Life 3

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Life 3 1. Where would information relating to the identity of the agent, the company, the policy and each rider be found? buyer's guide declarations page policy summary initial receipt 2. Robert named Becky as an absolute irrevocable beneficiary. If Becky dies before Robert: All rights revert back to Robert. Becky's estate will still have an interest in the policy. One should never name an absolute irrevocable beneficiary 3. In the formation of a life insurance contract, the special significance of a conditional receipt is that it: guarantees the applicant that a policy will be issued in the amount applied for in the application. serves a proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company. is given by the agent only to applicants who fully prepay all scheduled premiums in advance of the policy being issued. is intended to provide coverage on a date earlier than the date of the issuance of the policy. 4. On May 8, a prospect filled out an application for a life insurance policy but paid no premium. The insurance company approved the application on May 14 and issued the policy on May 15. The agent delivered the policy on May 26 and collected the first premium. The coverage became effective on: May 8 May 14 May 15 May 26 5. A prospect's statements made in the application for insurance constitute a part of which of the following? Consideration Clause Incontestability Clause Subrogation Clause Coinsurance Clause 6. All of the following are methods of tax deducting life insurance premiums except: key person life business creditors employer group life life insurance by an ex-spouse as part of an alimony decree 7. Nancy wants to name Tonya as the beneficiary of her life policy. However, she wishes Tonya to be at the bottom of the list. Nancy should have Tonya named as: Irrevocable beneficiary Revocable beneficiary Secondary beneficiary Tertiary beneficiary 8. Information regarding premiums, dividends and cash surrender values would be found in which of the following? The buyer's guide The policy summary The entire contract The policy illustration 9. Louie Longlife, age 65, has elected a life income settlement option. He has, according to the insurance company, a life expectancy of 20 years. If Louie passed away at age 95, how long did he receive payments? until age 85 until age 95 until age 100 until age 75 10. The purpose of a mortality table is to: To provide the probability of death at given ages To provide the expectation of life at given ages Both Neither 11. All of the following are exceptions to the "transfer for value" rule except: transfers to the insured transfers to a relative transfers to a corporation in which the insured is an officer transfers to a partner 12. Allen, a cancer survivor, was rated by the insurance company to cover the additional risk. Which of the following rating methods would increase his cash value? extra percentage tables permanent flat extra premium temporary flat extra premium none of the above 13. Lucy has a $100,000 life insurance policy with $25,000 accumulated as cash value. If she were to borrow $20,000 from her policy how much cash value would be in her policy the next day? $5000 $80,000 $75,000 $25,000 14. Wilma the widow is receiving payments under the fixed period settlement option. The company is currently paying the payments at an interest rate of 5%. If, in the future, the company elects to raise the interest rate to Wilma, what effect would this have on her payout? There is not a chance this could happen. The period would be longer. Her payments would be higher. Wilma would be very very happy. 15. A STANDARD RISK applicant is considered covered when: the agent completes the application and the applicant signs it. the insurance company mails the policy (which had at least one month's premium submitted with the application) for delivery. the proposed insured completes the application and submits to a physical with the intent to pay the premium if he/she is approved. the agency manager deposits the initial premium in the bank. 16. The annuity rule applies to all of the following except: life income fixed period fixed amount lump sum 17. Which beneficiary term would designate the children of a DECEASED named beneficiary as recipients of the death benefits? Per Stirpes Per Capita Per Lineage Per Child 18. Harry the Hobo has no estate problems. His estate is worth very little. He finds some money under the bridge and buys a $100,000 whole life insurance policy, naming his mother as beneficiary. (We don't want to get toooo serious.) How has this changed his estate. $0 $50,000 $75,000 $100,000 19. When a mistake has been made in the application, which would be the best course of action taken by the agent? The agent should have the applicant complete a new application The agent should erase and correct the mistake The agent should correct the mistake and have the applicant initial it The applicant should correct the mistake and have the agent initial it 20. When insuring substandard life insurance risks, provision is usually made for the expected higher death rate by: Charging an additional premium Reducing the death benefits Establishing special risk groups Reducing the agent's commission 21. Pover Tee is named by the insured, Kik LeBucket, as the first in line to receive the death benefit provided by Kik's accident policy. Their daughter, Spoilt Chile, is named as second in line to receive the benefit. Which statement is correct? PoverTee is the primary beneficiary and Spoilt Chile is the contingent beneficiary. PoverTee is the contingent beneficiary and Kik is the priamary beneficiary. Kik is the primary beneficiary and Spoilt Chile is the contingent beneficiary. Both Pover Tee and Spoilt Chile are primary beneficiaries. 22. When a policy owner notifies the company in writing of a beneficiary change, this is called: A written method An absolute method A revocable method A recording method 23. The insured and the beneficiary are killed as a result of the same accident, but the beneficiary survived the insured by 24 hours. Which provision would stipulate that proceeds of the policy be paid as if the insured died last? the Uniform Simultaneous Death Act the Per Stirpes Provision the Common Disaster Provision the Per Lineage Provision 24. The process of evaluating risks standard or sub-standard is known as: Classifying Underwriting Rating Baiting 25. Which of the following statements about the Fair Credit Reporting Act is correct? It prohibits insurance companies from obtaining reports on applicants from outside investigative agencies It provides that consumers have the right to question reports made about them by investigative agencies It applies to reports about applicants that are made by insurance agents to their companies It prohibits insurance companies from rejecting an application based on a credit report 26. Beatrice was the owner and insured of a $100,000 life insurance policy which named her former husband as the beneficiary. She signed a change of beneficiary form the day before her death naming her new husband as beneficiary, but the home office had not yet received the form. Which course of action will the insurance company take? The company will pay the former husband, as the form was not presented before her death. The company will pay her present husband. The company will pay to the court and let the court decide. unfortunate chain of events 27. The spendthrift trust clause: 1. protects the beneficiary from the claims of either the beneficiary's or the insured's creditors. 2. applies only to proceeds paid in a lump sum. 3. applies only to proceeds paid in installments. 4. states that the proceeds are not assignable. 1 & 2 1 & 3 1, 2 & 4 1, 3 & 4 28. What is the minimum age in Florida to purchase insurance? 21 18 16 15 29. Where would the insurance company determine the character of a prospective insured? 1. The inspection report 2. Special questionnaires 3. The agent's report 4. Credit reports 1 only 2 only 1 & 3 all the above 30. The annuity rule would be applied to all of the following except: Fixed period option Fixed amount option Life income option Lump-sum cash option 31. All of the following statements concerning viatical death benefits are true except: To be classified as terminally ill the insured must have a condition that can reasonably result in death within one year. Chronically ill persons receive the same tax benefits as do terminally ill insureds. Florida insurance law requires viatical brokers to inform viators (those buying the policy) that the proceeds might be taxable. Passage of the Health Insurance Portability & Accountability Act of 1996 made benefits tax free. 32. The policyowner has how many days, after the maturity date, to exercise an annuity option before the rule of construtive receipt takes effect? 15 days 30 days 45 days 60 days 33. In Florida, all of the following must appear in the application except: agent's name beneficiary company name agent's I.D. number 34. A field underwriter: decides who will be issued the policy. is responsible to agents in the field. is the agent. supervises agents in the field. 35. Clockster surrenders his $25,000 life insurance policy with $10,000 of cash value. He has paid a total of $5,000 in premiums. He had received $2,000 of dividends of which he bought $7,000 of paid-up insurance. How much will Clockster have to report to the IRS as a gain? $7000 $5000 $10000 $0 36. How is the Medical Information Bureau funded? It is funded by the states and authorized insurance companies. It is funded by the states. It is funded by more than 700 member insurance companies. It is funded by the states and the federal government. 37. Where would the insurance company find the number of hours a pilot has flown over the last year? The FAA The Office of Homeland Security The Inspection Report The Special Questionaire 38. The transfer for value rule states that if a policy is sold any amounts received by the purchaser above his cost basis would be taxable at ordinary income rates. This would not apply to which of the following? If transferred to the insured If transferred to a partner of the insured If transferred to a corporation in which the insured is an officer All of the above 39. Preliminary term insurance can be used for how long? 1 month to 1 year 1 to 11 months 6 months 2 years 40. Which of the following statements about the M.I.B. (Medical Information Bureau) is true? It is a non-profit central information agency The APPLICANT can call the M.I.B. for a personal report. Information obtained by the MIB is available to all physicians The M.I.B. is operated by a network of hospitals 41. Which of the following transactions would not result in a taxable event according to the 1035 exchange rules? exchanging an annuity contract for a life insurance contract exchanging an insurance contract for a mutual fund with the same company exchanging a life insurance contract for an annuity contract exchanging an endowment contract for a life insurance contract with the same company 42. What provision would allow the insurance company to pay the death benefit to someone not named as a beneficiary? Facility of Payment Provision Right of Assignment Provision Tertiary Benefit Provision Uniform Gift to Minors Act 43. An agent takes an application from a proposed insured without receiving payment of the first premium. The insurance company issues the policy and, when the agent visits the proposed insured to deliver it, she realized that the health of the applicant has deteriorated significantly since the application was taken. The agent should: obtain the premium from the prospect and send it to the company immediately. rate the policy and obtain any additional premium required. deliver the policy as it was issued. refuse to deliver the policy or to accept any premium offered. 44. Which of the following premium factors have the greatest effect on rate making? mortality interest expense loading 45. All of the following are automatically presumed to have an insurable interest in the insured except: spouses parents cousins children 46. Where does the company get general character and reputation info on the proposed insured? The proposed application Medical report Inspection report M.I.B. 47. All the below are available settlement options EXCEPT: life income without a refund lump sum distribution of the face value life income with 10 years certain joint and first survivor 48. What is on part 3 of the application? The agent's report The medical report The inspection report Special questionaires 49. Which of the following is not true about life insurance policy proceeds? They are part of the insured's estate if payable to the estate They are not part of the insured's estate if payable to the estate They are not included in the probate process Proceeds can not be contested by disgruntled heirs 50. If a proposed insured has a hazardous occupation the insurance company will probably: rate the insured and charge an extra premium. forward the information to the M.I.B. remove the family plan benefit. reduce the dividends. 51. Binding receipts: 1. are a maximum of $100,000 and not more than 30 days. 2. are a maximum of $100,000 and not more than 60 days. 3. are issued with no medical exam required. 4. will pay for accidental death within 30 days of the agreement, even if a required exam was not completed. 1 & 3 1 & 4 2 & 3 2 & 4 52. Which of the following statements concerning cash values is/are true? 1. Cash values are a liability to the insurance company. 2. Cash values are an asset to the insurance company. 3. Cash values are an asset to the policyowner. 4. Cash values are a liability to the policyowner. 1 & 3 3 2 & 4 2 & 3 53. Under a viatical settlement arrangement, an insured received $80,000 for his $100,000 life insurance policy. Which of the following statements are true? 1. The $80,000 will be tax free. 2. The $80,000 will be taxable. 3. The $20,000 gain paid to the buyer will tax free. 4. The $20,000 gain paid to the buyer will be taxable. 1 & 3 2 & 3 1 & 4 2 & 4 54. Which of the following is not a settlement option? I. Life Income II. Fixed Period III. Fixed Rate IV. Interest Only I only II only III II & III 55. The rule of constructive receipt takes effect after: 10 days 30 days 60 days 90 days 56. "Under no circumstances are you to send me the money", Joe told his insurance company when he turned 65. Joe had an endowment policy for $50,000 that matured at age 65. He had paid in a total of $25,000 and did not want to pay the taxes quite yet desiring to delay the inevitable for as long as possible. "Too bad", said the IRS. "You're taxed." Under what rule was Joe taxed? the non-deferral rule the make it, pay it rule the rule of constructive receipt the endowment rule 57. To be considered chronically ill and qualify for benefits under an accelerated benefit rider, a licensed health care practitioner must certify that the person is unable to perform: at least two activities of daily living for 90 days at least three activities of daily living for 60 days at least two activities of daily living for 60 days at least three activities of daily living for 90 days 58. The purpose of the Medical Information Bureau is to: Provide doctors a way to share information To help keep premiums down To provide a way for insurance companies to share underwriting decisions Provide insureds an easier way to obtain their medical records 59. All the following issues about BENEFICIARIES are true EXCEPT: Secondary beneficiaries are the same as contingent beneficiaries. More than one primary beneficiary may be named. Beneficiaries must always be named as individuals. The insured, if he/she is also the owner, can designate any beneficiary he/she chooses. 60. A STANDARD RISK applicant submits an application REQUIRING a medical exam and receives a CONDITIONAL RECEIPT for his premium. The policy is first effective: as of the date of the application. as of the date the policy is issued. as of the completion of the required medical examination. as of the delivery date of the policy. 61. John owned a life insurance policy on his sister. His sister's children were named as the beneficiaries. If his sister and her children were killed in an accident, to whom would the insurance company pay the benefits? the sister's estate John's estate John his sister's husband 62. When would the insurance company require a statement of the insured's good health? At the delivery of the policy if a conditional receipt was given At the delivery of the policy if no money was given with the application At anytime when the policy is delivered if the agent feels the applicant's health has changed At no time will this be needed 63. Avril was given a binding receipt for a $50,000 life insurance policy which required an exam. Two weeks later he was killed in an accident before the exam could be completed. Which of the following would the company do? Return all premiums Pay the full death benefit Pay partial death benefits Deny he ever existed 64. Which of the following settlement options might provide payments that exceed the proceeds of the policy and the interest earned? Life Annuity Fixed Period Fixed Amount Interest Only 65. Which type of settlement option could possibly be paid out to the beneficiary completely tax free? lump sum interest only fixed-amount life income 66. Dude paid a total of $25,000 for his $100,000 life insurance policy. He borrows $35,000 against the cash value. How much will Dude have to report as a gain? $35,000 $25,000 $10,000 $0 67. Which of the following death benefit settlement options is true? Death benefits are tax free. Benefits are tax free unless they are paid in installments. Benefits paid under the installment method are tax free. Eeney meeny miney moe... 68. An accelerated death benefit rider could be found in which type of policy? individual plans group plans both group and individual

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