California Life Insurance State Exam
Simulator Questions & Answers
Exclusion ratio - ANSWERSAn annuitant would life to determine the amount of an
annuity distribution that is exempt from taxation. What is used to calculate this?
Mortality rate,
Exclusion ratio,
Morbidity rate,
Debt-to-Equity ration
Offers a maximum interest rate that increases annually - ANSWERSWhich of the
following is NOT a feature of equity-indexed annuities?
Offers long term inflation protection, Offers a minimum guaranteed rate, Offers a
maximum interest rate that increases annually, Offers protection during a decline in the
stock market
Joint and survivor annuity - ANSWERSWhat kind of annuity pays income to two
annuitants until their deaths?
Period certain annuity
Joint and survivor annuity
Straight life annuity
Installment refund
For a minimum of 120 months and a maximum of the remainder of his life -
ANSWERSVictoria owns a life annuity and elects to receive annuity payments monthly
for the remainder of her life with "ten years certain". Her annuity will make payments
For a period of time dependent on the performance of the annuity's underlying assets
For a maximum of 120 months
For the remainder of her life only
For a minimum of 120 months and a maximum of the remainder of his life
Variable annuity - ANSWERSAn annuitant would life to determine the current value of
her annuity. To do this, she multiplies the number of "accumulation units" she owns
times the unit value of the "separate account". What kind of annuity BEST matches this
description?
Variable annuity
Fixed annuity
Immediate annuity
Life annuity
60 payments - ANSWERSCindy buys a 10-year annuity with an installment refund. After
receiving monthly payments for 5 years, Cindy dies. How many remaining payments will
the insurer make to her beneficiary?
,No payments
30 payments
60 payments
120 payments
To protect against the risk of outliving their financial resources - ANSWERSWhat is a
common reason people purchase an annuity?
To create an immediate estate
To pay off a debt in the event of death
To minimize their tax burden
To protect against the risk of outliving their financial resources
Variable annuity - ANSWERSAn annuity which is backed by a life insurer's separate
account is called a(n)
Equity indexed annuity
Variable annuity
Immediate annuity
403(b) plan
The time at which benefit payments start - ANSWERSWhat distinguishes a deferred
annuity from an immediate annuity?
The time at which benefit payments start
The benefit payment amount
The taxation of benefit payments
The age at which the annuity can be purchased
Deferred annuity - ANSWERSA savings vehicle designed to first accumulate funds and
then systematically liquidates the funds is called a(n)
Immediate annuity
Deferred annuity
Endowment
Whole life policy
Insurance policy - ANSWERSWhich of the following is a contract that involves one party
which indemnifies another when a loss arises from an unknown event?
Insurance policy
Loss contract
Warranty arrangement
Indemnification arrangement
Mutual insurer - ANSWERSA participating company is also referred to as which type of
insurer?
Reciprocal insurer
Re-insurer
Mutual insurer
Domestic insurer
,Reinsurance - ANSWERSAn insurer enters into a contract with a third party to insure
itself against losses from insurance policies it issues. What is this agreement called?
Reinsurance
Mutual
Multi-line
Reserves
Primary insurer - ANSWERSAAA Insurance Company has transferred a portion of its
loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA
Insurance Company called?
Tertiary insurer
Primary insurer
Secondary insurer
Captive insurer
Contract that allows the policyowner to receive a share of surplus in the form of policy
dividends - ANSWERSWhat is a participating life insurance policy?
Contract that gives beneficiaries the right to participate in any dividends
Agreement that insures two or more lives
Agreement that allows two or more beneficiaries to share in the death benefit
Contract that allows the policyowner to receive a share of surplus in the form of policy
dividends
Participating - ANSWERSJohn owns an insurance policy that gives him the right to
share in the insurer's surplus. What kind of policy is this?
Contributory
Nonparticipating
Surplus
Participating
Increases the unearned premium reserve - ANSWERSWhich of the following is NOT a
characteristic of reinsurance?
Protects against a very large claim
Increases the unearned premium reserve
A specialized branch of the insurance industry
Enables insurer to meet certain objectives
Marketing - ANSWERSOne important function of an insurance company is to identify
and sell to potential customers. Which of the BEST describes this function?
Regulation
Marketing
Underwriting
Reinsurance
, It is the distribution of excess of funds accumulated by the insurer on participating
policies - ANSWERSWhich of the following statements regarding a life insurance policy
dividend is TRUE?
It is a stockholders return on his investment in the company
It is the distribution of excess of funds accumulated by the insurer on participating
policies
It represents the built-up of cash value in a permanent insurance policy
It represents a refund of overcharged premium in a non-participating whole life policy
Losses due to fraud are eliminated - ANSWERSWhich of the following is NOT a benefit
of insurance?
Source of investment funds
Makes a loss whole again
Reduces the uncertainty of loss exposures
Losses due to fraud are eliminated
Mutual insurer - ANSWERSAn insurer owned by its policyholders is called a
Multi-line insurer
Mutual insurer
Reinsurer
Stock insurer
One party is restored to the same financial position the party was in before the loss
occurred - ANSWERSWhich of the following statements statements correctly describes
a contract of indemnity?
One party is restored to the same financial position the party was in before the loss
occurred
The unequal exchange of value or consideration for both parties
One party (the insurance company) prepares the contract with no negotiation between
the application and insurer
Only one party (the insurer) makes any kind of enforceable promise
Probability of loss - ANSWERSWhich of the following is NOT required in the content of
a policy?
Parties involved in the contract
Period to which the coverage exists
Probability of loss
Risk insured against
Equal consideration is required between the involved parties - ANSWERSWhich of the
following is NOT a requirement of a contract?
Parties involved must be competent
Equal consideration is required between the involved parties
Contract must have a legal purpose
Offer and acceptance must be involved
Simulator Questions & Answers
Exclusion ratio - ANSWERSAn annuitant would life to determine the amount of an
annuity distribution that is exempt from taxation. What is used to calculate this?
Mortality rate,
Exclusion ratio,
Morbidity rate,
Debt-to-Equity ration
Offers a maximum interest rate that increases annually - ANSWERSWhich of the
following is NOT a feature of equity-indexed annuities?
Offers long term inflation protection, Offers a minimum guaranteed rate, Offers a
maximum interest rate that increases annually, Offers protection during a decline in the
stock market
Joint and survivor annuity - ANSWERSWhat kind of annuity pays income to two
annuitants until their deaths?
Period certain annuity
Joint and survivor annuity
Straight life annuity
Installment refund
For a minimum of 120 months and a maximum of the remainder of his life -
ANSWERSVictoria owns a life annuity and elects to receive annuity payments monthly
for the remainder of her life with "ten years certain". Her annuity will make payments
For a period of time dependent on the performance of the annuity's underlying assets
For a maximum of 120 months
For the remainder of her life only
For a minimum of 120 months and a maximum of the remainder of his life
Variable annuity - ANSWERSAn annuitant would life to determine the current value of
her annuity. To do this, she multiplies the number of "accumulation units" she owns
times the unit value of the "separate account". What kind of annuity BEST matches this
description?
Variable annuity
Fixed annuity
Immediate annuity
Life annuity
60 payments - ANSWERSCindy buys a 10-year annuity with an installment refund. After
receiving monthly payments for 5 years, Cindy dies. How many remaining payments will
the insurer make to her beneficiary?
,No payments
30 payments
60 payments
120 payments
To protect against the risk of outliving their financial resources - ANSWERSWhat is a
common reason people purchase an annuity?
To create an immediate estate
To pay off a debt in the event of death
To minimize their tax burden
To protect against the risk of outliving their financial resources
Variable annuity - ANSWERSAn annuity which is backed by a life insurer's separate
account is called a(n)
Equity indexed annuity
Variable annuity
Immediate annuity
403(b) plan
The time at which benefit payments start - ANSWERSWhat distinguishes a deferred
annuity from an immediate annuity?
The time at which benefit payments start
The benefit payment amount
The taxation of benefit payments
The age at which the annuity can be purchased
Deferred annuity - ANSWERSA savings vehicle designed to first accumulate funds and
then systematically liquidates the funds is called a(n)
Immediate annuity
Deferred annuity
Endowment
Whole life policy
Insurance policy - ANSWERSWhich of the following is a contract that involves one party
which indemnifies another when a loss arises from an unknown event?
Insurance policy
Loss contract
Warranty arrangement
Indemnification arrangement
Mutual insurer - ANSWERSA participating company is also referred to as which type of
insurer?
Reciprocal insurer
Re-insurer
Mutual insurer
Domestic insurer
,Reinsurance - ANSWERSAn insurer enters into a contract with a third party to insure
itself against losses from insurance policies it issues. What is this agreement called?
Reinsurance
Mutual
Multi-line
Reserves
Primary insurer - ANSWERSAAA Insurance Company has transferred a portion of its
loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA
Insurance Company called?
Tertiary insurer
Primary insurer
Secondary insurer
Captive insurer
Contract that allows the policyowner to receive a share of surplus in the form of policy
dividends - ANSWERSWhat is a participating life insurance policy?
Contract that gives beneficiaries the right to participate in any dividends
Agreement that insures two or more lives
Agreement that allows two or more beneficiaries to share in the death benefit
Contract that allows the policyowner to receive a share of surplus in the form of policy
dividends
Participating - ANSWERSJohn owns an insurance policy that gives him the right to
share in the insurer's surplus. What kind of policy is this?
Contributory
Nonparticipating
Surplus
Participating
Increases the unearned premium reserve - ANSWERSWhich of the following is NOT a
characteristic of reinsurance?
Protects against a very large claim
Increases the unearned premium reserve
A specialized branch of the insurance industry
Enables insurer to meet certain objectives
Marketing - ANSWERSOne important function of an insurance company is to identify
and sell to potential customers. Which of the BEST describes this function?
Regulation
Marketing
Underwriting
Reinsurance
, It is the distribution of excess of funds accumulated by the insurer on participating
policies - ANSWERSWhich of the following statements regarding a life insurance policy
dividend is TRUE?
It is a stockholders return on his investment in the company
It is the distribution of excess of funds accumulated by the insurer on participating
policies
It represents the built-up of cash value in a permanent insurance policy
It represents a refund of overcharged premium in a non-participating whole life policy
Losses due to fraud are eliminated - ANSWERSWhich of the following is NOT a benefit
of insurance?
Source of investment funds
Makes a loss whole again
Reduces the uncertainty of loss exposures
Losses due to fraud are eliminated
Mutual insurer - ANSWERSAn insurer owned by its policyholders is called a
Multi-line insurer
Mutual insurer
Reinsurer
Stock insurer
One party is restored to the same financial position the party was in before the loss
occurred - ANSWERSWhich of the following statements statements correctly describes
a contract of indemnity?
One party is restored to the same financial position the party was in before the loss
occurred
The unequal exchange of value or consideration for both parties
One party (the insurance company) prepares the contract with no negotiation between
the application and insurer
Only one party (the insurer) makes any kind of enforceable promise
Probability of loss - ANSWERSWhich of the following is NOT required in the content of
a policy?
Parties involved in the contract
Period to which the coverage exists
Probability of loss
Risk insured against
Equal consideration is required between the involved parties - ANSWERSWhich of the
following is NOT a requirement of a contract?
Parties involved must be competent
Equal consideration is required between the involved parties
Contract must have a legal purpose
Offer and acceptance must be involved
