California Life Insurance Practice Exam B

Reviewed by Editorial Team
The ProProfs editorial team is comprised of experienced subject matter experts. They've collectively created over 10,000 quizzes and lessons, serving over 100 million users. Our team includes in-house content moderators and subject matter experts, as well as a global network of rigorously trained contributors. All adhere to our comprehensive editorial guidelines, ensuring the delivery of high-quality content.
Learn about Our Editorial Process
| By Selidron
S
Selidron
Community Contributor
Quizzes Created: 4 | Total Attempts: 41,798
| Attempts: 884 | Questions: 75
Please wait...
Question 1 / 75
0 %
0/100
Score 0/100
1. 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?

Explanation

Early withdrawals from qualified plans before the age of 59 ½ require the normal taxes owed, plus an additional 10% tax penalty for early distribution except for hardship withdrawals.

Submit
Please wait...
About This Quiz
Practice Exam Quizzes & Trivia

California Life Insurance Practice Exam B assesses knowledge on insurance regulations, insurable interest, policy provisions, risk classification, and annuity benefits. This exam is crucial for those preparing for... see morelicensure in the life insurance sector in California. see less

2. To authorize the release of an attending physician's report, the applicant must:

Explanation

Physicians require the patient’s written authorization to release patient information.

Submit
3. Which of the following is most likely to have a TSA?

Explanation

Tax Sheltered Accounts (TSA) are retirement programs for not-forprofit institutions such as school districts, churches, charities, etc.

Submit
4. According to the CIC, life-only agents must keep records of their transactions for:

Explanation

Agent records must be kept for 5 years.

Submit
5. Which of the following transactions would most likely be declined due to lack of insurable interest?

Explanation

While “blood and business” can be used as a way to remember the insurable interest relationship; employees do not have an insurable interest relationship with their employer.

Submit
6. At what age does Social Security Medicare program Part B start providing benefits?

Explanation

Medicare Part B provides medical expense coverage to those 65 and older.

Submit
7. The Commissioner can deny an applicant for a license after a hearing:

Explanation

Applicants allowing others to violate the insurance code would be suspect for further violations.

Submit
8. In insurance, the agents have authorization to represent the company. The producers may exercise this relationship through:

Explanation

An agent has three (3) types of authority which stem from the agency relationship. Express authority is written in the contract. Implied authority is not written, but is assumed based on common business practices. Apparent authority is action taken by the agent leading the consumer to believe the agent works for the insurer, i.e. business cards.

Submit
9. 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?

Explanation

If both the primary and the contingent beneficiaries predecease the insured and no other beneficiaries are named, the face amount distribution will be paid to the insured’s estate.

Submit
10. Which party has the legal authority to name or change the beneficiary?

Explanation

The policy owner/policy holder is usually the payor and has authority to decide who receives the proceeds.

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

Explanation

An insurer incorporated in a foreign country is considered to be an alien insurer.

Submit
12. For an insurance contract, utmost good faith means:

Explanation

This is the definition of utmost good faith.

Submit
13. Term insurance is best described by which of the following?

Explanation

Term insurance provides a substantial amount of coverage at a low cost. The lower price is possible due to no cash value.

Submit
14. 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:

Explanation

This is the definition of twisting, which is an unfair trade practice.

Submit
15. Which of the following is not a personal use of life insurance?

Explanation

Buy-sell agreements are typically bought by partners in a business as a personnel/business use of insurance. The others are examples personal/family uses of insurance.

Submit
16. Which of the following is not an acceptable underwriting classification?

Explanation

Even though a sub-standard rating results in a higher premium, the risk (insured) has been accepted by the insurer. Declined means the risk is too high and therefore is not accepted by the insurer.

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

Explanation

Morale hazards are characterized by an indifference towards risk. DUIs show apathy towards hurting oneself and others.

Submit
18. Profit Sharing Plans:

Explanation

In profit sharing plans, companies earmark a portion of their profits to be contributed to the employee.

Submit
19. 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?

Explanation

Contingent/secondary beneficiary is the individual who has the right to receive the face amount of the policy if the primary beneficiary has died and no new primary beneficiary has been named.

Submit
20. 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?

Explanation

A hazard is any factor that increases the likelihood that a loss may occur. This statement contains examples of physical hazard, moral hazard and morale hazard.

Submit
21. 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:

Explanation

A consumer report includes information about a potential client’s credit, character and reputation. This report may be obtained by the insurer during the underwriting process.

Submit
22. 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?

Explanation

Agents must be mindful of the effects of an annuity purchase on Medi-Cal eligibility.

Submit
23. 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?

Explanation

The client has purchased an annuity with one payment (single premium) and has requested that the benefit payments begin within 12 months or less of the contract date (immediate annuity).

Submit
24. 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?

Explanation

The misstatement of age provision states that the insurer will “make it right” by adjusting the death benefit accordingly. This provision is not subject to the incontestable clause.

Submit
25. How many hours of continuing education are required per renewal for a life-only agent?

Explanation

According to the CIC, 24 hours of continuing education must be completed each renewal. Of the 24 hours, at least 4 must be in ethics.

Submit
26. 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?

Explanation

The contestability period is still in force so the policy can be rescinded by the company for material misrepresentation on the application.

Submit
27. Which action by an insurer, or its representatives, is not considered an unfair claims violation?

Explanation

It is only an unfair claims practice to advise a claimant to NOT obtain an attorney. A claimant always has the right to seek council.

Submit
28. 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:

Explanation

The time during which the account owner invests money in the annuity is known as the accumulation period.

Submit
29. All of the following statements about agents are true, except:

Explanation

Exclusive agents work for or represent one insurer at a time. Independent agents work for themselves and can be appointed by multiple insurers.

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

Explanation

This is true about policy illustrations according to the California Insurance Code.

Submit
31. 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:

Explanation

The “Spendthrift Clause” keeps the beneficiary’s creditors from attaching the death benefit while held by the insurance company

Submit
32. What is the minimum number of members required for group life insurance?

Explanation

10 is the minimum per the CIC.

Submit
33. 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):

Explanation

Explanation: An irrevocable beneficiary shares many vested (ownership) rights with the policyowner. Therefore, the policyowner must obtain approval from the irrevocable beneficiary to make any of these policy changes.

Submit
34. Variable insurance and variable annuity products are regulated by:

Explanation

Variable products are governed at the national level by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), and at the state level by the Department of Insurance (DOI).

Submit
35. Who submits a request for life insurance to a company?

Explanation

While the agent often handles the paperwork; it’s the applicant who is technically requesting life insurance coverage.

Submit
36. 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?

Explanation

If included in a cash value policy, APLs allow insurers to subtract the missed premiums from the cash value as a loan to keep a policy from inadvertently lapsing for non-payment. This will continue until the client begins paying again or the cash value runs out. Interest will be charged on these loans.

Submit
37. Which of the following is an incorrect statement about a client's privacy rights?

Explanation

The client does have access to his/her MIB report.

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

Explanation

The guaranteed insurability rider/option allows the insured to purchase additional amounts of insurance at specified times, regardless of health status, but at an increased premium.

Submit
39. All of the following statements about a policy grace period are false, except:

Explanation

According to the CIC, the grace period is 31 days.

Submit
40. Which statement best describes "agreement" as it relates to contracts?

Explanation

Agreement includes both an offer and its acceptance.

Submit
41. Which of the following are characteristics of renewable term?

Explanation

Renewable term Insurance may be renewed at the end of the specified term for another term of the same length. When renewed, renewable term premiums will be higher to reflect the insured’s attained age.

Submit
42. 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:

Explanation

This is the definition of annuitant. The owner does not have to be the annuitant, there may not be a beneficiary, and an annuity is a retirement plan, not insurance

Submit
43. All of the following needs to be included on an application for life insurance except:

Explanation

Disability income insurance is not material to a life insurance contract.

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

Explanation

A warranty must be literally true. A violation of a material warranty permits the other party to rescind the contract.

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

Explanation

Endowment policies mature, or endow at any time specified in the contract.

Submit
46. 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:

Explanation

Crimes of this nature are misdemeanors. There are various levels of punishment based upon the level of damage done to the insurer and its clients.

Submit
47. In a group life policy with a death benefit of more than $50,000:

Explanation

Any premiums paid by an employer for an employee’s coverage of more than $50,000 are taxable to the employee. Premiums for coverage of $50,000 or less are not taxable to the employee.

Submit
48. An insurer invests the cash value of a fixed annuity in which of the following assets?

Explanation

An insurer guarantees the cash value in a fixed product and therefore assumes the risk of the investment. Money in fixed products is held in the general account which is invested in relatively safe and low risk instruments such as bonds, mortgages, and real estate.

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

Explanation

Because whole life has a level premium and a fixed rate of return, the resulting cash value is predictable.

Submit
50. 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

Explanation

A representation is true to the best of the applicant’s knowledge.

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

Explanation

Limited pay policies limit the length of time for premium payment, all other features remain the same, such as length of coverage, maturity, and endowment. Because the number of premium payments is reduced in a limited pay policy, the premium must be higher than straight life.

Submit
52. All of these statements about life insurance settlement options are false, except:

Explanation

“Lump sum” is the default option. Life settlement options are good for those who cannot handle large sums of money, but the interest portion of each payment is taxable income. Only the face amount or lump sum amount is tax free.

Submit
53. Under which life settlement option does the insurer retain the death benefit but pays the beneficiary the earnings on the death benefit?

Explanation

The “accumulate with interest” option and the “cash option” are dividend options, not settlement options. The “interest only” option is the settlement option that pays earnings on the death benefit.

Submit
54. 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?

Explanation

Universal life insurance is also known as “flexible premium” The calculation for gross premium is: Mortality risk – Interest + Expense, any remaining premium will be applied to cash value.

Submit
55. Which type of insurer requires an attorney-in-fact overseen by an advisory committee of subscribers?

Explanation

A committee of subscribers holds the attorney-in-fact accountable in reciprocal insurance agreements.

Submit
56. All of the following are true about key person insurance, except:

Explanation

Key person life insurance premium is not deductible by the business and the death benefit is not taxable to the business.

Submit
57. The Roth and Traditional IRAs have some similarities. Which of the following is not true?

Explanation

The Roth has non-deductible contributions, while the Traditional IRA allows tax deductible contributions.

Submit
58. 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?

Explanation

Facility of payment is a process whereby someone who is not a beneficiary could make a claim for reimbursement of final expenses

Submit
59. All of the following statements about life insurance policy illustrations and the senior market are correct, except:

Explanation

Non-guaranteed elements will change over time. Guaranteed elements show the minimum, guaranteed performance that will occur

Submit
60. All of the following statements about assignments are not false, except:

Explanation

Changes in ownership always need to be filed with the insurer.

Submit
61. Premiums paid into a variable annuity purchase which of the following?

Explanation

Variable annuity premiums purchase accumulation units during the accumulation period.

Submit
62. Which statement is false concerning insurance company regulations?

Explanation

Insurers suffering from an impairment of paid-in capital are insolvent.

Submit
63. In comparing the purchase of individual life insurance to acquiring group life, which statement is not true?

Explanation

Group insurance premium paid by the employer is tax deductible to the employer, while individual insurance premium is non-deductible.

Submit
64. All of the following statements about policy provisions are true, except:

Explanation

The missed premium will be deducted from the full death benefit if death occurs during the grace period.

Submit
65. Which of the following is not a qualified 1035 exchange?

Explanation

“A 1035 exchange includes an exchange from one life policy to anther life policy, a life policy to an annuity, or from one annuity to another annuity. Exchanging an annuity for a life policy is not a “1035 exchange.”

Submit
66. All of the following describe differences between binding receipts and conditional receipts, except:

Explanation

Under a binding receipt a claim would be paid even if the policy was not issued yet. Binding receipts tend to be used for property insurance.

Submit
67. Which statement about reinstatement is false?

Explanation

A reinstated policy will be contestable again for another two years.

Submit
68. Which of the following is considered ordinary insurance?

Explanation

Mortgage redemption must be ordinary or individual insurance, while whole life and term can be group or individual. Blanket insurance is group insurance.

Submit
69. While collecting underwriting information, certain rules must be followed. Which of the following is incorrect?

Explanation

Post-claims underwriting is a prohibited process in disability insurance. All underwriting must be completed prior to issuing the policy; it is illegal to do more underwriting after a claim has been filed.

Submit
70. All of the following statements are true about participating and nonparticipating policies, except:

Explanation

Dividends on non-participating policies are paid to shareholders.

Submit
71. Which statement is not true about insurance sales?

Explanation

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

Submit
72. 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?

Explanation

The nonforfeiture option that results in a paid-up policy with the same face amount as the original policy is the “Extended Term” option.

Submit
73. Which of the following is not excluded from the California Life and Annuity Replacement Law?

Explanation

Any transaction in which a client purchases a new policy with the intention of cancelling an existing policy is considered to be a replacement transaction.

Submit
74. Which statement below is least correct regarding the type of insurance that fits best with the applicant's needs?

Explanation

Convertible term converts to a cash value policy with the same death benefit but at a higher premium.

Submit
75. Which of the following statements is not included in the Entire Contract clause?

Explanation

This describes the Insuring clause.

Submit
View My Results

Quiz Review Timeline (Updated): Mar 22, 2023 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 08, 2012
    Quiz Created by
    Selidron
Cancel
  • All
    All (75)
  • Unanswered
    Unanswered ()
  • Answered
    Answered ()
A forty-five year old investor has been laid off from his job. In...
To authorize the release of an attending physician's report, the...
Which of the following is most likely to have a TSA?
According to the CIC, life-only agents must keep records of their...
Which of the following transactions would most likely be declined due...
At what age does Social Security Medicare program Part B start...
The Commissioner can deny an applicant for a license after a hearing:
In insurance, the agents have authorization to represent the company....
Ashley, the policy owner and insured, named Wendell as primary...
Which party has the legal authority to name or change the beneficiary?
According to the California DOI, an insurer whose articles of...
For an insurance contract, utmost good faith means:
Term insurance is best described by which of the following?
An agent who knowingly misrepresents material information for the...
Which of the following is not a personal use of life insurance?
Which of the following is not an acceptable underwriting...
A client has a history of DUIs. To his insurer, they see him as a...
Profit Sharing Plans:
In life insurance, beneficiary succession is the method used to...
Situations where the risk is increased by slippery floors, a habit of...
An applicant has the right to know that the insurance company will...
At age 72, Mrs. Smith is considering applying for Medi-Cal so she can...
A client has purchased an annuity with an annual bonus she received at...
Brian purchased a variable life policy and died 25 months after the...
How many hours of continuing education are required per renewal for a...
The insured dies 6 months after the policy issue date. Upon death of...
Which action by an insurer, or its representatives, is not considered...
For a flexible premium deferred annuity, the time during which the...
All of the following statements about agents are true, except:
Which of the following cannot be used in a policy illustration if...
The provision that protects the proceeds of a life insurance policy...
What is the minimum number of members required for group life...
A policyowner who cannot borrow the equity, change beneficiaries,...
Variable insurance and variable annuity products are regulated by:
Who submits a request for life insurance to a company?
A client has missed her premium payment on her cash value policy, and...
Which of the following is an incorrect statement about a client's...
Which of the following riders would provide for an insured to increase...
All of the following statements about a policy grace period are false,...
Which statement best describes "agreement" as it relates to contracts?
Which of the following are characteristics of renewable term?
The person who will receive the benefit of an annuity and whose life...
All of the following needs to be included on an application for life...
Which of the following becomes part of the contract, is guaranteed to...
A policy pays the face amount if the insured dies before a specified...
Any person to whom the commissioner has issued a seizure order and who...
In a group life policy with a death benefit of more than $50,000:
An insurer invests the cash value of a fixed annuity in which of the...
Which insurance is known for having a level premium with a fixed rate...
When an applicant makes a material statement believed to be true to...
Which of the following statements is false in regard to a Life Paid-up...
All of these statements about life insurance settlement options are...
Under which life settlement option does the insurer retain the death...
In which type of policy does the insurer apply flexible premium to pay...
Which type of insurer requires an attorney-in-fact overseen by an...
All of the following are true about key person insurance, except:
The Roth and Traditional IRAs have some similarities. Which of the...
A partial payment of proceeds to cover final expenses is paid to...
All of the following statements about life insurance policy...
All of the following statements about assignments are not false,...
Premiums paid into a variable annuity purchase which of the following?
Which statement is false concerning insurance company regulations?
In comparing the purchase of individual life insurance to acquiring...
All of the following statements about policy provisions are true,...
Which of the following is not a qualified 1035 exchange?
All of the following describe differences between binding receipts and...
Which statement about reinstatement is false?
Which of the following is considered ordinary insurance?
While collecting underwriting information, certain rules must be...
All of the following statements are true about participating and...
Which statement is not true about insurance sales?
What nonforfeiture option allows a policyowner to use the existing...
Which of the following is not excluded from the California Life and...
Which statement below is least correct regarding the type of insurance...
Which of the following statements is not included in the Entire...
Alert!

Advertisement