Life Insurance Exam Practice Questions and Answers 2024, Exams of Nursing

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Life-Only Agent Exam #2 practice exam

actual questions and answers 2024

If the owner of a life insurance policy does not select a settlement option on behalf of the beneficiary, the beneficiary: - Answer Can choose a settlement since it was not chosen by the owner.

When does an individual have an insurable interest in the life of another person? - Answer The individual depends on the other person for financial support.

When premium payments on a whole life insurance policy are being waived because the person whose life is insured is totally disabled, the actual effect on the policy's cash value will be to: - Answer provide for the continued increase in the cash value during the period of disability.

With the cost of living rider, the life insurance policy owner: - Answer gets the automatic increase in the face value if there is an increase in the cost of living index. There is an additional premium for the additional coverage.

What is the first step in the personal financial planning process? - Answer Define Objectives

Which two insurance products are commonly used to fund buy-sell agreements? - Answer Life insurance and Disability insurance

An assignment which transfers all "incidents of ownership" to another part is a(n): - Answer Absolute Assignment

Which of the following is not a factor in determining the premium for a life insurance contract? - Answer The number of new policy owners expected in the next anniversary year.

An insured replaces an existing annuity with a new one and must pay a surrender charge for cancelling the existing annuity. The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of: - Answer An unnecessary replacement

Joe receives a large bonus at work and decided to purchase an annuity with it. His monthly income payments from the annuity will begin the following month. Which of the following has Joe purchased? - Answer A single premium immediate annuity.

Non-participation life insurance policies provide all of the following, EXCEPT:

Guaranteed premiums

Settlement options

Death benefits

Dividends - Answer Dividends

Which of the following would be the best client to purchase a variable annuity?

An older man searching for a guaranteed monthly income that will last for the rest of his life. He is on Social Security and has little savings.

A person who does not like the fluctuations of equity investments.

A middle aged divorced housewife with a substantial portfolio, and $60,000 per year income.

All of the above would be suitable candidates for a variable annuity. - Answer A middle aged divorced housewife with a substantial portfolio, and $60,000 per year income.

Which of the following is an express authority of an agent in an agency agreement?

Authority to collect premiums

Authority to bind an insurer to any risks

Authority to represent the insurer

Authority to advertise - Answer Authority to represent the insurer.

All of the following would be considered one of the four major types of loss exposures, EXCEPT:

Personnel loss exposure

Property loss exposure

Liability loss exposure

Financial loss exposure - Answer Financial loss exposure

From the choices below, select the answer that best reflects the concept of indemnification.

Either of the parties to the contract can assume the other is not concealing facts.

The insured can not get back any more than the loss they have experienced.

If it is determined that a statement in the contract is ambiguous, courts will favor the policyowner.

A promise is given by only one party, the insurer. - Answer The insured can not get back any more than the loss they have experienced.

Which retirement plan was designed for employees of public school system? - Answer TSA

An automatic premium loan, found only in cash value policies: - Answer Will pay a premium that is die by using the policy's cash value.

In the life insurance planning process, the "blackout period" is: - Answer The period of the time when a surviving spouse does not receive any Social Security benefits.

Creditors have rights to life insurance policy proceeds when the beneficiary is the - Answer Insured's estate

The components of determining policy premiums include all of the following EXCEPT

Investment return

Dividends

Insurer expenses

Mortality cost - Answer dividends

As defined by the California Code of Regulations, a person who asserts a right of recovery under an insurance policy is called a - Answer Claimant

The price of insurance for each exposure unit is called the: - Answer Rate

Any situation that presents the possibility of a loss is known as: - Answer A loss exposure

A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted. Which statement option should be chosen? - Answer Fixed amount option

Which statement best describes how the Return of Premium (ROP) rider works on a term life policy? - Answer The policy owner will receive all or a portion of the premiums paid in over the life of the policy if the insured is still living at the end of the policy's term.

Subject to restriction of the California Insurance Code, any person capable of making a contract may be considered - Answer an insurer

Which type of beneficiary designation gives the policy owner the right to change the beneficiary designation without requiring the beneficiary's consent? - Answer A revocable beneficiary designation.

The minimum number if employees for group life insurance in California is: - Answer Two

Which of the following is false about dividends paid from life insurance policies?

Dividends are a return of excess premium and are therefore taxable.

Interest earned on dividends is considered taxable.

Dividends are not guaranteed to be paid to the policyowner.

All of the above statements about life policy dividends are false. - Answer Dividends are a return of excess premiums and are therefore taxable.

Which of the following is a hazard?

A peril

A condition that might increase the likelihood of a loss occurring.

A large number of similar exposure units

A speculative risk - Answer A condition that might increase the likelihood of a loss occurring.

Insurance negatively affects society in all of the following ways EXCEPT:

To earn more money insureds inflate claims

Takes qualified labor away from other parts of society.

Takes away capital that could be used for other things.

Paid claims do not actually replace the damages as a whole. - Answer Paid claims do not actually replace the damages as a whole.

Assume two people apply for life insurance with exactly the same monthly premiums. One individual buys a whole life policy, and the other, a 10-year renewable term plan. Both are standard risks with no difference in their age or health rating. Select the statement which is false.

Stopping premium payments on the whole life plan may trigger an option of having the cash value pay for premiums. This will have the effect of reducing the overall death benefit.

The 10-year renewable term contract will have a premium increase every 10 years while the whole life policy premium remains level.

The whole life policy will pay a higher amount to the beneficiary should the insured die within the first 10 years.

The whole life policy will generate a larger cash value. - Answer The whole life policy will pay higher amount to the beneficiary should the insured die within the first 10 years.

if the commissioner issued a notice of seizure for documents and the individual fails to send those documents what is the penalty? - Answer 1 year in jail and/or $1000 fine

Which type of insurance coverage has both a saving element and a flexible premium option? - Answer Universal Life

Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability? - Answer Guaranteed insurability

All of the following are contained in a mortality table EXCEPT

yearly probability of dying.

age at the beginning of the year.

number of dying during a designated year.

number living at the end of designated year. - Answer number living at the end of designated year.

The purpose if laws regarding the replacement of life and annuity contracts includes all of the following, EXCEPT:

To establish the penalties for failure to comply with replacement requirements.

To assure the purchaser receives information to make an informed decision.

To reduce the opportunity for misrepresentation and incomplete disclosures.

To protect the interests of life insurers and their agents. - Answer To protect the interests of life insurers and their agents.

In a group 'insurance policy acts of war and aviation are considered examples of: - Answer Exclusions

all of the following statements apply to a producer acting as an insurance BROKER, EXCEPT:

A broker acts on behalf of the insurer.

A broker represents the insured in dealings with the insurer.

A broker is appointed by an insurer to sell insurance.

A broker may collect a fee for service from the insured. - Answer A broker acts on behalf of the insurer

A person has paid $50,000 into a fixed annuity over 20 years. When he decides to begin income payments the insurer calculates that he will receive $4,000 per year for life, which means that he will receive a total of $100,000. In the first 10 years of payments how much is taxable each year? - Answer $2,

The Free Look provision of life insurance issued in California states that certain conditions exist in order for a policy to be delivered to the policy owner properly. which of the following is not correct in determining good delivery?

The policy was mailed certified.

The policy was mailed with a signed delivery receipt.

The policy was hand delivered personally, no receipt of delivery needed.

None of the above. - Answer The policy was hand delivered personally, no receipt of delivery needed.

Which of the following is required to be included in the writing of an insurance contract?

The risks insured against.

The period in which the insurance is to continue.

The parties between whom the contract is made.

All the above. - Answer All of the above.

Which of the following statements about life insurance policy loans is correct?

Policy loans can be used to pay premiums without affecting the amount of the death benefit.

Policy loans may be repaid at any time while the policy is in force.

A policy loan establishes a debtor-creditor relationship between the insurer and the policyowner.

Unpaid policy loans become debts of a deceased policyowner's estate. - Answer Policy loans may be repaid at any time while the policy is in force.

According to the California Insurance Code, which of the following MUST be specified in an insurance contract?

Insurer financial rating

Risks insured against

Additional coverages

Policy exclusions - Answer Risks insured against

Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium? - Answer Renewable term

An annuity in which the underlying investment performance will cause a fluctuation in the value of the benefit is: - Answer A variable annuity

There is a financial product that was created to address the risks of a person outliving their life savings. What is this product called? - Answer Annuities

What is the performance of an Equity Index annuity based on - Answer S&P 500

How would a 'peril' best be defined? - Answer Reason for the loss

What is the penalty tax imposed on amounts received from a modified endowment contract? - Answer 10%

an example of a morale hazard in relation to a life insurance application would be: - Answer An individual has an indifferent attitude about participating in activities that may be damaging to his health.

Who are members of the Medical Information Bureau? - Answer life insurance companies

Failure to report background changes within 30 days as required under section 1729.2 of the California Insurance Code could subject a licensee or applicant to: - Answer > Revocation of the license

Denial

Suspension

Choose the payments from an insurance policy which are not subject to federal income taxes: - Answer The death benefit paid to a beneficiary in a lump sum.

select the type of annuity payment option that has the least amount of risk for the insurer, and therefore, pays the highest amount of income to the insured over time. - Answer Straight/pure life

All of the following are characteristics of adverse selection EXCPET

People with the greatest probability of loss are the ones most likely to buy insurance.

It normally occurs if the premium is low relative to the loss exposure.

Poor underwriting results may occur if too many of the applicants accepted for insurance are those most likely to incur serious losses.

Insurance companies can not discriminate against applicants who have a higher probability of loss. - Answer Insurance companies can not discriminate against applicants who have a higher probability of loss.

A type of life insurance policy called first-to-die policy is very helpful in business situations whereby a partner can purchase the interest of a deceased partner at death. This policy can also be used by a husband and wife by naming each other as beneficiaries. Select the incorrect statement about first-to- die plans from below.

They pay a reduced amount upon death of the last surviving insured.

They pay the full face amount on the death of the first insured to die.

Compared to buying two individual ordinary life insurance contracts, a first-to-die would be cheaper.

All of the above are incorrect statements about first-to-die policies. - Answer They pay a reduced amount upon the death of the last surviving insured.

An individual with a low income and high insurance needs should buy: - Answer Term insurance

The insured cannot borrow against the loan value of the policy without the permission and consent of which to the following? - Answer Irrevocable beneficiary

Unless the applicant indicates otherwise during the right-to-return period in an individual annuity, the premium for a variable annuity would be invested only in: - Answer Fixed income investment and money market funds.

The policy provision which comes into effect when the insured and primary beneficiary die in a simultaneous accident with no evidence as to who died first is: - Answer Common disaster provision

Which type of policy pays the face amount if the insured survives to the end of a certain period? - Answer Endowment insurance

Choose from the following selections the best description of a premium.

A bonus paid to an agent for high insurance sales production.

The amount an insured pays for each unit of coverage. $ 7 for every $ 1,000 of coverage is an example.

Funds received by an insurer from an insured to realize the benefits of the policy.

Funds received by an insured from an insurer to realize the benefits of the policy. - Answer Funds received by an insurer from an insured to realize the benefits of the policy.

Individual life insurance policies sold to seniors in the state of California must include a prominently placed statement that divulges all of the following information EXCEPT

Proof of surrender must be notarized at the agent's principal office.

The policy can be returned during a free look period for a full refund.

The policy should be returned to the agent or insurer in not wanted.

A charge might apply if declined after the time allowed for surrender. - Answer Proof of surrender must be notarized at the agents principle office.

There are four basic classes of life insurance. All of the selections listed below are regarded as ordinary insurance, EXCPET:

A 10-year endowment contract

A life paid-up-at-age-55 policy

Term life insurance

20 pay life policy - Answer Term life insurance policy

Which of the following is not a characteristic of life insurance?

it creates an immediate estate.

It may be based strictly on an oral agreement.

An incompetent adult may not enter into a contract.

It does not have to be paid for at once. - Answer It may be based strictly on an oral agreement.

The mathematical rule that says that as the number of individual but similar exposure units increases the easier it is to predict losses is which of the following? - Answer The Law of Large Numbers

What is the limit of liability in a term life insurance policy? - Answer The face amount of the policy.

Which of the following products creates an immediate estate?

Mutual Funds

Annuities

IRAs

Life insurance - Answer Life insurance

When children are covered under a family life policy: - Answer Evidence of insurability is not required if conversion is made to permanent insurance for those children.

When are parties to a contract required to communicate information solely based on personal judgement for a matter in question? - Answer Never

The purchase of an insurance policy may not provide one of the following for the insured. Select the most complete answer:

Reduction in worry/greater peace of mind.

The replacement of a large possible loss for a small certain loss.

A reduction of uncertainty.

Elimination of the risk. - Answer Elimination of the risk.

John pays the premium for a $200,000 life insurance policy and is issued a binding receipt. John dies in an accident the next day. In the course of underwriting, the company determines John was not insurable by their guidelines at the time the binding recipe was issued. What must the insurer do? - Answer Pay the claim in full.

The theory of probability is applied to life insurance through the use of - Answer Mortality Tables

All of the following are reasons for an individual to purchase personal life insurance, EXCEPT:

To have cash available for emergencies.

For the creation of an immediate estate.

To have funds that can supplement Social Security at retirement.

To cover a buy/sell agreement. - Answer To cover a buy/sell agreement.