Life Law 1

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Life Law 1 1. Real Deal wants to name her husband as the beneficiary of her life policy; however, she wishes to retain all of the rights of ownership. Real should have has husband named as: irrevocable beneficiary revocable beneficiary secondary beneficiary tertiary beneficiary 2. When changing from a whole life to a variable life policy, the agent must provide notification to the policyowner within how many days? 10 days 15 days 30 days 45 days 3. A life insurance company's legal reserve shows on the balance sheet as: An asset A liability 4. Ways in which DIVIDENDS may be used by the policy-owner include all the following EXCEPT: As stock in the company Applied to reduce the premium. Left to accumulate with interest. Used to buy additional paid-up insurance. 5. Which of the following is called the fifth dividend option? paid-up cash term reduction of premiums 6. Which of the following statements about the assignment of a life insurance policy is (are) true? I. Most insurance companies require that notice of any assignment of a policy be filed at the home office II. An insurance policy cannot be assigned to any lending institution for securing a loan without the insurers permission. I only II only Both I and II None of the above 7. Which of the following statements about the Misstatement of Age provision in a life insurance policy is true? If the insured's age has been overstated, it provides that a premium refund and the face amount of the policy will be payable. If the insured's age has been understated, it provides that a Death benefit smaller than the face amount of the policy will be payable. It becomes inoperative after the expiration of the policy's Contestable period. It is an optional provision. 8. The suicide clause provides that proceeds will never be paid in cases of self-destruction. True False 9. Sigmund buys a $10,000 life insurance policy on Guirty with a payor provision. Sigmund dies 4 years later. What happens to the premium? Policy is paid up for life Premiums are waived until Guirty reaches age 25 Premiums must be paid by Guirty until age 25 Guirty is responsible to pay all premiums 10. An insured has a $50,000 whole life insurance policy which has an accumulated cash value of $30,000. Upon the advice of his insurance agent he uses $20,000 of the cash value to pay for a single premium life insurance policy from the same company. The remaining $10,000 is used to purchase an annuity.Which of the following best describes the agent's recommendations? rebating twisting churning wisdom 11. Titus has absolutely assigned his $100,000 life insurance policy to the bank to cover a $75,000 mortgage. His wife is named as primary beneficiary. If Titus were to die which statement correctly reflects the insurance company's obligation? the insurance company would pay the bank $75,000 and $25,000 to his wife the insurance company would pay his wife $75,000 and the bank $25,000 his wife would receive the entire amount the bank would receive the entire amount 12. Using existing cash values to purchase additional insurance is considered: Churning Twisting a hanging offense I dont' know 13. Which of the following constitutes replacement? Reducing the face amount of one policy and buying another Electing a non-forfeiture option and buying another policy Borrowing 25% of more against the cash value and buying another policy All the above 14. From a TAX standpoint, when a policy-owner surrenders a life Insurance policy and receives a lump-sum payment of the cash value, which of the following applies? A lump-sum payment is totally exempt The lump sum, less the policyowners cost basis, is taxable as ordinary income The lump sum, less the policyowner's cost basis, is taxable as capital gains The lump sum payment is taxable under the annuity rule 15. An individual may convert his industrial insurance policies to ordinary policies when his industrial policies total at least: $10,000 $5000 $1000 $3000 16. The use of an IRREVOCABLE beneficiary option may do all the following EXCEPT: Limits the owners normal ability to exercise all her policy rights. Protect the rights of an alienated beneficiary. Restricts the owner from borrowing cash values. Does not restrict the owner in the use of the loan values in the policy. 17. The "Spendthrift Clause" enables a beneficiary to collect all policy proceeds even though: The insured was disabled and owed the last premium There were policy loans against the cash value The Insured had large outstanding debts The beneficiary will probably blow the money 18. Replacement is defined as any life insurance transaction in which new insurance is to be purchased and existing insurance is to be modified in certain specific ways. A way in which the existing insurance may be modified that brings the transaction within the definition of replacement is: Conversion to reduced paid-up ins, continued as extended term Insurance, or otherwise reduced in value by use of nonforfeiture benefits or other policy values. Converting term insurance to variable life Borrowing 10% of the cash value from a policy to pay the premium on a new policy Re-issuing a newer policy form without any reduction in cash value 19. At what time must the "Buyer's Guide" be delivered to the client? At the initial interview Prior to accepting the premium, unless there is a ten day free look Before delivery of the policy No buyer's guide is required 20. An "association group" may be eligible for group life insurance under Florida law if they meet which of the following criteria? 1. Must have been in existence for three years 2. Must hold monthly meetings 3. If the plan is contributory, a minimum of 100 members must participate 4. If the plan is non-contributory, all members must participate 1, 2, & 4 2, 3, & 4 1 & 2 3 & 4 21. Mary's age on the application for a $100,000 life insurance policy indicates that she is 31 when in fact she is actually 30 years old. This fact was discovered after her death. Which course of action would the company take? Increase the death benefit to what the premium would have purchased for a 30 yr old woman Pay the $100,000 and return the over charged premium Pay the $100,000 Lower the death benefit to what the premium would have purchased for a 30 yr old woman 22. The Viatical Settlement Act includes all of the following except: licensing of viatical settlement providers allows licensed agents to perform the functions of a viatical broker regulates terms of viatical agreements viatical providers are regulated by Dept. of Viatical Settlements 23. A Dually Licensed Agent: Is an agent representing two insurance companies Has completed this course and passed the State exam Holds an insurance and a securities license at the same time Was administered the oath by Tom Dually 24. Old Man AnnaCee, 67 yrs old, has had a policy for 16 years. In addition to his regular grace period he will have an additional grace period of how many days? 30 days 21 days 31 days there are no additional days 25. All of the following statements concerning a family plan life insurance policy are true except: coverage for children is normally term children born later are immediately covered the coverage for children will usually terminate at age 18 or 21 the children's term can be converted 26. The Florida Uniform Simultaneous Death act 1. Provides that when it is impossible to determine who dies last it is assumed the insured died last 2. It was designed to clear the way for paying claims 3. It determines who should be the surviving beneficiary I only II only III only I and II 27. Temporary term for interim coverage may be used to defer the effective date of an original policy for how many months? 1-11 1-12 0-11 0-12 28. Which of the following statements concerning par and non-par policies is correct? premiums for par policies are higher than non-par the cash value for a par policy will be higher, assuming everything else is equal but the premium premiums for non-par policies are higher the cash value for a non-par policy will be higher, assuming everything is equal but the premium 29. Borrowing money from a life insurance policy at 5% to invest in a variable universal life policy could be considered: leveraging churning embezzlement a pretty cool idea 30. Which of the following are disadvantages of naming the insured's estate as beneficiary: I. Creditors can easily attach the proceeds II. Proceeds increase the size of the estate III. If there is a will it may be contested. IV. The advantages of settlement options are lost I & II I & III II & III all the above 31. The maximum policy loan interest rate: 10% if fixed rate or, if adjustable rate, tied to Standard and Poor's bond index 10% if fixed rate or, if adjustable rate, tied to Moody's bond index 5% if fixed rate or, if adjustable rate, tied to Standard and Poor's bond index 5% if fixed rate or, if adjustable rate, tied to Standard and Poor's bond index 32. If a Dually Licensed Agent knows that a policy is going to be lapsed, according to the Dually Licensed Life Agent's rule, he/she must notify which of the following with-in 15 days? The policy-owner only The Chief Financial Officer The company whose policy is being replaced The policy-owner and the company whose policy is being replaced 33. Which of the following is correct concerning the grace period for folks aged 64 & over? 1. They are afforded an additional 31 days of grace 2. They are afforded an additional 21 days of grace 3. Does not apply to policies held less than one year 4. Have no idea what you are talking about 1 only 1 & 3 2 & 3 4 34. If the insurance company were to cancel a group life insurance policy it must notify the certificate holders covered under the group. How may the insurance company perform this action? the insurance company must notify each certificate holder the insurance comapany notifies the master contract holder 35. The _________ provision states the insurance company will pay the death proceeds. consideration entire contract insuring reinstatement 36. The Viatical Settlement Act I. Requires licensing for brokers and providers II. Allows licensed life agents to perform the functions of a Viatical Broker III. Provides for regulation of these products by the Dept. of Financial Services I only II only III only all of the above 37. Which of the following statements is not correct regarding an association group? must have been in existence for one year must be a natural group if the plan is non contributory all members must participate if the plan is contributory at least 100 members must participate 38. Robert had a $100,000 policy which he converted to a reduced paid-up policy with a $55,000 death benefit. At the same time Robert purchased a Variable Universal policy that allowed him to choose the investments. Which word best describes this? Twisting churning replacement styling 39. In a viatical settlement the viator is: the person buying the policy the insured the agent acting on behalf of the person selling the policy the agent acting on behalf of the person buying the policy 40. All the following statements concerning the Tax Treatment of life insurance are true EXCEPT: Premiums for business Key Person policies are not deductible. Premiums paid on policies owned by a qualified charitable organization are usually deductible to the donor premium payor. Premiums paid for life insurance in non-qualified plans are deductible. Group life premiums are usually deductible if the program benefits are not discriminatory. 41. The incontestable clause applies to all the following except: concealment fraud suicide impersonation 42. Policy assignment is: Assessing for more premium The policy owner assigns certain ownership rights to a second party The insured assigns certain ownership rights to a second party The beneficiary assigns back his/her rights 43. Which of the following provisions provides a sequence of beneficiaries for the distribution of policy proceeds in the event of the simultaneous death of both the insured and the primary beneficary. Common Disaster Provision Per Stirpes Per Capita Per Lineage 44. A life insurance policy is considered incontestable after it has been in force for a period of: 45 days 6 months 3 years 2 years 45. Shirley has a $10,000 life policy. She borrows $500 from the cash value at a rate of 5%. Five months later Shirley suffers a small calamity which put her in the grave. Her beneficiary will receive: $10,000 $9500 $9525 $9475 46. Joe has a $10,000 whole life insurance policy with an adjustable loan interest rate. Moody's bond index is 12%. If Joe were to borrow against his cash value, what is the most the insurance company could charge Joe for the loan? 5% 10% 12% no charge, loans are free of interest 47. Who regulates qualified retirement plans? the state the state & the SEC ERISA MALISSA 48. Monty died in year 2 of his 20 year family income policy. Which of the following statements is true concerning the payout? it will pay monthly for 20 years it will pay monthly for 18 years I could not care less, I have really, really had it 49. Which is the correct statement regarding policy replacement? State laws prohibit replacement. Twisting and replacement are synonymous terms. Agents must follow the replacement procedure outlined in Florida Law. Cash value buildups are always better in new policies. 50. Florida rules on disclosure require: I. A buyers guide and summary prior to acceptance of a premium II. A 10 day free look and buyers guide provided at delivery III. Florida does not require a buyers guide I only II only III only I & II 51. "Twisting" in policy replacement involves all the below except: Any form of misrepresentation Failure to disclose all relevant facts Stripping cash values to make outside investments Replacing policies after full disclosure of all relevant values and facts 52. Which of the following agencies regulate Variable Life insurance products: The State Department & Henry Kissinger The Office of Insurance Regulation & Securities and Exchange Commission The Office of Insurance Regulation & Federal Trade Commission The Office of Insurance Regulation & Florida Securities Department 53. Munch withdraws $2,000 of accumulated dividends from his life insurance policy. What will be the TAX RESULT? I. Accumulated dividends & any interest credited will be tax exempt. II. Accumulated dividends will be taxable income to Munch. III. The dividends are exempt from income tax, but any interest credited will be taxable. I only II only III only I & II

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