Term
| Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? |
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Definition
| They are tax free to terminally ill insured |
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Term
| Which of the following terms is used to name the nontaxed return of unused premiums |
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Definition
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Term
| Which of the following is NOT true regarding a nonqualified retirement plan? |
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Definition
It needs IRS approval
Non qualified retirement plans DO NOT need IRS approval |
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Term
| All of the following are characteristics of group life insurance EXCEPT |
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Definition
| Premiums are determined by age, sex, & occupation of each individual certificate holder |
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Term
| Which of the following insurance arrangements will be appropriate for a parent buying a life insuracne policy on a child where the parent is the policy owner? |
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Definition
Third-Party Ownership
Parent is a third party: Insured (chid), Insurer (Company), Policy Owner (Parent=Third Party) |
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Term
| All of the following are TRUE statements regarding the accumulation of interest EXCEPT |
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Definition
| The interest credited under this option is not taxable since it remains inside the insurance policy |
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Term
| When a replacement is inolved, a replacing insurance company is responsible for all of the following EXCEPT |
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Definition
| Provide a copy of the Important Notice Regardnig Replacement of Life Insurance to the applicant |
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Term
| Which Nonforfeiture option provides coverage for the longest period of time |
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Definition
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Term
| An individual has been making period premium payments on an annuity. The annuity income payments are scheduled to begin 2 years after the annuity was purchased. What type of annuity is it? |
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Definition
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Term
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?
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a)
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Paid-up additions
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b)
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Dividend Accumulation option
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c)
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Paid-up option
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d)
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Accumulation at Interest
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Definition
With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy’s cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy. |
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Term
An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?
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a)
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One-year term
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b)
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Reduction of premium
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c)
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Accumulation at interest
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d)
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Paid-up option
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Definition
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With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy’s cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy. |
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Term
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Which of the following is NOT true regarding policy loans?
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A) An insurer can charge interest on outstanding policy loans.
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B) A policy loan may be repaid after the policy is surrendered.
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C) Money borrowed from the cash value is taxable
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D) Policy loans can be repaid at death.
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Definition
C) Money borrowed from the cash value is taxable
Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans. |
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Term
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?
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a)
b)
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100 % participation of members is required for noncontributory plans.
Each member covered receives a policy.
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c)
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Coverage cannot be converted when an individual leaves the group.
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d)
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Premiums are determined by age, occupation, and individual underwriting.
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Definition
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a)
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100 % participation of members is required for noncontributory plans.
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If the employer pays all of the premium, then all employees must be included. |
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Term
The minimum number of credits required for partially insured status is
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Definition
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To be considered partially insured, an individual must have earned 6 credits during the last 13-quarter period. |
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Term
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The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
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a)
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Fixed period.
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b)
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Fixed amount.
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c)
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Joint life.
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d)
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Joint and survivor.
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Definition
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d)
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Joint and survivor.
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A joint and survivor option pays while either beneficiary is still living.
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Term
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What percentage of a company's employees must take part in a non-contributory group life plan?
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a)
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75%
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b)
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100%
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c)
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0%
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d)
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25%
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Definition
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If the employer pays all of the premium, all employees must be covered to avoid adverse selection. |
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Term
An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?
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a)
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$10,000, 60 days
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b)
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$10,000, 30 days
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c)
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$8,000, 60 days
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d)
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$8,000, 30 days
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Definition
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Generally, IRA rollovers must be completed within 60 days from the time the money is taken out of the first plan. If the distribution from the first plan is paid directly to the participant, 20% of the distribution must be withheld by the payor. |
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Term
In Texas, the Commissioner of Insurance is
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a)
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Elected by the state legislature's Banking and Insurance Committee.
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b)
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Elected by Texas voters.
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c)
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Appointed by the Governor.
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d)
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Appointed by the Insurance and Industry Committee of the state legislature.
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Definition
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c)
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Appointed by the Governor.
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The Commissioner is appointed to office by the Governor, with the advice and consent of the Senate, for a 2-year period. The Commissioner's appointment ends on February 1 of each odd numbered year. |
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Term
Which of the following would be required to be licensed as an insurance producer?
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a)
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A salaried full-time employee who furnishes information for group insurance
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b)
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An insurance company director who performs executive, administrative and managerial duties
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c)
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A salaried employee who advertises and solicits insurance
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d)
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A person whose activities are limited to producing insurance advertisements
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Definition
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c)
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A salaried employee who advertises and solicits insurance
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A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required. |
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Term
An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?
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a)
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The judge will determine when the hearing will be held.
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b)
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The hearing date can be set for any time within the next year, unless both parties agree to a later date.
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c)
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The hearing must be set for exactly 10 days after the request is made.
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d)
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The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.
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Definition
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d)
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The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.
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The hearing to show cause why the cease and desist order should not be affirmed or modified shall be held not later than the 10th day after the date of Commissioner receives the request for a hearing unless the parties mutually agree to a later date. (The cease and desist order remains in effect until the hearing is held.)
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Term
Which of the following is NOT true regarding a Variable Universal Life policy?
a) The minimum death benefit is guaranteed.
b) The cash values are not guaranteed.
c) The death benefit is fixed.
d) The policyowner can participate in some of the investment decisions. |
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Definition
c) The death benefit is fixed.
In a variable universal life policy, the death benefit is adjustable, and the cash values are not guaranteed. While the death benefit may decrease and increase, it cannot go below a guaranteed minimum face amount. |
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Term
A claimant, who is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of
a) 12 months.
b) 24 months.
c) 0 months.
d) 5 months. |
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Definition
d) 5 months.
Social Security applies a 5 month waiting period to claimants for disability benefits. |
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Term
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?
a) 100% participation of members is required in noncontributory plans.
b) Each member covered receives a policy.
c) Coverage cannot be converted when an individual leaves the group.
d) Premiums are determined by age, occupation, and individual underwriting. |
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Definition
a) 100% participation of members is required in noncontributory plans.
If the employer pays all of the premium, then all employees must be included. |
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Term
21. An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history 1 year later. What will probably happen?
a) The policy will be voided.
b) The insurer will sue the insured for committing fraud.
c) Because the insured is currently not a drug user, his policy will not be affected.
d) The policy will not be affected. |
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Definition
d) The policy will not be affected.
In insurance, fraud is the intentional misrepresentation of material information that is crucial when deciding whether or not to write a contract for an applicant. If an insurer finds that an applicant has committed fraud, it can void the contract, provided that the discovery occurs within the first two years of the effective policy date. In this particular instance the applicant did not commit intentional fraud. |
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Term
If an agent has completed 35 hours of continuing education in one renewal period, how many CE hours will the agent have to complete in the next renewal period?
a) 35
b) 20
c) 25
d) 30 |
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Definition
d) 30
Agents must complete 30 hours of continuing education (CE) every renewal period. All CE hours must be completed during the reporting period; licensees are not allowed to carry over excess hours to the next reporting period. |
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Term
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of
a) Concealment.
b) Unfair claim practice.
c) Rebating.
d) Misrepresentation. |
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Definition
d) Misrepresentation.
Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal. |
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