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Life insurance exam questions WI
Questions with Answers 2024
What is the purpose of the Wisconsin State Life Insurance Fund? a) to offer low-cost life insurance to state residents b) To protect insured against insolvent insurers c) To advertise different types of life insurance policies available in the state d) To provide life insurance through licensed intermediaries ✔ a An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a) The premium for individual coverage will be based upon the insured's attained age b) The insured may choose to convert to term or permanent individual coverage c) The insured would not need to prove insurability for a conversion policy d) The insured may convert coverage to an individual policy within 31 days ✔ b During a life insurance policy replacement, the insurer is required to provide the policyowner a free-look period of at least a) 10 days b) 20 days c) 30 days d) 90 days ✔ c Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) the former wife of the deceased insured b) a minor son of the insured c) a business partner of the insured d) the wife of the deceased insured ✔ b All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a) The policy is owned by the company b) Any type of insurance policy may be used c) The employer pays a bonus to a selected employee to fund the policy
d) It is considered a nonqualified employee benefit ✔ a Which of the following is NOT true regarding policy loans? a) Policy loans can be repaid at death b) an insurer can charge interest on outstanding policy loans c) a policy loan may be repaid after the policy is surrendered d) Money borrowed from the cash value is taxable ✔ d A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a) The amount of the distribution is reduced by the amount of a 20% withholding tax b) No taxes are due since the plan participant is over age 59 1/ c) There is a 10% early withdrawal penalty d) The amount distributed is subject to ordinary income tax ✔ a All of the following are true regarding the guaranteed insurability rider EXCEPT a) this rider is available to all insureds with no additional premium b) The insured may purchase additional coverage at the attained age c) The insured may purchase additional insurance up to the amount specified in the base policy d) It allows the insured to purchase additional amounts of insurance without providing insurability only at specified dates or events ✔ a A claimant, whi is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of a) 24 months b) 0 months c) 5 months d) 12 months ✔ c In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to a) the policy owner b) the insurance company c) The contingent beneficiary d) the insured's spouse
a) when the applicant turns in the application b) Up until the day before policy delivery c) on the day of policy delivery d) 30 days after policy delivery ✔ a Life insurance ppolicy illustration riles apply to which of the following types of policies? a) Whole life insurance b) Variable life insurance c) Individual annuity contracts d) Life insurance with a face amount of less than $10, ✔ a The dividend option in which the policyowner uses dividends to purchase a term policy or one year is referred to as the a) accelerated endowment b) Paid-up additions c) One-year term option d) Paid-up option ✔ c Which of the following is true regarding a market value adjusted annuity? a) the insurer bears all the market risk of changing interest rates b) there are no penalties for a premature surrender of the annuity c) it provides a level benefit payment d) the ownder is guaranteed a fixed interest rate for a specific period of time ✔ d Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? a) Medical information b) Inspection report c) Agent's report d) General information ✔ a Which of the following is NOT an example of an insurable interest? a) Employer in employee b) child in parent c) Debtor in creditor
d) business partners in each other ✔ c All of the following statements are true regarding tax-qualified annuities EXCEPT a) annuity earnings are tax deferred b) they must be approved by the IRS c) withdrawals are taxed d) employer contributions are not tax deductible ✔ d All other factors being equal, which of the following individuals would receive the largest monthly check from a single premium straight life immediate annuity? a) a 60-year-old man b) a 60-year-old woman c) a 50-year-old man d) a 50-year-old woman ✔ a If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than a) upon issuance of the policy b) within 30 days after the first premium payment was collected c) prior to filling out an application for insurance d) with the policy ✔ d The two types of assignments are a) absolute and partial b) complete and partial c) complete and proportionate d) absolute and collateral ✔ d An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe? a) reduction of premium b) accumulation at interest c) cash option d) flexible premium ✔ a
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) interest-sensitive whole life b) life annuity with period certain c) increasing term d) limited pay whole life ✔ d For how long is an insurance company allowed to defer policy loan requests? a) 30 days b) 60 days c) 6 months d) 1 year ✔ c 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 the coverage begin? a) When the agent submits the application to the company and the company issues a conditional receipt b) when the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health c) on the designated effective date d) on the application date ✔ b If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT a) erase the incorrect answer and record the correct answer b) Draw a line through the first answer, record the correct answer, and have the applicant initial the change c) note on the application the reason for change d) destroy the application and complete a new one ✔ a Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase? a) Withdrawn amounts are taxed on a last in, first out basis b) Withdrawn amounts are taxed on a first in, last out basis c) taxes are deferred on withdrawn amounts, but a flat penalty is charged d) taxes are deferred on withdrawn amounts
✔ a Which of the following is NOT an allowable 1035 exchange? a) A whole life insurance policy is exchanged for a term insurance policy b) A whole life insurance policy is exchanged for a Universal life insurance policy c) an annuity is exchanged for another annuity d) a life insurance policy is exchanged for an annuity ✔ a The Ownership provision entitles the policyowner to do all of the following EXCEPT a) set premium rates b) receive a policy loan c) assign the policy d) designate a beneficiary ✔ a All of the following statements concerning dividends are true EXCEPT a) dividend amounts are guaranteed in the policy b) lower insurance company costs generate higher dividends c) they stem from favorable underwriting experience d) favorable investment results generate higher dividends ✔ a 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? a) joint and survivor b) fixed amount option c) Interest only option d) life income with period certain ✔ c The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a) the beneficiary's life expectancy b) projected interest rates c) face amount of the policy d) the insured's age at death
Which of the following us used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are comparatively priced? a) policy cost guides b) consumer price indices c) policy cost indices d) cost comparison methods ✔ d What determines the penalty for surrendering a market value adjusted annuity prematurely? a) the current interest rate at the time of surrender b) the flat fee determined by an index of interest gains and the amount of time the annuity would take to mature c) there are no penalties imposed for surrendering annuities prematurely d) the guaranteed minimum interest rate provided in the contract ✔ a 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? a) 401(k) plan b) Tax-sheltered account plan c) HR 10 plan d) profit sharing plan ✔ d Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) premiums are not tax-deductible as a business expense b) premiums are tax-deductible as a business expense c) premiums are tax-deductible by the key employee d) premiums are taxable to the employee ✔ a Which of the following settlement options in life insurance is known as straight life? a) single life b) life with period certain c) fixed amount d) life income ✔ d
According to the entire contract provision, a policy must contain a) a declarations page with a summary of insureds b) Buyer's guide to life insurance c) listing of the insured's former insurer(s) for incontestability provisions d) a copy of the original application for insurance ✔ d An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called a) reduction of premiums b) paid-up additions c) one-year term purchase d) accumulation at interest ✔ b An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $10,000, no tax consequence b) $8,000, no tax consequence c) $8,000, tax on growth only d) $10,000, tax on growth only ✔ a An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a) recession of the policy b) adjustment in the amount of death benefit c) no change whatsoever d) automatic laps ✔ b 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 a) Revocable beneficiary b) Secondary beneficiary c) Contingent beneficiary d) Irrevocable beneficiary
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a) pay the policy proceeds up to an established unit b) not pay the policy proceeds under any circumstances c) automatically pay the policy proceeds d) pay the policy proceeds only if it would have issued the policy ✔ d 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? a) reduction of premium b) paid-up addition c) accumulation at interest d) cash option ✔ a All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a) the annual dividend is retained by the company b) the interest is credited at a rate specified by the policy c) the policyholder has the right to withdraw the accumulations at any time d) the interest is not taxable since it remains inside the insurance policy ✔ d Which of the following is the best reason to purchase life insurance rather than annuities? a) to create regular income payments b) to liquidate a sum of money over time c) to create an estate d) to liquidate a sum of money over a period of years ✔ c What is the penalty for IRA distributions that are below the required minimum for the year? a) 10% b) 25% c) 50% d) 60% ✔ c
Which of the following best describes annually renewable term insurance? a) it requires proof of insurability b) neither the premium nor the death benefit is affected by the insured's age c) it provides an annually increasing death benefit d) it is level term insurance ✔ d A provision in a life or health insurance policy that may assist an insurance company in determining the cause of death of an insured is called a) attending physician's report b) medical exam c) autopsy d) inspection ✔ c An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of report is that? a) agent's report b) underwriter's report c) inspection report d) medical information bureau's report ✔ c What is the purpose of the Buyer's guide? a) to provide the name and address of the agent/producer issuing the policy b) to list all policy riders c) to provide information about the issued policy d) to allow the consumer to compare the costs of different policies ✔ d An agent's advertisements for life insurance must be approved by a) the Governor b) the agent c) the agent's company d) the Commissioner ✔ c 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?
c) insurers must be licensed and authorized to transact life insurance and annuity business d) insurers may establish one or more separate accounts for allocation of settlement or dividend options ✔ b Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? a) state education waiver b) viatical settlement c) estate conversion d) life insurance proceeds ✔ d Employer contributions are made to a qualified plan a) may discriminate in favor of highly paid employees b) are after-tax contributions c) are taxed annually as a salary d) are subject to vesting requirements ✔ d An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated information during the application process. What can they do? a) refuse to pay the death benefit because of the misstatement on the application b) pay a decreased death benefit c) sue for the right to not pay the death benefit d) pay the death benefit ✔ d Annuities can be used to fund which of the following? a) group life insurance b) estate creation c) retirement plans d) variable life insurance ✔ c Which of the following characteristics applies to defined benefit plans but not defined contribution plans? a) they are qualified plans b) employers can choose not to make contributions for a particular year
c) they are subject to the rules of ERISA d) the amount of contributions made by the employer is determined by an actuarial formula ✔ d Which policy component decreases in decreasing term insurance? a) face amount b) cash value c) dividend d) premium ✔ a Which of the following is TRUE about nonforfeiture values? a) policyowners do not have the authority to decide how to exercise nonforfeiture values b) they are required by state law to be included in the policy c) they are optional provisions d) a table showing nonforfeiture values for the next 10 years must be included in the policy ✔ b When replacing a policy, an insurer must maintain a file containing copies of all statements for a) 10 years b) As long as the insurer remains in business c) 3 years d) 5 years ✔ d Which of the following statements is correct regarding a whole life policy? a) cash values are not guaranteed b) the policy premium is based on the attained age c) the death benefit may increase or decrease during the policy period d) the policyowner is entitled to policy loans ✔ d If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to a) live at least to his life expectancy b) die before his life expectancy c) name a beneficiary d) name another annuitant
✔ c Which of the following is TRUE of a qualified plan? a) it may allow unlimited contributions b) it has a tax benefit for both employer and employee c) it does not need to have a vesting schedule d) it may discriminate in favor of highly paid employees ✔ b If an insured continually uses the automatic premium loan option to pay the policy premium, a) The insurer will increase the premium amount b) the policy will terminate when the cash value is reduced to nothing c) the face amount of the policy will be reduced by the automatic premium loan amount d) the cash value will continue to increase ✔ b Traditional IRA contributions are tax deductible based on which of the following? a) owner's age b) IRA limit c) owner's income d) how long the plan has been in force ✔ c No individual life insurance policy may be contested after it has been in force for a) 1 year b) 2 years c) 3 years d) 5 years ✔ b What type of insurance would be used for a Return of Premium rider? a) decreasing term b) annually renewable term c) increasing term d) level term ✔ c During replacement of life insurance, a replacing insurer must do which of the following? a) designate a new producer for a replaced policy
b) send a copy of the notice regarding replacement to the department of insurance c) obtain a list of all life insurance policies that will be replaced d) guarantee a replacement for each existing policy ✔ c In the event the key employee quits or is terminated, what provision allows the policyowner to transfer coverage to the replacement employee, provided the new employee provides evidence of insurability? a) consideration b) misstatement of age c) free look d) change of insured ✔ d Which of the following is usually true of a participating life insurance policy? a) it may be converted to a term life policy b) it pays dividends to stockholders c) it assesses premiums against stockholders d) it pays dividends to policyowners ✔ d 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? a) proof of insurability is not required b) medical exam c) her parents' federal income tax receipts d) medical exam and parents' medical history ✔ a Variable whole life insurance is based on what type of premium? a) graded b) level fixed c) increasing d) flexible ✔ b Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the workers' earnings and retirement age? a) FICA
