Life, Accident, And Health Combo Exam
Questions and Answers
- 1.
QUESTION ID 1: When an insured purchases insurance with the intention of incurring a loss and subsequently filing a claim, it is called a:
- A.
Legal hazard
- B.
Morale hazard
- C.
Moral hazard
- D.
Indemnity
Correct Answer
C. Moral hazardExplanation
Moral hazard refers to the situation when an insured intentionally buys insurance with the intention of causing a loss and then filing a claim. This behavior is considered unethical and fraudulent as it involves intentionally manipulating the insurance system for personal gain. Moral hazards can lead to increased premiums for all policyholders and can undermine the integrity of the insurance industry.Rate this question:
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- 2.
QUESTION ID 2: An insurance company that is owned by its policyholders and can pay annual dividends to them is considered:
- A.
Reciprocal exchange
- B.
Mutual company
- C.
Risk Retention Group
- D.
Stock Company
Correct Answer
B. Mutual companyExplanation
A mutual company is an insurance company that is owned by its policyholders and can pay annual dividends to them. This means that the policyholders are also the shareholders of the company and share in its profits. The company operates for the benefit of its policyholders rather than for the benefit of external shareholders. This structure allows the company to prioritize the needs of its policyholders and provide them with financial benefits in the form of dividends.Rate this question:
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- 3.
QUESTION ID 3 : What are unincorporated groups of individuals termed as subscribers called?
- A.
Large Insurers
- B.
Mutual Insurers
- C.
Reciprocal Insurers
- D.
Risk Insurers
Correct Answer
C. Reciprocal InsurersExplanation
Reciprocal insurers are unincorporated groups of individuals who pool their resources to provide insurance coverage for each other. Unlike large insurers, mutual insurers, and risk insurers, reciprocal insurers do not have a formal corporate structure. Instead, they operate on a reciprocal basis, with each subscriber assuming a portion of the risk and benefiting from the coverage provided by the other subscribers. This arrangement allows for more flexibility and direct involvement in the insurance process for the subscribers.Rate this question:
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- 4.
QUESTION ID 4: Within how many days of requesting an Investigative Consumer Report must an insurer notify the consumer in writing that the report will take place?
- A.
14
- B.
3
- C.
5
- D.
7
Correct Answer
B. 3Explanation
Within 3 days of requesting an Investigative Consumer Report, an insurer must notify the consumer in writing that the report will take place. This notification is required by law to inform the consumer about the investigation and give them an opportunity to review the information being gathered. It ensures transparency and allows the consumer to be aware of the process and any potential impact on their insurance application or coverage.Rate this question:
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- 5.
QUESTION ID 5: The implied authority of an agent is normally influenced by the ______authority of the agent.
- A.
Professional
- B.
Qualified
- C.
Expressed
- D.
Fiduciary
Correct Answer
C. ExpressedExplanation
The implied authority of an agent is normally influenced by the expressed authority of the agent. Implied authority refers to the authority that is not explicitly granted to the agent but is reasonably necessary to carry out their duties. Expressed authority, on the other hand, is the authority that is explicitly granted to the agent through a written or verbal agreement. The expressed authority of the agent sets the boundaries and scope of their implied authority, influencing what actions they can take on behalf of the principal.Rate this question:
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- 6.
QUESTION ID 6: What report includes information about an applicant’s character, and includes interviews with neighbors or friends?
- A.
Protection Report
- B.
Investigative Consumer Report
- C.
Consumer Report
- D.
Agency Report
Correct Answer
B. Investigative Consumer ReportExplanation
An Investigative Consumer Report includes information about an applicant's character and may involve interviews with neighbors or friends. This type of report is more in-depth and comprehensive compared to a regular Consumer Report, as it delves into personal aspects of the applicant's life to provide a more thorough evaluation. The Protection Report and Agency Report do not specifically focus on character assessment or include interviews, making the Investigative Consumer Report the most suitable choice.Rate this question:
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- 7.
QUESTION ID 7: Large numbers of similar risks, describes which of the following terms?
- A.
Loss
- B.
Peril exclusion
- C.
Homogeneous
- D.
Sharing
Correct Answer
C. HomogeneousExplanation
Homogeneous refers to a situation where there are large numbers of similar risks. In this context, it means that the risks being considered are similar in nature and have common characteristics. This term is used to describe a group or pool of risks that share similar attributes, such as similar levels of potential loss or similar probabilities of occurrence. By categorizing risks as homogeneous, it allows for better analysis and assessment of the overall risk profile, as well as the development of appropriate risk management strategies.Rate this question:
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- 8.
QUESTION ID 691: Mike was under the influence of alcohol at the time his application was completed. Mike would not be issued a valid contract because the contract would not contain:
- A.
Offer and acceptance
- B.
Legal purpose
- C.
A Competent party
- D.
Consideration
Correct Answer
C. A Competent partyExplanation
Mike would not be issued a valid contract because he was under the influence of alcohol at the time his application was completed. A competent party is one of the essential elements of a valid contract, which means that all parties involved must have the legal capacity to enter into a contract. Since Mike was under the influence of alcohol, his ability to understand the terms of the contract and make informed decisions may have been impaired, making him an incompetent party. Therefore, the contract would not be valid because it lacks a competent party.Rate this question:
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- 9.
QUESTION ID 9: Each of the following is a true statement describing insurance, except:
- A.
Insurance transfers risk from the insured to the insurer
- B.
Insurance is used when covering Speculative Risk
- C.
The payment of a small certain loss (the premium) is traded for the large uncertain possibility of loss (the claim)
- D.
Uses the principle of Law of Large Numbers to help predict loss
Correct Answer
B. Insurance is used when covering Speculative RiskExplanation
Insurance is not used when covering Speculative Risk. Speculative Risk refers to situations where there is a chance of either gain or loss, and insurance is typically used to cover situations where there is only a possibility of loss. Insurance is designed to protect against the financial consequences of unexpected events or losses, not to speculate on potential gains.Rate this question:
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- 10.
QUESTION ID 10: Which would be eligible to obtain SGLI?
- A.
Small employers
- B.
Military personnel
- C.
The elderly
- D.
Low income individuals and families
Correct Answer
B. Military personnelExplanation
Military personnel would be eligible to obtain SGLI because SGLI (Servicemembers' Group Life Insurance) is a life insurance program specifically designed for members of the military. It provides low-cost life insurance coverage to active duty military members, as well as members of the National Guard and Reserves. SGLI coverage is automatic for most military members, with the option to increase or decline coverage. It offers financial protection to military personnel and their families in the event of death or serious injury during their service.Rate this question:
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- 11.
QUESTION ID 11: A Key Person Insurance Policy can pay for which of the following?
- A.
Costs associated with training a new replacement employee
- B.
Hospital bills
- C.
Loss of personal income
- D.
Medicare
Correct Answer
A. Costs associated with training a new replacement employeeExplanation
A Key Person Insurance Policy can pay for costs associated with training a new replacement employee. This type of insurance is designed to protect a business from financial loss in the event that a key employee, such as a manager or executive, becomes disabled or dies. The policy can cover expenses incurred in finding, hiring, and training a replacement for the key person, ensuring that the business can continue to operate smoothly.Rate this question:
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- 12.
QUESTION ID 12: Which of the following is usually true of a participating Life insurance Policy?
- A.
An attorney in fact manages the company
- B.
May be converted to a term life policy
- C.
Pays dividends to stockholders
- D.
Pays dividends to policy owners
Correct Answer
D. Pays dividends to policy ownersExplanation
A participating life insurance policy is a type of policy that allows the policyholders to receive dividends. These dividends are a portion of the insurance company's profits and are distributed to policy owners. Unlike stockholders who receive dividends from a company's profits, policy owners of participating life insurance policies are the ones who receive the dividends. Therefore, the correct answer is "Pays dividends to policy owners."Rate this question:
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- 13.
QUESTION ID 13: Mortality tables are statistical tables used by Life Insurance companies to help predict:
- A.
Premium amounts in future years
- B.
Unexpected losses
- C.
The probability of diseases for specific groups of individuals
- D.
Life expectancy and the death rates for specific groups of individuals
Correct Answer
D. Life expectancy and the death rates for specific groups of individualsExplanation
Mortality tables are statistical tables that provide information on life expectancy and death rates for specific groups of individuals. Life insurance companies use these tables to predict the likelihood of an individual's death and calculate premium amounts for future years. By analyzing mortality data, insurers can assess the risk associated with insuring a particular individual or group and determine appropriate premium rates. Therefore, mortality tables help insurance companies make accurate predictions about life expectancy and death rates, which are crucial factors in the insurance industry.Rate this question:
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- 14.
QUESTION ID 14: Life insurance premiums are determined by several factors pertaining to the insured, including age, occupation and:
- A.
Location of residence
- B.
Number of children
- C.
Avocation
- D.
Marital status
Correct Answer
C. AvocationExplanation
The correct answer is "Avocation." Avocation refers to a person's hobbies or recreational activities. Life insurance premiums are determined by several factors, including the insured's avocation, as it can affect the risk of injury or death. Certain activities, such as extreme sports or dangerous hobbies, may increase the likelihood of accidents or fatalities, leading to higher premiums.Rate this question:
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- 15.
QUESTION ID 15: Which of the following is the term used for the inability to perform at least two Activities of Daily Living?
- A.
Type II Disability
- B.
Type I Disability
- C.
Chronically ill
- D.
Terminally ill
Correct Answer
C. Chronically illExplanation
The term "chronically ill" refers to a person who has a long-term or persistent illness that affects their ability to perform everyday activities. In this context, the term is used to describe the inability to perform at least two Activities of Daily Living (ADLs). ADLs are basic self-care tasks such as bathing, dressing, eating, and using the toilet. Therefore, the correct answer is "Chronically ill".Rate this question:
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- 16.
QUESTION ID 16: Which is the least expensive way to pay a premium?
- A.
Annually
- B.
Semi-annually
- C.
Quarterly
- D.
Monthly
Correct Answer
A. AnnuallyExplanation
Paying the premium annually is the least expensive way because it involves making a single payment for the entire year. This means that there are no additional fees or charges for processing multiple payments throughout the year, as would be the case with semi-annual, quarterly, or monthly payments. By paying annually, the policyholder can save money on transaction fees and potentially even receive a discount from the insurance company for choosing this payment frequency.Rate this question:
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- 17.
QUESTION ID 17: Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
- A.
The Key Person is the owner and the employer is the beneficiary
- B.
The employer is the owner and beneficiary
- C.
The employer is the owner and the Key Person is the beneficiary
- D.
The Key Person is the owner and beneficiary
Correct Answer
B. The employer is the owner and beneficiaryExplanation
In a Key Person Life Insurance Policy, the employer is the one who takes out the policy and pays the premiums, making them the owner of the policy. Additionally, the employer is also the beneficiary, meaning they are the one who will receive the payout in the event of the key person's death. The key person, who is the individual being insured, does not have any ownership or beneficiary rights in this type of policy.Rate this question:
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- 18.
QUESTION ID 18: Richard becomes angry when his insurer asks for his mortgage expenses when attempting to determine the Human Value of his Life Insurance Policy. What should Richard do?
- A.
Ask that this information be omitted
- B.
Report the insurer to the Department of Insurance
- C.
Sue the insurer
- D.
Answer the question, since it’s required for Life underwriting
Correct Answer
D. Answer the question, since it’s required for Life underwritingExplanation
Richard should answer the question, since it is required for Life underwriting. The insurer needs to determine his mortgage expenses in order to accurately assess the Human Value of his Life Insurance Policy. By providing this information, Richard can ensure that his policy is properly evaluated and that he receives the appropriate coverage based on his financial situation.Rate this question:
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- 19.
QUESTION ID 19: When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT:
- A.
Obtain from the producer a list of the applicant’s contracts to be replaced
- B.
Include a policy summary on the proposed Life Insurance in the communication with the existing company
- C.
Provide a copy of the Important Notice Regarding Replacement of Life insurance to the applicant
- D.
Send the existing insurance company a written notice of replacement
Correct Answer
C. Provide a copy of the Important Notice Regarding Replacement of Life insurance to the applicantExplanation
The replacing insurance company is responsible for obtaining a list of the applicant's contracts to be replaced, including a policy summary on the proposed Life Insurance in the communication with the existing company, and sending the existing insurance company a written notice of replacement. However, providing a copy of the Important Notice Regarding Replacement of Life insurance to the applicant is not the responsibility of the replacing insurance company.Rate this question:
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- 20.
QUESTION ID 20: In which part of the application would I find information on an applicant’s medical background?
- A.
Agent’s Report
- B.
Part 1
- C.
Part 3
- D.
Part 2
Correct Answer
D. Part 2Explanation
In Part 2 of the application, you would find information on an applicant's medical background.Rate this question:
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- 21.
QUESTION ID 21: What does “liquidity” refer to in a life insurance policy?
- A.
The insured is receiving payments each month in retirement
- B.
The policy owner receives dividend checks each year
- C.
Cash values can be borrowed at any time
- D.
The death benefit replaces the assets that would have accumulated if the insured had not died
Correct Answer
C. Cash values can be borrowed at any timeExplanation
Liquidity refers to the ability to access cash or borrow against the cash value of a life insurance policy. In this case, the correct answer states that cash values can be borrowed at any time, indicating that the policyholder can access funds from the policy whenever needed. This feature provides flexibility and financial security to the policyholder.Rate this question:
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- 22.
QUESTION ID 22: Key Person Life Insurance does NOT reimburse a company for which of the following?
- A.
For a loss of leadership resulting from a key person’s death.
- B.
For a reduction of profits resulting from a key person’s death.
- C.
For increased pension liability resulting from a key person’s death.
- D.
For a loss of previous business results from a key person’s death.
Correct Answer
C. For increased pension liability resulting from a key person’s death.Explanation
Key Person Life Insurance provides coverage for a company in the event of a key person's death, specifically for the loss of leadership and reduction of profits resulting from it, as well as for the loss of previous business results. However, it does not reimburse the company for increased pension liability that may arise due to the key person's death. This means that if the key person's death leads to an increase in the company's pension liability, the insurance policy will not cover that particular expense.Rate this question:
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- 23.
QUESTION ID 23: Which is generally true regarding insurered's who have earned preferred status?
- A.
They can borrow higher amounts from their policies
- B.
They can decide when to pay their monthly premiums
- C.
They keep a higher percentage of any interest earned on their policies
- D.
Their premiums are lower.
Correct Answer
D. Their premiums are lower.Explanation
Insured individuals who have earned preferred status generally have lower premiums. This is because preferred status is typically granted to individuals who are considered to be lower risk by the insurer. These individuals may have a healthier lifestyle, a good medical history, or a low likelihood of making claims. As a result, the insurer offers them lower premiums as an incentive to maintain their preferred status and continue their coverage.Rate this question:
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- 24.
QUESTION ID 24: Within how many months must a person be expected to die from a sickness in order to be classified as “terminally ill”?
- A.
3
- B.
24
- C.
6
- D.
12
Correct Answer
B. 24Explanation
A person must be expected to die within 24 months from a sickness in order to be classified as "terminally ill". This means that their condition is severe and their life expectancy is limited to two years or less.Rate this question:
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- 25.
QUESTION ID 25: Which of the following allows the policy holder to “dump” in additional funds to shorten the premium paying period?
- A.
Indeterminate
- B.
Interest Sensitive
- C.
Limited Payment
- D.
Continuous Premium
Correct Answer
B. Interest SensitiveExplanation
Interest Sensitive policies allow the policy holder to "dump" in additional funds to shorten the premium paying period. This means that the policy holder can make extra payments towards their policy, which will reduce the amount of time they need to pay premiums. This flexibility is attractive to policy holders who want to pay off their policy sooner and have more control over their premium payments.Rate this question:
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- 26.
QUESTION ID 407: If the policyholder chooses to pay premiums for a specified number of years, the policy is referred to as:
- A.
An Adjustable Policy
- B.
Accrued Premium Whole Life
- C.
Variable Whole Life Policy
- D.
Limited Payment
Correct Answer
D. Limited PaymentExplanation
The correct answer is "Limited Payment." In a limited payment policy, the policyholder chooses to pay premiums for a specified number of years, after which the policy is considered fully paid up and no further premiums are required. This type of policy allows the policyholder to have coverage for their entire life, but only pay premiums for a limited period of time.Rate this question:
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- 27.
QUESTION ID 414: The word level and level term refers to the:
- A.
Cash value
- B.
Face amount
- C.
Length of the policy
- D.
Premium
Correct Answer
B. Face amountExplanation
The word "level" in insurance refers to a fixed or constant amount, and "level term" specifically refers to a life insurance policy with a face amount that remains the same throughout the term of the policy. The face amount is the death benefit or the amount of money that will be paid out to the beneficiary upon the insured's death. Therefore, in this context, the correct answer is "face amount".Rate this question:
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- 28.
QUESTION ID 28: Equity Indexed Universal Life is a Universal Life policy with what kind of index as its investment feature?
- A.
Universal
- B.
Equity
- C.
Consumer Price
- D.
Consumer Investment
Correct Answer
B. EquityExplanation
Equity Indexed Universal Life is a type of Universal Life policy that has an equity index as its investment feature. This means that the policy's cash value is linked to the performance of a specific equity index, such as the S&P 500. The cash value has the potential to grow based on the performance of the index, providing the policyholder with the opportunity to earn higher returns compared to traditional Universal Life policies.Rate this question:
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- 29.
QUESTION ID 29: Ernest purchased a $100,000 Joint Life policy that covered himself and his wife Sarah. Eight years later, Ernest died in an automobile accident. How much will Sarah receive from the policy?
- A.
$200,000
- B.
$100,000
- C.
Nothing
- D.
$50,000
Correct Answer
B. $100,000Explanation
Sarah will receive $100,000 from the policy. A Joint Life policy covers two individuals and pays out the death benefit upon the death of the first insured. In this case, Ernest died, so Sarah is entitled to the full policy amount of $100,000.Rate this question:
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- 30.
QUESTION ID 30: Your client wants both protection and savings from insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
- A.
Life annuity, Period Certain
- B.
Limited Pay Whole Life insurance
- C.
Increasing Term Insurance
- D.
10-year Endorsement
Correct Answer
B. Limited Pay Whole Life insuranceExplanation
Limited Pay Whole Life insurance would be the right policy for this client because it provides both protection and savings. With this policy, the client pays premiums until retirement at age 65, and then the coverage remains in force for the rest of their life. This means that the client will have the protection they need throughout their working years, and they will also have a savings component that accumulates cash value over time. This policy offers a combination of lifelong coverage and a savings element, making it suitable for the client's needs.Rate this question:
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- 31.
QUESTION ID 403: All of the following are characteristics of a Universal Life policy EXCEPT:
- A.
The policy has a cash value account at a guaranteed interest rate and endowment insurance
- B.
The insurance company reserves the right to adjust the mortality charges and/or interest rate
- C.
The planned premium pays for mortality charges and expenses and any excess is returned to the policy owner
- D.
In effect, Universal Life is a combination of term insurance and a separate savings account joined in a single contract
Correct Answer
C. The planned premium pays for mortality charges and expenses and any excess is returned to the policy ownerExplanation
Universal Life policies do not typically have a cash value account at a guaranteed interest rate and endowment insurance. Instead, they have a cash value account that earns interest based on the performance of underlying investments. The policy owner can access the cash value through withdrawals or loans, but any outstanding loans will reduce the death benefit.Rate this question:
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- 32.
QUESTION ID 418: When would a 20-pay whole life policy endow?
- A.
When the insured reaches age 100, or until the insured’s death
- B.
After 20 payments
- C.
In 20 years
- D.
When the insured is 20 years old
Correct Answer
A. When the insured reaches age 100, or until the insured’s deathExplanation
A 20-pay whole life policy would endow when the insured reaches age 100 or until the insured's death. This means that after making 20 payments, the policy will continue until the insured reaches age 100 or passes away, at which point the policy will pay out the endowment benefit.Rate this question:
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- 33.
QUESTION ID 412: The death benefit in a Variable Universal Life Policy:
- A.
Depends on the investment performance of the sub-account
- B.
Is guaranteed to be higher than when the policy is originally issued
- C.
Is fixed
- D.
Always equals the face amount stated in the policy
Correct Answer
A. Depends on the investment performance of the sub-accountExplanation
The death benefit in a Variable Universal Life Policy depends on the investment performance of the sub-account. This means that the amount of the death benefit can fluctuate based on how well the investments in the sub-account perform. If the investments perform well, the death benefit may increase. Conversely, if the investments perform poorly, the death benefit may decrease. This feature of variable universal life policies allows policyholders to potentially benefit from market gains, but also exposes them to the risk of market losses.Rate this question:
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- 34.
QUESTON ID 489: Bonnie wants to name her husband as the beneficiary of her Life Policy. She also wishes to retain all of the rights of ownership. Bonnie should have her husband named as the:
- A.
Tertiary beneficiary
- B.
Secondary beneficiary
- C.
Revocable beneficiary
- D.
Irrevocable beneficiary
Correct Answer
C. Revocable beneficiaryExplanation
Bonnie should have her husband named as the revocable beneficiary because she wants to retain all of the rights of ownership. By naming her husband as the revocable beneficiary, Bonnie can change or revoke the designation at any time without needing her husband's consent. This gives her the flexibility to make changes to the beneficiary designation if her circumstances or wishes change in the future.Rate this question:
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- 35.
QUESTION ID 506: Which of the following statements is true about a policy assignment?
- A.
It is valid during the insurer’s lifetime only, because the death benefit is payable to the named beneficiary.
- B.
It transfers the owner’s rights under the policy to the extent expressed in the assignment form
- C.
It is the same as a beneficiary designation
- D.
It permits the beneficiary to designate the person or persons to receive the benefits
Correct Answer
B. It transfers the owner’s rights under the policy to the extent expressed in the assignment formExplanation
A policy assignment transfers the owner's rights under the policy to the extent expressed in the assignment form. This means that the owner of the policy can transfer their rights to another person or entity, such as a bank or creditor. The assignee then becomes the new owner of the policy and is entitled to the benefits and rights associated with it. This is different from a beneficiary designation, which only designates who will receive the benefits upon the owner's death.Rate this question:
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- 36.
QUESTION ID 488: Bill owns a Life Insurance policy on his fifteen-year-old daughter, Jenna. The policy contains the Optional Payor Benefit rider. If Bill becomes disabled, what will happen to the Life Insurance premiums?
- A.
Jenna will have to pay premiums for six months. If, at the end of this period, her father is still disabled, she will be refunded the premiums.
- B.
The company will waive the premiums, until Jenna is an age predetermined in the policy
- C.
The premiums will become tax deductible until Jenna’s 21st birthday
- D.
Nothing. Bill has become disabled, not Jenna. Her life insurance policy will not be affected
Correct Answer
B. The company will waive the premiums, until Jenna is an age predetermined in the policyExplanation
If Bill becomes disabled, the company will waive the premiums on Jenna's life insurance policy until a certain age specified in the policy. This means that Jenna will not have to pay the premiums during this period.Rate this question:
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- 37.
QUESTION ID 500: When the policy owner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
- A.
Life Income Period Certain
- B.
Fixed Period.
- C.
Extended Term
- D.
Fixed Amount
Correct Answer
D. Fixed AmountExplanation
When the policy owner specifies a dollar amount in which installments are to be paid, he/she has chosen the "Fixed Amount" settlement option. This means that the policy owner has decided on a specific fixed dollar amount that will be paid out in installments, rather than opting for other settlement options such as Life Income Period Certain, Fixed Period, or Extended Term.Rate this question:
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- 38.
QUESTION ID 482: All of the following are TRUE statements regarding the Accumulation at Interest Option EXCEPT:
- A.
The interest is credited at a rate specified by the policy
- B.
The annual dividend is retained by the company.
- C.
The interest credited under this option is not taxable since it remains inside the insurance policy
- D.
The policyholder has the right to withdraw the accumulations at any time.
Correct Answer
C. The interest credited under this option is not taxable since it remains inside the insurance policyExplanation
The interest credited under the Accumulation at Interest Option is taxable, contrary to the statement in the answer.Rate this question:
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- 39.
QUESTION ID 499: When a Whole Life Policy lapses or is surrendered prior to maturity, the cash value can be used to:
- A.
Receive payments for a fixed amount
- B.
Purchase a Term rider to attach to the policy.
- C.
Pay back all premiums owed plus interest
- D.
Purchase a Single Premium policy for a reduced face amount
Correct Answer
D. Purchase a Single Premium policy for a reduced face amountExplanation
When a Whole Life Policy lapses or is surrendered prior to maturity, the cash value can be used to purchase a Single Premium policy for a reduced face amount. This means that instead of completely losing the value of the policy, the policyholder can use the accumulated cash value to buy a new policy with a lower face amount, potentially providing some level of coverage while reducing the premiums. This option allows the policyholder to make use of the cash value and maintain some form of insurance coverage.Rate this question:
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- 40.
QUESTION ID 501: Which of the following applies to the ten day Free Look privilege?
- A.
It allows the insurer ten days to pay the initial premium.
- B.
It permits the insurer to return the policy for a full refund of premiums paid
- C.
It can be waived only by the insurance company
- D.
It is granted only at the option of the agent
Correct Answer
B. It permits the insurer to return the policy for a full refund of premiums paidExplanation
The ten day Free Look privilege allows the insurer to return the policy for a full refund of premiums paid. This means that within ten days of receiving the policy, the insured can review the terms and conditions and if they are not satisfied, they can cancel the policy and receive a full refund of any premiums they have already paid.Rate this question:
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- 41.
QUESTION ID 498: What is the manner or frequency that the policyholder pays the policy premium called?
- A.
Grace period
- B.
Mode
- C.
Modification
- D.
Provision
Correct Answer
B. ModeExplanation
The correct answer is "Mode". In insurance, the mode refers to the manner or frequency in which the policyholder pays the policy premium. It determines whether the premium is paid annually, semi-annually, quarterly, or monthly. The mode can affect the overall cost of the policy as well, with some insurers offering discounts for annual payments.Rate this question:
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- 42.
QUESTION ID 508: Which rider waives the policy premium and pays a monthly income to the insured?
- A.
Waiver of Cost of Insurance
- B.
Paid up Addition
- C.
Disability Income Benefit
- D.
Waiver of Premium
Correct Answer
C. Disability Income BenefitExplanation
The correct answer is Disability Income Benefit. This rider allows the insured to waive the policy premium and instead receive a monthly income in the event of disability. This ensures that the insured can continue to receive financial support even if they are unable to work due to a disability.Rate this question:
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- 43.
QUESTION ID 510: Within a specified number of days a policyholder may return a policy for a full refund, this is called?
- A.
Temporary Assignment
- B.
Free Look
- C.
Grace Period
- D.
Reinstatement
Correct Answer
B. Free LookExplanation
The correct answer is Free Look. Free Look refers to the period of time within which a policyholder can review their insurance policy and if they are not satisfied, they can return it for a full refund. This gives the policyholder the opportunity to thoroughly examine the policy terms and conditions and decide whether it meets their needs or not. It is a consumer protection measure that allows individuals to make an informed decision about their insurance purchase.Rate this question:
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- 44.
QUESTION ID 484: An applicant for insurance misstates her age at the time her Life Insurance application is taken. This misstatement may result in:
- A.
Recession of the policy.
- B.
Adjustment in the death benefit
- C.
No charge
- D.
Automatic lapse
Correct Answer
B. Adjustment in the death benefitExplanation
If an applicant for insurance misstates her age at the time her Life Insurance application is taken, it may result in an adjustment in the death benefit. This means that the death benefit amount will be modified based on the correct age of the applicant. The insurance company will recalculate the premium and coverage based on the accurate age information provided. This adjustment ensures that the policy is still valid and reflects the correct risk assessment for the insured individual.Rate this question:
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- 45.
QUESTION ID 507: Which of the following would reduce a policy owner’s next year’s premiums?
- A.
One-year Term Dividend option
- B.
Accumulated at Interest Dividend option
- C.
Reduction of Premium Dividend option
- D.
Paid-up Addition Dividend option
Correct Answer
C. Reduction of Premium Dividend optionExplanation
The Reduction of Premium Dividend option would reduce a policy owner's next year's premiums. This option allows the policy owner to use the dividends earned on the policy to reduce the amount they need to pay for premiums in the following year. By choosing this option, the policy owner can effectively lower their out-of-pocket expenses for maintaining the policy.Rate this question:
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- 46.
QUESTION ID 3: A Variable Annuity has a payout that is:
- A.
Guaranteed in the contract
- B.
Tied to an index like S&P 500
- C.
Contingent upon the profitability of the investment portfolio
- D.
The same from one payment to the next
Correct Answer
C. Contingent upon the profitability of the investment portfolioExplanation
A Variable Annuity has a payout that is contingent upon the profitability of the investment portfolio. This means that the amount of the payout will vary based on how well the investments in the portfolio perform. If the investments generate high returns, the payout will be higher, but if the investments perform poorly, the payout will be lower. This provides the potential for higher returns but also carries the risk of lower payouts if the investments underperform.Rate this question:
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- 47.
QUESTION ID 13: If an annuitant dies before the annuitization occurs, what will the beneficiary receive?
- A.
Cash value of the plan
- B.
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
- C.
Amount paid into the plan
- D.
Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount
Correct Answer
B. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amountExplanation
If an annuitant dies before the annuitization occurs, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is the greater amount. This means that the beneficiary will receive either the total amount that was paid into the plan by the annuitant or the current cash value of the plan, depending on which amount is higher.Rate this question:
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- 48.
QUESTION ID 19: What do annuity units represent?
- A.
Market values
- B.
Guaranteed values
- C.
Cash value
- D.
Shares in an investment account and are invested in the stock market
Correct Answer
D. Shares in an investment account and are invested in the stock marketExplanation
Annuity units represent shares in an investment account that are invested in the stock market. This means that when an individual purchases annuity units, they are essentially buying shares in an investment account that will be invested in stocks. The value of these units will fluctuate based on the performance of the stock market.Rate this question:
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- 49.
QUESTION ID 1: A common purpose to purchase an annuity is to:
- A.
Reciprocal exchange
- B.
Risk retention group
- C.
Provide future income security, and payments that do not fluctuate
- D.
Make tax reinvestments
Correct Answer
C. Provide future income security, and payments that do not fluctuateExplanation
An annuity is a financial product that provides future income security and payments that do not fluctuate. This means that when someone purchases an annuity, they are looking for a reliable source of income in the future, without having to worry about the payments fluctuating. An annuity can be a useful tool for retirement planning or for individuals who want a steady stream of income over a certain period of time.Rate this question:
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- 50.
QUESTION ID 25: _______ annuities are invested in securities, hopefully maintaining a constant purchasing power, as a protection against inflation.
- A.
Separate
- B.
Variable
- C.
General
- D.
Guaranteed
Correct Answer
B. VariableExplanation
Variable annuities are invested in securities, hopefully maintaining a constant purchasing power, as a protection against inflation. This means that the value of the annuity can fluctuate based on the performance of the underlying investments. By investing in securities, the annuity has the potential to grow and keep up with inflation, providing a hedge against rising prices.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Mar 24, 2012Quiz Created by
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