Insurance Practice Exam Guide

Insurance Exam Practice Exam: Questions and Answers Pure or straight life Which of the following annuity benefit payment options would generate the highest monthly payments to the contract owner upon annuitization? Paid-up additions 1-year term Cash All of the following are dividend options on a participating life insurance policy: Insured The person upon whose life an annuity is based is known as the: Reduced paid-up When a policyowner uses the cash value in their policy to buy a lesser amount of permanent life insurance, they have exercised which nonforfeiture option: Interest only Which of the following life insurance settlement options enables the beneficiary to conserve the proceeds of a life insurance policy? The account value In the case of a variable annuity sold to a senior citizen in this state for which the owner has directed that the premium be invested in the mutual funds underlying the contract during the 30-day cancellation period, cancellation during that period entitles the owner to a refund of: They are purchased by those who are worried about outliving their savings. All of the following are true regarding annuities They are not suitable as short term investments. They may be used as a life insurance settlement option. Group (Life Insruance) Which of the following would not be considered to be ordinary life insurance? They are not guaranteed They are legally defined as a return of premium and are not taxable All of the following are true regarding dividends paid by a mutual life insurance company They are paid out of the insurer's accumulated surplus Renewable Which type of term life insurance has a level face amount but a premium that increases each year as the insured gets older? The amount and frequency of future losses are unknown The transfer of risk to an insurance company is an effective risk management technique when: Change the beneficiary Assign or transfer ownership in the policy The owner of a life insurance policy may do all of the following Take a loan The employer is the policyowner and the beneficiary Death benefits are payable to the employer tax free All of the following are true regarding key person life insurance: The employee is the insured A buy/sell agreement If a corporation and a shareholder enter into an agreement that requires the corporation to buy the shareholder's shares upon his or her death, they have entered into: Extended term Cash surrender All of following are required nonforfeiture options or provisions on a cash value life insurance policy: Reduced paid-up Large numbers The greater the number of similar exposure units insured, the easier it will be to predict future claims based upon the law of: Modified, ordinary, limited pay, single premium List in order from the lowest annual premium to the highest: 1/3 Military Aviation Group life insurance policies may exclude all of the following: War (EXCEPT Accidents) Non-standard Which risk classification will have the highest premium? Insured The person upon whose life a life insurance policy is based is known as the: Variable life A client who wants life insurance protection and cash values that fluctuate in value based upon the performance of a separate account should purchase: Absolute assignment When making a life settlement, a policyowner will permanently transfer all rights of ownership in the policy to another party by making a(n): Applicant Which of the following completes the application for life insurance? Fixed amount If the beneficiary of a life insurance policy wants $1,000 per month for as long as the money lasts, they should choose the ________ settlement option. Proof of insurability is not required The employee may convert to any policy issued by the group insurer, except term All of the following are true regarding group life conversion: Death during the conversion period is covered by the group policy __________________________ The employer will pay the entire cost of the new policy (Except) After the policy has been in effect for a specified period of time The incontestability clause in a life insurance policy protects the insured by preventing an insurer from denying a claim: 40 Under social security, being fully insured entitles a worker and family to full benefits. To achieve fully insured status, an individual must attain at least ____ quarters of coverage. 3 Where replacement is involved, every life insurer that uses an agent in a life insurance or annuity sale shall send to the existing life insurer a written communication advising of the replacement within ____ working days of the date the application was received. They are not meant to replace the full value of a person's earnings. Individuals must have fully insured status. All of the following are true regarding social security disability income benefits EXCEPT: The disability must be expected to last at least 12 months or to result in death. ___________________ (Except) Individuals must meet the own job definition of total disability. The premium that an employer pays for group life insurance coverage for an employee that exceeds $50,000 in coverage is: Taxable as income to the employee They may pay dividends out of their accumulated surplus They are known as mutual insurers The IRS has ruled that any dividends paid are a tax free return of premium All of the following are true regarding participating life insurers: __________________ EXCEPT: They are owned by their stock holders 2/3 26 On group life insurance, dependent children may be covered up to age: It allows the policyholder to purchase more insurance coverage without a physical exam Option dates that are not exercised are lost, but future option dates may be available All of the following are true about the guaranteed insurability rider : Coverage may be increased on specified future option dates EXCEPT:The premiums charged for the additional coverage is based upon the insured's original age It will accumulate in the usual manner If a whole life policy is being kept in force by use of the waiver of premium rider, what happens to the policyowner's cash value? Nursing home and home based care Adding a comprehensive long-term care rider to a life insurance policy will provide the insured with which of the following coverages: Dressing and eating Under a long-term care rider, which of the following are considered to be activities of daily living? 3/3