AD BANKER COMPREHENSIVE EXAM 2024 WITH 100% CORRECT ANSWERS GRADED A+, Exams of Business Finance

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A producer who is acting as an agent is representing:

A

The insured, the applicant and the beneficiary

B

Always the insured

C

The insured and the insurer

D

Always the insurer - correct answer ✔✔D

In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as:

A

Restricted persons

B

Considerations

C

Competent parties

AD BANKER COMPREHENSIVE EXAM

2024 WITH 100% CORRECT ANSWERS

D

Agreement - correct answer ✔✔C

A company that is licensed to sell insurance in a particular state is:

A

A domiciled company

B

A nonadmitted company

C

An authorized company

D

A foreign companyA company that is licensed to sell insurance in a particular state is: - correct answer ✔✔C

An insurance contract is an aleatory contract. This means:

A

Equal value is not given by both parties to the contract

B

The contract must be for a legal purpose

C

Parties to the contract must have the legal capacity to enter into the contract

D

Statements made in the application are guaranteed to be true in all respects - correct answer ✔✔A

Which of the following would be considered a speculative risk?

A

The possibility your car is totaled in an auto accident

B

The possibility the painting you bought might be a long-lost masterpiece

C

The possibility you will die on the job at a young age

D

The possibility you will become disabled - correct answer ✔✔B

Which is the proper term for a company owned by its policyowners?

A

A charitable insurance company

B

A reciprocal insurance company

C

A domestic insurance company

D

D

A mutual insurance company - correct answer ✔✔D

All of the following are elements of a contract, except:

A

Offer and acceptance

B

Legal purpose

C

Authority

D

Consideration - correct answer ✔✔C

Each of the following would be an element in the definition of fraud, except:

A

A false statement on the application that is material to the acceptance of the risk

B

Withholding of known material facts

C

Intentional material misrepresentation with the intent of causing injury to another party

D

An individual warrants a fact stated on the application - correct answer ✔✔D

Legally speaking, a producer has a duty when handling life insurance premiums and applications for an insurer.

A

Fiduciary

B

Undisputed

C

Negotiated

D

Professional - correct answer ✔✔A

refers to the jurisdiction where an insurer was formed or incorporated.

A

Authorized

B

Approved

C

Domicile

D

Admitted - correct answer ✔✔C

To address adverse selection what can an insurer legally do?

A

Limit the amount of coverage issued

B

Raise the premium higher than most people can afford to pay

C

Establish and enforce sound underwriting practices

D

Not offer policies to those over age 55 - correct answer ✔✔C

The relationship of a person who acts on behalf of a company whereby the person's actions can bind the company is known as:

A

Surplus lines or excess insurance

B

The law of large numbers

C

The law of agency

D

Brokerage business - correct answer ✔✔C

consists of groups of underwriters called syndicates, each of which specializes in insuring a particular type of risk.

A

Lloyds of London

B

Risk retention insurers

C

Self insurers

D

Reciprocal insurers - correct answer ✔✔A

The insurance industry is primarily regulated at the level.

A

State

B

County

C

Federal

Insurers - correct answer ✔✔A

Which of the following is NOT considered one of the essential elements of a contract?

A

Competent Parties

B

Legal Purpose

C

Offer and Acceptance

D

Conditions - correct answer ✔✔D

The most effective way to ensure that the applicant will accept the policy when it is issued is:

A

To collect the initial premium upon policy delivery, not at the time of application

B

To deliver the policy with a gift certificate to a local restaurant

C

Offer to pay the first premium for them

D

To have the applicant pay the initial premium at the time of application - correct answer ✔✔D

Which of the following is NOT a characteristic of life insurance as property?

A

It may be paid for in installments

B

It requires a fund portfolio manager

C

It creates an immediate estate

D

It requires no physical maintenance - correct answer ✔✔B

Which of the following statements about the average number of people who die each year is true?

A

It is called the mortality rate

B

It is called the principle of indemnity

C

It is called the predictability rate

D

It is called the principle of life insurance - correct answer ✔✔A

Insurers generally calculate premiums on:

A

A weekly basis

B

An annual basis

C

A monthly basis

D

A daily basis - correct answer ✔✔B

Third-party ownership refers to:

A

A situation where the beneficiary has no insurable interest in the insured

B

A situation where the beneficiary is irrevocable

C

A situation where the policyowner is someone other than the insured

D

A situation where the applicant is someone other than the payor - correct answer ✔✔C

With regard to life insurance policies, loading refers to:

A

The amount of money the insurance company reserves for expected mortality costs

B

The amount the company anticipates for dividend payout

C

Assignment of the appropriate share of the company's operating expenses to each policy

D

Surrender charges applied to the cash surrender of the policy - correct answer ✔✔C

Which statement best describes the term reserve?

A

That amount that enables the insurer to provide sales bonuses and incentives for their commissioned sales staff

B

That amount that, when increased by future premiums on outstanding policies, and interest on those premiums will enable the company to meet future death claims

C

That amount, required by law, that the company must hold in reserve to pay only cash value accumulations on permanent insurance policies

D

That amount insurer's maintain in reserve to guarantee that they can profit from future death claims - correct answer ✔✔B

Controlled business may be defined as insurance sold:

A

To individuals needing an increased amount of term insurance

B

To existing clients only

C

To anyone willing to buy

D

To the producer, the producer's family and friends, and the producer's business associates - correct answer ✔✔D

Which of the following policies could be expected to have the lowest premium?

A

Whole life

B

Endowment to age 65

C

Single pay life

D

10-pay life - correct answer ✔✔A

A variable life policy:

A

Has a fixed death benefit

B

Death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum

C

Guarantees a minimum return on the cash value account

D

Has flexible premiums that can be changed as well as frequency - correct answer ✔✔B

If an insured currently has a policy with a waiver of premium rider and should change to a more hazardous occupation, the insurance company will:

A

Void the policy

B

Continue the waiver of premium rider

C

Increase the premium

D

Cancel the waiver of premium rider - correct answer ✔✔B

D

Provides a variety of living benefits - correct answer ✔✔C

The waiver of premium rider normally expires at age:

A

B

C

D

65 - correct answer ✔✔B

Term insurance differs from permanent insurance in that term:

A

Builds cash value and provides limited death benefit options only

B

Costs more than permanent insurance

C

Builds no cash value, pays a death benefit only

D

The third year - correct answer ✔✔D

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance:

A

On his own life at certain specified ages without proof of insurability

B

On his own life at specified periods of time at a fixed guaranteed premium

C

Anytime before the age of 65

D

On his own life at specified periods, but must prove insurability - correct answer ✔✔A

In many jurisdictions, permanent policies are required to have some cash value by the end of:

A

The fourth year

B

The first year

C

The second year

D

The amount of monthly benefit selected - correct answer ✔✔B

A limited pay life policy:

A

Requires premium payments for a specified number of years or until a specified age is reached

B

Start off with small premium payments and then they increase, but only up to a specified limit

C

Is offered in limited face amounts only

D

Can only be purchased by individuals on a specified limited income - correct answer ✔✔A

Which of the following provides the basis for the benefit amount paid to an insured under a disability income rider?

A

The length of time income payments are to be paid out

B

The face amount of the policy

C

The elimination period

D

Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son, Donald. Suppose that when Donald reaches age 21 his father presents him with the policy as a gift. Which of the following statements is NOT correct?

A

Donald has enjoyed protection against the problems of premature death

B

The premium will continue to be based on his original age of 5

C

The face value of Donald's policy has increased by 5 times

D

Donald must change the beneficiaries immediately - correct answer ✔✔D

The type of policy that can be changed from one that does not accumulate cash values to one that does is a:

A

Universal life policy

B

Variable life policy

C

Permanent policy

D

Convertible term policy - correct answer ✔✔D

With a modified premium whole life contract, premium payments:

A

Are lower in the early years of the contract

B

Are invested in the stock market

C

Never change for the life of the policy

D

Are modified throughout the life of the plan and may fluctuate at the insurer's discretion - correct answer ✔✔A

With regard to the waiver of premium rider, after the disability a policyowner normally:

A

Must prove insurability to continue the policy on an annual basis

B

Must reapply for the insurance

C

Need not repay the premiums paid by the company during disability

C

Survivorship or second-to-die policy

Must repay the premiums paid by the company during disability - correct answer ✔✔C

In a whole life insurance policy:

A

The insurance protection remains level throughout the policy period, and the cash value does not impact the amount of insurance protection at all

B

The cash value is equal to the face amount of insurance throughout the life of the policy

C

The cash value provides no living benefits until the policy endows

D

The cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy - correct answer ✔✔D

Warren and Wilma have a joint life policy. Warren dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a:

A

Variable life policy

B

Level term policy

D

C

The loan value of a policy cannot exceed the current cash value

Reduced paid up policy - correct answer ✔✔C

Each of the following is a source of life insurance policy dividends, except:

A

Guaranteed cash value accumulations

B

Reductions in operating expenses

C

Savings in mortality

D

Additional interest earnings - correct answer ✔✔A

Each of the following statements about policy loans is correct, except:

A

A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value

B

If a policy has cash value, the insurance company cannot refuse to lend the policyowner money

D

C

Encumbering the proceeds of the policy

Policy loans may be made on any type of policy - correct answer ✔✔D

Why should a policyowner be especially careful when deciding to increase the amount of an outstanding policy loan?

A

If the loan amount, plus interest charged exceeds the face amount at death, the beneficiary would owe the insurance company the balance of the loan

B

If the outstanding loan balance, plus interest, equals or exceeds the cash value of the policy, the company could cancel the insurance

C

If a loan payment is not established within one year, the insurance company may cancel the policy - correct answer ✔✔B

The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following, except:

A

Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary designations

B

Transferring the proceeds of the policy

D

Commuting the proceeds of the policy - correct answer ✔✔A

The factors that determine the amount of each payment under the fixed period settlement option are:

A

Length of the fixed period, face amount of the policy and interest

B

Age of the beneficiary only

C

Length of the fixed period, face amount of the policy, interest, and age of the beneficiary

D

Length of the fixed period payout only - correct answer ✔✔A

Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991. When Fred dies, his insurance company will make settlement by paying:

A

Interest in periodic payments to Wilma

B

$100,000 total death benefit amount to Wilma immediately

C

Nothing, until a period of 5 years has elapsed

D

Equal lump sum payments to both Wilma and Pebbles immediately - correct answer ✔✔A

If a policyowner has a $100,000 policy with an accumulated cash value of $6,000, the policyowner can borrow up to:

A

The entire accumulated cash value of $6,000, less interest for 1 year

B

Never more than the full face amount of the policy

C

The total amount of premiums paid into the policy

D

50% of the accumulated cash value - correct answer ✔✔A

The settlement option that provides for the proceeds plus interest to be paid in installments for a specified period of time is called the:

A

Life income period certain option

B

Joint life option

C

Fixed amount option

D

Fixed period option - correct answer ✔✔D

Collateral for a policy loan is:

A

The cash value of the policy itself

B

The premiums applied to the cash value account minus the load

C

Not required at all

D

Provided by the policy's death benefit - correct answer ✔✔A

An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company:

A

May apply the cash values to purchase additional paid up insurance

B

May exercise any nonforfeiture option it deems appropriate

C

Applies the remaining cash values into a deferred annuity

D

Will automatically institute the extended term option - correct answer ✔✔D

If an insured has an outstanding loan of $5,000 on a policy with a face amount of $25,000, at death the company will:

A

Pay the beneficiary $20,000, after subtracting the amount of the outstanding loan

B

Cancel the policy

C

Pay the beneficiary the full $25,000 face amount

D

Institute a required loan repayment schedule before allowing the death claim to be processed - correct answer ✔✔A

What is a postmortem dividend?

A

A second dividend declared after the initial dividend had been paid out

B

A dividend declared but held for future payout