California Life Insurance Practice Exam

150 Questions  I  By Selidron
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Life Insurance Quizzes & Trivia
Practice examination for Life Insurance Licensing in California. Combines exams A, B, and C with 125 questions.

  
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  • 1. 
    In disability insurance, the period of time between when the disability started and the commencement of benefits is the:
    • A. 

      Cancellation Period

    • B. 

      Elimination Period

    • C. 

      Probationary Period

    • D. 

      Grace Period


  • 2. 
    Which of the following characteristics would not stop an insurance company from accepting an insurance risk? The item to be insured:
    • A. 

      Faces high catastrophic loss exposure

    • B. 

      Is part of a large group of homogeneous exposure units

    • C. 

      Has a market value difficult to determine

    • D. 

      Holds no hardship to the owner should it be lost or damaged


  • 3. 
    All of the following statements about mutual insurance companies are correct, except:
    • A. 

      If a mutual company goes public, it demutualizes

    • B. 

      Mutual companies issue policies referred to as participating

    • C. 

      Policy dividends issued by mutual companies are guaranteed and not taxable

    • D. 

      Dividends allow policyholders to share in a mutual companies divisible surplus


  • 4. 
    In a seven year vesting schedule, what percentage of employer contributions is vested after seven years?
    • A. 

      0%

    • B. 

      60%

    • C. 

      80%

    • D. 

      100%


  • 5. 
    Which is a false statement? The California Insurance Commissioner is:
    • A. 

      Elected by the people of California every four years

    • B. 

      Selected by the Governor as an appointee

    • C. 

      Is a representative to the National Association of Insurance Commissioners (NAIC)

    • D. 

      Capable of becoming the conservator of a financially impaired, or insolvent, insurer


  • 6. 
    Which statement about life insurance code and ethics is not true?
    • A. 

      Marketing plans to offer free insurance as an inducement to buy or rent real property are prohibited

    • B. 

      Acts of fair and unfair discrimination are prohibited

    • C. 

      Agents are not permitted to advertise that an insurer is a member of any insurance guaranty association

    • D. 

      The act of twisting could result in a license suspension for up to three years


  • 7. 
    Which of the following statements about a resident life-only agent licensing is incorrect?
    • A. 

      A licensee has 30 days to update a change in address

    • B. 

      Licensees are required to have an in-state residential address

    • C. 

      Loss of a precious professional license could result in the automatic denial of the life-only license application

    • D. 

      A plea of nolo contendere is considered a conviction, thus it could hinder attempts to obtain a life-only license


  • 8. 
    Tommy Greene has a CLU certification. Which of th following names would automatically approve for use as his agency's name?
    • A. 

      Tommy Greene and Associates

    • B. 

      Thomas Greene, CLU, & Company

    • C. 

      Greene Insurance Agency

    • D. 

      None of the would ever be automatically approved


  • 9. 
    An agent follows the rules and terms of his agent contract. He is excersising his _______ authority.
    • A. 

      Implied

    • B. 

      Express

    • C. 

      Apparent

    • D. 

      Contractual


  • 10. 
    Any person who misappropriates fiuciary funds for personal use is guilty of:
    • A. 

      Fraud

    • B. 

      Theft

    • C. 

      Misreperesentation

    • D. 

      Pre-texting


  • 11. 
    According to the code, any person legally capable of making an insurance policy is considered:
    • A. 

      An agent

    • B. 

      A broker

    • C. 

      An insurer

    • D. 

      An underwriter


  • 12. 
    Mrs. Anderson need to invest the proceeds from her late husband's life insurance. She invests a portion of the money into an annuity. Since she is 62, and is still working, she decides to purchase a single premium deferred annuity. She won' t need an income for a few more years. What should the agent make sure Mrs. Anderson understands?
    • A. 

      As a life insurance product, future proceeds are tax free.

    • B. 

      She has a 30 day free look period in case she changes her mind.

    • C. 

      Since she only has a few more years before she retires, she should invest with the objective tho make as much money as possible. Her time horizon is limited.

    • D. 

      She will have to begin taking withdrawals within six months of receiving the proceeds.


  • 13. 
    In a non-contributory group policy:
    • A. 

      75% of eligible employees must elect to join the plan.

    • B. 

      100% of eligible employees must participate.

    • C. 

      75% of employees must elect to join the plan.

    • D. 

      100% of employees must be allowed to participate.


  • 14. 
    An employee has lost access to their group term life insurance plan, but they are allowed to convert to a new plan. Which best describes this new plan?
    • A. 

      The new policy will be term life. The employee pays all premiums.

    • B. 

      The new policy will be term life. The employer will pay a portion of the cost.

    • C. 

      The new policy will be cash value. The employer will pay a portion of the cost.

    • D. 

      The new policy will be cash value. The employee pays all the premiums.


  • 15. 
    Bob and Neal are partners in a law firm together. If one of them were to pass away, the want to make sure that their surviving family will receive a fair value for their stake in the business. What life insurance arrangement would be most suited for transitioning the business during this time of loss?
    • A. 

      Split Dollar Plan

    • B. 

      Executive Bonus Plan

    • C. 

      Buy-Sell Agreement

    • D. 

      Deferred Compensation Plans


  • 16. 
    Rank from lowest to highest, the amount of monthly income that would result from the following annuity settlement options:
    • A. 

      Life with refund option, life with 10 years certain, straight life

    • B. 

      Straight life, life with ten years certain, life refund option

    • C. 

      Life with ten year certain, life with refund option, straight life

    • D. 

      Life with refund option, straight life, life with 10 years certain


  • 17. 
    All of the following are dividend options, except:
    • A. 

      Interest only option

    • B. 

      One-year term option

    • C. 

      Reduce the nest premium payment

    • D. 

      Accumulate with interest


  • 18. 
    Which best describes industrial insurance?
    • A. 

      $2,000 or less in coverage and premiums collected by agent.

    • B. 

      $10,000 coverage and premiums paid by mail.

    • C. 

      $50,000 coverage and premiums paid by mail.

    • D. 

      $100,000 coverage and premiums collected by agent.


  • 19. 
    A client's flexible premium is invested into a seperate account. What type of insurance product did he purchase?
    • A. 

      Universal Life

    • B. 

      An Annuity

    • C. 

      Variable Life

    • D. 

      Variable Universal Life


  • 20. 
    Which rider pays a multiple of the original face amount?
    • A. 

      Accelerated Death Benefit

    • B. 

      Accidental Death Benefit

    • C. 

      Accidental Death and Dismemberment

    • D. 

      Cost of Living


  • 21. 
    A life-only agent issues a binding receipt to his client since the client did include a check for the initial premium with his completed application. Which is true?
    • A. 

      The client is covered during underwriting.

    • B. 

      The agent faces potential suspension or revocation of their license.

    • C. 

      The client is not covered during underwriting since binders only start once underwriting is complete.

    • D. 

      Since the medical exam hasn't been completed yet, the client is not covered at all.


  • 22. 
    Which of the following would not be considered a speculative risk?
    • A. 

      Every week your client plays $20 on the lotto.

    • B. 

      Any action that could do harm to your clients well-being such as reckless driving.

    • C. 

      Your client invest 5% of his salary into the defined benefit plan at his work.

    • D. 

      All of the above situations involve some risk.


  • 23. 
    According to the California Insurance Code, what information is the agent required to include on their business card?
    • A. 

      Identification of their relationship to the insurance company.

    • B. 

      License number must appear in the same size font as the phone number.

    • C. 

      Must not include any title, designations, or licenses that are not currently held.

    • D. 

      All of the above.


  • 24. 
    How does the IRS classify the two different types of retirement accounts?
    • A. 

      Qualified and unfunded

    • B. 

      Fully funded and non-qualified

    • C. 

      Qualified and non-qualified

    • D. 

      Contributory and noncontributory


  • 25. 
    An insured has a terminal illness and needs to access 1/3 of his death benefit to pay mounting medical expenses. Which rider would meet the insured's current needs?
    • A. 

      Automatic Premium Loan

    • B. 

      Accelerated (Living) Benefit

    • C. 

      Assignment of Benefit

    • D. 

      Payor Benefit


  • 26. 
    A beneficiary decides to take the option that will the largest amount per payment, knowing after death no monies will be paid out to any descendants. The settlement option is:
    • A. 

      Life Guaranteed

    • B. 

      Life with Period Certain

    • C. 

      Life Income (Straight Life)

    • D. 

      Life Refund Income


  • 27. 
    After 12 years, the policyowner decides she no longer needs the large death benefit on her whole life policy. She calls you, her agent, and you tell her she can use the reduced paid-up non-forfeiture option. Which of the following is not true about the new policy?
    • A. 

      The new policy will require no further premium payments.

    • B. 

      The new policy will expire in 10 years.

    • C. 

      The new death benefit is much lower than the original policy.

    • D. 

      The new policy will be in effect until the age of 100, or until she dies, whichever occurs first.


  • 28. 
    Which qualified plan is characterized by having a non-deductible contribution and tax-free distribution?
    • A. 

      Traditional IRA

    • B. 

      Keogh

    • C. 

      Roth IRA

    • D. 

      TSA's


  • 29. 
    Which of the following statements about the process of replacement is incorrect?
    • A. 

      The replacement insurer must notify the insurer within 3 days of the potential replacement.

    • B. 

      The agent and the applicant must sign a statement as to whether replacement will be involved in the transaction.

    • C. 

      A copy of the signed replacement disclosure must be left with the applicant.

    • D. 

      Copies of any written illustration or comparisons used in the process of making the replacement do not need to be included with the submitted application.


  • 30. 
    Members of the MIB are required to report
    • A. 

      Names of patients treated by member physicians.

    • B. 

      Cause of death when death benefits are paid.

    • C. 

      Medical conditions found during underwriting.

    • D. 

      Amounts of life insurance applied for by all applicants.


  • 31. 
    All of the following statements about survivorship life are true, except:
    • A. 

      They are particularly well suited to help families deal with estate tax burdens.

    • B. 

      The face amounts are often for $1,000,000 or more.

    • C. 

      The face amount is payable after the first death.

    • D. 

      As a form of joint life, it covers two individuals on the same policy.


  • 32. 
    In contrasting stock insurers with mutual insurers, which statement is not false?
    • A. 

      Mutual insurers are owned by the shareholders, and issue participating policies.

    • B. 

      Stock insurers are owned by the shareholders, and issue non-participating policies.

    • C. 

      Stock dividends are tax-free while policy dividends are taxable.

    • D. 

      Non-participating policies can pay out dividends to the policyholders.


  • 33. 
    An applicant for an insurance license has had a previous application for a professional license denied for cause within the last five years. The insurance commissioner will:
    • A. 

      Accept or deny the application after an exploratory hearing.

    • B. 

      Deny the application without hearing.

    • C. 

      Accept the application as other licenses have no bearing on this application.

    • D. 

      Accept the application for a two year provisional license.


  • 34. 
    In order to be financially solvent, an insurer must accomplish all of the following, except:
    • A. 

      Reinsure any risk in excess of state retention limits.

    • B. 

      Possess enough assets to cover its liabilities.

    • C. 

      Maintain an amount at least equal to its required minimum paid-in capital.

    • D. 

      Contribute a specific amount of capital reserves to the state.


  • 35. 
    Pete, who is 35 years old, has a life insurance policy with a death benefit of $150,000. At the age of 65 the cash value of his policy will be $150,000. What policy does he have?
    • A. 

      Whole Life

    • B. 

      An Endowment to the age of 65

    • C. 

      Life Paid-up at 65

    • D. 

      A 30-Year Term Plan


  • 36. 
    Roger, who is 35 years old, has a whole life insurance policy with a death benefit of $150,000. At the age of 65 he will no longer make premium payments. When will the cash value of his policy be $150,000?
    • A. 

      65

    • B. 

      100

    • C. 

      35

    • D. 

      70


  • 37. 
    Agent Darren offers life insurance for no cost to people buying property in a local development. When the Commissioner investigates his actions, which of the following is not a likely consequence?
    • A. 

      A civil penalty of up to $5,000 if his actions were not willful and $10,000 fine they were.

    • B. 

      A cease and desist order will be issued.

    • C. 

      A hearing will be called.

    • D. 

      Darren will be charged with a felony and/or up to 10 years in jail.


  • 38. 
    A life settlement broker
    • A. 

      Places property & casualty insurance with non-admitted carriers.

    • B. 

      Negotiates life settlement contracts between an owner and providers.

    • C. 

      Sells single premium immediate annuities to seniors.

    • D. 

      Assists beneficiaries in filing a claim on a life insurance policy.


  • 39. 
    E&O coverage
    • A. 

      Protects an agent in the case of unintentional negligence.

    • B. 

      Has very low deductibles.

    • C. 

      Does not protect the agent if the case against him/her is frivolous.

    • D. 

      Is unlimited.


  • 40. 
    Candee owns a participating whole life policy and uses her policy dividends to buy more of the same type of coverage for herself. Candee has chosen the:
    • A. 

      One-year term option

    • B. 

      Accumulated at interest option

    • C. 

      Reduced paid up option

    • D. 

      Paid-up additions option


  • 41. 
    A policy illustration may not include:
    • A. 

      The name of the insurer, the name of the client, and the name of the producer.

    • B. 

      Vanishing premiums if the policy becomes paid up with non-guaranteed elements paying future premiums.

    • C. 

      An interest rate for non-guaranteed elements that is less than the earned interest rate of the disciplined current scale.

    • D. 

      Depictions of policy performance being less favorable than the insurer's illustrated scale.


  • 42. 
    What is not likely to happen with a return of premium policy?
    • A. 

      The total premiums paid are added to the death benefit.

    • B. 

      The total premiums paid is returned to the insured when the policy is cancelled.

    • C. 

      These policies typically have a higher premium than policies without this feature.

    • D. 

      Increasing term insurance is use to provide this additional benefit.


  • 43. 
    When a client is declined after submitting a prepaid application for life insurance:
    • A. 

      The insurance company can keep the initial premium paid.

    • B. 

      The client is still covered for 90 days on the conditional receipt.

    • C. 

      The insurance company must refund the entire premium paid.

    • D. 

      The client will pay an increased premium.


  • 44. 
    All of the following are characteristics of the social insurance program known as Social Security, except:
    • A. 

      Full retirement age is 65 for all persons born after 1937.

    • B. 

      Fully insured status can be achieved by paying the FICA tax for forty quarters/credits.

    • C. 

      Retirement age is based upon the worker's birth year.

    • D. 

      The worker's full retirement benefits are determined by the PIA.


  • 45. 
    In the insurance planning processes, the blackout period is:
    • A. 

      The period of time in which a policy can be rescinded due to the applicants intentional or unintentional misstatements on the application.

    • B. 

      The period of time in which the policy is still in force despite non-payment.

    • C. 

      The period of time after the youngest child reaches 16, but before the widow reaches 60, in which the surviving spouse receives no Social Security benefits.

    • D. 

      The period of time in which an employee is not yet eligible to join a group life insurance plan.


  • 46. 
    A client receives a lump-sum inheritance. He'd like to use some of the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy?
    • A. 

      Single Premium Immediate Annuity

    • B. 

      Flexible Premium Deferred Annuity

    • C. 

      Flexible Premium Immediate Annuity

    • D. 

      Single Premium Deferred Annuity


  • 47. 
    The applicant works 2 different jobs. The underwriter will rate him according to which job?
    • A. 

      The job with the most hours worked each week on average.

    • B. 

      The job with the highest income.

    • C. 

      The job the insured is most closely trained for professionally.

    • D. 

      The job that is most hazardous.


  • 48. 
    Your policy contains the guaranteed insurability rider. When can you purchase additional insurance on you policy?
    • A. 

      Any time you wish once proving you are insurable for the additional coverage.

    • B. 

      At specified ages or date after providing evidence of insurance.

    • C. 

      Without proof of insurability when the cost of living increases.

    • D. 

      Without evidence of insurability at specified ages or dates.


  • 49. 
    After the insured passes away, it is discovered that the policy was rated based upon an incorrect age. The client lied about their age when filling out the application 8 years earlier. What effect will this have on the benefit?
    • A. 

      The policy is incontestable. Full claim will be paid.

    • B. 

      The policy will be rescinded as it is contestable.

    • C. 

      The proceeds payable will be adjusted.

    • D. 

      The shortage of premium will be deducted from the death benefit.


  • 50. 
    Which of the following are common provisions found within many life insurance policies?
    • A. 

      Reinstatement, entire contract, incontestability

    • B. 

      Aviation, suicide, incontestability

    • C. 

      Pre-existing conditions, entire contract, grace period

    • D. 

      Right to return, reinstatement, war clause


  • 51. 
    The term aleatory is best defined by which of the following?
    • A. 

      Unequal exchange in value.

    • B. 

      Only one party to the contract is bound by a legally enforceable obligation.

    • C. 

      If in dispute, the courts rule in favor of the insured, not the insurer.

    • D. 

      Both parties to the contract are required to disclose to the other all material information.


  • 52. 
    Of the following, which best descirbes the difference between life insuracne and annuities?
    • A. 

      Annuities create an instant estate, while life insurance liquidate an estate.

    • B. 

      Annuities provide a tax free income in retirement.

    • C. 

      Life insurance can be funded monthly, while annuities require a lump-sum funding.

    • D. 

      Life insurance creates an instant estate, while annuities liquidate a sum of money.


  • 53. 
    Which pair are Activities of Daily Living (ADLs)?
    • A. 

      Hearing $ eating

    • B. 

      Dressing & seeing

    • C. 

      Speaking & sleeping

    • D. 

      Mobility & bathing


  • 54. 
    The definition of mortality and morbidity:
    • A. 

      Odds of sickness versus odds of disability.

    • B. 

      Odds of dying versus the odds of disability.

    • C. 

      Odds of sickness versus the odds of dying.

    • D. 

      They are virtually the same concept.


  • 55. 
    Per the Code, the best definitions of "shall" and "may" are:
    • A. 

      Mandatory & optional

    • B. 

      Permissive & mandatory

    • C. 

      Mandatory & permissive

    • D. 

      Mandatory & unknown


  • 56. 
    Starting from lowest to highest, rank the initial premium paid by the client for these insurance policies below:
    • A. 

      Ordinary whole life, modified whole life, single premium whole like

    • B. 

      Single premium whole life, modifies whole life, ordinary whole life

    • C. 

      Modified whole life, ordinary whole life, single premium whole life

    • D. 

      Modified whole life, single premium whole life, ordinary whole life


  • 57. 
    Sam has a $200,000 convertible life insurance policy. If he chooses, he can:
    • A. 

      Purchase an individual annuity for any face amount using the 1035 exchange privilege.

    • B. 

      Purchase another term policy and increase his death benefit without proof of insurability.

    • C. 

      Convert to a whole life policy for the same face amount without proof of insurability.

    • D. 

      Convert to another term policy with a lower face amount without proof of insurability.


  • 58. 
    The future account value of the annuity Alex purchased is connected to the S&P500 index. What type of annuity did he purchase?
    • A. 

      Variable annuity

    • B. 

      Equity-Indexed annuity

    • C. 

      Deferred annuity

    • D. 

      Immediate annuity


  • 59. 
    The entire contract can include many components. Which of the following cannot be a part of the entire contract.
    • A. 

      Any riders

    • B. 

      Any document referenced by the policy

    • C. 

      The policy

    • D. 

      A copy of the application


  • 60. 
    Which of the following can be written as a group policy?
    • A. 

      Life paid-up at 65

    • B. 

      Credit life

    • C. 

      Endowment at 65

    • D. 

      Survivorship life


  • 61. 
    How does the incontestability clause benefit the insured?
    • A. 

      It dictates that if the insured and beneficiary die together, and the order of death is unknown, the beneficiary is presumed to have died first.

    • B. 

      It protects the death benefit from attachment by creditors after the insured passes away.

    • C. 

      It keeps the policy from being cancelled if, after two years, it is discovered that there was an error, concealment, or misrepresentation by the policy owner.

    • D. 

      It keeps the policy from lapsing should the premium go unpaid by borrowing from the cash value.


  • 62. 
    Under the cost of living adjustment rider, the policy:
    • A. 

      Will see an increase in its face value each year by a set percentage.

    • B. 

      Will increase or decrease along with the CPI. The premium will adjust accordingly. No evidence of insurability is required.

    • C. 

      Will only increase with the inflation rate. There will be an additional premium charged, but no evidence of insurability is required.

    • D. 

      Will allow the insured to purchase additional insurance with evidence of insurability.


  • 63. 
    Every admitted insurer in California must maintain a unit, or department, responsible for investigating which of the following?
    • A. 

      Possible arson activity

    • B. 

      Ratings and claims abuses by the insurers

    • C. 

      Possible fraudulent claims by the insured

    • D. 

      Unfair trade practices by the insurer


  • 64. 
    Concerning qualified plans, which statement is false?
    • A. 

      ESOP's invest in a portfolio of stock selected by the employer.

    • B. 

      Profit-sharing plans allow employees to share in the employer's success.

    • C. 

      Defined benefit plans are often linked to an employee's years of service.

    • D. 

      Defined benefit and defined contribution plans have different penalties for early distribution.


  • 65. 
    Of the following, which is not one of the three major loss exposures faced by insured?
    • A. 

      Human losses

    • B. 

      Liability losses

    • C. 

      Financial losses

    • D. 

      Property losses


  • 66. 
    What type of insurance would a person select as the most efficient method of paying the outstanding debt on their home in the event of death?
    • A. 

      Level term

    • B. 

      Family maintance

    • C. 

      Mortgage redemption (decreasing term/mortgage protection)

    • D. 

      Joint life (first-to-die)


  • 67. 
    Which statement is an accurate description of life insurance policy dividends?
    • A. 

      They are likely to be larger in nonparticipating policies.

    • B. 

      They are not taxable and are not guaranteed.

    • C. 

      Stock insurers pay dividends to policy owners, mutual insurers pay dividends to shareholders.

    • D. 

      They are guaranteed to be paid and they are taxable.


  • 68. 
    Under the terms of the 10-day free-look period, a claim will be paid
    • A. 

      If the policy has not been returned, whether or not a premium was paid.

    • B. 

      Under no circumstance; there is no coverage until the 10-day period has passed.

    • C. 

      If the premium has been paid and the policy has not been returned.

    • D. 

      Only if the policy is returned.


  • 69. 
    When a policy continues because of a payor benefit clause, it means
    • A. 

      The insurer pays monthly disability income to the premium payor.

    • B. 

      The insured is only covered to age 18, then the policy expires.

    • C. 

      The owner of the policy is disabled or has died.

    • D. 

      At age 21 or 25, the death benefit is reduced by up to 50%.


  • 70. 
    Upon the death of a primary breadwinner who is fully insured under Social Security, a dependent child is eligible to receive an income benefit until the age of
    • A. 

      18 or 19, if unmarried and a student in elementary or secondary school

    • B. 

      18

    • C. 

      22 or 23, if unmarried and a college student

    • D. 

      19


  • 71. 
    The beneficiary chooses to receive the policy proceeds in the form of monthly income at the rate of $3,000 per month, until principal and interest are exhausted. What settlement option did the beneficiary select?
    • A. 

      Life-only income

    • B. 

      Interest-only to age 40

    • C. 

      Fixed period

    • D. 

      Fixed amount


  • 72. 
    What is the usual federal income tax treatment of individual life insurance?
    • A. 

      Deductibility of premiums, taxable death benefits

    • B. 

      Non-deductibility of premiums, non-taxable death benefits

    • C. 

      Deductibility of premiums, non-taxable death benefits

    • D. 

      Non-deductibility of premiums, taxable death benefits


  • 73. 
    A universal life policy may be surrendered for its cash value:
    • A. 

      Only when the cash value equals the death benefit

    • B. 

      At any time

    • C. 

      Within 30 days of an interest payment

    • D. 

      Only if there are no outstanding loans


  • 74. 
    California rules for annuity sales require all agents to present a specific disclosure document in advance to any senior citizen who is not already a client whenever a sales appointment will be conducted in the person’s home. How far in advance must the prospect receive the written notice?
    • A. 

      One business day

    • B. 

      At least 24 hours

    • C. 

      Prior to entering the home

    • D. 

      Three calendar days


  • 75. 
    Gloria owns an annuity in which she has invested $5,000 a year for 10 years. She is currently receiving $8,000 annually from her annuity. By the time all of the principal and interest is paid out, Gloria will have been paid $100,000. How much of the annual benefit is taxable?
    • A. 

      $0

    • B. 

      $4,000

    • C. 

      $2,000

    • D. 

      $900


  • 76. 
    Which statement is false concerning insurance company regulations?
    • A. 

      Insurers may not advertise their membership in the Guarantee Association.

    • B. 

      An insurer suffering from an impairment of their minimum required paid-in capital is labeled solvent.

    • C. 

      The commissioner may begin conservation proceedings against companies who cannot meet solvency regulations.

    • D. 

      An insurer may be liquidated if conservation proves to be futile.


  • 77. 
    Which of the following transactions would most likely be declined due to lack of insurable interest?
    • A. 

      A parent buys insurance on their adult child

    • B. 

      An employee insures their employer in the fear of losing their job

    • C. 

      A spouse insures the other spouse

    • D. 

      A local hospital insures its chief of surgery


  • 78. 
    All of the following statements about policy provisions are true, except:
    • A. 

      Death during the grace period results in a full death benefit being paid.

    • B. 

      Suicide during the policy’s first two years results in policy rescission.

    • C. 

      The insuring clause states the insurer’s promise to pay a death benefit if premiums are paid, and proof of death is received.

    • D. 

      The automatic premium loan can keep a policy in force when payments are missed and there is sufficient cash value to pay the premium.


  • 79. 
    A client has a history of DUIs. To his insurer, they see him as a ________ hazard.
    • A. 

      Physical

    • B. 

      Moral

    • C. 

      Morale

    • D. 

      Legal


  • 80. 
    Which statement about reinstatement is false?
    • A. 

      Reinstatement usually requires an application with underwriting questions, but may not require any physical exams.

    • B. 

      Reinstatement requires payment of past due premium plus interest.

    • C. 

      A reinstated policy’s premium is based upon the insured’s original age.

    • D. 

      The reinstated policy is incontestable if the first time it was in force it already passed the two year mark.


  • 81. 
    The person who will receive the benefit of an annuity and whose life the payout is based upon when the contract is purchased is the:
    • A. 

      Policy owner

    • B. 

      Annuitant

    • C. 

      Beneficiary

    • D. 

      Insured


  • 82. 
    The Roth and Traditional IRAs have some similarities. Which of the following is not true?
    • A. 

      Both have penalties for early withdrawal

    • B. 

      Both grow tax deferred

    • C. 

      Both are tax deductible to the investor

    • D. 

      Both allow the investor to invest for themselves and their non-income earning spouse


  • 83. 
    A policy pays the face amount if the insured dies before a specified date, or lives to that specified date. This best describes:
    • A. 

      Term Insurance

    • B. 

      Social Security

    • C. 

      An endowment policy

    • D. 

      An annuity


  • 84. 
    All of the following statements about life insurance policy illustrations and the senior market are correct, except:
    • A. 

      Guaranteed elements must be emphasized in bold print.

    • B. 

      To be understandable, policy illustrations must follow certain formats so the insured can make informed buying decisions.

    • C. 

      Illustrations must note that they are only an illustration.

    • D. 

      The illustration will note that both guaranteed and non-guaranteed elements will remain unchanged for the years illustrated.


  • 85. 
    All of the following statements about agents are true, except:
    • A. 

      Independent agents can be appointed by multiple insurers.

    • B. 

      If an agent submits business to an insurer that the agent is not appointed with, the insurer can submit a notice of appointment within 14 days to validate the relationship.

    • C. 

      Exclusive agents work for themselves.

    • D. 

      Agents need to complete 4 hours of ethics continuing education every license renewal as a part of their regular CE hours.


  • 86. 
    Which statement is not true about insurance sales?
    • A. 

      Mass marketing techniques usually involve selling insurance without the use of an agent.

    • B. 

      Brokers represent insurers in negotiating coverage with various insureds.

    • C. 

      Insurance agents are not authorized to sell life insurance.

    • D. 

      An agent or broker must exercise care when using apparent authority during the sales process.


  • 87. 
    In comparing the purchase of individual life insurance to acquiring group life, which statement is not true?
    • A. 

      Group insurance is automatic and requires less medical information than the individual coverage.

    • B. 

      Group life tends to have a lower premium per person than individual life.

    • C. 

      Both provide a tax free death benefit.

    • D. 

      Group insurance has a non-deductible premium while individual insurance has a tax deductible premium to the payor.


  • 88. 
    Which of the following is not a personal use of life insurance?
    • A. 

      A client buys cash value insurance to fund their children’s college education.

    • B. 

      A client buys insurance to pay off their mortgage should they pass away prematurely.

    • C. 

      A client buys insurance to fund a buy-sell agreement.

    • D. 

      A client buys insurance to provide future income to a surviving spouse.


  • 89. 
    All of these statements about life insurance settlement options are false, except:
    • A. 

      Fixed amount is the default option when no option is selected.

    • B. 

      Life income payments are income tax free.

    • C. 

      Life income with 10 years certain provides at least 120 months of payments.

    • D. 

      Settlement options like fixed period are good ways to provide an income to a beneficiary who cannot handle large sums of money.


  • 90. 
    Under which life settlement option does the insurer retain the death benefit but pays the beneficiary the earnings on the death benefit?
    • A. 

      Interest only option

    • B. 

      Accumulate with interest option

    • C. 

      Life income option

    • D. 

      Cash option


  • 91. 
    Any person to whom the commissioner has issued a seizure order and who refuses to deliver any books, records, or assets of an insurer faces:
    • A. 

      A felony punishable by a fine up to $1,000, a year in prison, or both.

    • B. 

      A misdemeanor punishable by a fine up to $1,000, a year in jail, or both.

    • C. 

      A misdemeanor punishable by a $5,000 fine, if unintentional, or $10,000, if intentional.

    • D. 

      Administrative fines only.


  • 92. 
    The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the applicant made a material misstatement on the application. What is the most likely course of action for the insurer?
    • A. 

      Rescind the policy

    • B. 

      An administrative hearing by the DOI

    • C. 

      A hearing by a court of law to determine the appropriate actions

    • D. 

      No course of action allowed since the policy has already been issued


  • 93. 
    All of the following describe differences between binding receipts and conditional receipts, except:
    • A. 

      Conditional receipts are commonly used for life insurance applications.

    • B. 

      No claim is paid with either receipt until a policy is issued

    • C. 

      The binding receipt always provides immediate coverage from the date of the receipt

    • D. 

      The conditional receipt can provide coverage from the date of application once the application is later approved by underwriting


  • 94. 
    According to the California DOI, an insurer whose articles of incorporation are registered in Oslo, Norway, is considered:
    • A. 

      A domestic insurer

    • B. 

      A foreign insurer

    • C. 

      An alien insurer

    • D. 

      An admitted insurer


  • 95. 
    Which of the following riders would provide for an insured to increase the face amount of their life insurance policy without proof of insurability?
    • A. 

      Guaranteed insurability/future purchase option

    • B. 

      Waiver of premium

    • C. 

      Accelerated death benefit

    • D. 

      Double indemnity rider


  • 96. 
    What nonforfeiture option allows a policyowner to use the existing cash value to purchase a policy of the same face amount as the original policy but for a reduced amount of time?
    • A. 

      Reduced paid-up insurance

    • B. 

      Cash surrender value

    • C. 

      Extended term insurance

    • D. 

      Extended paid-up insurance


  • 97. 
    In which type of policy does the insurer apply flexible premium to pay for the cost of insurance and expenses and then uses the remaining balance plus interest to build the cash value account?
    • A. 

      Universal life

    • B. 

      Adjustable life

    • C. 

      Renewable term

    • D. 

      Whole life


  • 98. 
    Which of the following is not a qualified 1035 exchange?
    • A. 

      A whole life policy exchanged for a variable life policy.

    • B. 

      A variable annuity exchanged for a variable universal life policy.

    • C. 

      A variable annuity exchanged for a fixed annuity.

    • D. 

      A universal life policy exchanged for a whole life policy.


  • 99. 
    Which of the following is not an acceptable underwriting classification?
    • A. 

      Sub-standard

    • B. 

      Preferred

    • C. 

      Declined

    • D. 

      Standard


  • 100. 
    The provision that protects the proceeds of a life insurance policy from attachment by the beneficiary’s creditors after the insured’s death is known as the:
    • A. 

      Spendthrift (Trust) Clause.

    • B. 

      Common Disaster Clause.

    • C. 

      Incontestability Clause.

    • D. 

      The Beneficiary Protection Clause.


  • 101. 
    Which of the following is an incorrect statement about a client’s privacy rights?
    • A. 

      Signed consent is required before an Attending Physician’s Statement (APS) will be completed.

    • B. 

      Abuse of information found within medical records could result in a HIPAA violation.

    • C. 

      A client does not have access to their MIB report as it belongs to the member’s life insurers.

    • D. 

      Consent is required before an insurer may access an insured’s credit history. Any entry may be disputed if in error.


  • 102. 
    In a group life policy with a death benefit of more than $50,000:
    • A. 

      Premium cost is taxable to the employer.

    • B. 

      Premium cost for insurance above $50,000 is taxable as income to the employee.

    • C. 

      Premium cost for insurance below $50,000 is taxable as income to the insured.

    • D. 

      Premium cost is tax deferred.


  • 103. 
    To authorize the release of an attending physician’s report, the applicant must:
    • A. 

      Sign a consent form

    • B. 

      Send a letter to the physician.

    • C. 

      Furnish the name of the physician.

    • D. 

      Submit to a physical examination.


  • 104. 
    The Commissioner can deny an applicant for a license after a hearing:
    • A. 

      If the applicant doesn’t lack integrity.

    • B. 

      If the applicant has permitted someone in their employment to violate the California Insurance Code.

    • C. 

      For applicants holding other professional licenses.

    • D. 

      For applicants seeking the license for the purpose of aiding the enforcement of the California Insurance Code.


  • 105. 
    At age 72, Mrs. Smith is considering applying for Medi-Cal so she can afford her medical bills. Today Agent Charles is visiting her home and wanting to sell her an annuity product. Which of the following is true?
    • A. 

      It’s permissible for Agent Charles to visit Mrs. Smith for the first time without providing her a pre-meeting notice in writing 24 hours in advance.

    • B. 

      Agent Charles cannot allow Mrs. Smith to purchase an annuity if after the purchase, Mrs. Smith wouldn’t qualify for Medi-Cal.

    • C. 

      Mrs. Smith must agree to meet with Agent Charles alone.

    • D. 

      Agent Charles should recommend the annuity purchase to assure he receives the greatest commission possible from the visit.


  • 106. 
    What is the minimum number of members required for group life insurance?
    • A. 

      15

    • B. 

      10

    • C. 

      25

    • D. 

      100


  • 107. 
    Which statement below is least correct regarding the type of insurance that fits best with the applicant’s needs?
    • A. 

      Applicants concerned with the increasing cost of living should purchase increasing term.

    • B. 

      Applicants wishing to pay off a mortgage should they suffer a premature death might buy a decreasing term plan.

    • C. 

      Annual renewable term works well for employers looking to provide cost effective group life insurance for their employees.

    • D. 

      Convertible term can be purchased by applicants who may require a larger death benefit in the future.


  • 108. 
    Which of the following is considered ordinary insurance?
    • A. 

      Renewable term insurance

    • B. 

      Blanket policies

    • C. 

      Mortgage redemption

    • D. 

      Whole life insurance


  • 109. 
    Who submits a request for life insurance to a company?
    • A. 

      The beneficiary

    • B. 

      The underwriter

    • C. 

      The applicant

    • D. 

      The agent


  • 110. 
    All of the following needs to be included on an application for life insurance except:
    • A. 

      Life Insurance with other insurers

    • B. 

      The agent’s statement, if applicable

    • C. 

      Signatures of the agent, proposed insured, and the owner

    • D. 

      Disability income insurance


  • 111. 
    A partial payment of proceeds to cover final expenses is paid to someone not designated as a beneficiary but acting in a legal or fiduciary capacity. This is provided in which provision?
    • A. 

      Automatic Premium Loan

    • B. 

      Payor Benefit

    • C. 

      Cost of Living

    • D. 

      Facility of Payment


  • 112. 
    While collecting underwriting information, certain rules must be followed. Which of the following is incorrect?
    • A. 

      When credit is used to determine insurability, the applicant must be furnished with the name, address, and phone number of the credit agency used by the insurer.

    • B. 

      Information contained on the non-medical application may result in the requirement for a physical exam.

    • C. 

      Post-claims underwriting is a valid and necessary means of determining the insurability of a potential applicant.

    • D. 

      Insurers may test for HIV after getting informed consent from the applicant, and may ask questions concerning the existence of the condition as long as they don’t reveal information about sexual orientation.


  • 113. 
    At what age does Social Security Medicare program Part B start providing benefits?
    • A. 

      67

    • B. 

      65

    • C. 

      62

    • D. 

      60


  • 114. 
    Which of the following statements is not included in the Entire Contract clause?
    • A. 

      All statements made by the insured in the application will be considered as representations, not warranties.

    • B. 

      A copy of the application, if used, must be attached to the policy.

    • C. 

      Insurer agrees to provide life insurance protection for the named insured which will be paid to a designated beneficiary when proof of death is received by the insurer.

    • D. 

      Only an executive officer can make changes to the contract.


  • 115. 
    Which action by an insurer, or its representatives, is not considered an unfair claims violation?
    • A. 

      A claims adjustor misrepresents pertinent facts or policy provisions to dissuade a client from making a claim.

    • B. 

      An agent does not respond to a claimant’s communication concerning a claim where a response is required.

    • C. 

      The claims department fails to affirm or deny coverage within a reasonable period of time after proof of loss has been submitted.

    • D. 

      An agent advises a claimant to obtain the services of an attorney.


  • 116. 
    All of the following statements are true about participating and nonparticipating policies, except:
    • A. 

      They are sometimes referred to as par and non-par.

    • B. 

      Participating policies allow a policy owner to share in a mutual company’s divisible surplus in the form of dividends.

    • C. 

      Non-participating policies issue dividends to shareholders.

    • D. 

      Non-participating policies issue dividends to policy owners.


  • 117. 
    All of the following statements about assignments are not false, except:
    • A. 

      Absolute assignments can be used for life settlement agreements.

    • B. 

      Absolute assignments can be used for life settlement agreements.

    • C. 

      Absolute assignments involve the complete transfer of all policy owner rights in the insurance policy.

    • D. 

      Assignments need not be filed with the insurer if notarized and filed in county records.


  • 118. 
    How many hours of continuing education are required per renewal for a life-only agent?
    • A. 

      20 hours, 4 of the hours must be in ethics

    • B. 

      20 hours, 2 of the hours must be in ethics

    • C. 

      24 hours, 4 of the hours must be in ethics

    • D. 

      24 hours, 2 of the hours must be in ethics


  • 119. 
    All of the following statements about a policy grace period are false, except:
    • A. 

      Death during the grace period results in the denial of the claim.

    • B. 

      Grace periods are typically 31 days.

    • C. 

      Returning the policy during the grace period results in a full refund of premiums.

    • D. 

      Not every insurer is required to provide a grace period.


  • 120. 
    A client has missed her premium payment on her cash value policy, and the grace period has also lapsed. The policy is still in force because her insurer has been deducting the cost of the premium from her cash value. What provision allows this?
    • A. 

      Automatic Premium Loan

    • B. 

      Incontestability Clause

    • C. 

      Reinstatement Provision

    • D. 

      Over-Draft Protection


  • 121. 
    Which insurance is known for having a level premium with a fixed rate of return resulting in guaranteed cash value?
    • A. 

      Adjustable Life

    • B. 

      Whole Life

    • C. 

      Variable Life

    • D. 

      Universal Life


  • 122. 
    A forty-five year old investor has been laid off from his job. In order to pay bills he takes a premature distribution from his traditional IRA account. What tax penalties, if any, will he face?
    • A. 

      None. Distributions during times of unemployment are not penalized.

    • B. 

      None. Distributions before the age of 59 ½ are penalty-free.

    • C. 

      He will be required to pay a 10% tax penalty on the amount withdrawn.

    • D. 

      Since traditional IRA’s are often tax deductible, the client owes the normal taxes they avoided when they made their contribution.


  • 123. 
    For a flexible premium deferred annuity, the time during which the owner makes premium payments and the time before benefit payments begin is known as the:
    • A. 

      Activity period.

    • B. 

      Annuity period.

    • C. 

      Accumulation period.

    • D. 

      Annuitization period.


  • 124. 
    An agent who knowingly misrepresents material information for the purpose of inducing a client to lapse, forfeit, change or surrender a life insurance policy or annuity has committed an illegal practice known as:
    • A. 

      Concealment

    • B. 

      Misrepresentation

    • C. 

      Twisting

    • D. 

      Fraud


  • 125. 
    An applicant has the right to know that the insurance company will collect certain personal information about their credit, character and reputation. The insurer may gain such information from:
    • A. 

      A privacy notice.

    • B. 

      An application for insurance.

    • C. 

      A consumer report.

    • D. 

      A pretext interview.


  • 126. 
    A client has purchased an annuity with an annual bonus she received at the end of last year. She has requested annual benefit payments to start at the end of this year. What type of annuity did she purchase?
    • A. 

      Flexible Premium Deferred Annuity

    • B. 

      Single Premium Immediate Annuity

    • C. 

      Flexible Premium Immediate Annuity

    • D. 

      Single Premium Deferred Annuity


  • 127. 
    Which of the following cannot be used in a policy illustration if nonguaranteed elements are intended to pay future premiums?
    • A. 

      Paid up additions

    • B. 

      Paid-up premiums

    • C. 

      Disappearing premiums

    • D. 

      Vanishing premiums


  • 128. 
    Premiums paid into a variable annuity purchase which of the following?
    • A. 

      Annuity units

    • B. 

      Accumulation units

    • C. 

      Purchased units

    • D. 

      Paid-up units


  • 129. 
    Variable insurance and variable annuity products are regulated by:
    • A. 

      SEC and FINRA.

    • B. 

      SEC, FINRA and DOI.

    • C. 

      DOI and FINRA.

    • D. 

      None of the above.


  • 130. 
    Which of the following is most likely to have a TSA?
    • A. 

      Corporate executive

    • B. 

      Small business owner

    • C. 

      School district employee

    • D. 

      Employee of a blue chip corporation


  • 131. 
    Which of the following is not excluded from the California Life and Annuity Replacement Law?
    • A. 

      Purchasing credit life insurance for the purchase of a second home

    • B. 

      Purchasing credit life insurance for the purchase of a second home

    • C. 

      Purchasing a new policy that will take the place of an existing policy

    • D. 

      Converting a convertible term policy to whole life insurance


  • 132. 
    According to the CIC, life-only agents must keep records of their transactions for:
    • A. 

      7 years

    • B. 

      5 years

    • C. 

      3 years

    • D. 

      12 months


  • 133. 
    For an insurance contract, utmost good faith means:
    • A. 

      Each party is equally responsible for the value of the policy.

    • B. 

      The contract just involves the policy owner and the insurer.

    • C. 

      Each party relies upon the truthfulness of the other.

    • D. 

      The policy owner will be indemnified in case of loss.


  • 134. 
    Which type of insurer requires an attorney-in-fact overseen by an advisory committee of subscribers?
    • A. 

      Fraternal insurer

    • B. 

      Mutual insurer

    • C. 

      Reinsurer

    • D. 

      Reciprocal insurer


  • 135. 
    Brian purchased a variable life policy and died 25 months after the issue date. It is then discovered that Brian understated his age on the application. What will the insurer do in regard to the payment of the death benefit to the beneficiary?
    • A. 

      The death benefit will be reduced to reflect the age discrepancy.

    • B. 

      The policy will be rescinded and all premium paid will be refunded to the beneficiary.

    • C. 

      The full death benefit will be paid because the policy is over 2 years old.

    • D. 

      The death benefit will be paid to the estate of the insured for legal action.


  • 136. 
    All of the following are true about key person insurance, except:
    • A. 

      The business is the applicant and owner.

    • B. 

      The employee must give written consent by signing the application.

    • C. 

      The business is the beneficiary.

    • D. 

      The death benefit is taxable to the business.


  • 137. 
    Which statement best describes “agreement” as it relates to contracts?
    • A. 

      The intent of the contract must be legally acceptable to both parties.

    • B. 

      All parties must be capable of entering into a contract.

    • C. 

      Each party must offer something of value.

    • D. 

      One party accepts the exact terms of the other party’s offer.


  • 138. 
    Profit Sharing Plans:
    • A. 

      Are fixed liabilities to the business.

    • B. 

      Often allow companies to delay distribution of each employee’s share.

    • C. 

      Cannot be used along with other retirement programs.

    • D. 

      Allow for a contribution of a specified proportion of company profits.


  • 139. 
    When an applicant makes a material statement believed to be true to the best of their knowledge, the statement is considered to be a/an
    • A. 

      Indemnity

    • B. 

      Estoppel

    • C. 

      Warranty

    • D. 

      Representation


  • 140. 
    Which of the following becomes part of the contract, is guaranteed to be true, and if untrue, may be grounds for rescinding the policy?
    • A. 

      Facility of payment clause

    • B. 

      Contract of adhesion

    • C. 

      Warranty

    • D. 

      Consideration


  • 141. 
    In insurance, the agents have authorization to represent the company. The producers may exercise this relationship through:
    • A. 

      Express authority, implied authority and apparent authority.

    • B. 

      Domestic authority, foreign authority and alien authority.

    • C. 

      Underwriting department, actuarial department and claims department.

    • D. 

      Reciprocal authority, risk retention and reinsurance.


  • 142. 
    Ashley, the policy owner and insured, named Wendell as primary beneficiary and Barbara as contingent beneficiary. Just six (6) weeks prior to Ashley’s death, Wendell and Barbara are killed in a common disaster. The insurance proceeds will be received by whom?
    • A. 

      Ashley’s survivors

    • B. 

      Ashley’s estate

    • C. 

      Split equally between the estates of Wendell and Barbara

    • D. 

      Wendell’s estate


  • 143. 
    Which of the following statements is false in regard to a Life Paid-up at-65 whole life policy?
    • A. 

      Premium payments will be higher than a straight whole life policy.

    • B. 

      The policy will mature at the death of the insured or age 100, whichever occurs first.

    • C. 

      Premium payments stop at age 65.

    • D. 

      The policy will endow at age 65.


  • 144. 
    A policyowner who cannot borrow the equity, change beneficiaries, assign a policy or stop paying premiums without the beneficiary’s written consent has designated the beneficiary as a(n):
    • A. 

      Revocable beneficiary

    • B. 

      Irrevocable beneficiary

    • C. 

      Defined beneficiary

    • D. 

      Primary Beneficiary


  • 145. 
    Which party has the legal authority to name or change the beneficiary?
    • A. 

      Insurer

    • B. 

      Policy owner

    • C. 

      Insured

    • D. 

      Agent


  • 146. 
    Term insurance is best described by which of the following?
    • A. 

      Provides coverage to age 100, builds cash value, participates in dividend payments, high premium and is payable at the end of a preselected period.

    • B. 

      Combines monthly income during a stated period with a death benefit, nonforfeiture provisions and greater flexibility during times of inflation.

    • C. 

      Provides temporary protection, builds no cash value, is less expensive, and may be renewed.

    • D. 

      Provides the option to adjust the face amount, change anniversary dates, and automatically increases face amount at given age.


  • 147. 
    An insurer invests the cash value of a fixed annuity in which of the following assets?
    • A. 

      Index account

    • B. 

      Blended account

    • C. 

      General account

    • D. 

      Separate account


  • 148. 
    In life insurance, beneficiary succession is the method used to determine who will receive death proceeds. If the primary beneficiary is not living upon the death of the insured who will receive the payment?
    • A. 

      Third party beneficiary

    • B. 

      Revocable beneficiary

    • C. 

      Irrevocable beneficiary

    • D. 

      Contingent beneficiary


  • 149. 
    Situations where the risk is increased by slippery floors, a habit of lying, or reckless drunk driving are best described by which of the following?
    • A. 

      A peril

    • B. 

      A hazard

    • C. 

      Pure risk

    • D. 

      Cause of loss


  • 150. 
    Which of the following are characteristics of renewable term?
    • A. 

      Allows the insured to apply for a new contract at the end of the term but there are no guarantees.

    • B. 

      Allows the insured to exchange the temporary protection for a form of permanent insurance without evidence of insurability.

    • C. 

      Allows the policy owner the opportunity to provide evidence of insurability at the end of the term with reduced premiums.

    • D. 

      Allows the policyowner the opportunity to renew the policy at the end ofterm, without evidence of insurability. The premium will increase.


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