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Life and Health Insurance Exam 308 Questions with Verified

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Pure Risk - CORRECT ANSWER Insurance is defined as the transfer of what to the insurance company in consideration for a premium? Speculative Risk - CORRECT ANSWER What type of risk is not insurable? Exposure - CORRECT ANSWER A condition that could result in a loss is now as what? Hazard - CORRECT ANSWER This increases the chance of loss. Lump Sum - CORRECT ANSWER If a settlement option is not chosen by the beneficiary or policy owner, which option will be used? Straight Life - CORRECT ANSWER What policy would be classified as a traditional level premium contract? The employer is the owner and beneficiary. - CORRECT ANSWER Who is the owner and who is the beneficiary on a key person life insurance policy? Promote the public welfare - CORRECT ANSWER What is the purpose of insurance regulation? 30 months - CORRECT ANSWER Employer health plans must provide primary coverage for individuals with end-stage renal disease before medicare becomes primary for how many months? Ratio of men and women in the group - CORRECT ANSWER Group life is based on what? The source must be identified - CORRECT ANSWER What is true regarding statistics use din an advertisement?

10 years - CORRECT ANSWER Any licensed person whose activities affect interstate commerce and who knowingly make false material statements related to the business of insurance my be imprisoned for up to how long? Rates by Class - CORRECT ANSWER Insurers may change which of the following on a guaranteed renewable health insurance policy? Face Amount - CORRECT ANSWER What does "level" refer to in level erm insurance? It is used to lower premiums - CORRECT ANSWER An insurer invests money it receives form premiums paid by its insurers, what would happen to this investment? It provides income the beneficiary cannot outlive - CORRECT ANSWER What can happen regarding a single life settlement option? The refund of the original amount minus payments already made - CORRECT ANSWER With the cash refund option, when the annuitant dies, what would the beneficiary receive? Bail-Out provision - CORRECT ANSWER What allows the owner to surrender an annuity without a charge? 31 days - CORRECT ANSWER When an employee terminates coverage under a group insurance policy, coverage continues in force for how long? Illegal - CORRECT ANSWER An insurer devised an intimidation strategy in order to corner a large portion of the insurance market. What best describes this practice? a securities license A life insurance license A FINRA registration - CORRECT ANSWER To sell variable life insurance policies, an agent must receive what?

Policy of Claims Provision - CORRECT ANSWER What provision would prevent an insurance company from paying a reimbursement claim to someone other than the policy owner? Monthly - CORRECT ANSWER Under an individual disability policy, the minimum schedule of time in which a claim payment must be made to an insured is what? Consumer Report - CORRECT ANSWER What type of report includes information regarding a person's credit, character, reputation and habits? The guaranty Association The SEC The insurance Department - CORRECT ANSWER What entities regulate variable life polices? Providing a customer with an incomplete illustration - CORRECT ANSWER What would be a violation of a life policy illustration regulation? 2 or more - CORRECT ANSWER HIPPA applies to groups of what? within 1 year of revocation - CORRECT ANSWER A producer's license has been revoked for a violation of the Insurance Code. When can the producer apply for a new license? Recurrent disability - CORRECT ANSWER When an insurer combines two periods of disability into one, the insured must have suffered what? The source of the report - CORRECT ANSWER Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained n a consumer report, have to be informed of what? Guaranteed insurability rider - CORRECT ANSWER IF a life policy allow she policy owner to make periodic additions to the face amount at standard rates, without provide insurability, the policy includes a what?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive - CORRECT ANSWER An insured has chose joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? period of time - CORRECT ANSWER Which renewability provision are you most likely to see on a travel accident policy? Insurers are barred from requisition HIV testing - CORRECT ANSWER What is not true regarding HIV testing for life insurance policies? The surrender charge is a percentage of the cash value and decreases over time - CORRECT ANSWER If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined? Ancestry - CORRECT ANSWER What is not a relevant faced assessed in a consumer report? taxable - CORRECT ANSWER An distributions from MEC's are what? This includes withdrawals and policy loans. Modified Endowment Contract - CORRECT ANSWER What is an MEC? 3 - CORRECT ANSWER What is the minimum required number of continuing education credits in ethics every licensing period? gets higher - CORRECT ANSWER Regarding long-term care coverage's the elimination period gets shorter, the premium does what? Mental Illness - CORRECT ANSWER In health underwriting, it would be inappropriate to decline a risk using what? Installments for a fixed period - CORRECT ANSWER What annuity option does the annuitant select the time period for benefits and the insurer determine how much each payment will be? occupational or nonoccupational - CORRECT ANSWER disability insurance can be written as what?

Cash surrender extended term Reduced paid-up option - CORRECT ANSWER Nonforfeiture values include what? within 90 days or as soon as reasonably possible, but not to exceed 1 year - CORRECT ANSWER How soon following the occurrence of a covered loss must an insured submit written proof of such loss t the insurance company? Guarantee of insurability - CORRECT ANSWER What option allows the insured to periodically increase benefit without providing evidence of insurability? any form of life insurance - CORRECT ANSWER A buy-sell agreement can be funded by what form of life insurance? Unlawful Insurance Fraud - CORRECT ANSWER Any statements made on an application for insurance, renewal of policy, claims for payment or benefits, premiums paid, and financial condition of an insurer that are false or omission of material fact are considered to be what? Co-payment - CORRECT ANSWER In a group prescription drug plan, the insured typically pays what amount of the drug cost? One-year term option - CORRECT ANSWER The dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as what? False Advertising - CORRECT ANSWER Circulation deceptive sales material to the public is what type of Unfair trade practice? Metal Level Classification - CORRECT ANSWER Under the Affordable Care Act, which classification applies to health plans based on the amount of covered costs? Tax-free - CORRECT ANSWER Group medical and dental benefits are relied in what way to the employees?

First premium has been paid and the application has been approved. - CORRECT ANSWER Health coverage become effective at what time? first 20 days - CORRECT ANSWER Following hospitalization of rat least 3 days, if medically necessary, medicare pays for all covered services during the first how many days in a skilled nursing facility? Interest - CORRECT ANSWER During a partial withdrawal form a universal life policy, which portion will be taxed? 5 days - CORRECT ANSWER IF a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A certain period of time and typically 50% of the total disability benefit - CORRECT ANSWER The payment of partial disability benefits is limited to what? To cover the expenses of retraining the insured to return to work - CORRECT ANSWER What is the purpose of the rehabilitation benefit in disability insurance? The state - CORRECT ANSWER The regulation of the insurance industry primarily rests with who? They are tax deductible - CORRECT ANSWER An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation? Human Life Value Approach - CORRECT ANSWER This type of approach is a way of determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. what is it? Registered nurses licensed practical nurses' licensed vocational nurses or community based organizations like hospice - CORRECT ANSWER What occasional visits to a persons home is covered under LTC home health care?

Health Maintenance Organization plan - CORRECT ANSWER What health care plan would most likely provide the insured/subscriber with comprehensive health care coverage? Health Maintenance Organization Plan - CORRECT ANSWER What is an HMO? Joint and Survivor - CORRECT ANSWER What option guarantees an income for two or more recipients that none of them can outlive? Increasing Term - CORRECT ANSWER What type of insurance would be used for a return of premium rider? provide evidence of insurability - CORRECT ANSWER If a policy owner of an adjustable life policy wants to increase the death benefit what could he do? Refund the premium - CORRECT ANSWER If an insured committed suicide one year after his life insurance policy was issued what would the insurer do? Increased benefits - CORRECT ANSWER Issue age policy premiums increase in response to what? Refund of the original amount minus payments already made - CORRECT ANSWER With the cash refund option, when the annuitant dies, what would the beneficiary receive? Beneficiaries are not identified by name - CORRECT ANSWER What is true about class designation? Payment of claims - CORRECT ANSWER What provision would prevent an insurance company from paying a reimbursement claim to someone other than the policy owner? Human life value approach - CORRECT ANSWER What method of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

Bail-out provision - CORRECT ANSWER This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe? to cover expenses of retraining the insured to return to work - CORRECT ANSWER What is the purpose of the rehabilitation benefit in disability insurance? an estate they liquidate - CORRECT ANSWER Annuities do not create a what? but they do this? Rated - CORRECT ANSWER Another name for a substandard risk classification is what? 5 years - CORRECT ANSWER Insurer examinations must occur no less frequently than every what? case management provision - CORRECT ANSWER When an insurer offers services like readmission testing, second options regarding surgery, and preventative care, what term would best apply? Case Management Provisions - CORRECT ANSWER Cost-saving services are what? Method of premium payment - CORRECT ANSWER What is not a type of a disability policy? Within 30 days and it could result in a $50 fine - CORRECT ANSWER IF a resident producer or solicitor has a change of residential or business address, how soon must the licensee notify the commissioner? and what could be the result fine if they don't? 5 years - CORRECT ANSWER What is the maximum amount of time that could pass before an insurer's financial stability would be examined? doctor - CORRECT ANSWER Who can provide skilled nursing care?

misrepresentation - CORRECT ANSWER During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant, what best describes this? Misrepresentation - CORRECT ANSWER making false or misleading statements with the intent to defraud another is what? interest only option - CORRECT ANSWER If a policyowner wanted 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 be paid to their children when they reach a certain age would choose what option? Conditonally renewable - CORRECT ANSWER What is the contract provision that allows the insurer to non renew health coverage if certain events occur? false advertising - CORRECT ANSWER Circulation deceptive sales material to a public is what type of Unfair Trade practice? the guaranty association - CORRECT ANSWER What entity doesn't regulate variable life policies? time of payment of claims - CORRECT ANSWER Which provision States that the insurance company must pay medical expense claims immediately? the option of purchasing coverage that raises benefit levels accoridingly - CORRECT ANSWER What do long-term care policies offer the policyholders to account for inflation? universal life - CORRECT ANSWER Which type of life insurance policy allows the policy owner to pay more or less than the planned premium? Legal actions - CORRECT ANSWER The provision which prevents the insured form bringing any legal action against the company of rat least 60 days after proof of loss is known as what? NAIC - CORRECT ANSWER A long term care insurance shopper's guid must be provided in the format developed by who?

National association of Inusruance Commissioners - CORRECT ANSWER what is the NAIC? application - CORRECT ANSWER what is the basic source of information used by the company in the risk selection process? Must be informed of the source of the report - CORRECT ANSWER Under the fair credit reporting act, individuals rejected for insurance due to information contained in a consumer report must be what? tax deductible - CORRECT ANSWER Contributions to a health savings account are what? Income tax free - CORRECT ANSWER Benefits received by the business in a disability buy-sell policy are what? increasing term - CORRECT ANSWER what type of insurance would be used for a return of premium rider? Death benefit can be increased by providing evidence of insurability - CORRECT ANSWER The policy owner of an adjustable life policy wants to increase the death benefit. What could the policy owner do? Refund of the original amount minus payments already made - CORRECT ANSWER With the cash refund option, when the annuitant dies, what would the beneficiary receive? Individual and group - CORRECT ANSWER What are the two main types of annuities 10 days - CORRECT ANSWER How long does it take for sickness to be covered after reinstatement of a policy? immediately - CORRECT ANSWER how long does it take for accidents to be covered following the reinstatement of a policy?

Aleatory contract - CORRECT ANSWER If unequal amounts are exchanged between, payments and benefits, what type of contract does this describe? Applicants past medical history - CORRECT ANSWER A health insurance company can refuse coverage solely for which reason? Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense - CORRECT ANSWER As it pertains to group health insurance, COBRA stipulates what? 18 to 36 months - CORRECT ANSWER COBRA requires employers with 20 or more employees to continue group medical insurance for terminated workers and dependents for how long? 102% - CORRECT ANSWER Under CORBA the employee can be required to pay up to what of the coverage's premium? Concurrent Review - CORRECT ANSWER When an insurance company monitors the treatment and progress of a client in order to make sure that everything proceeds according to the insurer's schedule, what is this called? Guaranteed and Current - CORRECT ANSWER What are the two types of interest rates in a Universal Life insurance policy? Time of Payment of Claims - CORRECT ANSWER An insured notifies the insurance company that he has become disabled What provision states that claims must be paid immediately up on written proof of loss? Must be appointed specifically by Colonial Life - CORRECT ANSWER If someone wants to serve as a producer for Colonial Life , in addition to obtaining a producer's license, what else must happen before you can officially transact insurance for Colonial Life? Contingencies - CORRECT ANSWER Installments for a fixed amount option has no what?

Occasional nursing or rehabilitative care - CORRECT ANSWER In long-term care insurance, what type of care is provided with intermediate care? to allow the consumer to compare the costs of different polices. - CORRECT ANSWER What is the purpose of the buyer's guide? Subscribers - CORRECT ANSWER Who is responsible of remaking premium payments in an HMO plan? Routine and restorative care - CORRECT ANSWER What dental insurance category would cover the filling of cavities? an independent examination as ofter as reasonably required - CORRECT ANSWER While a claim in spending, an insurance company may require an examination how often? 21 - CORRECT ANSWER If a payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches what age? It will increase because the insured will be 5 years older than when the policy was originally purchased - CORRECT ANSWER An insured buys a 5-year level premium term policy with a face amount $10,000.00. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? Guaranty association - CORRECT ANSWER IT is illegal for insurers to state that their policies are guaranteed by the existence of who? Cash Option - CORRECT ANSWER An insured receives an annual life insurance dividend check. What term describes this arrangement? TO help the insured understand all aspects of the contract - CORRECT ANSWER Why should the producer personally deliver the policy when he first premium has already been paid out?

Size of each installment - CORRECT ANSWER What determines the length of time that benefits will be received under the fixed-amount settlement option? Must be guaranteed renewable - CORRECT ANSWER Each medicare supplement policy must be what? 2 years - CORRECT ANSWER The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? increased benefits - CORRECT ANSWER Issue age policy premiums increase in response to which of the following factors? Fully insured status, Waiting period of 5 months, and inability to perform any gainful work - CORRECT ANSWER What are requirements of eligibility for social security disability income benefits? 12 months - CORRECT ANSWER In order to collect social security disability benefits, the claimant must be able to demonstrate that the disability will last at least how long? FTC federal trade commission - CORRECT ANSWER Who is a regulatory authority that participated in creating the National Do NOT Call List? refund of original amount minus payments already made - CORRECT ANSWER With the cash refund option, when the annuitant dies, what would the beneficiary receive? Insurer to insured - CORRECT ANSWER In the event of loss, after a notice of claim is submitted to the insurer, w ho is responsible for providing claims forms and to which party? 30 - CORRECT ANSWER What is the maximum age for qualifying for a catastrophic plan?

Medical history, physical condition, present occupation, habits and morals - CORRECT ANSWER In classifying risk, the home office underwriting department will look at what things about the applicant.? flexible premium - CORRECT ANSWER Both universal life and variable universal life have what? 18 months - CORRECT ANSWER To be eligible under HIPPA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan? adjust the benefit in accordance with the increased risk - CORRECT ANSWER if the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is filed, the insurance company should do which of the following? annuitant - CORRECT ANSWER When an annuity is written, whose life expectancy is taken into account? They are not included as income for the employee, but are taxable upon distribution - CORRECT ANSWER How are contribution to a tax-sheltered annuity treated with regards to taxation? Cash value available to the policyowner - CORRECT ANSWER What is an example of liquidity in a life insurance contract? increases annually - CORRECT ANSWER Annually renewable term policies provide a level death benefit for a premium that does what? optionally renewable - CORRECT ANSWER Which renewability provision allows an insurer to terminate a policy for any reason, and o increase the premiums for class of insureds? to terminate the policy for any reason not he date specified in the contract (usually renewal date) - CORRECT ANSWER The renewability provision in an optionally renewable policy gives the insurer the option do what?

10 hours - CORRECT ANSWER A producer has completed 40 hours of continuing education this licensing period. How many credit hours may be carried over to the next licensing period? 24 hours of approved continuing eduction (CE) instruction or self-study - CORRECT ANSWER All insurance producers licensed in the state of Louisiana must complete what prior to each license renewal? universal Life - option A - CORRECT ANSWER What policy would have an IRS required corridor or gap between the cash value and the death benefit? 4 years or until the next examination by the department. - CORRECT ANSWER In Louisiana, insurance companies are required to keep files of all advertisements used for how long? insruring clause - CORRECT ANSWER The section of a health policy that sates the causes of eligible loss under which an insured is assumed to be disabled is the what? institutional setting - CORRECT ANSWER Which location would skilled care most likely be provided? Skilled nursing care - CORRECT ANSWER What type of care is performed under the direction of a physician, usually in an institutional setting? 80% - CORRECT ANSWER for those who have purchased the coverage, part B pays out how much of out-patient medical cost after a deductible has been met? Part B - CORRECT ANSWER What part of medicare covers physician and outpatient hospital services and other medical services, such as diagnostic tests and physical therapy? Interest only option - CORRECT ANSWER The policy owner wants to make sure that upon his death, the life policy will pay a portion of the process 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 policy owner choose?

deductibles and coinsurance. out of pocket costs - CORRECT ANSWER once a primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay such as what? and the insured will then, be reimbursed for what? an employees group medical benefits are generally exempt from taxation as income - CORRECT ANSWER under which condition would an employee's group medical benefits be exempt from income taxes? principal amount - CORRECT ANSWER an accidental death and dismemberment policy will usually pay what amount for the loss of both eyes or two or more limbs? face amount - CORRECT ANSWER What does "level" refer to in level term insurance? policy summary - CORRECT ANSWER what document that is delivered to the policy owner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? re-entry - CORRECT ANSWER What type of option makes it to where the insured, upon the end of a term policy with a guaranteed renewable option, may answer medical questions to prove insurability and quality for a discounted premium rate? Universal Life - CORRECT ANSWER An insured owns a policy. To pay some medical bills, the insured withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? Universal Life - CORRECT ANSWER In this type of policy the insured is allowed to withdraw a limited portion of the policy's cash value. each withdraw, however, is usually charged, and the amount and frequency of withdrawals are usually limited, what type of policy is it? The date of medical exam - CORRECT ANSWER an individual applied or an insurance policy and paid the initial premium. The insurer issued a conditional

receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? They offer the option of purchasing coverage that raises benefit levels accordingly. - CORRECT ANSWER What do long-term care policies offer to policyholders to account for inflation? What year was the McCarren-Ferguson Act enacted? - CORRECT ANSWER 1945 Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated? - CORRECT ANSWER 1070 Fair Credit Reporting Act A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as: - CORRECT ANSWER fraternal benefit society What type of reinsurance contract involves two companies automatically sharing their risk exposure? - CORRECT ANSWER treaty Who elects the governing body of a mutual insurance company? - CORRECT ANSWER policy holders At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? - CORRECT ANSWER Upon completion of the application What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained - CORRECT ANSWER Fair Credit Report A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a - CORRECT ANSWER risk retention group Which of these describes a participating life insurance policy? - CORRECT ANSWER Policyowners are entitled to receive dividends

An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the - CORRECT ANSWER Fair Credit Reporting Act The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called - CORRECT ANSWER reserves 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? - CORRECT ANSWER Aleatory In an insurance contract the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? - CORRECT ANSWER Unilateral Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. - CORRECT ANSWER Conditional Because certain future conditions or acts must occur before any claims can be paid, insurance contracts are known as conditional. Stranger Originated Life Insurance has been found to be in violation of which if the following contractual elements? - CORRECT ANSWER Legal Purpose A policy of adhesion can only be modified by whom? - CORRECT ANSWER The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.) At what point does an informal contract begin binding? - CORRECT ANSWER When one party makes an offer and the other party except that offer

When third-party ownership is involved applicants who also happen to be the stated primary beneficiary are required to have - CORRECT ANSWER insurable interest in the proposed insured A life insurance arrangement which circumvents insurable interest statutes is called - CORRECT ANSWER Investor-Originated Life Insurance Statements made on an insurance application that are believed to be true to the best of an applicants knowledge are called - CORRECT ANSWER Representations Which of these require an offer, acceptance, and consideration? - CORRECT ANSWER Contract The part of a life insurance policy guaranteed to be true is called a - CORRECT ANSWER Warranty Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void. What is the consideration given by an insurer in the consideration clause of a life policy? - CORRECT ANSWER Promise to pay a death benefit to a named beneficiary All of the following are considered to be typical characteristics describing the nature of an insurance contract except - CORRECT ANSWER bilateral If a contractor that he's in contains complicated language to whom would the interpretation be in favor of? - CORRECT ANSWER The insured Taking receipt of premiums and holding them for the insurance company is an example of - CORRECT ANSWER fudiciary responsibility 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? - CORRECT ANSWER F Which of these is not considered to be an element of an insurance contract? - CORRECT ANSWER negotiation Which of these is considered a statement that is assured to be true in every respect? - CORRECT ANSWER warranty In regards to representations or warranties, which of these statements is TRUE? - CORRECT ANSWER If material to the risk, false representations will void a policy What is a warranty? - CORRECT ANSWER is a statement guaranteed to be true Who makes the legally enforceable promises in a unilateral contract? - CORRECT ANSWER insurance company A policy of adhesion can only be modified by whom? - CORRECT ANSWER The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.) Which of these arrangements allows one to bypass insurable interest laws? - CORRECT ANSWER Investor-Originated Life Insurance When most insurable interest be present in order for a life insurance policy to be valid? - CORRECT ANSWER When the application is made Which of these is not a type of agent authority? - CORRECT ANSWER Principal Agent authority is what an agent is authorized to do on behalf of his company. The three types of agent authority include express, implied, and apparent authority. A life insurance policy would be considered a wagering in contract without - CORRECT ANSWER insurable interest.

Without insurable interest, a life insurance policy would be considered a wagering contract. Insurance policies are considered aleatory contracts because - CORRECT ANSWER Insurance contracts are aleatory. This means there is an element of chance and potential for unequal exchange of value or consideration for both parties. An aleatory contract is conditioned upon the occurrence of an event. performance is conditioned upon a future occurrence When must insurable interest exist for a life insurance contract to be valid? - CORRECT ANSWER Inception of the contract. Insurable interest must only exist at the inception of the contract. Life and health insurance policies are - CORRECT ANSWER Unilateral contracts. (Life and health insurance policies are considered unilateral contracts because one party makes a promise, and the other party can only accept by performance.) The Consideration clause of an insurance contract includes - CORRECT ANSWER The schedule and amount of premium payments. (The Consideration clause of a Life or Health policy includes the schedule and amount of premium payments.) Insurance policies are offered on a "take it or leave it" basis which makes them - CORRECT ANSWER Contracts of Adhesion A Family Income Policy is a combination of Whole Life and - CORRECT ANSWER Decreasing term insurance A(n)___life policy offers the owner investment and products such as money market funds long-term bonds and equities - CORRECT ANSWER Variable If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase - CORRECT ANSWER A Whole Life Policy with an Other Insured Rider

K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable? - CORRECT ANSWER level The most important factor to consider when determining whether to convert term insurance at the insurance attained age or the insurance original age is - CORRECT ANSWER The cost A term life insurance policy matures - CORRECT ANSWER upon the insured's death during the term of the policy What type of life insurance are credit policies issued as? - CORRECT ANSWER Term. The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance. A whole life policy endows when the - CORRECT ANSWER Cash value equals the death benefit Which of the following types of policies best identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors - CORRECT ANSWER Universal Life When is the face amount of a Whole Life policy paid? - CORRECT ANSWER When the insured dies or at the policy's maturity date, whichever happens first Which of the following characteristics is correct about interest sensitive whole life

• CORRECT ANSWER There is a flexible premium payment What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time? - CORRECT ANSWER Decreasing term K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies? - CORRECT ANSWER Endowment at Age 65

All of these are characteristics of an Adjustable Life policy EXCEPT - CORRECT ANSWER face amount can be adjusted using policy dividends What type of life policy covers two lives in pays the face amount after the first one dies - CORRECT ANSWER Joint Life Policy The universal policy is called in and bundle of life policy because the policy holder can see the expense charges, the interest earned, and the - CORRECT ANSWER Cost of insurance 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? - CORRECT ANSWER 20-Pay Life accumulates cash value faster than Straight Life Which of the following actions require a policy owner to provide proof of insurability in an adjustable life policy? - CORRECT ANSWER increase face amount What kind of premium does a Whole Life policy have? - CORRECT ANSWER level How does a typical Variable Life Policy investment account grow? - CORRECT ANSWER Through mutual funds, stocks, bonds 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? - CORRECT ANSWER Equity index insurance A 15-year mortgage is best protected by what kind of life policy? - CORRECT ANSWER 15-year decreasing term 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? - CORRECT ANSWER 20-pay life Which statement is true regarding a variable whole life policy - CORRECT ANSWER A minimum guaranteed Death benefit is provided

A life insurance policy that provides a policy owner with cash value along with a level face amount is called - CORRECT ANSWER whole life What type of insurance offers permanent life coverage with premiums that are payable for life? - CORRECT ANSWER whole life Which of these characteristics is consistent with a Straight Life policy? - CORRECT ANSWER Premiums are payable for as long as there is insurance coverage in force Which of these statements describe a modified endowment contract MEC - CORRECT ANSWER Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract Which type of life policy contains a monthly mortality charge as well as self- directed investment choices? - CORRECT ANSWER Variable Universal Life Variable Whole Life Insurance can be described as - CORRECT ANSWER ariable Whole Life Insurance is both an insurance and securities product. M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is - CORRECT ANSWER Modified Premium Life When is the face amount paid under a Joint Life and Survivor policy? - CORRECT ANSWER upon death of the last insured How long does the covers normal remain on a limited pay life policy - CORRECT ANSWER Age 100 What type of policy would offer a 40-year old the quickest accumulation of cash value? - CORRECT ANSWER 20-pay life Which of these life products is NOT considered interest-sensitive? - CORRECT ANSWER Modified Whole Life

A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as - CORRECT ANSWER Variable Life Which if true considering a variable universal life policy - CORRECT ANSWER Policy owner controls where the investment will go and select the amount of the premium payment Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase? - CORRECT ANSWER Whole life policy with other insured rider Which of the following policies combines investment choices with a form of term coverage - CORRECT ANSWER Variable Universal Life A renewal term policy is renewable at the option of the - CORRECT ANSWER Insured Which of these is an element of variable life policy - CORRECT ANSWER A fixed, level premium A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision? - CORRECT ANSWER Payor provision A policy that becomes a Modified Endowment Contract (MEC) - CORRECT ANSWER will lose many of its tax advantages What kind of life policy either pays the face value upon the death of this insured or when the insured reaches age 100 - CORRECT ANSWER Whole life When a life policy extends its certain IRS values the result will create which of the following - CORRECT ANSWER Modified endowment contract What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death? - CORRECT ANSWER Face amount plus the policy's cash value