INDIANA STATE LIFE AND HEALTH INSURANCE EXAM 2024-2025, Exams of Nursing

Download INDIANA STATE LIFE AND HEALTH INSURANCE EXAM 2024-2025 and more Exams Nursing in PDF only on Docsity! 1 | P a g e INDIANA STATE LIFE AND HEALTH INSURANCE EXAM 2024-2025 WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED ANSWERS |FREQUENTLY TESTED QUESTIONS AND SOLUTIONS |ALREADY GRADED A+|NEWEST|GUARANTEED PASS |LATEST UPDATE A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. which of these statements made by the producer would be correct? Straight life accumulates faster than Limited-Pay Life 20-Pay Life accumulates cash value faster than Straight Life Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurers financial rating 20-Pay Life and Straight Life accumulate cash value at the same rate 20-Pay Life accumulates cash value faster than Straight Life In the event of employment termination, a person covered by a group policy also has the right to convert such coverages to an individual policy within____days without proving insurability? 15 30 31 45 31 2 | P a g e Which of these is considered a statement that is assured to be true in every respect? Estoppel Warranty Guarantee Representation Warranty Which of the following is a requirement to obtain a nonresident producer license in Indiana? The producer must be at least 21 years of age The producers state of residence must have reciprocity with Indiana The producer must be bonded in the producers state of domicile The producer must pass a special examination for nonresident producers The producers state of residence must have reciprocity with Indiana Which of the following is the reimbursement of benefits for the treatment of a beneficiary's injuries caused by a third party? Indemnity Subrogation Legal Action Consideration Subrogation Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options? Modified Whole Life Variable Life Universal Life Adjustable Life Variable Life P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount? Accelerated Benefits Provision Entire Contract Accidental Death & Dismemberment Clause Consideration Clause 5 | P a g e Fixed Amount Life Income Life Income Why would the Insurance Commissioner issue a temporary license? To allow a person who failed the state exam to conduct insurance business To allow a nonresident producer to conduct business in Indiana To allow the personal representative of a deceased producer to provide service to existing policyowners To allow a producer to sell for an unauthorized insurer To allow the personal representative of a deceased producer to provide service to existing policyowners What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained? State Guaranty Association Fair Labor Standards Board Fair Credit Reporting Act National Association of Insurance Commissioners Fair Credit Reporting Act An Indiana resident insurance producer must preform which of the following actions to continue with their license? Retake the state exam Complete a pre-licensing course Meet continuing education requirements Maintain a sales quota Meet continuing education requirements Which of these is considered a mandatory provision? Payment of Claims Insurance with Other Insurers Misstatement of Age Change of Occupation Payment of Claims 6 | P a g e S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy? Accelerated death benefit rider Return of premium rider Family income rider Term rider Return of premium rider XYZ Corp was issued a Group Health policy for its employees. Under this plan a? Certificate must be issued to XYZ, and a policy must be issued to each employee Certificate must be issued to XYZ and each employee Policy must be issued to XYZ, and a certificate must be issued to each employee Policy must be issued to XYZ and each employee Policy must be issued to XYZ, and a certificate must be issued to each employee The provision that defines to whom the insurer will pay benefits to is called? Entire Contract Proof of Loss Claim Form Payment of Claims Payment of Claims Convincing a prospective insured to buy an insurance policy based on exaggerations is considered to be a form of? Rebating Intimidation Twisting Misrepresentation Misrepresentation An insurance company may not reject a prospective insured's life application on the basis of which of the following factors? Hobbies Weight Gender Medical History 7 | P a g e Gender The free-look period of life insurance policies issued in Indiana is___days? 10 14 30 45 10 A domestic insurance company in Indiana must? Own real estate in Indiana Write insurance on risks located only in Indiana Be incorporated and formed in Indiana Honor the charter of the NAIC Be incorporated and formed in Indiana How are surrender charges deducted in a life policy with a rear-end loaded provision? Deducted from the death benefit Deducted when the policy is discontinued Deducted from policy's cash value Deducted when assigned to another policyowner Deducted when the policy is discontinued An example of false advertising would be Paid testimonials from celebrity endorsements An insurer exaggerating its dividends in a magazine advertisement An producer spending more than $25 on marketing gifts for a client An insurer advertising in an insurance trade journal An insurer exaggerating its dividends in a magazine advertisement 10 | P a g e Decreasing Term Which of the following statements is correct about the Indiana Life and Health Insurance Guaranty Association? It is governed by the NAIC It is an agency of the state government It is a voluntary association of admitted Indiana insurance companies It protects Indiana insurance policyowners in the event an insurance company becomes insolvent It protects Indiana insurance policyowners in the event an insurance company becomes insolvent The___must provide an insured with proper disclosure concerning the replacement of a life insurance policy? Compliance Officer Underwriter Commissioner Producer Producer Insurance policies are offered on a "take it or leave it" basis, which make them? Conditional Contracts Aleatory Contracts Unilateral Contracts Contracts of Adhesion Contracts of Adhesion A noncontributory group term life plan is characterized by? The entire cost of the plan is paid for by the employer The entire cost of the plan is paid for by the employee The cost of the plan is shared by both employer and employee Both employer and employee must provide evidence of insurability The entire cost of the plan is paid for by the employer Who is responsible for determining if Long-Term Care coverage is appropriate to meeting an applicant's needs? 11 | P a g e Commissioner Applicant Producer Insurance Company Producer If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? Insurer Beneficiary Reinsurer Insured Insured Which of the following is not an unfair claim settlement practice? Failing to acknowledge and act promptly with respect to an insurance claim Compelling an insured to initiate a lawsuit by offering less on an insurance claim Failing to accept or deny a claim within reasonable time after proof of loss is submitted Needing written documentation of claim details Needing written documentation of claim details An example of rebating would be A mutual insurance company paying dividends to its policyowners Reducing the premiums across the board for a specific risk class Returning a portion of a premium as inducement to purchase insurance Using intimidation in order to restrain or monopolize the business of insurance Returning a portion of a premium as inducement to purchase insurance J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used? Irrevocable Contigent 12 | P a g e Primary Revocable Revocable If a producer commits an act of coercion or intimidation, how would the producer's insurance company be held responsible for this act? If the insurer only suspends the producer, not terminate If the insurer reduces the commission level of the producer If the insurer approves of the act If the insurer does not make a public announcement of the act If the insurer approves of the act With Optionally Renewable Health policies, the insurer may? Renew the policy only if no claims have been filed the previous year Renew the policy only with the insured'd consent Review the policy whenever they please and determine whether or not to renew it Review the policy annually and determine whether or not to renew it Review the policy annually and determine whether or not to renew it With Optionally Renewable Health policies, the insurer may? Renew the policy only if no claims have been filled the previous year Renew the policy only with insured's consent Review the policy whenever they please and determine whether or not to renew it Review the policy annually and determine whether or not to renew it Review the policy annually and determine whether or not to renew it A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered except for? Hospital Charges Physician Fees 15 | P a g e Offering a client something of value not stated in the contract in exchange for their business Using intimidation in order to restrain or monopolize the business of insurance Offering a client something of value not stated in the contract in exchange for their business What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a simple retirement plan? 25 50 100 250 100 Which is true concerning a Variable Universal Life policy? Policyowner controls where the investment will go and selects the amount of the premium payment Policyowner has no say where the investment will go but can choose the premium mode The investment vehicle for this type of policy is held in the insurer's general portfolio The death benefit can vary but the policyowner has no say in the premium amount paid Policyowner controls where the investment will go and selects the amount of the premium payment According to Indiana Law, how long can statements made by an Applicant on a Health insurance policy be contested? 2 Years 3 Years Anytime During the Free-Look period 2 Years What is the Suicide provision designed to do? Decline an applicant who is contemplating suicide Safeguard the insurer from an applicant who is contemplating suicide Protect the insurer from ever paying a claim that results from suicide Allows the insurer the option to pay a death benefit in the event of suicide 16 | P a g e Safeguard the insurer from an applicant who is contemplating suicide which of the following actions is not possible with a Universal Life policy? Policy's cash value may be used to pay premiums Premium payments may be made at unscheduled times Premiums may be applied as a credit against income tax Face amount may be adjusted Premiums may be applied as a credit against income tax A level premium indicates? The premium is fixed for a period stated in the contract, then becomes variable The premium con only be changed with the consent of the insurer The premium stays level until the policy's renewal date The premium is fixed for the entire duration of the contract The premium is fixed for the entire duration of the contract which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value? 17 | P a g e Life Paid-Up at age 70 20-Pay Life Increasing Term to age 65 Straight Life 20-Pay Life A life insurance application must be signed by all of these except? The policyowner The agent the insured (if an adult) Beneficiary Beneficiary Which type of contract liquidates an estate through recurrent payments? Universal Life Insurance Whole Life Insurance Annuity 401k Annuity Which of the following situations does a Critical Illness plan cover? Asthma Leukemia Alcohol Rehabilitation Severe car accident Leukemia Group life insurance policies are generally written as? A term rider Annually renewable term Increasing term Group whole life Annually renewable term Which of the following statements is correct about the insurance commissioner's authority to examine the business records of a producer? 20 | P a g e 3 Years 4 Years 1 Year K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this? Variable Life Adjustable Life Graded Premium Whole Life Modified Whole Life Modified Whole Life which of these is not considered to be an element of an insurance contract? The offer Acceptance Negotiating Consideration Negotiating Which of these is considered a true statement regarding Medicaid? Funded by both state and federal governments Intended to be used by individuals age 65 and older Provides disability income benefits Automatically covers those receiving Social Security disability benefits Funded by both state and federal governments Which of the following does Social Security not provide benefits for? Survivorship Dismemberment Disability Retirement Dismemberment 21 | P a g e All of the following statements are true regarding a policy's Grace Period except? Past due premiums are waived Policy loans may still be made Full coverage continues Grace period terms are stated in the policy Past due premiums are waived Which of he following would be a valid reason for suspending or revoking an insurance producer's license? The producer has been convicted of a misdemeanor within the past 10 years The producer unintentionally made a material misstatement on the license application The producer has misappropriated money held in a fiduciary capacity The producer has filled for personal bankruptcy within the last 5 years The producer has misappropriated money held in a fiduciary capacity W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a? Flexible Premium Deferred annuity Variable annuity Immediate annuity Straight Life annuity Immediate annuity An individual covered under a Group Life insurance policy is considered to be a? Annuitant Policyowner Certificate Holder Contingent Certificate Holder A policy of adhesion can only be modified by whom? The agent The applicant The primary beneficiary The insurance company 22 | P a g e The insurance company Kathy has a family Health Insurance policy where any dependent children she has are removed from the policy once they have reached a certain age. This policy is known as? Maturation Date Coming of Age Limiting Age Expiration Date Limiting Age Which of the following is a standard provision of the conversion privileges in a Group Life policy? Group Life coverage can only be converted if the employer pays for the individual policy Group Life coverages can normally be converted to an individual policy within 6 months Group Life coverages can only be converted by providing evidence of insurability Group Life coverage can be converted to an individual policy at regular rates on an attained-age basis Group Life coverage can be converted to an individual policy at regular rates on an attained-age basis A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies? Proceeds will go to the primary beneficiary's estate Probate will decide who receives proceeds Proceeds will go to the contingent beneficiary proceeds will go to the insured's estate Proceeds will go to the contingent beneficiary M is insured under a basic Hospital/Surgical Expense policy. A physician performs surgery on M. What determines the claim M is eligible for? Claim payment is equal to physician's actual charges Claim payment is negotiated between physician and patient 25 | P a g e Claim will be denied and policy terminated Claim will be partially paid claim will be paid Claim will be denied Claim will be denied Medicare Part B does not cover? Occupational Therapy Inpatient Hospital Services Physician and Surgeon Services Medical Equipment Rental Inpatient Hospital Services Qualified Long-Term Care policies may take into consideration an applicant's pre-existing conditions for a maximum of not more than __ month(s) prior to the effective date of coverage? 1 6 12 24 6 One becomes eligible for Social Security disability benefits after having been disabled for? 3 Months 5 Months 6 Months 12 Months 5 Months How many days is a temporary producers license valid? 30 60 90 180 180 In Indiana, the maximum fine the the commissioner can impose on a producer or company who violates a cease and desist order is___per violation? $10,000 26 | P a g e $15,000 $20,000 $25,000 $25,000 Which of these is an example of twisting? A producer maliciously aligns another insurance company's financial status A producer misrepresents a policy to induce a policyowner to surrender an existing policy A producer reduces the commission in order to sell a policy A producer induces a policyowner with something of value to purchase a policy A producer misrepresents a policy to induce a policyowner to surrender an existing policy Which of the following is a requirement to obtain a nonresident producer license in Indiana? Maintain a specific sales quota in resident state Own real estate in Indiana Be licensed as a producer in the producer's state of domicile Pass a special examination for nonresident producers Be licensed as a producer in the producer's state of domicile P is a producer who is licensed in Indiana, but a resident of Michigan. In Indiana , P is considered to be a____Producer? Nonresident Foreign Alien Reciprocal Nonresident If an existing Accident and Health policy is being replaced with a new policy, the decision to replace should not be based on? Waiting Periods Commissions to be Paid Exclusion and Limitations Underwriting Requirements 27 | P a g e Commissions to be Paid A domestic insurance company in Indiana must? Be organized under Indiana insurance laws Own real estate in Indiana Write insurance on risks located only in Indiana Honor the charter of the NAIC Be organized under Indiana insurance laws Which of the following is a requirement to obtain a nonresident producer license in Indiana? The producer must be at least 21 years of age The producer's state of residence must have reciprocity with Indiana The producer must be bonded in the producer's state of domicile The producer must pass a special examination for nonresident producers The producer's state of residence must have reciprocity with Indiana What is Indianas definition of Life insurance replacement? A transaction in which coverage on an existing policy is increased A transaction in which group life coverage is converted to an individual policy A transaction in which a new policy is bought and an old policy is terminated A transaction in which a policyowner reinstates a lapsed policy A transaction in which a new policy is bought and an old policy is terminated Upon reaching the limiting age, a handicapped child can extend their health insurance coverage as a dependent? Only if the child is incapable of employment and chiefly dependent on the policyowner For up to an additional 10 years only Only physically disabled 30 | P a g e Family's income level must be greater than 150% of Federal poverty level, but less than 200% Must have been born in the united States to qualify Must have been born in the united States to qualify As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of? Coercion Defamation Rebating Misrepresentation Coercion Which of these statements regarding health coverage for physically handicapped dependents is false? The dependent must have been over 10 years of age when the handicap was insured The dependent must have been covered under the insureds policy at the time the handicap was insured The dependent must rely chiefly on the policyowner for support and maintenance The dependent must agree to periodic medical examinations at the request of the insurance company The dependent must have been over 10 years of age when the handicap was insured Life insurance replacement regulation protects the interests of? The Policyowner The Producer The Insurer The NAIC The Policyowner What is the purpose of the Indiana Life and Health Insurance Guaranty Association? Ensures that claims filled against insolvent insurance companies will be paid Enforces Indianas insurance regulations Approves policy forms Underwrites high-risk insurance applicants Ensures that claims filled against insolvent insurance companies will be paid 31 | P a g e The _____ must provide an insured with proper disclosure concerning the replacement of a life insurance policy? Compliance Officer Underwriter Commissioner Producer Producer In Indiana, which o the following is considered an Unfair Competition Practice? Replacement Coercion Aleatory Subrogation Coercion The Insurance Commissioner may suspend, revoke, or refuse to renew a producer's license for which of the following reasons? Producer files for bankruptcy Producer engages in the replacement of an existing policy Producer has used fraudulent, coercive, or dishonest practices Producer does not meet a sales quota Producer has used fraudulent, coercive, or dishonest practices The Commissioner is appointed be the? Governor Attorney General State Senate NAIC State Senate The coordination of benefits provision exists in order to? Avoid duplication of benefits payments Avoid excessive hospitalization Lower insurance premiums 32 | P a g e Maximize patient care Avoid duplication of benefits payments According to Indiana law, how long is the Free Look period for a Medicare Supplement Policy? 10 Days 20 Days 30 Days 40 Days 30 Days How long does an insurance company appointment remain in force for? 1 Year 2 Years 3 Years Until Terminated Until Terminated Which of the following is not an unfair claim settlement practice? Failing to acknowledge and act promptly with respect to an insurance claim Compelling an insured to initiate a lawsuit be offering less on an insurance claim Failing to accept or deny a claim within reasonable time after proof of loss is submitted Needing written documentation of claim details Needing written documentation of claim details The Affordable Care Act provides health coverage to dependents up to the age of? 18 21 26 28 26 to continue health coverage for a newborn, the policyowner must notify the insurer of birth and provide the first premium payment within ____ days of birth? 10 15 35 | P a g e Passing a separate examination specifically devoted to Long Term Care Eight hours of post licensing education specifically devoted to LTC S is a life insurance policyowner who enters into a written agreement to receive immediate cash in exchange for the sale transfer of her life insurance policy. This agreement is referred to as a? 1035 Exchange Viatical Settlement Equity Cash Agreement Cash Conversion Viatical Settlement The Indiana Children's Health Insurance Program provides children of need with health benefits until the child reaches age ____ or becomes financially ineligible, whichever is earlier? 18 19 20 21 19 A life policy loan in Indiana cannot charge a fixed of interest higher than? 7% 8% 9% 10% 8% According to Indianas Mammography Coverage statue, which of these benefits are considered mandatory in every Medical Expense Policy? One baseline mammogram for women between ages 30-34 One mammogram every year for women aged 35 and older One mammogram every year for women aged 40 and older Two mammograms every year for those considered "women at risk" One mammogram every year for women aged 40 and older What is the minimum Grace Period for an individual health policy that is paid monthly? 36 | P a g e 5 Days 10 Days 15 Days 30 Days 10 Days What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan? 30% 40% 50% 60% 50% The Common Disaster clause provides that if both the insured and sole named beneficiary were to die in a common accident, which of the following is true? This clause provides the payment of proceeds to the insured's estate This clause provides the payment of proceeds to the beneficiary's estate The estate taxes in the insured's estate may be reduced The estate taxes in the beneficiary's estate may be reduced This clause provides the payment of proceeds to the insured's estate What is considered a valid reason for small businesses to insure the lives of its major shareholders? To provide an income for the surviving dependents Reduce the company's tax liability To pay for final expenses Fund a buy-sell agreement Fund a buy-sell agreement Which of these Nonforfeiture Options continue a build-up of cash value? Waiver of Premium Extended Term Reduced Paid-Up Cash Surrender 37 | P a g e Reduced Paid-Up A producer's license may be denied, suspended, or revoked if the license? Engages in replacement of an existing policy Is found guilty of misrepresentation in obtaining the license Files for bankruptcy Does not meet a sales quota Is found guilty of misrepresentation in obtaining the license When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a? Federal Fair Credit Act Violation Title 18 Fraud Violation Anti-Money Laundering Violation Unfair Trade Practice Violation Anti-Money Laundering Violation A policyowner is allowed to pay premiums more than once a year under which provision? Insuring Consideration Payor Mode of Premium Mode of Premium Non-occupational disability coverage is designed for? 24 hour protection Those who are exempt from Workers' Compensation coverage Sole proprietors and self-employed individuals Employees who suffer non-work related disabilities, since work-related disabilities are covered be Workers' Compensation Employees who suffer non-work related disabilities, since work-related disabilities are covered be Workers' Compensation 40 | P a g e An example of unfair discrimination would be? Declining an insurance application because of involvement in a hazardous occupation Offering the same terms of coverage to different policyowners in the same risk classification Offering different terms of coverage for different policyowners having the same risk classification Issuing a policy at a substandard rate because of poor health Offering different terms of coverage for different policyowners having the same risk classification An individual who in any manner sells, solicits, or negotiates insurance on behalf of insurance companies for compensation is an insurance? Solicitor Adjuster Producer Representative Producer What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy? Premiums may increase at time of renewal Premiums may increase at any time Policy may be renewed at the discretion of the insured Policy may be amended by insured at any time Premiums may increase at time of renewal K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable? Increasing Decreasing Adjustable Level Level An insurance applicant must be informed of an investigation regarding his/her reputation and character according to the? State Guaranty Association 41 | P a g e Fair Labor Standards Board Fair Credit Reporting Act National Association of Insurance Commissioners Fair Credit Reporting Act Which of the following consists of an offer, acceptance, and consideration? Warranty Estoppel Contract Representation Contract Life insurance replacement regulation protects the interest of? The Policyowner The Producer The Insurer The NAIC The Policyowner If an annuity is terminated prior to beginning of the income payment period, the contract owner receives? No refund money The contract surrender value at the time All premiums paid up to the date of termination Reimbursement of all expenses deducted from the contract value The contract surrender value at the time Eligible employees must be added to group health coverage no later than ____ days after their first day of employment? 30 45 42 | P a g e 60 90 90 ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has? Waived one of its legal rights Issued a voidable policy Committed an act of fraud Assigned the risk to a reinsurer Waived one of its legal rights J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct? The gross premium is higher on a monthly payment mode as compared to being paid annually The gross premiums is lower on a monthly payment mode as compared to being paid annually The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis The gross premium is higher on a monthly payment mode as compared to being paid annually Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant? Geographical Location Source of Income Risk Classification Marital Status Risk Classification From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant? Fair Credit Reporting Act Medical Information Bureau Part 3 of the Application Life Insurance Buyer's Guide Fair Credit Reporting Act 45 | P a g e Notice of Claim Coordination of Benefits Coordination of Benefits An example of rebating would be A mutual insurance company paying dividends to its policyowners Reducing the premiums across the board for a specific risk class Offering a client something of value not stated in the contract in exchange for their business Using intimidation in order to restrain or monopolize the business of insurance. Offering a client something of value not stated in the contract in exchange for their business All of the following statements regarding group health insurance is true except? Premiums are usually determined by the claims experience of the group A master contract is issued for the group An individual policy is given to each member Group health insurance premiums are typically lower than individual health insurance premiums An individual policy is given to each member 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? Aleatory Adhesion Unilateral Consideration Aleatory Which of the following statements regarding a Tax Sheltered Annuity is incorrect? The income from the TSA is received income tax-free The amount contributed is deductible from taxable income 46 | P a g e The interest earnings are tax deferred A tax-sheltered annuity is available to employees of non-profit organizations The income from the TSA is received income tax-free An applicant must receive an Outline of Coverage when an applicant is taken for a? Endowment Annuity Medicare Supplement Policy Universal Life Policy Medicare Supplement Policy What would be an accurate definition of "controlled business"? Insurance business that is written on the producer's own life, property, or interests Insurance business obtained by an agent through coercion, intimidation, or boycotting Insurance business that is obtained through false advertising Insurance business that is obtained by replacing an existing policy through misrepresentation Insurance business that is written on the producer's own life, property, or interests When must insurable interest be present in order for a life insurance policy to be valid? When the insured dies Within the incontestability period When the application is made Before the insured dies When the application is made Who elects the governing body of a mutual insurance company? Chairman of the board Bondholders Stockholders Policyholders Policyholders 47 | P a g e In Indiana, the maximum fine that the Commissioner can impose on a producer or company who violates a cease and desist order is____per violation? $10,000 $15,000 $20,000 $25,000 $25,000 An individual life insurance policy sold in Indiana can be contested by the insurer only during the first____years of the contract? 2 3 4 5 2 An example of an Unfair Claims Settlement Practice is? Making it mandatory that the proof of loss be provided for each claim Requiring a time for submitting a claim Paying a claim in a timely matter Turning down a claim without providing the basis of denial Turning down a claim without providing the basis of denial The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called? Entire Contract Provision Consideration Clause Insuring Agreement Assignment Agreement Insuring Agreement Which of the following is the most important factor when deciding how much Disability Income coverage an applicant should purchase? 50 | P a g e premiums start low, gradually increase each year (for about 5 to 10 years), and remain level thereafter Interest Sensitive Whole Life (Current Assumption Life) provides same benefits as traditional whole life policies with added benefit of current interest rates which may allow for either greater cash value accumulation or a shorter premium-paying period Equity-Indexed Whole Life cash value is dependent upon the performance of the equity index (S&P 500) although there is a guaranteed minimum interest rate; policy's face amount increases annually to keep pace with inflation Adjustable LIfe insured determines how much coverage is needed and the affordable amount of premium; as insured's needs change, policy owner may make adjustments such as increase or decrease the premium or the premium paying period, increase or decrease the face amount (requires proof of insurability for increasing the death benefit or changing to a lower premium type policy), or change the period of protection; policy owner also has option of converting from term to whole life or vice versa Universal Life (flexible premium adjustable life) policy owner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again; interests sensitive policy with a guaranteed contract interest rate (usually 3 to 6%) and opportunity to get the current interest rate; two components: insurance (always annually renewable term insurance) and cash account; option A (level death benefit) and option B (increasing death benefit) Fixed Life Insurance and Annuities contracts that offer guaranteed minimum of fixed benefits that are stated in the contract Variable Life Insurance and Annuities cash values accumulate based upon a specific portfolio of stocks without guarantees of performance; keep pace with inflation, and are determined by the value of securities backing it Variable Whole Life Insurance level, fixed premium, investment-based product; guaranteed minimum death benefit; cash value is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer; policy owner bears investment risk in variable contracts Variable Universal Life Insurance securities version of universal life insurance Joint LIfe insures two or more lives; term or permanent; premium based on a joint average age and the death benefit is paid upon the first death only Buy-Sell Agreement 51 | P a g e business continuation agreement that determines what will be done with the business in the event that an owner dies or becomes disabled Survivorship Life premium based on joint age; pays on the last death; lower premium than joint life; used to offset the liability of the estate tax upon the death of the last insured Juvenile Life any life insurance written on the life of a minor; "jumping juvenile" is a common type where the face amount increases at a predetermined age, often age 21; premium remains level throughout Family Protection Policy combines whole life with term insurance to cover family members in a single policy; whole life on breadwinner (permanent life insurance) and convertible term insurance (term riders) on the other family members Credit Life written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor; usually decreasing term insurance; individual policy or group plan (if group policy, creditor is owner of the master policy and each debtor receives a certificate of insurance); creditor is owner and beneficiary of the policy and premiums usually paid by debtor; cannot pay out more than the balance of the debt Cost Recovery Rule the amount of cash value that exceeds the sum of the total premiums will be taxed as ordinary income when cash withdrawn or policy surrendered for cash value Policy Loan loan from cash value of life insurance policy; not income taxable to the policy owner; individual cannot receive a deduction for interest paid on life insurance policy loan Estate Taxation death benefit of life insurance policy may be included in the insured's taxable estate at death and can be subject to the federal estate tax Settlement Options interest portion of the payments received is taxable as income; immediate annuity is purchased with the face amount at death or with the cash value at surrender 7-Pay Test cumulative premiums paid during the first 7 years of the policy must not exceed the total amount of net level premiums that would be required to pay the policy up using guaranteed mortality costs and 52 | P a g e interest; new test required any time there is a material change to a policy (increase in death benefit); essentially, determines if policy is "overfunded" or if it's a MEC Modified Endowment Contract (MEC) any life insurance policy that fails a 7-pay test; loses the standard tax benefits of a lifer insurance contract; death benefit received by the beneficiary is tax free; cash value: tax-deferred accumulations; any distributions are taxable, including withdrawals and policy loans; distributions are taxed are taxed on LIFO basis - known as "interest-first" rule; distributions before age 59 1/2 are subject to a 10% penalty Owner Privileges of Adjustable Life increase/decrease the premium, change the premium-paying period, increase/decrease the face amount of coverage, change the period of protection Straight Life charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit Dividends (policy) non-taxed returns of unused premiums Family Income Policy principle wage earner is the only family member insured Annuity contract that provides income for a specified period of years, or for life; protects person against outliving his or her money; vehicle for accumulation of money and the liquidation of an estate; deferred grows tax free Accumulation Period the pay-in period; the period of time over which the owner makes payments (premiums) into an annuity; period during which payments earn interest on a tax-deferred basis Annuity Period known as annuitization period, liquidation period, or pay-out period; time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant; may last for the lifetime of the annuitant or for a specified period, which could be longer or shorter Single Premium Immediate Annuity (SPIAs) purchased with a single lump sum payment and provides income payments that start within 1 year from the date of purchase (typically makes first payment as early as 1 month from purchase) Annuity Income Amount Based On 55 | P a g e how well a recommended product will meet the applicant's needs an resources Exclusion Ratio (Annuity) total investment divided by total amount expected to be paid out over the life of the contract Accumulation Phase period after an annuity has been purchased but before distributions begin Provisions stipulate the rights and obligations of an insurance contract and are fairly universal from one policy to the next Riders modify provisions that already exist; used to increase or decrease policy benefits and premiums Options offer insurers and insureds ways to invest or distribute a sum of money available in a life policy Absolute Assignment transferring all rights of ownership to another person or entity; new policy owner doesn't need to have insurable interest in the insured Collateral Assignment transfer of partial rights to another person; usually done to secure a loan or some other transaction; partial and temporary assignment of some of the policy rights; once debt/loan repaid, assigned rights returned to the policy owner Entire Contract provision that stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract Insuring Clause (insuring agreement) sets forth the basic agreement between the insurer and the insured; states the insurer's promise to pay the death benefit upon the insured's death; usually located on the policy face page, and also defines who the parties to the contract are, the premium to be paid, how long coverage is in force, and the amount of the death benefit Right to Examine (Free Look) allows policy owner a specified number of days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium; starts when policy owner receives policy Premium Mode 56 | P a g e manner or frequency that the policy owner pays the policy premium; if other than annual, there will be an additional charge to offset the loss of earnings since the company does not have the entire premium at once, and there are additional administrative costs Application of State Law provision that states that no matter what the home state of the insurance company or the applicant is, the law of the state in which the policy is sold would be considered the law under which the policy will be enforced Common Disaster Clause provided under the Uniform Simultaneous Death Law; assumed that the primary beneficiary died first in a common disasters; most insurers specify a certain period of time, usually 14 to 30 days, in which death must occur for this provision to apply; as long as the beneficiary dies within this specified period of time following the death of the insured, it will still be interpreted that the beneficiary died first Spendthrift Clause protects beneficiaries from the claims of their creditors; designed to protect life insurance policy proceeds that have not yet been paid to a named beneficiary from the claims of the creditors of the beneficiary of policy owner Automatic Premium Loans loan that prevents the unintentional lapse of a policy Payor Benefit Rider if the payor becomes disabled for at least 6 months or dies, insurer will wave the premiums until the minor reaches a certain age, such as 21; primarily used with juvenile policies (written on the life of a minor); also used when the owner and the insured are two different individuals Accidental Death Rider pays some multiple of the face amount if the death is the result of an accident as defined in the policy; death must usually occur within 90 days of such an accident Straight Life The insured and Insurance company will share the cost of covered losses under which health policy feature? Payment of Claims provision XYZ Corp was issued a group Health policy for its employees. Under this plan a: Policy must be issued to XYZ, and a certificate must be issued to each employee Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this? 57 | P a g e Guaranteed insurability rider An employer that offers a qualified retirement plan to its employees is eligible to: make tax-deductible contributions to the plan A policyowner's rights are limited under which beneficiary designation? Irrevocable The Notice of Claims provision requires a policyowner to: Notify an insurer of a claim within a specified time An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with a(n): Extra premium P's individual health policy is now in the Grace Period. P's coverage will remain in force if: the premium is paid In health insurance policies, a waiver of premium keeps the coverage in force without premium payments: After an insured has become totally disabled as defined in the policy T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this? Life annuity with period certain Dividends payable to a policyowner are declared by the insurance company A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a: risk retention group What type of reinsurance contract involves two companies automatically sharing their risk exposure? Treaty Who elects the governing body of a mutual insurance company? policyholders 60 | P a g e All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: Bilateral A policy of adhesion can only be modified by whom? The insurance company Which of these is considered a statement that is assured to be true in every respect? Warranty Which of these require an offer, acceptance, and consideration? Contract Who makes the legally enforceable promises in a unilateral contract? Insurance company When must insurable interest exist for a life insurance contract to be valid? Inception of the contract Which of the following consists of an offer, acceptance, and consideration? Contract Which of the following BEST describes a warranty? Statement guaranteed to be true What is the consideration given by an insurer in the consideration clause of a life policy? Promise to pay a death benefit to a named beneficiary The part of a life insurance policy guaranteed to be true is called a warranty Which of these is NOT considered to be an element of an insurance contract? negotiating Taking receipt of premiums and holding them for the insurance company is an example of Fiduciary responsibility A life insurance arrangement which circumvents insurable interest statutes is called: Investor-Originated Life Insurance Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. 61 | P a g e Conditional Insurance policies are offered on a "take it or leave it" basis, which make them: Contracts of Adhesion Which of these arrangements allows one to bypass insurable interest laws? Investor-Originated Life Insurance 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? F Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? Legal Purpose (Insurable Interest) Life and health insurance policies are: unilateral contracts When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have Insurable interest in the proposed insured A policy of adhesion can only be modified by whom? The insurance company The consideration clause of an insurance contract includes: The schedule and amount of premium payments A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of Adhesion Insurance policies are considered aleatory contracts because Performance is conditioned upon a future occurrence At what point does an informal agreement become a binding contract? When consideration is provided by one of the parties to the contract If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? 62 | P a g e Insured In regards to representations or warranties, which of these statements is TRUE? If material to the risk, false representations will void a policy Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called Representations All of these are characteristics of an Adjustable Life policy EXCEPT face amount can be adjusted using policy dividends The investment gains from a Universal Life Policy usually go toward The cash value Term insurance has which of the following characteristics? Expires at the end of the policy period The combination of Whole Life and _________ Term insurance is referred to as a Family Income Policy Decreasing Which of the following types of permanent life insurance policies offers the highest initial cash value? Single Premium A Limited-Pay Life policy has: premium payments limited to a specified number of years What advantage does the renew ability feature give to a term policy? The insured may extend the coverage period Which of these characteristics is consistent with a Straight Life policy? Premiums are payable for as long as there is insurance coverage in force Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy? Increase face amount Who has the option to renew a renewable term policy? Insured Additional coverage can be added to a Whole Life policy by adding a(n) Decreasing term rider 65 | P a g e A 15-year mortgage is best protected by what kind of life policy? 15-year decreasing term What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years? Family maintenance policy How long does the coverage normally remain on a limited-pay life policy? age 100 What type of life insurance gives the greatest amount of coverage for a limited period of time? Term life What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time? Decreasing term What kind of life insurance product covers children under their parent's policy? Term rider What kind of premium does a whole life policy have? Level Premium Which of the following types of Term Life policies most likely contains a Renewability feature? 10 year convertible term Which is true concerning a Variable Universal Life policy? Policyowner controls where the investment will go and selects the amount of the premium payment A life insurance policy that provides a policyowner with cash value along with a level face amount is called: Whole life N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase? 30 pay life A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT Change the policy's interest rate 66 | P a g e K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy. Universal Life insurance that covers an insured's whole life with level premiums paid over a limited time is called: Limited Pay life Which of the following actions is NOT possible with a Universal Life policy? Premiums may be applied as a credit against income tax When is the face amount paid under a joint life and survivor policy? upon the death of the last insured K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary? 20,000 death benefit Which of the following life insurance policies combine term insurance with an investment element? Universal Life What type of life policy covers two people and pays upon the death of the last insured? Survivorship Which of these life products is NOT considered interest-sensitive? Modified Whole Life K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this? Modified Whole Life Variable Whole Life Insurance can be described as both an insurance and securities product K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable? Level Which of the following information is NOT required to be included in a Whole Life policy? 67 | P a g e Policy's guaranteed dividend table Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT Partial withdrawal features beyonh a surrender charge period What type of life policy covers two lives and pays the face amount after the first one dies? Joint Life Policy When is the face amount of a whole life policy paid? When the insured dies or at the policy's maturity date, whichever happens first Which of these statements describe a Modified Endowment Contract (MEC)? Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract Credit Life Insurance is: issued in an amount not to exceed the amount of the loan J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this? Modified Premium Life Which of these would be considered a Limited-Pay Life policy? Life paid-up at age 70 Which of the following is considered an element of a Variable Life Policy Underlying equity investment All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for: Modified Whole Life A term life insurance policy matures: upon the insured's death during the term of the policy What type of policy would offer a 40-year old the quickest accumulation of cash value? 20-pay Life 70 | P a g e T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? Renewable What type of like insurance are credit policies issued as? Term Which of these needs is satisfied by Adjustable Life insurance? Insured's need for flexible premiums A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as: variable life Under an interest sensitive whole life policy cash values are determined by interest rates What kind of lnsurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability? Convertible Term A(n) ____________ life policy combines investment choices with a form of term coverage Variable Universal A(n) ____________ term life policy is normally used when covering an insured's mortgage balance. Decreasing Variable Life products require a producer to hold a Life Insurance license and a Securities license All of these statements about Equity Indexed Life Insurance are correct EXCEPT The premiums can be lowered or raised, based on investment performace Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it? Decreasing Term If a 10-Year Term Life policy contains a Renewability provision, the policy will renew Without evidence of insurability 71 | P a g e In order to sell a (n)____ Life policy, a producer is required to register with financial Industry Regulatory Authority (FINRA). Variable S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase? Equity A Universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, cost of insurance, and the Expense Charges Under a Graded Premium Whole Life policy, the premium increases each year during the early years of the contract and remains the same after that time 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? Decreasing term policy A universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, expense charges, and the cost of insurance K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT K's wife dies at age 66 Which type of policy is considered to be overfunded, as stated by IRS guidelines? Modified Endowment Contract Under a Renewable Term policy, the renewal premium is calculated on the basis of the insured's attained age Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase? Term life Which of the following life insurance policies combine term insurance with an investment element? Universal Life 72 | P a g e What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100? Whole life