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ExamFX Life Insurance Practice Exam
Questions with Answers 2024
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out? ✔ $50, Which of the following documents must be provided to the policyowner or applicant during policy replacement? ✔ Notice Regarding Replacement. The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is ✔ A nonqualified annuity plan. During replacement of life insurance, a replacing insurer must do which of the following? ✔ Obtain a list of all life insurance policies that will be replaced An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? ✔ Decreasing term. An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called ✔ Single premium whole life. Which of the following statements is TRUE concerning the Accidental Death Rider? ✔ It will pay double or triple the face amount. Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? ✔ SEPs are suitable for large companies. In insurance, an offer is usually made when ✔ An applicant submits an application to the insurer. An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be
sure that additional coverage will be available in the future. Which of the following options should be included in the policy? ✔ Guaranteed insurability option Who can make a fully deductible contribution to a traditional IRA? ✔ An individual not covered by an employer-sponsored plan who has earned income A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as ✔ Survivor protection. When is the earliest a policy may go into effect? ✔ When the application is signed and a check is given to the agent Which of the following is a key distinction between variable whole life and variable universal life products? ✔ Variable whole life has a guaranteed death benefit. When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? ✔ Consideration A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? ✔ Level term A Return of Premium term life policy is written as what type of term coverage? ✔ Increasing All of the following are duties and responsibilities of producers at the time of application EXCEPT ✔ Change any incorrect statement on the application by personally initialing next to the corrected statement. The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? ✔ Reduction of premium An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? ✔ Aleatory
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? ✔ Making comparisons between different policies An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? ✔ Mutual How does an individual become the Insurance Director in this state? ✔ Appointed by the Commissioner When transacting business in this state an insurer formed under the laws of another country is known as a/an ✔ Alien insurer. Which of the following statements is true regarding requirements for applicants for an insurance license? ✔ They must provide information about their personal history and experience. An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? ✔ Illegal under any circumstances Who might receive dividends from a mutual insurer? ✔ Policyholders After being placed on a noncompliance list, an obligor may be eligible for a temporary license, lasting no longer than ✔ 150 days. To legally transact insurance in this state, an insurer must obtain which of the following? ✔ Certificate of Authority Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract? ✔ Viatical settlement provider The document that indicates that an insurer has been approved and is authorized to transact insurance in a particular state is known as a ✔ Certificate of Authority. If a Director receives a written statement requesting a hearing, within what period of time must a trial be held? ✔ 30 days
What is the minimum age for insurance license applicants in this state? ✔ 18 An insurance license cannot be issued to a person who would, during the first year, earn an aggregate amount in commissions that would exceed what percentage of the aggregate amount represented by all other insurance business that would be procured through the applicant? ✔ 50% An initial temporary license in this state may be issued for up to ✔ 90 days. Which of the following is another term for an authorized insurer? ✔ Admitted Individual licenses must be renewed every ✔ 2 years. Chris, who is unlicensed, works part-time in her father's insurance agency. She may perform all of the following activities EXCEPT ✔ Collect premium for in-force policies and explain coverages to existing clients. When does a license renewal period begin? ✔ 90 days before expiration Which of the following insurers are owned by stockholders? ✔ Stock Which of the following is an example of an agent's fiduciary responsibilities? ✔ Forwarding premiums to the insurer An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? ✔ Pay a reduced death benefit What does "liquidity" refer to in a life insurance policy? ✔ Cash values can be borrowed at any time. The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as ✔ The policy contains sufficient cash value to cover the cost of insurance.
The Director is asked to examine documentation regarding the investigation of a life insurance claim. The Director can expect to find all of the following in the records EXCEPT ✔ An expert's conclusions regarding the initial investigation. How long must a standard insurance transaction remain on file? ✔ 5 years Which of the following entities issues Certificates of Authority? ✔ Director Life insurance policies that have been in force for three years must provide for maximum policy loan interest rate of not more than ✔ 8% per year. If the Director receives written notice demanding a hearing regarding an order, and if the order is scheduled to go into effect during the trial, then the order will be delayed. This is called ✔ Stay of Action. Which of the following best describes a misrepresentation? ✔ Issuing sales material with exaggerated statements about policy benefits How many continuing education credits must be completed every 2 years? ✔ 24 When transacting business in this state an insurer formed under the laws of another country is known as a/an ✔ Alien insurer. Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT ✔ Conditions When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will ✔ Issue the policy anyway and pay the face value to the beneficiary. A rider attached to a life insurance policy that provides coverage on the insured's family members is called the ✔ Other-insured rider.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? ✔ Size of each installment The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? ✔ The annuitant must be a natural person. The Ownership provision entitles the policyowner to do all of the following EXCEPT ✔ Set premium rates. The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? ✔ Interest only option Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must ✔ Respond to the consumer's complaint. Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? ✔ The employer is the owner and beneficiary. Which of the following is another term for the accumulation period of an annuity? ✔ Pay-in period Which of the following statements is correct regarding a whole life policy? ✔ The policyowner is entitled to policy loans. Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? ✔ Life income with period certain All of the following would be different between qualified and nonqualified retirement plans EXCEPT ✔ Taxation on accumulation A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? ✔ Proof of insurability is not required. Which of the following is NOT true regarding the accumulation period of an annuity?
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered ✔ An unfair trade practice. Each policy must contain a table showing the loan value in figures, as well as any options available if a default occurs in the payment of premiums, either during the term of the policy or during the first ✔ 20 years When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered ✔ Discrimination In order to get a nonresident license in this state, a producer must ✔ Apply and pay a fee to a nonresident state that reciprocates. Who is protected from financial loss by the Guaranty Association? ✔ Policyholders Any person investigating or settling a claim must inform the claimant in writing if the claim was accepted or denied within how many working days after all evidence of loss is received? ✔ 15 When a licensee changes his residence address, the Insurance Department must be notified within ✔ 30 days. The Director has a question for a producer about a transaction that occurred under an employment contract with a former firm. The producer must respond to the Director within ✔ 3 days. Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? ✔ Payor Benefit Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? ✔ Payor Benefit A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
✔ Revocable beneficiary. During replacement of life insurance, a replacing insurer must do which of the following? ✔ Obtain a list of all life insurance policies that will be replaced Variable Whole Life insurance is based on what type of premium? ✔ Level fixed Under an extended term nonforfeiture option, the policy cash value is converted to ✔ The same face amount as in the whole life policy. Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? ✔ 3 days The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called ✔ Waiver of premium. If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? ✔ Lump sum An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? ✔ Limited-pay Life Which of the following statements about a suicide clause in a life insurance policy is true? ✔ Suicide is excluded for a specific period of years and covered thereafter. A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the ✔ Revocable beneficiary. Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? ✔ Warranty All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT ✔ The employer can receive a current tax deduction for any contributions made to the plan.
Which of the following settlement options in life insurance is known as straight life? ✔ Life income All of the following statements about equity index annuities are correct EXCEPT ✔ The annuitant receives a fixed amount of return. What is the purpose of settlement options? ✔ They determine how death proceeds will be paid. Which is TRUE about the cash surrender nonforfeiture option? ✔ Funds exceeding the premium paid are taxable as ordinary income. Which nonforfeiture option provides coverage for the longest period of time? ✔ Reduced paid-up Children's riders attached to whole life policies are usually issued as what type of insurance? ✔ Term Which of the following is NOT a type of whole life insurance? ✔ Level term What is the purpose of a conditional receipt? ✔ It is intended to provide coverage on a date prior to the policy issue. Which of the following documents must be provided to the policyowner or applicant during policy replacement? ✔ Notice Regarding Replacement The premium of a survivorship life policy compared with that of a joint life policy would be ✔ Lower. Which of the following is NOT one of the three types of term coverage based on what happens to the face amount during the policy term? ✔ Renewable Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? ✔ Warranty Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
✔ Term rider What is the advantage of reinstating a policy instead of applying for a new one? ✔ The original age is used for premium determination. All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT ✔ Upon conversion, the death benefit of the permanent policy will be reduced by 50%. Upon policy delivery, the producer may be required to obtain any of the following EXCEPT ✔ Signed waiver of premium. What is the waiting period on a Waiver of Premium rider in life insurance policies? ✔ 6 months Methods used to pay the death benefits to a beneficiary upon the insured's death are called ✔ Settlement options. What kind of policy allows withdrawals or partial surrenders? ✔ Universal life Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? ✔ Premiums are not tax deductible as a business expense. A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as ✔ Survivor protection. What type of premium do both Universal Life and Variable Universal Life policies have? ✔ Flexible Which of the following best describes what the annuity period is? ✔ The period of time during which accumulated money is converted into income payments The Ownership provision entitles the policyowner to do all of the following EXCEPT ✔ Set premium rates. An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? ✔ $100,
✔ Rebates are allowed if it is in the best interest of the client. Who is a person, other than a viator, that enters into a viatical settlement contract? ✔ Provider The Director must examine insurers at least ✔ Every 3 years. A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases an insurance policy from the bank in the amount of the loan. This is an example of ✔ Coercion. If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered ✔ An unfair trade practice. A participating insurance policy may do which of the following? ✔ Pay dividends to the policyowner On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of ✔ Misrepresentation. Who is protected from financial loss by the Guaranty Association? ✔ Policyholders In which of the following situations is it legal to limit coverage based on marital status? ✔ It is never legal to limit coverage based on marital status. Who has the ability to reassign a policy? ✔ Policyowner The maximum civil penalty that may be assessed for a willful violation of the Insurance Code is ✔ $25,000. The type of policy that can be changed from one that does not accumulate cash value to the one that does is a ✔ Convertible Term Policy. An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? ✔ Profit sharing plan
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? ✔ When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy ✔ Required a premium increase each renewal. What is the purpose of key person insurance? ✔ To lessen the risk of financial loss because of the death of a key employee Which of the following applicants would NOT qualify for a Keogh Plan? ✔ Someone who works 400 hours per year Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? ✔ Automatic premium loan During replacement of life insurance, a replacing insurer must do which of the following? ✔ Obtain a list of all life insurance policies that will be replaced Contracts that are prepared by one party and submitted to the other party on a take-it- or-leave-it basis are classified as ✔ Contracts of adhesion. Which of the following best describes what the annuity period is? ✔ The period of time during which accumulated money is converted into income payments All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT ✔ Upon conversion, the death benefit of the permanent policy will be reduced by 50%. A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy ✔ Required a premium increase each renewal. Which of the following is INCORRECT concerning a noncontributory group plan? ✔ The employees receive individual policies. Who bears all of the investment risk in a fixed annuity? ✔ The insurance company A participating insurance policy may do which of the following?
✔ Policy summary Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another? ✔ Twisting This state provides for a temporary license to be issued to a producer's representative for all of the following reasons EXCEPT ✔ A producer's retirement. Who might receive dividends from a mutual insurer? ✔ Policyholders Concerning insurance, the definition of a fiduciary is ✔ A producer who handles insurer funds in a trust capacity. A participating insurance policy may do which of the following? ✔ Pay dividends to the policyowner Who is protected from financial loss by the Guaranty Association? ✔ Policyholders Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as ✔ Rebating. If a company has a Simplified Employee Pension plan, what type of plan is it? ✔ A qualified plan for a small business All of the following are true of an annuity owner EXCEPT ✔ The owner must be the party to receive benefits. A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as ✔ Survivor protection. Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? ✔ A policy summary A domestic insurer issuing variable contracts must establish one or more ✔ Separate accounts.
If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? ✔ The death benefit will be smaller. Which of the following types of risk will result in the highest premium? ✔ Substandard risk Which of the following is an example of a limited-pay life policy? ✔ Life Paid-up at Age 65 Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? ✔ Life income with period certain If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a ✔ Guaranteed insurability rider. Which of the following is INCORRECT regarding a $100,000 20-year level term policy? ✔ At the end of 20 years, the policy's cash value will equal $100,000. An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? ✔ Common Disaster Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid? ✔ Insuring clause Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? ✔ Joint Life Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? ✔ Automatic premium loan What is the benefit of choosing extended term as a nonforfeiture option? ✔ It has the highest amount of insurance protection.
