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CA Life Insurance Exam 164 Questions with Answers 2023,100% CORRECT

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CA Life Insurance Exam 164 Questions with Answers 2023 What is meant by referring to an insurance policy as a unilateral contract? - CORRECT ANSWER Only one party makes a legally enforceable prom... ise. When must insurance records of insurance agents and brokers be made available to the Insurance Commissioner? - CORRECT ANSWER At all times. Any situation that presents the possibility of a loss is known as - CORRECT ANSWER a loss exposure Which of the following information is not required to be communicated in a Life insurance contract? - CORRECT ANSWER Personal judgment. The direct distribution of insurance utilizes all of the following to promote the sale of insurance EXCEPT - CORRECT ANSWER telephone call from an agent. A contract in which one party promises to indemnify another against loss that arises from an unknown event is - CORRECT ANSWER an insurance policy. All of the occurrences listed below are examples of an insurable event as defined by the California Insurance Code EXCEPT - CORRECT ANSWER an insured suffers a financial loss in the state lottery All of the following statements about aleatory contracts are true EXCEPT - CORRECT ANSWER the insured and insurer contribute equally to the contract. All of the following would be considered unfair trade practices EXCEPT - CORRECT ANSWER committing any act of discrimination whether it be deemed fair or unfair. As authorized by the California Insurance Code, the Insurance Commissioner has provided standards for names used by life insurance agents. Under these standards which, if any, of the following are automatically acceptable for Mary Brown, a holder of the CLU designation? - CORRECT ANSWER Mary Brown Insurance Services. A contract of indemnity is one in which - CORRECT ANSWER one party is restored to the same financial position the party was in before the loss occurred. In insurance terminology, "indemnity" means - CORRECT ANSWER make whole. As defined in the California insurance Code, "insurance" is a - CORRECT ANSWER contract. What would a person be guilty of who refuses to deliver any books, records, or assets to the commissioner once a seizure order has been executed? - CORRECT ANSWER A misdemeanor An agent who is acting as an insurance agent, broker, solicitor, life agent, accident and health, or bail agent acts in which capacity when handling premiums or return premiums for an insured? - CORRECT ANSWER Fiduciary Which of the following statements regarding risk is TRUE? - CORRECT ANSWER Only pure risks are insurable. The purchase of an insurance policy may accomplish all of the following for the insured EXCEPT - CORRECT ANSWER the elimination of risk. Insureds are entitled to recover an amount NOT greater than the amount of their loss under the principle of - CORRECT ANSWER indemnity. What rule is used to determine the importance of a representation? - CORRECT ANSWER The materiality of concealment. The required contents of a policy include all of the following EXCEPT - CORRECT ANSWER the probability of loss All of the following are characteristics of reinsurance EXCEPT it - CORRECT ANSWER increases the unearned premium reserve. According to the California Insurance Code, an insurance policy must specify all of the following EXCEPT the - CORRECT ANSWER financial rating of the insurer. All of the following qualify as "background information" as defined in Section 1729.2 of the California Insurance Code, EXCEPT - CORRECT ANSWER misdemeanor charges filed, not resulting in a conviction. Loss retention is an effective risk management technique when all of the following conditions exist EXCEPT the - CORRECT ANSWER probability of loss is unknown. A situation in which there is a possibility of loss or a gain is a - CORRECT ANSWER speculative risk. Why is having a large number of similar exposure units important to insurers? - CORRECT ANSWER The greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums. All of the following are benefits of insurance EXCEPT it - CORRECT ANSWER eliminates fraudulent losses. Who are members of the Medical information Bureau? - CORRECT ANSWER Life and health insurers. The process by which an insurer decides whether to issue requested insurance is called - CORRECT ANSWER underwriting. Unless it is merely a statement of an expectation or belief, a representation as to the future is considered which of the following? - CORRECT ANSWER Promise Upon notification of a claim, a claimant must be given access to the California Fair Claims Settlement Practices resolution by all of the following means EXCEPT - CORRECT ANSWER by interview appointment with the agent of record. hat is the definition of premium? - CORRECT ANSWER Money an insured pays an insurer to obtain the benefits provided in the policy. What is the goal of the underwriting process? - CORRECT ANSWER to avoid selecting a disproportionate number of bad risks. Insurer policy expenses include all of the following EXCEPT - CORRECT ANSWER premiums. Unintentional concealment entitles the injured party to which course of action, if any? - CORRECT ANSWER Rescission of the contract. Making an insured whole by restoring them to the same condition as before a loss is an example of - CORRECT ANSWER the principle of indemnity. Risk can be defined as all of the following EXCEPT - CORRECT ANSWER the cause of loss Which of the following is a requirement of a contract? - CORRECT ANSWER There must be an offer and acceptance of the contract terms. Moral hazard can be defined as the increase - CORRECT ANSWER chance of a loss occurring due to an insured's dishonest tendencies. According to the California Insurance Code, the Commissioner can disapprove a licensee's request to use a fictitious name for any of the following reasons EXCEPT that the - CORRECT ANSWER name is the licensee's actual name. It is considered an unfair method of competition for an agent to advertise that the insurer the agent is appointed with is - CORRECT ANSWER a member of the Insurance Guarantee Association. All of the following are requirements of contract EXCEPT - CORRECT ANSWER there must be equal consideration between the parties. If an insurer must have its rates accepted by the insurance Department prior to using them, the insurer would be operating in which of the following types of jurisdictions? - CORRECT ANSWER Prior approval. It is Federal offense for an insurance agent to do all of the following EXCEPT - CORRECT ANSWER misrepresent facts on an insurance application. How often MUST an insurer file the National Association of Insurance Commissioners (NAIC) financial statement? - CORRECT ANSWER Annually. A person authorized by and on behalf of an insurer who transacts life, disability or life and accident and health insurance is defined as a - CORRECT ANSWER life agent. An insurer entitled to transact business by complying with the California Insurance Code is known as an - CORRECT ANSWER admitted carrier. Who are the members of the Medical Information Bureau? - CORRECT ANSWER Life and Health insurers. If you have been convicted of a misdemeanor and that misdemeanor conviction is later expunged pursuant to California Penal Code Section 1203.4, which of the following is true? - CORRECT ANSWER Even though your misdemeanor conviction was expunged, you must still disclose your misdemeanor conviction on your individual application for an insurance license. The direct response distribution of Insurance utilizes all of the following to promote the sales of insurance EXCEPT - CORRECT ANSWER telephone call from the agent. The increase in the probability of a loss resulting from an insured's dishonest tendencies is known as - CORRECT ANSWER moral hazard. Which is an agreement in which an insurer contacts with a third party to insure itself against losses from insurance policies it issues? - CORRECT ANSWER Reinsurance Which if the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay? - CORRECT ANSWER A misdemeanor. What rule is used to determine the importance of a representation? - CORRECT ANSWER The materiality of concealment. Which of the following is a hazard? - CORRECT ANSWER A condition that may increase the likelihood of a loss occurring. When are parties to a contract REQUIRED to communicate information solely based on personal judgment for a matter in question? - CORRECT ANSWER Never According to the California Insurance Code, if an insurer's certificate of authority is revoked, the Commissioner can proceed with any of the following actions EXCEPT - CORRECT ANSWER using Guarantee Funds to pay salaries. Section 1729.2 of the California Insurance Code requires insurance producer applications and licensees to notify the Insurance Commissioner in writing, within ___days of charges in background information after an application has been submitted or a license has been issued. - CORRECT ANSWER 30 The insurer's department with PRIMARY responsibility for the risk selection process is called: - CORRECT ANSWER underwriting A person owns a life annuity. He elects to receive his annuity payments monthly for the remainder of his life with "ten years certain". The annuity will make payments - CORRECT ANSWER for a minimum of 120 months and a maximum of the remainder of his life. All of the following information is gathered during the personal financial planning process EXCEPT - CORRECT ANSWER a listing of a person's civic and professional organization memberships. Which policy provision allows an insured to continue coverage under a previously lapsed policy? - CORRECT ANSWER The reinstatement provision According to the California Insurance Code, governing the use of life insurance policy illustrations, the term illustration means - CORRECT ANSWER a presentation of policy features that includes non-guaranteed elements. The life insurance grace period allows the insured to - CORRECT ANSWER pay the premium after the due date without loss of coverage. When a family policy covers children, all of the following are true EXCEPT - CORRECT ANSWER evidence of insurability is required to convert coverage for children to permanent insurance. An attempt by an agent to deter an insured from replacing an existing life insurance policy is called - CORRECT ANSWER conservation Which of the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay? - CORRECT ANSWER A misdemeanor The additional premium charged by an insurer for adding the accidental death benefit to a whole life policy - CORRECT ANSWER does not affect the policy's cash value. How much employer-provided group term life insurance is exempt from income taxation? - CORRECT ANSWER $50,000 How long is the free cancellation period for the life insurance offered to individuals who are 60 or older? - CORRECT ANSWER 30 days. What does the statement "life insurance created an immediate estate" mean? - CORRECT ANSWER The total death benefit is paid whenever the insured dies. Which report of an insurance applicant's creditworthiness and personal characteristics may influence eligibility for life and health insurance? - CORRECT ANSWER Consumer report. In group life insurance, who is issued a certificate of insurance? - CORRECT ANSWER The participant. Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium? - CORRECT ANSWER Renewable term. If a life agent sells a whole life policy to a prospect on behalf of an insurer without an appointment, the - CORRECT ANSWER insurer must submit a notice of appointment to the Commissioner. Which component of a life insurance premium is based on the insured's age and gender? - CORRECT ANSWER Mortality Which benefits are provided by key employee insurance? - CORRECT ANSWER Payment to a business when an important employee dies. How can partners guarantee a market for their share of the business in the event of death? - CORRECT ANSWER Buy-sell agreements. Which policy covering two or more individuals pays the face amount only when the first person dies? - CORRECT ANSWER Joint life policy. Which two insurance products are commonly used to fund buy-sell agreements? - CORRECT ANSWER Life insurance and disability insurance. Which policy provision protects the insurer against possible adverse selection? - CORRECT ANSWER Suicide clause. Which type of insurance coverage has both a savings element and a flexible premium option? - CORRECT ANSWER Universal life A life insurance policy written after 1988 that fails to meet the seven-pay test is known as - CORRECT ANSWER a modified endowment contract. What type of insurance policy provides a death benefit that matches the projected outstanding debt on an individual's home? - CORRECT ANSWER Mortgage redemption. An agent who violates the laws governing life insurance policy illustrations is subject to all of the following EXCEPT - CORRECT ANSWER mandatory termination of all insurer appointments. Which policy is a saving instrument designed to first accumulate funds and then systematically to liquidate the funds? - CORRECT ANSWER Deferred annuity. Individual life insurance policies sold to seniors in the State of California must include a prominently placed statement that divulges all of the following information EXCEPT - CORRECT ANSWER proof of surrender must be notarized at the agent's principal office. People commonly purchase an annuity to protect against the risk of: - CORRECT ANSWER outliving their financial resources. What is one difference between group life an individual life underwriting? - CORRECT ANSWER Individual life insurance requires the applicant to answer medical questions. A $50,000 whole life policy with a cash value of $10,000 has been in force for eleven years. The policyowner is unable to continue the premium payments. Which of the following describes the reduced paid-up nonfordeiture option? - CORRECT ANSWER The cash value is used to select a $20,000 paid-up policy. Which of the following is a characteristic of nonqualified annuities? - CORRECT ANSWER Tax-deferred earnings. A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments will the insurer make? - CORRECT ANSWER 60 payments. The payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified in the policy that the - CORRECT ANSWER insurer will make the payments until the insured juvenile reaches a specified age-usually twenty-one or twenty-five. Which of the following contracts provides benefits that fluctuate automatically with investment results? - CORRECT ANSWER Variable life insurance. The theory of probability is applied to life insurance through the use of - CORRECT ANSWER mortality tables. What is the difference between deferred annuities and immediate annuities? - CORRECT ANSWER Deferred annuities have longer accumulation periods. which of the following is NOT an option for the use of the policy dividends? - CORRECT ANSWER Fund the distribution of monthly income payments. The insured is totally and permanently disabled. The insured's policy continues in force without payment of further premiums because the policy contains a - CORRECT ANSWER waiver of premium provision. Your client has just bought a new home which he has financed with a $150,000, 7.5% interest, 30 -year bank loan. He would like to be sure that if he dies that the unpaid balance of the mortgage would be paid. He wants a policy that will cover the mortgage balance-no more, no less-anytime during the life of the mortgage. Which policy is designed to meet this need? - CORRECT ANSWER Decreasing term policy. Death benefits that are received by a beneficiary are generally - CORRECT ANSWER exempt from federal income tax. An insured replaces an existing annuity with a new one and must pay a surrender charge for cancelling the existing annuity. The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of - CORRECT ANSWER an unnecessary replacement. What do we call the process whereby insurers decide which customers to insure and what coverage to offer? - CORRECT ANSWER Underwriting. what is used to determine the amount of an annuity distribution that is exempt from taxation? - CORRECT ANSWER The exclusion ratio. The number of deaths during a year compared with the total number of persons exposed in the class is known as the - CORRECT ANSWER mortality rate The insured bought an annuity ten years ago. He will retire in five years. To determine the value of his annuity, he must multiply the value of the "accumulation units" he owns, times the value of the "separate account". This type of annuity is known as a - CORRECT ANSWER variable annuity. All of the following are true about term life insurance policies EXCEPT the - CORRECT ANSWER face amount is paid if the insured survives to the end of the policy period. A life insurance policy dividend is - CORRECT ANSWER legally defined as a return of excess premium and not taxable. Life insurance policies written without a physical examination are called - CORRECT ANSWER non-medical. Why is the delivery of a life insurance policy important? - CORRECT ANSWER The free-look period begins on the policy delivery date. What is an ESOP? - CORRECT ANSWER Employee Stock Ownership Plan. Which policy provision protects the insurer against possible adverse selection? - CORRECT ANSWER Suicide clause. An insured replaces an exciting annuity with a new one and must pay a surrender charge for cancelling the existing annuity. The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of - CORRECT ANSWER an unnecessary replacement. A group life policy is issued on a contributory basis. This means that the - CORRECT ANSWER insured employees will pay part of the premium. What is the penalty tax imposed on amounts received from a modified endowment contract? - CORRECT ANSWER 10% A participating life insurance policy is defined as a contract that - CORRECT ANSWER allows the policyowner to receive a share of surplus in the form of policy dividends. All of the following are contained in a mortality table EXCEPT - CORRECT ANSWER number living at the end of designated year. Which policy pays the face amount if the insured survives to the end of a certain period? - CORRECT ANSWER Endowment insurance. A husband and wife have a disabled child who is financially dependent upon them. The death of one parent would not result in financial disaster for the disabled child, but the death of both parents would. Which policy should they purchase? - CORRECT ANSWER Second-to-die policy. How can partners guarantee a market for their share of the business in the event of death? - CORRECT ANSWER Buy-sell agreements. Which policy covering two or more individuals terminates after paying benefits on the first to die? - CORRECT ANSWER Joint life policy. The accidental benefit rider is also known as - CORRECT ANSWER double indemnity. The use of non-medical life insurance accomplishes all of the following EXCEPT - CORRECT ANSWER insureds can avoid answering medical questions on the application. Who MUST sign a statement acknowledging that a life insurance policy illustration was given to an applicant? - CORRECT ANSWER The applicant and the agent. In financial planning, the human life value concept is based on an individual's - CORRECT ANSWER income When does an individual have an insurable interest in the life of another person? - CORRECT ANSWER The individuals depends on the other person for financial support. The cost of employer-provided group life insurance above $50,000 is - CORRECT ANSWER taxable as income to the employee. If a term life insurance policy is renewable, the renewal provision usually states that: - CORRECT ANSWER a higher premium is payable at each renewal. Life insurers must include all of the following in their financial statements EXCEPT - CORRECT ANSWER policy summary description. Common life insurance policy riders include all of the following EXCEPT - CORRECT ANSWER extended term. In a group life insurance policy, who are the parties to the master contract? - CORRECT ANSWER The insurer and the employer. Which statement is TRUE regarding employer contributions to qualified plans? - CORRECT ANSWER They are tax deductible by the employer. Which of the following statements about policy dividends is TRUE? - CORRECT ANSWER Insureds elect a dividend option at the time of policy purchase. Which policy allows the insured to choose where the assets backing the cash value are invested? - CORRECT ANSWER Variable life. Creditors have rights to life insurance policy proceeds when the beneficiary is the - CORRECT ANSWER insured's estate. Which distribution from an annuity would be subject to a penalty tax? - CORRECT ANSWER A single payment made to a taxpayer who is age 55. The adjustments that insurers make to the cash value account in a - CORRECT ANSWER universal life policy each time a payment is made includes all of the following EXCEPT - CORRECT ANSWER subtract the policy surrender charges. The conversion privilege allows a terminating employee to convert - CORRECT ANSWER term insurance into permanent insurance. Which government regulation prevents retirement plans from favoring highly compensated employees? - CORRECT ANSWER Nondiscrimination. What is the difference between a conditional premium receipt and a binding premium receipt? - CORRECT ANSWER Only a binding receipt always provides insurance that is effective from the date the receipt is given. A life insurance policy's waiver of premium takes effect if an insured - CORRECT ANSWER becomes totally disabled. A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments MUST the insurer make? - CORRECT ANSWER 60 payments. Under a group life insurance policy, acts of war and aviation are examples of: - CORRECT ANSWER policy exclusions. What does the statement "Life insurance creates an immediate estate" mean? - CORRECT ANSWER The total death benefit is paid whenever the insured's dies. Which policy provision protects an insurer against a lawsuit before the insurer has had a reasonable opportunity to investigate a claim? - CORRECT ANSWER Legal actions. What factor determines the difference between deferred and immediate annuities? - CORRECT ANSWER When annuity benefit payments begin. How does the cost recovery rule apply when a life insurance policy is surrendered for its cash value? - CORRECT ANSWER The cost basis of the policy is exempt from taxation. The components of determining policy premiums include all of the following EXCEPT - CORRECT ANSWER dividends. From lowest to highest, which is the CORRECT order of initial premiums for life insurance policies? - CORRECT ANSWER Modified premium, ordinary life, single premium. Underwriters classify insurance risks as any of the following EXCEPT - CORRECT ANSWER dividends risks. Under which group term life provision does an insurer make payments to the guardian of a beneficiary who is a minor? - CORRECT ANSWER Facility of payment. A beneficiary wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should be chosen? - CORRECT ANSWER Interest option. Death benefits that are received by a beneficiary are generally - CORRECT ANSWER exempt from federal income tax. The California Insurance Code requirements regarding the return of life or annuity contracts issued to seniors - CORRECT ANSWER gives a senior at least 30 days to return specified life and/or annuity contracts for a full refund. When a family policy covers children, all of the following are true EXCEPT - CORRECT ANSWER evidence of insurability is required to convert coverage for children to permanent insurance. An insurer's request for an attending physician's report MUST be accompanied by a copy of the - CORRECT ANSWER signed authorization. What is REQUIRED when an application reveals conditions that require more information? - CORRECT ANSWER Attending physician's statement. Which policy provision protects the policyowner from unintentional lapse of the contract? - CORRECT ANSWER Grace period. Under which policy provision can a policy be surrendered for its net cash value? - CORRECT ANSWER Nonforfeiture options. The policyowner, age 50, has been paying the premiums on his whole life policy for fifteen years. He needs the equivalent of one-third of his policy's cash value for two years. He wants to continue to have the same amount of life insurance protection and he can afford to continue to pay the policy's premium. Which of the following would appear to be his BEST course of action? - CORRECT ANSWER Use the policy loan provision to borrow money from the policy, but keep making the premium payments to keep the policy in force. In a 5-year vesting schedule, what percentage of employer contributions MUST be vested after 5 years of service? - CORRECT ANSWER 100% Which of the following is a characteristic of nonqualified annuities? - CORRECT ANSWER Tax-deferred earnings. Which of the following is a correct statement about the premium payment modes? The total premium paid by a life policyowner for one policy year is: - CORRECT ANSWER greater if the premium is paid semiannually rather than annually. What is the limit of liability on a life insurance policy? - CORRECT ANSWER The face amount of the policy. [Show More]

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