enacted? -Answer: 1945 Which of these describe a participating life insurance policy? -Answer: Policyowners are entitled to receive dividends At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? -Answer -Answer: Upon completion of the application A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as -Answer -Answer: a fraternal benefit society An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the -Answer -Answer: Fair Credit Reporting Act Which of the following consists of an offer, acceptance, and consideration? -Answer: Contract Which of these is NOT a type of agent authority? -Answer: Principal E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? -Answer: F All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT -Answer -Answer: Bilateral The part of a life insurance policy guaranteed to be true is called a(n) -Answer -Answer: - warranty A life insurance arrangement which circumvents insurable interest statutes is called -Answer -Answer: Investor-Originated Life Insurance Taking receipt of premiums and holding them for the insurance company is an example of -Answer -Answer: Fiduciary responsibility Which of these arrangements allows one to bypass insurable interest laws? -Answer: Investor-Originated Life Insurance Insurance contracts are known as because certain future conditions or acts must occur before any claims can be paid. -Answer: conditional When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have -Answer -Answer: insurable interest in the proposed insured Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called -Answer -Answer: representations If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? -Answer: Insured At what point does an informal contract become binding? -Answer: When one party makes an offer and the other party accepts that offer When must insurable interest exist for a life insurance contract to be valid? -Answer: Inception of the contract A life insurance policy would be considered a wagering contract WITH- OUT -Answer -Answer: insurable interest what is a warranty? -Answer: is a statement guaranteed to be true Which of these is NOT considered to be an element of an insurance contract? -Answer: negotiating Who makes the legally enforceable promises in a unilateral insurance policy? -Answer: Insurance company In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? -Answer: Unilateral In regards to representations or warranties, which of these statements is TRUE? -Answer: If material to the risk, false representations will void a policy A policy of adhesion can only be modified by whom? -Answer: The insurance com- pany Insurance policies are considered aleatory contracts because -Answer: performance is conditioned upon a future occurrence Insurance policies are offered on a "take it or leave it" basis, which make them -Answer -Answer: Contracts of Adhesion Stranger Originated Life Insurance (STOLI) has been found to be in viola- tion of which of the following contractual elements? -Answer: Legal Purpose (Insurable Interest) Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? -Answer: Aleatory What is the consideration given by an insurer in the Consideration clause of a life policy? -Answer: Promise to pay a death benefit to a named beneficiary The Consideration clause of an insurance contract includes -Answer -Answer: the schedule and amount of premium payments When must insurable interest be present in order for a life insurance policy to be valid? -Answer: When the application is made Life and health insurance policies are -Answer -Answer: Unilateral contracts All of these are characteristics of an Adjustable Life policy, EXCEPT -Answer -Answer: ace amount can be adjusted using policy dividends No insurer shall refuse to insure an individual because of -Answer: race Which type of plan normally includes hospice benefits? -Answer: Managed care plans An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors? -Answer: Gender Which statement is TRUE regarding a Variable Whole Life policy? -Answer: A mini- mum guaranteed Death benefit is provided Under the North Carolina insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of -Answer: two years All of these statements concerning Settlement Options are true, EXCEPT -Answer: Only the beneficiary may select Defamation is BEST described as publishing or circulating which of the following types of information? -Answer: Brochures falsely criticizing the financial condition of an insurance company A policyowner is able to choose the frequency of premium payments through what policy feature? -Answer: Premium Mode N is covered under an individual Disability policy with a 30-day Elimination period and a monthly benefit of $500. N is totally disabled for 3 1/2 months. N's total benefit received on this claim is -Answer -Answer: $1,250 After the 30-day Elimination period has been satisfied, the total benefit paid on this claim is $1,250 ($500+$500+$250) Which of these factors does NOT influence an applicant's need for life insurance? -Answer: Self-maintenance expenses All of the following statements are true regarding a policy's Grace period, EXCEPT -Answer -Answer: Past due premiums are waived All of the following actions are considered rebating EXCEPT -Answer: sharing com- missions with other licensed and appointed agents According to the Affordable Care Act (ACA), a dependent child's eligibility status is determined by -Answer -Answer: age In life insurance, the needs approach is used mostly to establish -Answer -Answer: how much life insurance a client should apply for A person is required to be AT LEAST how old before he or she is licensed as an agent in North Carolina? -Answer: 18 Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan? -Answer: Collateral assignment The policyholder has how many days to return an Accident/Health Insur- ance Policy and receive a full refund on premiums? -Answer: 10 The Legal Actions provision of an insurance contract is designed to do all of the following, EXCEPT -Answer -Answer: protect the producer A Limited-Pay Life policy has -Answer -Answer: premium payments limited to a specified num- ber of years An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable? -Answer: $25,000 An insurance company MUST clearly specify questions designed to obtain information solely for marketing research -Answer: in any insurance transaction A vacancy that occurs during the North Carolina Commissioner of Insur- ance's term of office MUST be filled by the -Answer: Governor Every Group Health Policy providing benefits for chemical dependency treatments must include, for the life of the contract, a -Answer: minimum benefit of $16,000 An example of rebating would be -Answer: offering a client something of value not stated in the contract in exchange for their business If after satisfactory proof of loss, an insurer fails or refuses to pay death proceeds, the insurer must pay interest on the proceeds after how many days? -Answer: 30 A written agreement to provide a Life Insurance Policy holder immediate cash in exchange for the sale and transfer of a Life Insurance Policy is a -Answer: Viatical Settlement When L applies for a Health Insurance Policy, L unintentionally fails to list a previous visit to a cardiologist. If the insurance company contests the policy, it MUST do so within 2 years -Answer: from the date of issue When an employee is terminated, which statement about a group term life conversion is true? -Answer: Policy proceeds will be paid if the employee dies during the conversion period Which of these actions should a producer take when submitting an insurance application to an insurer? -Answer: Inform insurer of relevant information not included on the application A prepaid application for individual Disability Income insurance was recently submitted to an insurer. When the insurer received the Medical Information Bureau (MIB) report, the report showed that the applicant had suffered a stroke 18 months ago, something that was not disclosed on the application. Which of the following actions would the insurance company NOT take? -Answer: Send a notice to the MIB that the applicant was declined F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? -Answer: Decreasing term policy Under a Renewable Term policy, -Answer: he renewal premium is calculated on the basis of the insured's attained age Which of these are NOT an example of a Nonforfeiture option? -Answer: Life Income Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? -Answer: Variable Universal Life Which statement regarding the Change of Beneficiary provision is true? -Answer: - The policyowner can change the beneficiary What do Dread Disease policies cover? -Answer: A specific disease or illness What is the initial requirement for an insured to become eligible for benefits under the Waiver of Premium provision? -Answer: Insured must be under a physician's care Which of the following types of insurance is exempt from the Rules Gov- erning Life Insurance and Annuity Replacements? -Answer: Credit Life A physician opens up a new practice and qualifies for a $7,000/month Dis- ability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow? -Answer: Guaranteed Insurability Option rider Which of these is an element of a Single Premium annuity? -Answer: Lump- sum payment