California Life Insurance Final Exam 125 Questions with Answers ,100% CORRECT

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California Life Insurance Final Exam 125 Questions with Answers the risk selection process is primarily given to which insurance company department? - CORRECT ANSWER underwriting which of... the following is NOT a feature of equity-indexed annuities? - CORRECT ANSWER offers a maximum interest rate that increases annually John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this? - CORRECT ANSWER participating According to the California Insurance Code, what is "insurance"? - CORRECT ANSWER a contract A unilateral contract is one in which - CORRECT ANSWER only one party (the insurer) makes any kind of legally enforceable promise which statement is true regarding policy dividends? - CORRECT ANSWER A dividend option is selected by the insured at the time of policy purchase What does the term "illustration" mean when used in the phrase "life insurance policy illustration", according to the California Insurance Code? - CORRECT ANSWER Presentation of policy features that includes non-guaranteed elements How does underwriting differ between group life and individual life insurance? - CORRECT ANSWER medical questions must be answered on individual life insurance Which of the following does NOT have to be included on life insurance policy illustration? - CORRECT ANSWER statement that all values and benefits are guaranteed A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n) - CORRECT ANSWER deferred annuity Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty for taking a loan against this policy prior to age 59 1/2? - CORRECT ANSWER 10% AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called? - CORRECT ANSWER Primary insurer Employer-provided group term life insurance is exempt from income taxation up to - CORRECT ANSWER $50,000 When calculating life insurance premium rates, which component would an agent's commission fall under? - CORRECT ANSWER insurer's expenses The California Insurance Code requires that an insurer must have enough assets to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount? - CORRECT ANSWER its paid-in capital All of these are reasons the Commissioner may disapprove a licensee's request to use a fictitious name EXCEPT - CORRECT ANSWER the name is the licensee's actual name When handling premiums for an insured, an agent is acting in which capacity? - CORRECT ANSWER fiduciary What does the term "indemnity" mean as it pertains to insurance? - CORRECT ANSWER to make whole An agent has advertised that the insurer to which the agent is appointed with is a member of the Insurance Guarantee Association. This agent has committed a(n) - CORRECT ANSWER unfair method of competition A participating company is also referred to as which type of insurer? - CORRECT ANSWER mutual insurer Which of the following is NOT an insurer policy expense? - CORRECT ANSWER premiums A hazard can be best described as - CORRECT ANSWER a condition that may increase the likelihood of a loss occurring A life insurance policy's limit of liability would be - CORRECT ANSWER the policy's face amount According to the California Insurance Code, how is the word "may" interpreted? - CORRECT ANSWER permissive Retirement plans are prevented from favoring highly compensated employees under which government regulation? - CORRECT ANSWER nondiscrimination Who does a life settlement broker represent? - CORRECT ANSWER Individual wanting to sell their life policy to a third party An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this? - CORRECT ANSWER exclusion ratio Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct? - CORRECT ANSWER Jim must still disclose the conviction on his insurance license application An insurer that has been found using rates based on race, religion, or ethnicity is said to be engaging in - CORRECT ANSWER unfair discrimination AN annuitant would life to determine the current value of her annuity. To do this, she multiplies the number of "accumulation units" she owns times the unit value of the "separate account". What kind of annuity BEST matches this description - CORRECT ANSWER variable annuity What distinguished a deferred annuity from an immediate annuity? - CORRECT ANSWER the time at which benefit payment start Which of these is the automatic mode of settlement for life insurance policy proceeds? - CORRECT ANSWER lump-sum Which policy provision protects the policyowner from unintentional lapse of the contract? - CORRECT ANSWER grace period An insurer having a large number of similar exposure units is considered important because - CORRECT ANSWER the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness? - CORRECT ANSWER accelerated death benefit the objective of underwriting is to - CORRECT ANSWER avoid selecting a disproportionate number of bad risks the free-look period for life insurance policyowners age 60 or older is - CORRECT ANSWER 30 days Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance - CORRECT ANSWER solicitor Which of the following is NOT considered a definition of risk - CORRECT ANSWER the cause of a loss What must an applicant do in order to authorize the release of an attending physician report? - CORRECT ANSWER sign a consent form Which of the following is NOT protected under the California Life and Health Guarantee Association? - CORRECT ANSWER insurers the probability of death, listed by year, is demonstrated in - CORRECT ANSWER mortality tables life insurance surplus must be distributed to policyowners at what frequency? - CORRECT ANSWER annually Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of? - CORRECT ANSWER theft Tom is shopping for a policy that covers two people and would pay the face amount ONLY when the first person dies. The type of life policy he is looking for is called a - CORRECT ANSWER joint life policy All of these are common personal uses of life insurance EXCEPT - CORRECT ANSWER fund a buy-sell agreement Why is a life insurance policy's delivery date important? - CORRECT ANSWER the free-look period begins on the policy delivery date Who are the parties to the master contract in a group life insurance policy - CORRECT ANSWER insurer and employer Which of the following contracts is defined as "one that restores an injured party to the condition that was present before loss"? - CORRECT ANSWER indemnity contract A situation in which there is ONLY a chance of loss or no loss is a - CORRECT ANSWER pure risk Which of the following does a policyowner NOT have a right to change? - CORRECT ANSWER dividend schedule Which of the following does the California Insurance Code NOT require an insurance policy to specify? - CORRECT ANSWER insurer's financial rating A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen? - CORRECT ANSWER the insured's estate Which of the following is NOT considered to be an unfair claims settlement practice? - CORRECT ANSWER advising a claimant to hire an attorney An applicant has revealed conditions that require more information. Which of the following is needed next? - CORRECT ANSWER attending physician's statement When an insurance company request an attending physician's report, the request must be accompanied by a - CORRECT ANSWER copy of the signed authorization When an accidental death benefit is added to a whole life policy, how does this affect the policy's cash value? - CORRECT ANSWER policy's cash value is not affected Which principle is accurately described with the statement "insureds are entitled to recover an amount NOT greater than the amount of their loss"? - CORRECT ANSWER indemnity When calculating life insurance premium rates, which component is affected by an insured's age and gender - CORRECT ANSWER mortality which of the following is NOT a requirement of a contract? - CORRECT ANSWER equal consideration is required between the involved parties All of the following are considered characteristics of group life insurance, EXCEPT - CORRECT ANSWER individual policies What type of license is required for an individual who charges a fee to review an insured's existing life insurance policy? - CORRECT ANSWER life and disability analyst A terminated employee that has exercised the conversion privilege is able to convert - CORRECT ANSWER term insurance into permanent insurance what is an "insurance broker" according to the California Insurance Code? - CORRECT ANSWER A person compensated for transacting insurance on behalf of another person with an insurer The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCEPT - CORRECT ANSWER self-funded plans In a renewable term life insurance policy, the contract will usually - CORRECT ANSWER require a higher premium payable at each renewal An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is this agreement called? - CORRECT ANSWER reinsurance Victoria owns a life annuity and elects to receive annuity payments monthly for the remainder of her life with "ten years certain". Her annuity will make payments - CORRECT ANSWER for a minimum of 120 months and a maximum of the remainder of her life Which of the following describes a contributory group insurance plan? - CORRECT ANSWER part of the premium is paid by the employee Which of the following is NOT an element of an insurable risk? - CORRECT ANSWER loss must be catastrophic An insurance policy written after 1988 that fails to pass the seven-pay test is known as - CORRECT ANSWER a modified endowment contract a representation may be altered or withdrawn - CORRECT ANSWER only before the insurance is in effect What is the proper order of initial life insurance premiums, from lowest to highest? - CORRECT ANSWER modified premium, ordinary life, single premium Which of these statement correctly describes risk? - CORRECT ANSWER pure risk is the only insurable risk An insurer can be protected from adverse selection with which policy provision? - CORRECT ANSWER suicide clause restoring an insured to the same condition as before loss is know as - CORRECT ANSWER principle of indemnity When intentional concealment is involved, what course of action is the injured party entitled to? - CORRECT ANSWER rescission of the contract What kind of annuity pays income to two annuitants until their deaths? - CORRECT ANSWER joint and survivor annuity When does a life insurance policy's waiver of premium take effect? - CORRECT ANSWER insured becomes totally disabled Retirement plans cannot favor highly compensated employs. The government regulation that prevents this from happening is called - CORRECT ANSWER nondiscrimination ESOPs are typically invested in - CORRECT ANSWER employer stock Which of the following risk classification charges the highest premium? - CORRECT ANSWER substandard How does a conditional receipt differ from a binding receipt? - CORRECT ANSWER binding receipts always provide insurance which starts from the date of receipt Which of the following statement about aleatory contracts is NOT true? - CORRECT ANSWER the insured and the insurer contribute equally to the contract Jerry is an insured who understated his age on his life insurance application, paying $12 per $1,000 of insurance instead of $15 per $1,000. If he dies, how will the adjusted death benefit be calculated? - CORRECT ANSWER 12/15th of the policy's face amount The Human Life Value concept is based on - CORRECT ANSWER income If an insured does because of an accident, which type of life insurance rider will provide additional coverage? - CORRECT ANSWER Accidental death rider What are collateral assignments normally associated with? - CORRECT ANSWER bank loans life insurance creates an immediate estate. this phrase means: - CORRECT ANSWER when the insured dies, a death benefit is paid Any changes in background information that occur after a producer application has been submitted or a license has been issued MUST be reported to the Insurance Commissioner within - CORRECT ANSWER 30 days Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n) - CORRECT ANSWER unnecessary replacement Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance Department prior to using them? - CORRECT ANSWER prior approval In a life insurance policy, the entire contract consists of - CORRECT ANSWER policy and attached application The Medical Information Bureau consists of - CORRECT ANSWER life and health insurance companies Which of the following types of life insurance is normally associated with a mortgage loan? - CORRECT ANSWER decreasing term Which of the following is NOT a component of determining policy premiums? - CORRECT ANSWER dividends Which of the following is NOT a characteristic of reinsurance? - CORRECT ANSWER increase the unearned premium reserve According to section 1729.2 of the California Insurance Code, which of these does NOT qualify as "background information" ? - CORRECT ANSWER misdemeanor charges filed, not resulting in a conviction In a modified endowment contract, the penalty tax imposed on premature withdrawals is - CORRECT ANSWER 10% Which of the following is an insurer established by a parent company for the purpose of insuring the parent company's loss exposure? - CORRECT ANSWER captive insurer The California Insurance Code allows an individual how many days to cancel a life policy for a full refund? - CORRECT ANSWER between 10 and 30 days Bruce is involved in an accident and becomes totally and permanently disabled. His insurance policy continues in force without payment of further premiums. Which policy provision is responsible for this? - CORRECT ANSWER waiver of premium provision Premiums are best described as - CORRECT ANSWER the amount an insured pays per unit of coverage Under the California Insurance Code, a licensee's license number must be printed at what size on all price quotes, business cards, and printed material? - CORRECT ANSWER the same print as the licensee's phone number, fax number or address What is the price of insurance for each exposure unit - CORRECT ANSWER rate When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called - CORRECT ANSWER underwriting Which of the following is a type of insurance where an insurer transfers loss exposure from policies written for its insureds? - CORRECT ANSWER reinsurance Restoring an insured to the same condition as before a loss is known as - CORRECT ANSWER indemnity A life insurance policy can be surrendered for its cash value under which policy provision? - CORRECT ANSWER nonforfeiture option insurance agents and brokers must make their insurance records available to the Commissioner - CORRECT ANSWER at all times Express power given to an agent in an agency agreement is - CORRECT ANSWER the authority to represent the insurer A life insurance policy that pays the face amount if the insured survives to a specified period of time is called - CORRECT ANSWER endowment insurance What time period allows an insured's life insurance policy to remain in force even if the premium was not paid on the due date? - CORRECT ANSWER grace period Which of the following is NOT considered to be a definition of the term "loss"? - CORRECT ANSWER probability that an event will occur Which of the following is NOT a characteristic of the conversion privilege? - CORRECT ANSWER employer pays the premiums for the converted policy An agent's attempt to stop the replacement of an existing life insurance policy is known as - CORRECT ANSWER conservation An annuity which is backed by a life insurer's separate account is called a(n) - CORRECT ANSWER variable annuity How are acts of war and aviation treated under a group life insurance policy? - CORRECT ANSWER policy exclusion What prevents a life insurance policy from being rescinded by the insurer after being in force for two years? - CORRECT ANSWER incontestability clause Which Social Security status does a worker with 6 quarters of coverage during the last 13-quarter period have? - CORRECT ANSWER currently insured According to the California Insurance Code, which of the following is NOT an example of an insurable event? - CORRECT ANSWER An insured sufferers a financial loss in the state lottery Who is issued a certificate of insurance with a group insurance policy? - CORRECT ANSWER participants A life insurance policy where the insured can choose where the cash value can be invested is called - CORRECT ANSWER variable life Employer contributions to qualified plans are - CORRECT ANSWER Tax deductible by the employer Most U.S. life insurance companies belong to the - CORRECT ANSWER Medical Information Bureau [Show More]

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