FlashcardsInsurance Licensing Exam Flashcards
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This 102-card flashcard set prepares candidates for insurance licensing exams, with emphasis on life insurance products, policy provisions, retirement plans, and Georgia-specific regulations. Content includes whole life vs. term policies, settlement options, 401(k) and IRA rules, annuity types, and unfair trade practices. Use it for exam review, licensing preparation, or self-study before taking a state insurance certification test.
Terms in This Set
- What does a 401(k) plan generally provide its participants? A defined retirement benefit Salary-deferral distributions Tax-free distributions Salary-deferral contributionsThe exam writers love this question because only one option captures the core feature of a 401(k
- An example of unfair discrimination would be offering the same terms of coverage to different policyowners in the same risk classification issuing a policy at a substandard rate because of poor health offering different terms of coverage for different policyowners having the same risk classification declining an insurance application because of involvement in a hazardous occupation
- Before an insurance company can pay commissions to an agent, the agent must be bonded licensed and appointed licensed only bonded and insured
- Defamation occurs when an agent makes a false statement intended to misrepresent the provisions of an insurance policy replace an existing insurance policy with another restrict fair trade malign another insurer
- An insurance agent is in violation of the Rules Governing Advertisement of Life Insurance and Annuities if the agent takes which of the following actions during a sales presentation? Analyzes another insurance company's policy Asks prospects for referrals Refers to guaranteed policy dividends Compares the costs of two similar policies
- Cash surrendering an existing whole life policy and purchasing a new whole life policy is referred to as a(n) cancellation illegal transaction replacement conversion
- In Georgia, most life insurance policies have a contestability period of 1 year 3 years 5 years 2 years
- Which of the following situations does NOT apply to the Georgia Replacement Rule? A new policy is issued while an existing one is surrendered An existing policy is reissued with a reduction in cash value An existing policyholder purchases an additional policy from the same insurer An existing policy is subject to extensive borrowing
- Insurance agents do NOT have a fiduciary responsibility to another agent insureds insurance companies applicants
- Nonprofit life insurance providers that are covered by a special section in the Georgia insurance code are called Domestic life insurance organizations Unauthorized insurers Mutual life insurers Fraternal life insurance organizations
- Someone who is appointed by an insurer to engage in insurance transactions is called a(n) salesperson adjuster agent an attorney-in-fact employee
- Under which circumstance may the Commissioner of Insurance suspend, revoke, or refuse to renew the license of an agent? Agent fails to write any business for six consecutive months Agent files for bankruptcy Agent is found guilty of misrepresentation in obtaining the license Agent is convicted of a misdemeanor
- Using an existing life insurance policy's cash value to purchase another policy with the same insurer for the sole purpose of earning additional commissions is called Rebating Twisting Misrepresentation Churning
- What is an organization that solicits insurance only to its members? Mixed company Captive society Fraternal benefit society Nonadmitted company
- In Georgia, an insurance company must notify the Commissioner within __ days to terminate an agent’s appointment. 30 60 90 45You’ve already answered this one perfectly earlier, and the rule stays the same every time it appears in Georgia licensing questions.When an insurer terminates an agent’s appointment, it must notify the Commissioner within:
- A domestic insurance company MUST be examined by the Commissioner every __ years. 5 3 4 2
- Which Unfair Trade Practice involves an agent suggesting that an insurance policy is like a share of stock? Sliding Twisting Intimidation Misrepresentation
- An example of an unfair claims practice would be paying a claim promptly after receiving proof of loss requiring the insured to give a statement under oath failing to effectuate prompt, fair, and equitable settlements of a claim requesting a third-party arbitrator to resolve a disagreement
- In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT: Owner Payor Applicant Insured
- Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE? Each partner owns a $1,000,000 policy on their own life Each partner owns a $1,000,000 policy on their partner's life Each partner owns a $500,000 policy on their own life Each partner owns a $500,000 policy on their partner's life
- What does a 401(k) plan generally provide its participants? Salary-deferral distributions A defined retirement benefit Tax-free distributions Salary-deferral contributions
- What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive? Primary Insurance Amount (PIA) State of residence Number of dependents Total taxes paid into FICA
- When does a life insurance contract become effective if the initial premium is not collected during the application process? When producer delivers policy and collects initial premium After all medical and personal information has been evaluated After application has been approved by the underwriters When insurer receives initial premium from the producer
- A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a: rollover plan 403(b) plan profit-sharing plan salary reduction plan
- In a qualified retirement plan, the yearly contributions to an employee's account: are restricted to maximum levels set by the IRS are not tax-deductible must be matched dollar-for-dollar by the employer are restricted to minimum levels set by the IRS
- What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time? 20-year paid up policy Decreasing term Modified whole life Endowment
- Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability? Incontestable Period Conversion privilege Insuring Agreement Owner's Rights clause
- M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect, EXCEPT: free-look period has expired policy is delivered initial premium is collected insurance company issues policy
- Which type of policy is considered to be overfunded, as stated by IRS guidelines? Modified Endowment Contract Variable Universal Life Modified Whole Life Interest-Sensitive Whole Life
- When a life insurance policy exceeds certain IRS table values, the result would create which of the following? Endowment An investment Modified Endowment Contract (MEC) 1035 Exchange
- Which of these characteristics is consistent with a Straight Life policy? Premiums are payable for as long as there is insurance coverage in force Owner can adjust both premium and death benefit Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract Owner has the option of converting to term insurance
- 111minutes and:17seconds Progress 32 % Multiple Choice Whole Life insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate when using this phrase? The duration of premium payments The incontestable period The ability to borrow against the cash value The Grace Period
- K is an insured under a life insurance policy owned by a third party. Which of these statements is true? K has no ownership rights K may change the premium mode K may change the beneficiary K may borrow against the policy's cash value
- An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee? Distribution is subject to ordinary income tax Distribution is subject to a tax penalty Distribution is subject to capital gains tax Distribution is subject to federal income tax withholding
- Credit life insurance is typically issued with which of the following types of coverage? Group Term Individual Whole Life Annual Renewable Term Decreasing Term
- A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as: a mutual assent an insuring agreement a warranty a representation
- A Life insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n) ________ rate loan. Increasing Variable Fixed Fluctuating
- Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase? Term life Endowment Straight life Annuity
- In an individual retirement account (IRA), rollover contributions are: subject to ordinary income tax not limited by dollar amount subject to capital gains tax partially limited by dollar amount
- Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself? Assignment Incontestable Policy Exclusion Entire Contract Provision
- What is the initial source of underwriting for an insurance policy? Medical exam MIB report Application containing statements from the insured Credit report
- Whose life is covered on a life insurance policy that contains a payor benefit clause? Parent Spouse Beneficiary Child
- T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? Level Renewable Decreasing Increasing
- P is a producer who notices 5 questions on a life application were not answered. What actions should P take? Call the applicant and complete application over the phone Set up a meeting with the applicant to answer the remaining questions Mail incomplete application to applicant to be completed and returned to the agent Submit the application as-is to the insurer
- All of these statements concerning Settlement Options are true, EXCEPT: Increased proceeds can be provided through accumulation of interest Proceeds can be administered by the insurance company Only the beneficiary may select Rapid depletion of proceeds can be avoided
- Which of these is NOT relevant when determining the amount of personal life insurance needed? Local unemployment rate Household income Household debt Existing life insurance coverage
- premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will then likely issue the coverage with a(n) Aviation Exclusion Graded Benefit Waiver of Premium Disability RiderA pilot applies for Life insurance. The insurer approves the application with a $10 additional monthly
- ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has: waived one of its legal rights assigned the risk to a reinsurer issued a voidable policy committed an act of fraud
- Upon initial premium was submitted with the application The applicant is suspected of making a material misrepresentation The initial premium was NOT submitted with the application The applicant chose an annual premium modepolicy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
- Which Federal law allows an insurer to obtain an inspection report on a potential insured? Medical Information Bureau Act Medical Information Act Fair Credit Reporting Act Freedom of Information Act
- A(n) _____ rider may be used to include coverage for children under their parents' life insurance policy. Term Parent Conversion Payor
- D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive? Refund of premiums paid plus interest The full face amount Nothing, due to actively serving in the armed forces Double the face amount because cause of death was accidental
- The cash value in a(n) ____________ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors. Universal Graded Term Endowment
- K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT A child dies at age 18 K's wife dies at age 60 A child dies at age 15 K's wife dies at age 66
- The combination of Whole Life and _______ Term insurance is referred to as a Family Income Policy Universal Variable Level Decreasing
- P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase? Family Maintenance policy Family Income policy Family Benefit policy Family Survivor policy
- A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n) Variable Universal Life policy Joint Life policy Endowment Universal Life policy
- Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the: capital gains tax rate marital deduction death benefits Section 1035 exchange
- Under a Graded Premium Whole Life policy, the premium decreases each year during the early years of the contract and remains the same after that time the premium always remains the same while the death benefit increases during the early years the premium can be adjusted by the policyowner at anytime the premium increases each year during the early years of the contract and remains the same after that time
- What does a Face Amount Plus Cash Value Policy pay upon the insured's death? Face amount plus the policy's dividends Face amount plus total premium paid throughout the life of the policy The greater amount of the policy's death benefit or the cash value Face amount plus the policy's cash value
- P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take? Beneficiary will be paid the Death Benefit Beneficiary will be paid a partial Death Benefit Beneficiary will be denied the claim Beneficiary will be denied the claim and refunded all paid premiums
- Before a life policy is issued, which of these contract elements is necessary? A binding receipt A minimum amount of coverage A signed application by the prospect A beneficiary's signature on an application
- 101minutes and:52seconds Progress 62 % Multiple Choice All of these statements about Equity Indexed Life Insurance are correct, EXCEPT: Tied to an equity index such as the S&P 500 The premiums can be lowered or raised, based on investment performance Cash value has a minimum rate of accumulation If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index
- Under a Graded Premium policy, the premiums are lower during the policy's early years can be adjusted by the insured are constant throughout the length of the policy are higher during the policy's early years
- When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take? Void the policy only if it is discovered during the Contestable period and proven to be material Void the policy at any time only if it is found to be material Void the policy, no matter when it is discovered Void the policy if found during the Contestable period
- P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary? $50,000 minus any outstanding policy loans Nothing. Claim will be denied Premiums paid plus interest $100,000 because the cause of death was accidental
- Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE? Tax deductible Partially taxable Nontaxable Taxed as ordinary income
- Which statement regarding the Change of Beneficiary provision is true? The insured can change the beneficiary The beneficiary can only be changed with the consent of the insurer The policyowner can change the beneficiary A beneficiary change is subject to underwriting procedures
- All of the following statements are true regarding a policy's Grace period, EXCEPT: Past due premiums are waived Full coverage continues Grace period terms are stated in the policy Policy loans may still be made
- How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period? Premiums are returned under the Consideration clause Company pays twice the face amount under the double indemnity clause Claims are denied under the Suicide clause of the policy Claims are paid in full
- A policyowner is able to choose the frequency of premium payments through what policy feature? Assignment provision Consideration Premium Mode Payor benefit
- Life insurance that covers an insured's whole life with level premiums paid over a limited time is called: Joint Life Renewable Term Limited Pay Life Adjustable Life
- K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose? Reduced Premiums Cash Option Paid-Up Additional Insurance Accumulate with Interest
- A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need? Primary Contingent Irrevocable Revocable
- The free-look provision begins upon the date of the sales presentation upon the completion of the application upon receipt of the policy by the producer upon receipt of the policy by the policyowner
- J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this? Graded Premium Life Modified Premium Life Endowment Straight Life
- Which statement is TRUE regarding a Variable Whole Life policy? Its premiums and benefits are variable It has guaranteed dividends It is a combination of an Endowment and a Increasing Term policy A minimum guaranteed Death benefit is provided
- The advantage of reinstating an original life policy is the interest charged on policy loans will be lowered the premiums are based on a younger age a new incontestable period will begin the premiums are based on the current age of the insured
- Typically a life insurance death benefit is paid by a lump-sum payment. A(n) ___________ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment. aleatory conversion dividend settlement
- A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? Straight life accumulates faster than Limited-pay Life Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating 20-Pay Life accumulates cash value faster than Straight Life 20-Pay Life and Straight Life accumulate cash value at the same rate
- What action will an insurer take if an interest payment on a policy loan is not made on time? disallow any further loans cancel the policy if not paid within the grace period automatically add the amount of interest due to the loan balance subtract from any dividends owed
- What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability? Limited-Pay Whole life Convertible Term Endowment policy Decreasing Term
- S is covered by a whole life policy. Which insurance product can cover his children? Accelerated benefit rider Assignment provision Payor benefit Child term rider
- 95minutes and:10seconds Progress 83 % Multiple Choice T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary? Change will be made only if premiums are paid current Change will be made immediately Request will be accepted only if in writing by the insured Request of the change will be refused
- A(n) _______ _______ Life policy combines investment choices with a form of Term coverage Variable Universal Straight Whole Adjustable Universal Variable Term
- A life insurance policy that provides a policyowner with cash value along with a level face amount is called: Level term Ordinary life Credit life Whole life
- A(n) _________ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary. Replaceable Tertiary Irrevocable Revocable
- A level premium indicates: the premium stays level until the policy's renewal date the premium is fixed for the entire duration of the contract the premium is fixed for a period stated in the contract, then becomes variable the premium can only be changed with the consent of the insurer
- K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary? Return of premiums paid Cash value plus interest Face amount plus interest $20,000 death benefit
- K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? K's estate Daughter Husband's estate Trust fund
- A non-contributory plan requires ____ participation of all eligible employees. 25% 50% 100% 75%
- P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to: Q's estate R's estate P only P and Q's estate
- If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee? The entire premium paid in a year The annual premium divided by the number of employees Nothing Half the premium paid in a year
- If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee? The entire premium paid in a year The annual premium divided by the number of employees Nothing Half the premium paid in a year
- Which of these is an element of a Single Premium annuity? Lump-sum payment Tax-deductible Deferred payment Fixed income
- An individual who purchases a Life annuity is given protection against: the risk of living longer than expected the risk of not having enough retirement income inflation the risk of dying prematurely
- W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a(n): Flexible Premium Deferred annuity Immediate annuity Straight Life annuity Variable annuity
- What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? Fixed Deferred Variable Flexible
- K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase? Single Premium Deferred Annuity with Period Certain Single Premium Immediate Joint with Survivor Annuity Flexible Premium with Period Certain Flexible Premium with Survivor Annuity
- Which of these statements concerning an Individual Straight Life annuity is accurate? Life expectancy of the annuitant is not a factor The payments are received tax-free Payments are made to an annuitant for life Only available to employees of nonprofit charitable, educational, and religious organizations
- T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company has the option to continue making payments based on what has already been paid out does NOT have to make any further payments MUST make half-payments to the beneficiary MUST make full payments to the beneficiary
- What is the basic function of an annuity? The systematic liquidation of accumulated funds The protection against loss of income due to partial or total disability The accumulation of funds to pay for life insurance premiums during retirement years The guarantee of a specific sum of money to a designated beneficiary upon the death of the insured
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