California Life And Health Insurance Exam Questions Quiz
This California Life and Health Insurance Exam quiz is helpful for those looking to produce or sell life and/or health insurance in California. Since you need a license to do so, which comes with the California Life and Health Insurance Agent exam, so you need a lot of practice to make it through the exam. Here we have got a useful practice test for you. Take the test and prepare yourself for the exam. All the best!
- 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
Correct Answer
B. Elimination PeriodExplanation
LTC and disability income policies don't begin to pay out benefits until a certain number of days of illness have elapsed.Rate this question:
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- 2.
Which of the following characteristics would not stop an insurance company from accepting an insurance risk?
- A.
The item to be insured faces high catastrophic loss exposure.
- B.
The item to be insured is part of a large group of homogeneous exposure units.
- C.
The item to be insured has a market value that is difficult to determine.
- D.
The item to be insured holds no hardship to the owner should it be lost or damaged.
Correct Answer
B. The item to be insured is part of a large group of homogeneous exposure units.Explanation
Insurance companies prefer insured persons that are part of a large group with similar risks so they can understand the scope of the risk and charge the appropriate premium.Rate this question:
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- 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 company's divisible surplus.
Correct Answer
C. Policy dividends issued by mutual companies are guaranteed and not taxable.Explanation
Insurance policy dividends are not guaranteed and are not taxable.Rate this question:
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- 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%
Correct Answer
D. 100%Explanation
If employment terminates, the employee owns 100% of the employer's contributions after 7 years. They earn 20% each year for years 3 through 7. Employee contributions are immediately vested.Rate this question:
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- 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
Correct Answer
B. Selected by the Governor as an appointeeExplanation
The California Insurance Commissioner is not selected by the Governor as an appointee. Instead, they are elected by the people of California every four years. This distinction is important because it highlights the democratic process involved in selecting the Insurance Commissioner, as opposed to being appointed by the Governor, which would give the Governor more direct influence over the position.Rate this question:
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- 6.
Which statement about the 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.
Correct Answer
B. Acts of fair and unfair discrimination are prohibited.Explanation
Acts of fair discrimination, such as charging older clients a higher premium is legal.Rate this question:
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- 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 cou ld hinder attempts to obtain a life-only license.
Correct Answer
B. Licensees are required to have an in-state residential address.Explanation
Licensees in some states may not be required to have an in-state residential address. The specific requirements for residency and addresses can vary from one jurisdiction to another. It's essential for individuals seeking a life-only license to check the regulations and requirements of their specific state's insurance department.Rate this question:
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- 8.
Tommy Greene has a CLU certification. Which of the 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 above would be automatically approved
Correct Answer
D. None of the above would be automatically approvedExplanation
No name is ever automatically approved for licensee use. There are always procedures and background checks to administer.Rate this question:
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- 9.
An agent follows the rules and terms of his agent contract. He is exercising his _______ authority.
- A.
Implied
- B.
Express
- C.
Apparent
- D.
Contractual
Correct Answer
B. ExpressExplanation
Express authority is legitimate authority written into a contract.Rate this question:
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- 10.
Any person who misappropriates fiduciary funds for personal use is guilty of:
- A.
Fraud
- B.
Theft
- C.
Misrepresentation
- D.
Pre-texting
Correct Answer
B. TheftExplanation
A 'person' with fiduciary responsibilities is an agent. If an agent steals their clients' money, the agent is guilty of theft.Rate this question:
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- 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
Correct Answer
C. An insurerExplanation
Legally, a corporation is a "person." The insurer makes/produces the insurance policies the agents and brokers sell.Rate this question:
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- 12.
Mrs. Anderson needs 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 decided 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 of making 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.
Correct Answer
B. She has a 30-day free look period in case she changes her mind.Explanation
As someone who is 60+, she gets the 30-day free-look period and should invest cautiously.Rate this question:
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- 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.
Correct Answer
B. 100% of eligible employees must participate.Explanation
In a non-contributory plan, the employer pays all of the premiums, so they must cover all eligible employees.Rate this question:
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- 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.
Correct Answer
D. The new policy will be cash value. The employee pays all the premiums.Explanation
Conversion from group to individual can be any insurance except term. The insured who lost their coverage is now paying the entire premium.Rate this question:
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- 15.
Bob and Neal are partners in a law firm together. If one of them were to pass away, they 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
Correct Answer
C. Buy-Sell AgreementExplanation
Buy-sell agreements allow surviving partners to buy out the family of the deceased partner so the business may continue past the death of the insured.Rate this question:
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- 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 ten years certain, straight life
- B.
Straight life, life with ten years certain, life refund option
- C.
Life with ten years certain, life with refund option, straight life
- D.
Life with refund option, straight life, life with ten years certain
Correct Answer
A. Life with refund option, life with ten years certain, straight lifeExplanation
The larger the guarantee of payments or returned monies, the lower the guaranteed income. The more risk the annuitant takes during the annuity period, the higher the monthly income.Rate this question:
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- 17.
All of the following are dividend options, except:
- A.
Interest only option
- B.
One-year term option
- C.
Reduce the next premium payment
- D.
Accumulate with interest
Correct Answer
A. Interest only optionExplanation
"Interest only" is a settlement option, not a dividend option.Rate this question:
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- 18.
Which best describes industrial insurance?
- A.
$2,000 or less in coverage and premiums collected by the 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 the agent.
Correct Answer
A. $2,000 or less in coverage and premiums collected by the agent.Explanation
By law, industrial insurance must be paid in person. Since it involves high-risk insureds, very low amounts are purchased.Rate this question:
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- 19.
A client's flexible premium is invested into a separate account. What type of insurance product did he purchase?
- A.
Universal Life
- B.
An Annuity
- C.
Variable Life
- D.
Variable Universal Life
Correct Answer
D. Variable Universal LifeExplanation
Any universal policy is characterized by a flexible premium. Any variable product is characterized by the use of separate accounts.Rate this question:
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- 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
Correct Answer
B. Accidental Death BenefitExplanation
Also known as "double indemnity," accident riders pay a larger death benefit if the death is due to accidental means.Rate this question:
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- 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.
Correct Answer
B. The agent faces potential suspension or revocation of their license.Explanation
Binding receipt gives immediate coverage in the field of property insurance. Issuing a binding receipt to a life client could result in license suspension for jeopardizing and misleading the client. Life-only agents do not have the authority to issue binding receipts.Rate this question:
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- 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 client's 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.
Correct Answer
B. Any action that could do harm to your client's well-being, such as reckless driving.Explanation
Any situation that could result in harm, but no chance for financial gain, is a pure risk, not a speculative risk.Rate this question:
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- 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.
The license number must appear in the same size font as the phone number.
- C.
Must not include any titles, designations, or licenses that are not currently held.
- D.
All of the above.
Correct Answer
D. All of the above.Explanation
There are many rules related to business cards on full disclosure, clear communications, and proper identification of agent and insurer.Rate this question:
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- 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
Correct Answer
C. Qualified and non-qualifiedExplanation
"Qualified" means a plan meets certain IRS guidelines so it receives beneficial tax treatment, such as tax deferred. "Non-Qualified" means it does not meet those guidelines and therefore, does not receive beneficial tax treatment.Rate this question:
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- 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
Correct Answer
B. Accelerated (Living) BenefitExplanation
The accelerated death benefit, or living need rider, pays a portion of the death benefit before death if the insured has a terminal illness.Rate this question:
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- 26.
A beneficiary decides to take the option that will have the largest amount per payment, knowing after death, no money 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
Correct Answer
C. Life Income (Straight Life)Explanation
The life income settlement option pays the beneficiary an income until they die. Since no further payments will be made to their survivors, the insurer can afford to pay them a larger income versus the other options given.Rate this question:
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Current Version
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Feb 14, 2024Quiz Edited by
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Oct 09, 2012Quiz Created by
Selidron
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