California Life Insurance Practice Exam B
Practice examination for Life Insurance Licensing in California
- 1.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.
- 2.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
- 3.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.
- 4.A client has a history of DUIs. To his insurer, they see him as a ________ hazard.
- A.
Physical
- B.
Moral
- C.
Morale
- D.
Legal
- 5.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.
- 6.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
- 7.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
- 8.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
- 9.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.
- 10.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.
- 11.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.
- 12.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.
- 13.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.
- 14.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.
- 15.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
- 16.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.
- 17.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
- 18.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
- 19.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
- 20.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
- 21.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
- 22.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
- 23.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.
- 24.Which of the following is not an acceptable underwriting classification?
- A.
Sub-standard
- B.
Preferred
- C.
Declined
- D.
Standard
- 25.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.
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