Ad Banker Comprehensive Exam Questions with accurate answers, 100% verified. Rated A

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Ad Banker Comprehensive Exam Questions with accurate answers, 100% verified. Rated A Which insurer's owner receives taxable corporate dividends as a return of profit? - ✔✔Stock To make ins... urance more affordable and protect the insurance company from paying out too much in claims, insurers will: - ✔✔Reinsure the risk The direct writing distribution model utilizes: - ✔✔Salaried employees A good example of Risk Reduction might be: - ✔✔When one takes action to minimize the severity of a potential loss In insurance, to determine acceptable risks is the primary responsibility of the: - ✔✔Underwriter When an insurance policy is not clear, the court will usually interpret in favor of the insured because: - ✔✔The policy is a Contract of Adhesion A Contract of Adhesion is a contract between two parties that does not allow for negotiation, i.e. take it or leave it. An insurance policy, drawn up by the insurer, is such a contract. Any ambiguity in the contract is construed against the party who drew it up. All of the following are true of the Law of Large Numbers, except: - ✔✔The prediction of individual losses is based upon past experience Which of the following is classified as an insurance broker? - ✔✔A person who negotiates insurance contracts on behalf of an insured An insurer that is not approved by the state Department of Insurance to transact insurance is called a(n) ___________ insurer. - ✔✔Non-admitted Which of the following best describes a Contract of Indemnity under insurance? - ✔✔The insured is restored to the same financial condition as prior to the loss, with no intent of loss or gain In insurance, the insurer's promise to pay a covered loss and defend the insured in a lawsuit and the insured's payment of the first premium, are all examples of: - ✔✔Consideration A(n) ________ insurer is authorized to write insurance policies in a particular state. - ✔✔Admitted In insurance, when an applicant intentionally fails to make a material fact known, it is known as: - ✔✔Concealment Concealment is defined as the withholding of known facts, the knowledge of which would change the decision of an insurer with respect to underwriting, settling a loss, or determining the premium. Which of the following is true about a Stock Insurance Company? - ✔✔The company is directed by officers and directors and has a stated amount of capital stock owned by stockholders A contract whereby only one party is bound to future performance, is said to be: - ✔✔A unilateral contract All of the following are true of a substandard risk, except: - ✔✔The premium would be discounted A producer submits a completed application to the insurer along with the premium check after giving the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior to the insurer declining the application based upon the results of the medical exam, what is the insurer's responsibility? - ✔✔Refund any and all premiums paid with the application In a policy summary all of the following must be shown on both a guaranteed and non-guaranteed basis, except: - ✔✔Dividends When a producer receives an application for life insurance that is completed and signed, but without premium payment, when does coverage start? - ✔✔On the date the policy is delivered and premium collected Buying life insurance so that the death benefit will be available for paying estate taxes due upon the death of the insured is known as: - ✔✔Estate conservation A personalized computer-generated illustration detailing premiums, cash values, interest rates, and surrender values is called __________. - ✔✔A policy summary Which of the following is included in Part II of a Life Insurance Application? - ✔✔Family member's age and cause of death Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of family members and causes of death of deceased relatives. A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal? - ✔✔Purchase a Joint life policy Joint Life pays on the death of the first insured. It is less expensive than buying two separate policies. The owner of a Variable Life Policy may allocate the premium into a sub-account which is owned by the insurer, this sub-account is a part of what is also known as the: - ✔✔Separate Account Owners of Variable insurance products may allocate their cash value into the insurer's separate account, with subaccounts that work like mutual funds, or into a guaranteed interest fund. All of the following are correct pertaining to Decreasing Term, except: - ✔✔The premium declines throughout the term of the policy Which of the following policies must be sold by prospectus? - ✔✔Variable Whole Life Variable Whole Life is a security. It is required that the producer have a securities registration in order to sell it and the policy must be sold with a prospectus detailing all fees, charges, risks, and expenses. In a life settlement transaction who represents only the owner and owes a fiduciary duty to the owner to act in the best interest according to the owner's instructions, regardless of the manner in which they are compensated? - ✔✔The life settlement broker A life settlement broker represents only the owner and owes a fiduciary duty to the owner to act in the best interest according to the owner's instructions, regardless of the manner in which the broker is compensated. Which of the following is a true characteristic of a Variable Universal Life policy? - ✔✔As long as there is sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned premium A characteristic of universal life insurance is that there is no requirement to pay any premium other than the first. As long as there is sufficient cash value to pay policy expenses (cost of insurance, riders, and other fees) when due, the policy remains in force. A participating life insurance policy has a long-term care rider. The insured qualifies for the benefit. Where does the initial benefit money come from? - ✔✔It is an advance of the face amount of the policy The Long-Term Care Rider's initial benefit is from an advance of the death benefit, after which additional dollars are paid out by the insurer. The amount the insurer is responsible to pay out maximum is determined at the time the rider is acquired. The bigger the benefit the more the rider costs. If the premium payable for the first few years of the policy (e.g. 3-5) are lower than an ordinary whole life policy in order to make it more affordable, what premium paying method was used? - ✔✔Modified Level, decreasing and increasing term refer to which policy feature? - ✔✔Death benefit The words level, decreasing and increasing as they apply to term insurance describe the death benefit, rather than the premium. Term life insurance has no cash value. Term life premiums can be level or increase, then never decrease. How does an Option A death benefit feature of a Universal Life policy work? - ✔✔It pays out the policy's face amount Option A in a Universal Life Insurance policy pays out a level death benefit, while Option B pays out an increasing death benefit, the face amount plus the cash values. When the death of an insured occurs within a specified period, causing the policy to pay double or triple benefits, this policy must have which of the following riders? - ✔✔Accidental Death Rider Also known as the Double Indemnity Rider, the policy pays the stated multiple of the face amount should the insured die as the result of an accident. In the event a parent becomes disabled or dies while paying premiums on a life insurance policy for a minor child, which provision would allow the policy to continue in force until the child reaches a predetermined age? - ✔✔Payor Benefit (Waiver of Payor Premium) A Payor benefit rider waives the policy premium in the event of the death or total disability of the premium payor. Usually found in policies covering children to the child's age 21 or 25. Sara applies for a $100,000 30 year level term life insurance policy. The producer quoted her a price of $750 annually if issued as applied for. She wants to make sure that the policy premiums are taken care of just in case she has a total disability. The policy is issued but the premium is now $825. What is the most likely reason why the overall premium increased? - ✔✔Sara now has added a waiver of premium rider, which requires an additional premium payment A waiver of premium rider has a premium associated with it. The combination of the base policy and the rider is what Sara must now pay if she wants both benefits in the policy. Term Life insurance is designed to provide coverage for ___________. - ✔✔Term Life Insurance is designed to provide coverage for a temporary period of time. The amount of time is specified in the policy acquired, for example, 10 year, 20 year, or 30 year term. Which of the following is designed for someone with a large insurance need but with limited cash flow? - ✔✔Term Life Insurance Term Insurance is pure protection (i.e. no cash value develops.) Its cost per thousand dollars of coverage is significantly lower initially than Permanent Insurance. In order to make sure that a creditor of the insured is not paid more than the outstanding loan at time of claim, the policyowner should: - ✔✔Purchase a decreasing benefit policy that matches the loan repayment schedule Credit insurance or decreasing term insurance is the best way to accomplish this. With a life insurance policy, in the event of the premature death of the insured, who has first claim to the policy benefits? - ✔✔Primary beneficiary The purpose of designating a beneficiary is to bypass the probate process. Assets pass directly to the beneficiary per the terms of the policy (i.e. contract). When there is enough cash value within a life policy to pay the premium, the Automatic Premium Loan provision prevents the policy from: - ✔✔Lapsing The owner always has a right to borrow from the cash value. The APL provision gives the insurer the right to invade the policy cash value to prevent a lapse. An insured with a participating life insurance policy receives annual dividends. She has opted for the insurer to use these funds to increase her overall amount of insurance. This would refer to which option: - ✔✔Paid-Up Additions Paid-Up Additions is a Dividend Option that buys small amounts of life insurance with a single premium and increases both the death benefit and cash value of the policy. Each addition's cash value is separate from the cash value of the base policy. Reduced Paid-Up is a Nonforfeiture Option. A policyowner has chosen the Fixed Amount Settlement Option. Which of the following best describes this option? - ✔✔The owner specifies the amount of each periodic payment and the insurer pays that amount until the funds plus interest are depleted In the Fixed Amount Settlement Option, the policyowner or beneficiary states the amount to be paid periodically. This amount will include interest and is paid until the death benefit has been fully distributed. The number of periodic payments is affected by the interest rate payable. ___________ in a policy allow the owner to name the beneficiary, choose a dividend option or settlement option, or borrow against the contract. - ✔✔Ownership Provision The rights of ownership are a standard contract provision and allows the policyowner to do all of these things and more. _________ Options allow for the distribution of the life insurance death benefit, or endowment contract face amount at maturity, to the named beneficiary or contract owner, as the situation warrants. - ✔✔Settlement A Settlement Option dictates a mode of payment to an owner or beneficiary (e.g. Fixed Amount, Fixed Period, Life Income, etc.) The owner may choose Settlement Option for a beneficiary that may not be changed by the beneficiary if the owner dictates. An insured bought a whole life policy 15 years ago and it has accumulated a cash value of several hundred dollars. She named her spouse as the owner at the time of purchase. Who has the right to change beneficiaries and access the cash value? - ✔✔The policyowner Ownership provides privileges. Only the owner, in this case the spouse, controls the rights in the policy. This is an example of third-party ownership. After a life insurance policy has been in force for more than _____ years the policy is considered incontestable. - ✔✔2 Lucy uses her dividends to purchase single premium additional permanent benefits at her attained age. Which Dividend Option is Lucy exercising? - ✔✔Paid-up Additions Only Paid-up Additions, Paid-up Option and One-Year Term are dividend options. Reduced Paid-Up is a nonforfeiture option. Lucy wanted additional permanent benefits so she should choose Paid-up Additions. The ____________ provision prevents a Whole Life Policy from lapsing, as long as there is adequate cash value, if the insured/policyowner forgets to pay the premium by the end of the grace period. - ✔✔Automatic Premium Loan The Automatic Premium Loan Provision (APL) gives the insurer the right to borrow sufficient funds from the cash value to prevent a policy lapse. This works only if adequate cash value is available. According to the contract, a policy loan may include annual prepaid interest. Dividends if declared are paid _________ - ✔✔Annually Unlike corporate stock which pays dividends typically on a quarterly basis policy dividends if declared are paid out on an annual basis. A small business owner used her life insurance policy as collateral for a bank loan. The face amount of the whole life policy was $100,000 and the original amount of the loan was $20,000. If the outstanding loan balance at the time the small business owner died was $10,000, how much will the policy's named beneficiary receive? - ✔✔$90,000 The collateral assignee, the bank, will take a priority claim on the policy's death benefit limited to the amount of the loan outstanding at the time of death, the named beneficiary will receive the balance. In this case $90,000 ($100,000 - $10,000). A universal life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal? - ✔✔The death benefit or cash accumulation will be reduced by the partial withdrawal A partial withdrawal also known as a partial surrender will cause the policy to have either the face amount or cash accumulation reduced by the amount of the withdrawal. Which of the following beneficiary designations prevents a policyowner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent? - ✔✔Irrevocable An irrevocable beneficiary has a vested interest in the policy and anything that could affect the values of the policy requires their consent. Annuities may be funded with either a lump sum or on either a ______ or a ______ basis. - ✔✔Periodic, flexible Contributions made during the accumulation period are made with a lump sum or on either a periodic or a flexible basis depending on contract design. The period of time over which distributions of the accumulated balance is made to the annuitant is referred to as the: - ✔✔Annuitization Period Annuities that provide income payments to annuitants have entered the annuity period by design or request. Susan, age 65, inherits a substantial sum of money and wants to have the money distributed to her over the rest of her life starting next month. Which product offered by the life insurance industry will allow her to accomplish her objective? - ✔✔Single Premium Immediate Annuity A Single Premium Immediate Annuity involves payment of a single sum to the insurer with periodic payments commencing within one year of deposit of the sum. Harry, the annuitant of a non-qualified tax deferred annuity with $40,000 cash value chooses the Life Income with Refund Payment Option when he annuitizes the policy. After receiving $1,000 each month for 80 months, Harry suddenly dies. How much will his beneficiary, his wife Lucille, receive? - ✔✔Zero A Refund Option returns the remaining unpaid principal, since Harry lived well beyond the refund (principal amount) there would be no residual values remaining on the payment option selected. Every insurer and life agent offering for sale individual life insurance policies, or individual annuity contracts that are issued for delivery to senior citizens in California with the use of non-preprinted illustrations of non-guaranteed values must disclose on those illustrations, or on an attached cover sheet, all of the following, except: A Guaranteed values are insured by the California Insurance Guaranty Association B Interest rates, dividends, or values that are set forth in the illustration are not guaranteed, except for those items clearly labeled as guaranteed C This is an illustration only D An illustration is not intended to predict actual performance - ✔✔Guaranteed values are insured by the California Insurance Guaranty Association What must insurers use to gather required information and producers must receive product-specific training for each annuity they market to seniors before they may even market the annuity? - ✔✔Suitability questionnaires Insurers must use suitability questionnaires to gather the required information and producers must receive product-specific training for each annuity they market to seniors before they may even market the annuity. With a Contributory Group Life Plan, what percentage of the employees must participate? - ✔✔At least 75% A Contributory Plan is one in which the participants pay all or a portion of the premiums. The high enrollment percentage, 75%, helps to minimize the risk of adverse selection. An agreement that establishes a price with the intent to purchase the assets of a business should one of the parties to the agreement predeceases the other is called a ___________. - ✔✔Buy-Sell Agreement A Buy-Sell Agreement is a legal and binding contract. A method of valuing the business is critical for the buy/sell to be effective and carried out in a timely manner. In an Entity Purchase Plan, the company is the beneficiary. In a Cross Purchase Plan, each partner is the owner and beneficiary of policies purchased on the other partners. Which of the following is a likely outcome if a buy-sell agreement in a two person partnership is not in place when one of the partners dies? - ✔✔The surviving spouse of the deceased becomes the other partner An employee who is covered under an employer group life insurance plan may assume all of the following are TRUE of the opportunity of conversion, except: - ✔✔The employee chooses which type of insurance to convert to The greatest advantage of group life conversion is that evidence of insurability is not required. The insurance company requires conversion to a permanent policy, which will be more costly. A(n) _________ plan calls for the business to purchase life insurance policies on each of the business owners. - ✔✔Entity An entity plan calls for the business to buy life insurance policies on the business owners. A cross purchase plan calls for the partners to buy life insurance policies on one another. If life insurance proceeds are paid to the deceased's estate they may be subject to ________ taxes. - ✔✔Federal Estate While the death benefit is income tax free, the amount in the deceased's estate may be subject to Federal Estate taxes. Which of the following scenarios will trigger an income tax due? - ✔✔Interest earned on dividends left on deposit with the insurer While the dividend is free from income tax the interest earned on the dividend is subject to tax. If an annuitant withdraws funds from their annuity prior to age 59 1/2 what is the tax consequence? - ✔✔Tax and 10% penalty tax on the withdrawal that represents earnings Distributions from a Modified Endowment Contract (MEC) made on or after age _____ are not subject to any tax penalties. - ✔✔59 1/2 For withdrawals of any gains from a MEC prior to age 59 1/2 there is a 10% tax penalty that applies. If, as the result of an injury or illness, the insured is deemed to be terminal (i.e., expected to die within 1 or 2 years), what rider added to a life insurance policy would advance a portion of the face value? - ✔✔Accelerated Benefit (Living Need) The Accelerated Benefit or Living Need Rider advances a portion of the death benefit to the owner if the insured is diagnosed with a terminal condition (i.e., death expected within 2 years). Unless an exception applies, life insurance proceeds are income taxable in which of the following circumstances? - ✔✔When a transfer of ownership takes place while the insured was alive If a transfer of ownership takes place while the insured was alive the death benefit becomes income taxable unless an exception applies. If a policyowner of a life insurance policy accidently pays in premiums in excess of the MEC guidelines, the insurer can refund the excess within ______ days of the end of the contract year. - ✔✔60 Any excess premium can be refunded by the insurer within 60 days after the end of the contract year. Which of the following could initiate the Accelerated Benefits Provision or Rider of a life policy? - ✔✔A condition that is terminal The qualifying event in the Living Needs rider is the terminal status of the insured (i.e. projected to die within 1 or 2 years). The exception to the rule concerning the non-deductibility of life insurance premiums is: - ✔✔Employer paid group life insurance premium up to $50,000 of coverage An employer may deduct 100% of the total group life premium it pays as a business expense, but the value of premiums for any employee's coverage in excess of $50,000 must be 'imputed' to the employee and income tax paid on that amount. In the event that an insured receives a periodic benefit as the result of exercising the Accelerated Death Benefit Rider, what information must the insurer provide to the insured? - ✔✔The amount of the accelerated payment, the remaining death benefit and cash values The Accelerated Death Benefit Rider advances a terminally ill insured a portion of the death benefit, treating it as if it were a loan. This is the only accident and health insurance policy that pays out a lump-sum benefit upon the death of the insured in certain situations. - ✔✔Accidental death Accidental Death pays (principal sum) upon accidental death, loss of sight, or loss of 2 limbs. It may be added as a rider to a Disability Income, Medical Expense or a Life Insurance Policy. Information about an applicant's work behavior or character gathered from neighbors or co-workers would be included on an? - ✔✔Inspection Report An Inspection Report is a general report of the applicant's finances, character, morals, work, hobbies and other habits. It is sometimes called a Consumer Investigative Report. Statements made on the application are considered true to the best of the applicant's knowledge and belief are considered to be: - ✔✔Representations Warranties are statements of absolute truth. Which of the following are included in Part II of a Health Insurance Application? - ✔✔Present health and medical background of applicant and family Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of living relatives, and causes of death of deceased relatives. Which of the following has primary responsibility for ensuring that the application is filled out completely? - ✔✔Producer It is the agent/producer's responsibility to make certain the application is filled out completely, correctly, and to the best of his/her knowledge. All of the following are a prohibited form of advertising, except: A When an insurer excludes coverage for preexisting conditions, an advertisement of the policy that implies that the applicant's medical condition or history will not affect eligibility or payment B An advertisement that uses the words 'only', 'just', 'merely', 'minimum', or similar words to imply a minimal imposition of restrictions and reductions C Advertisements for Medicare Supplements containing information that create undo anxiety in the minds of the insureds D Stating that 'We have been in business for over 50 years, for more information contact a local agent.' - ✔✔Stating that 'We have been in business for over 50 years, for more information contact a local agent.' When a policy is mailed to an insured by an insurer, it is considered to be: - ✔✔Delivered A policy may be delivered by registered or certified mail with a signed receipt of delivery. 'Constructive delivery' occurs when the insurer places the policy with the delivery service and no longer has physical custody of the policy. Which policy utilizes a Corridor Deductible after Basic Medical Expense Coverage benefits have been exhausted and before Major Medical benefits begin? - ✔✔Supplementary Major Medical Concerning PPOs, which is a true statement? - ✔✔The insured has a financial incentive to use providers who have agreed to predetermined reimbursements for medical services rendered PPOs cover out-of-network providers, but the financial incentive of lower out-of-pocket cost is intended to encourage the use of in-network providers, who have agreed to accept the PPO's reimbursements as payment in full. Which is not a classification of a healthcare plan? - ✔✔Blue Cross/Blue Shield The classifications of healthcare plans are Service, Reimbursement (Indemnity), and Self-Funded plans. Accidental Death and Dismemberment provides that the face amount, or principal sum, will be paid if the insured dies due to an accident within how many days from the date of the accident? - ✔✔90 Accidental Death and Dismemberment provides that the face amount, or principal sum, will be paid if the insured dies due to an accident within 90 days from the date of the accident. HMOs are established as either ________, which means the doctor can work with anyone, including HMO members, or ________, which means the doctor can only work with HMO members. - ✔✔Open panel, closed panel As the terms imply, the open panel is open to all patients, and the closed panel is closed to all but the HMO's subscribers. When payment under a Medical Expense policy is based on the average fee charged by all doctors in a given geographical area, and the balance of any overcharges or costs of any disallowed services are the insured's responsibility, the payment is known as: - ✔✔Usual, customary, reasonable (UCR) payment Which is not considered one of the basic benefits required of all HMOs? - ✔✔Long-term care Long-Term Care Coverage is not usually provided by HMO health insurance. Which of the following types of limited policies would a common carrier purchase to provide medical and surgical benefits in excess of any primary coverage? - ✔✔Blanket Plan Blanket plans are primarily sold to groups whose membership fluctuates to provide medical and surgical benefits in excess of any primary coverage. A Short-Term Disability Policy generally is for a disability lasting for: - ✔✔Not more than 2 years A Short-Term Disability is always defined as less than 2 years' duration. Residual Disability Income pays funds to the insured, to make up for what the insured would have earned after returning to work, and while recovering from ___________. - ✔✔Total disability Residual Disability provides benefits for loss of income after the insured returns to work usually following a total disability. The type of disability coverage purchased by a small business owner, to cover ongoing overhead in the event of the owner becoming disabled, would be called: - ✔✔Business Overhead Expense Business Overhead Expense provides the funds to cover the overhead expenses of a business when the owner becomes disabled, such as office rent, employee labor, etc. To reduce its exposure to claims from a substandard disability risk, an insurer may take all of the following actions, except: - ✔✔Remove all of the exclusion riders The underwriter might utilize a Full Exclusion Rider when a certain condition is more likely to result in claims. 24-Hour Care Coverage in California is transacted by: - ✔✔Only a licensed Accident & Health agent Only a licensed Accident & Health agent may be authorized to transact 24-Hour Care Coverage who must complete 4 hours of CE in Workers' Compensation. Which rider would eliminate coverage for a preexisting condition? A - ✔✔Impairment Rider [Show More]

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