Practice Exam 5 - Life Insurance

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  • 1/75 Questions

    An individual license is considered terminated

    • When transferred to another person
    • When transferred to another license
    • On the death of the license
    • When transferred to a beneficiary
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Life Insurance Quizzes & Trivia
About This Quiz

Practice Exam 5 - Life Insurance assesses knowledge on policy replacements, the issuance of binders, organizational licensing, agent activities, and legal compliance. It is crucial for professionals in the insurance sector aiming to ensure adherence to legal and operational standards.

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  • 2. 

    A policy is returned to the insurer within 10 days of the date the policy is delivered. How much of the premium is returned to the applicant?

    • None

    • 50%

    • 80%

    • 100%

    Correct Answer
    A. 100%
    Explanation
    If a policy is returned to the insurer within 10 days of delivery, the entire premium is returned to the applicant. This means that the applicant will receive a full refund of the amount they paid for the policy.

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  • 3. 

    Which party has rights in a life insurance policy only after the death of the insured?

    • The policy owner

    • The beneficiary

    • The applicant

    • The insured

    Correct Answer
    A. The beneficiary
    Explanation
    The beneficiary is the party who has rights in a life insurance policy only after the death of the insured. The beneficiary is the person or entity designated by the policy owner to receive the death benefit when the insured passes away. They are entitled to receive the proceeds of the policy and can use it for various purposes, such as paying off debts, covering funeral expenses, or providing financial support to dependents. The beneficiary has no rights or access to the policy while the insured is still alive.

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  • 4. 

    The mathematical rule that says that as the numver of individual but similar exposure units increases the easier it is o predict losses is which of the following?

    • Insurable interest standard

    • Contract law

    • The law of large numbers

    • Materiality

    Correct Answer
    A. The law of large numbers
    Explanation
    The law of large numbers is a mathematical principle that states that as the number of individual but similar exposure units (such as insurance policies) increases, the easier it becomes to predict losses. This is because with a larger sample size, the results become more stable and predictable. Therefore, the law of large numbers is the correct answer to this question.

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  • 5. 

    A failure to communicate information which a party to an insurance contract knows and should communicate is called an act of:

    • Concealment

    • Intimidation

    • Warranty

    • Coercion

    Correct Answer
    A. Concealment
    Explanation
    Concealment refers to the act of intentionally withholding or failing to disclose important information that one party to an insurance contract knows and should communicate to the other party. This can include not sharing relevant facts or details about a risk or potential claim. By concealing information, the party may gain an unfair advantage or mislead the other party, which goes against the principle of utmost good faith in insurance contracts.

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  • 6. 

    Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as:

    • Replacement

    • Reinsurance

    • Reinstatement

    • Assignment

    Correct Answer
    A. Replacement
    Explanation
    Replacement refers to any transaction that involves purchasing a life insurance policy and terminating an existing policy. It is the process of replacing an old policy with a new one. This can occur when a policyholder wants to switch to a different insurance company or when they want to upgrade their coverage. The replacement process typically involves a thorough evaluation of the new policy to ensure that it meets the policyholder's needs and objectives.

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  • 7. 

    The policy pervision which prevents an insurer from voiding a policy for misstatements after two years is:

    • Incontestability

    • Indemnity

    • Misrepresentation

    • There is no such provision

    Correct Answer
    A. Incontestability
    Explanation
    Incontestability is the policy provision that prevents an insurer from voiding a policy for misstatements after two years. This means that once the policy has been in force for two years, the insurer cannot cancel or void the policy based on any misrepresentations made by the insured. This provision is designed to protect the insured and provide them with certainty and stability in their insurance coverage. It allows the insured to have peace of mind knowing that their policy cannot be retroactively canceled or voided based on any misstatements made in the past.

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  • 8. 

    What does it mean if an agent's license is inactive?

    • The agent can still transact insurance business in CA, but not in any other states unti the license is reactived.

    • The agent can transact any insurance business with another agent's approval

    • The agent can transact any insurance business for which the agent is licensed.

    • The agent cannot transact any insurance business for which a license is required.

    Correct Answer
    A. The agent cannot transact any insurance business for which a license is required.
    Explanation
    If an agent's license is inactive, it means that the agent is not authorized to transact any insurance business for which a license is required. This implies that the agent cannot legally sell insurance or perform any activities related to insurance that require a license.

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  • 9. 

    What does the Insurance COmmissioner have the right to do if an agent lacks authority from an insurer named on a binder for coverage?

    • Request his certificate of authority

    • Authorize agent with a certificate of convenience

    • Suspend or revoke the license of the agent

    • Fine the insurance company

    Correct Answer
    A. Suspend or revoke the license of the agent
    Explanation
    The Insurance Commissioner has the right to suspend or revoke the license of the agent if they lack authority from an insurer named on a binder for coverage. This means that the agent is not authorized to sell insurance on behalf of the insurer, which is a violation of licensing regulations. By suspending or revoking the agent's license, the Insurance Commissioner is taking appropriate action to ensure that only authorized individuals are selling insurance and protecting consumers from potential fraud or misconduct.

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  • 10. 

    An insurer organized under the laws of the State of California is a:

    • Domestic insurer

    • Foreign Insurer

    • Non-alien insurer

    • Non-admitted insurer

    Correct Answer
    A. Domestic insurer
    Explanation
    A domestic insurer is an insurance company that is organized and licensed under the laws of a specific state. In this case, since the insurer is organized under the laws of the State of California, it is considered a domestic insurer.

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  • 11. 

    Why should a contigent beneficiary be named in a life insurance policy?

    • To determine who receives the policy benefits if the primary beneficiary is deceased

    • To become the policy owner f the primary beneficiary is deceased

    • To allow creditors to received policy proceeds

    • To share the proceeds with the primary beneficiary

    Correct Answer
    A. To determine who receives the policy benefits if the primary beneficiary is deceased
    Explanation
    A contingent beneficiary should be named in a life insurance policy to determine who will receive the policy benefits if the primary beneficiary is deceased. This ensures that the policy benefits are distributed according to the insured's wishes and avoids any confusion or disputes regarding the distribution of the proceeds. By naming a contingent beneficiary, the insured can have peace of mind knowing that their loved ones will be taken care of even if the primary beneficiary is unable to receive the benefits.

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  • 12. 

    Regarding an organizational license, what happens when a corporation is dissolved?

    • The license is continued if an original partner (stockholder) remains with the new corporation

    • The license is terminated

    • The license is passed on to the beneficiary

    • The license is renewed provided that fees are paid

    Correct Answer
    A. The license is terminated
    Explanation
    When a corporation is dissolved, the license associated with it is terminated. This means that the corporation no longer has the legal authority or permission to operate under that license. The dissolution of the corporation effectively ends its ability to conduct business under that license.

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  • 13. 

    The main master policy owner of a group insurance contract is the

    • Employer

    • Employee members

    • Plan administrator

    • Agents

    Correct Answer
    A. Employer
    Explanation
    The correct answer is "Employer" because in a group insurance contract, the employer is typically the one who purchases the policy and is responsible for providing coverage to their employees. The employer acts as the main policy owner and is responsible for managing the policy, making premium payments, and making decisions regarding coverage and benefits for the employee members. The employer also has the authority to make changes to the policy and terminate coverage if necessary.

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  • 14. 

    According to the Code, all insurers must maintain a department to investigate:

    • Possible abuses of rating laws

    • Possible arson

    • Possible fraudulent claims from insureds

    • Possible fraud by insurers

    Correct Answer
    A. Possible fraudulent claims from insureds
    Explanation
    According to the Code, all insurers must maintain a department to investigate possible fraudulent claims from insureds. This means that insurance companies are required to have a specific department dedicated to examining and verifying claims made by policyholders to ensure that they are not fraudulent. This is important to prevent any misuse or abuse of the insurance system and to protect the interests of both the insurer and other policyholders.

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  • 15. 

    Which of the following is a description of a Life and Disability Analyst?

    • A broker paid fees fror service

    • A person licensed to assist an agent in soliciting life insurance

    • A person licensed to advise clients about life and disability isnrance for a fee

    • Any agent

    Correct Answer
    A. A person licensed to advise clients about life and disability isnrance for a fee
    Explanation
    The correct answer is "A person licensed to advise clients about life and disability insurance for a fee." A Life and Disability Analyst is someone who has the necessary license to provide advice to clients regarding life and disability insurance. They are specifically trained in this area and are authorized to charge fees for their services.

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  • 16. 

    A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted. Which settlement option shiuld be chosen?

    • Fixed amount option

    • Cash option

    • Fixed period option

    • Interest option

    Correct Answer
    A. Fixed amount option
    Explanation
    The beneficiary should choose the fixed amount option. This option allows them to receive a fixed amount of $2,000 per month until both the principal and interest are exhausted. This ensures a consistent and predictable income stream for the beneficiary over a period of time.

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  • 17. 

    An insurer owned by policyholders is

    • Fraternal insurer

    • Capital stock insurer

    • Mutual insurer

    • Reciprocal exchange

    Correct Answer
    A. Mutual insurer
    Explanation
    A mutual insurer is an insurance company that is owned by its policyholders. Policyholders are considered members of the company and have the right to vote on important decisions, such as the selection of board members. In a mutual insurer, any profits that are generated are typically distributed back to the policyholders in the form of dividends or reduced premiums. This ownership structure ensures that the company operates in the best interest of its policyholders rather than shareholders.

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  • 18. 

    Tony Brown has a CLU certification. Which of the following names would be automatically approved for his agency's use?

    • Tony Brown CLU and Company

    • Brownies Insurances Services

    • Brown Insurance

    • None of these would be automatically approved

    Correct Answer
    A. None of these would be automatically approved
    Explanation
    The question states that Tony Brown has a CLU certification. However, none of the given options include the term "CLU" in the agency's name. Therefore, none of these options would be automatically approved for his agency's use.

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  • 19. 

    Which of the following would be considered a morale risk?

    • Misstatement by an applicant

    • The insured is blind

    • The insured drives too fast

    • The insured is color blind

    Correct Answer
    A. The insured drives too fast
    Explanation
    Driving too fast can be considered a morale risk because it indicates a lack of responsibility and disregard for safety. It can lead to accidents, injuries, and even fatalities. This behavior not only puts the insured at risk but also poses a threat to other drivers and pedestrians on the road. Therefore, driving too fast can negatively impact the morale of the insured and increase the likelihood of insurance claims.

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  • 20. 

    Who has the right to change life insurance policy beneficiaries?

    • The insurer

    • The beneficiary

    • The policyholder

    • The insured

    Correct Answer
    A. The policyholder
    Explanation
    The policyholder has the right to change life insurance policy beneficiaries. As the person who owns the policy, they have the authority to make changes to it, including selecting or changing the beneficiaries. The policyholder can decide who will receive the death benefit payout upon their passing, and they have the flexibility to update this information as needed throughout the policy term.

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  • 21. 

    According to the CA Insurance Code, in which of the following classes of insurance can a binder NOT be issued:

    • Marine insurance

    • Auto insurance

    • Fire insurance

    • Life insurance

    Correct Answer
    A. Life insurance
    Explanation
    A binder is a temporary agreement that provides immediate coverage until a formal insurance policy is issued. In the case of life insurance, a binder cannot be issued because life insurance policies require extensive underwriting and evaluation of the applicant's health and risk factors. Unlike other classes of insurance like marine, auto, and fire insurance, life insurance involves a longer process and cannot be quickly bound without proper assessment. Therefore, a binder cannot be issued for life insurance according to the CA Insurance Code.

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  • 22. 

    If the Commissioner issues a Notice of Seizure for documents and the individual falls to send those documents what is the penalty ?

    • 1 year in jail

    • $1000 fine

    • 1 year in jail and / or $1,000 fine

    • Each state handles discipline in its own way

    Correct Answer
    A. 1 year in jail and / or $1,000 fine
    Explanation
    If an individual fails to send the documents after receiving a Notice of Seizure from the Commissioner, the penalty is 1 year in jail and/or a $1,000 fine.

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  • 23. 

    What happens to a license after the death of a natural person  who hold a valid insurance license?

    • It always terminates

    • It may be transfered to another person

    • The license becomes inactive until the expiration date

    • The license must be returned tot he Commissioner to cancel the license

    Correct Answer
    A. It always terminates
    Explanation
    After the death of a natural person who holds a valid insurance license, the license always terminates. This means that the license is no longer valid and cannot be transferred to another person or remain inactive until the expiration date. The license must be cancelled by returning it to the Commissioner.

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  • 24. 

    The class beneficiary designation which means that the beneficiaries will receive equal shares of the death benefit devided among the surving members of the class is

    • Class beneficiary designation, equal shares

    • Per capita

    • Per stirpes

    • Per diem

    Correct Answer
    A. Per capita
    Explanation
    Per capita is the correct answer because it means that the beneficiaries will receive equal shares of the death benefit divided among the surviving members of the class. This means that each individual in the class will receive an equal portion of the benefit, regardless of their relationship to the deceased.

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  • 25. 

    The clause that protects the proceeds fo ta life insrauce policy from attachment by creditors after the death of the insured is:

    • Common disaster clause

    • Spendthrift clause

    • Incontestability clause

    • Beneficiary clause

    Correct Answer
    A. Spendthrift clause
    Explanation
    The spendthrift clause is the correct answer because it is a clause that protects the proceeds of a life insurance policy from being attached by creditors after the death of the insured. This clause ensures that the beneficiary of the policy receives the full amount without it being used to pay off any outstanding debts or claims. It provides a safeguard for the beneficiary's financial security and prevents creditors from accessing the funds.

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  • 26. 

    Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability?

    • Incontestability

    • Accelerated death benefit

    • Guaranteed insurability

    • Waiver of premium

    Correct Answer
    A. Guaranteed insurability
    Explanation
    Guaranteed insurability gives individuals the right to purchase additional life insurance regardless of their insurability. This means that even if their health or other factors change, they can still buy more coverage without having to go through medical underwriting or proving their insurability again. This option provides flexibility and ensures that individuals can increase their coverage as their needs change over time.

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  • 27. 

    Which of the following is not one of the common personal uses of life insurance?

    • Funding a buy/sell agreement

    • Helping to fund a person's retirement

    • Creating emergency funds to avoid the need to liquidate assets

    • Creation of an immediate estate

    Correct Answer
    A. Funding a buy/sell agreement
    Explanation
    Life insurance can be used for various personal purposes, such as helping to fund a person's retirement, creating emergency funds to avoid liquidating assets, and the creation of an immediate estate. However, funding a buy/sell agreement is not typically considered a common personal use of life insurance. Buy/sell agreements are commonly used in business settings to facilitate the transfer of ownership in the event of a partner's death or departure. Therefore, it is not one of the common personal uses of life insurance.

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  • 28. 

    Which of the following are common insruance policy provisions?

    • Reinstatement, suicide, pre-existing conditions

    • Entire contract, grace period, reinstatement

    • Entire contract, incontestability, pre-existing conditions

    • Grace period, suicide, right to return

    Correct Answer
    A. Entire contract, grace period, reinstatement
    Explanation
    The common insurance policy provisions are the entire contract, grace period, and reinstatement. The entire contract provision states that the written policy and any attached endorsements constitute the entire agreement between the insured and the insurer. The grace period provision allows the insured a specified period of time after the premium due date to pay the premium without the policy lapsing. The reinstatement provision allows the insured to reinstate a lapsed policy by paying any outstanding premiums and providing evidence of insurability.

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  • 29. 

    Which of the following is a true statement regarding the social security (OASDHI) program?

    • The program is fully funded

    • Except for a few exemptions. It is a voluntary program.

    • The program provides a minimum floor of income and is meant to supplement a retirees own personal program

    • The actuarial value of each person's contribution is equal to the actual value of each persons benefit.

    Correct Answer
    A. The program provides a minimum floor of income and is meant to supplement a retirees own personal program
    Explanation
    The social security (OASDHI) program provides a minimum floor of income and is meant to supplement a retiree's own personal program. This means that the program is designed to ensure that retirees have a basic level of income to support themselves, but it is not intended to be the sole source of income for retirees.

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  • 30. 

    A person has paid $50,000 into a fixed aunnuity over 20 years. When he decised to begin income payments the insurer calculates that he will receive $4,000 per year for life, which means that he will receive a total of $100,000. Int he first 10 years of payment how much is taxable each year?

    • $0

    • $800

    • $2,000

    • $4,000

    Correct Answer
    A. $2,000
    Explanation
    The taxable amount each year in the first 10 years of payment is $2,000. This can be calculated by dividing the total amount received over 20 years ($100,000) by the number of years the payments will be received (20), resulting in an annual payment of $5,000. Since the person will receive $4,000 per year, the difference of $1,000 is not taxable. Therefore, the taxable amount each year is $5,000 - $1,000 = $2,000.

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  • 31. 

    Which of the followog is NOT oridiary life insurance?

    • A life paid up to 65 policy

    • A group life insurance policy

    • A 30-ear decreasing term policy

    • A 20-year endowment policy

    Correct Answer
    A. A group life insurance policy
    Explanation
    A group life insurance policy is not considered ordinary life insurance because it is typically provided by an employer or organization to a group of individuals. It is a type of insurance coverage that offers a death benefit to the beneficiaries of the insured individuals within the group. Unlike ordinary life insurance policies that are purchased individually and can be customized based on the policyholder's needs, group life insurance policies are generally standardized and offer limited coverage options. Therefore, it is not classified as ordinary life insurance.

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  • 32. 

    An organization will cease to exsit as an entity eligible to hold a license for all of the following reasons, expept:

    • Termination of an association

    • Termination of a key employee

    • Dissolution of a corporation

    • Dissolution of a co-partnership

    Correct Answer
    A. Termination of a key employee
    Explanation
    An organization will cease to exist as an entity eligible to hold a license if there is a termination of a key employee. This is because a key employee plays a crucial role in the functioning and operations of the organization. Their termination can lead to a disruption in the organization's ability to meet its obligations and maintain compliance with licensing requirements. On the other hand, termination of an association, dissolution of a corporation, or dissolution of a co-partnership may have other legal and financial implications, but they may not necessarily result in the organization losing its eligibility to hold a license.

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  • 33. 

    An insured bought an aunnuity ten years agon. He will retire in five years. To determine the value fo the aunnuity, the number of accumulation units is multiplied by the value of the seperate account. What type o annuity was purchased?

    • Variable annuity

    • Fixed premium annuity

    • Tax sheltered annuity

    • Single payent annuity

    Correct Answer
    A. Variable annuity
    Explanation
    The insured purchased a variable annuity. In a variable annuity, the value of the annuity is determined by the number of accumulation units multiplied by the value of the separate account. This means that the value of the annuity can fluctuate based on the performance of the investments in the separate account.

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  • 34. 

    An insured and beneficiary die in a car accident and it is impossibe to determin who died first,. Who will reveive the life insurance proceeds?

    • The insured's estate

    • The insurance company retains the proceeds?

    • The beneficiary's estate

    • Both the insured's and beneficiary's estate will share

    Correct Answer
    A. The insured's estate
    Explanation
    When the insured and beneficiary die simultaneously in a car accident and the order of their deaths cannot be determined, the general rule is that the insured's estate will receive the life insurance proceeds. This is because the insured is the policyholder and the beneficiary's right to the proceeds is contingent upon the insured's death. Since it is impossible to determine who died first, the insured's estate is considered the rightful recipient of the proceeds.

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  • 35. 

    What must an insurer d who accepts an application from an agent who is not specifically appointed by that insurer and then issues a policy form that applicant?

    • The agent must become an employee of that company with in 30 days or resubmit the application

    • Add the agent's name on the company's list of approved agents

    • Send the agent an employment approval notice within 30 days of policy insurance

    • Forward to the Insurance Commissioner a Notice of appointment within 14 days of receipt of application

    Correct Answer
    A. Forward to the Insurance Commissioner a Notice of appointment within 14 days of receipt of application
    Explanation
    When an insurer accepts an application from an agent who is not specifically appointed by that insurer and issues a policy form to the applicant, the insurer must forward a Notice of appointment to the Insurance Commissioner within 14 days of receiving the application. This is necessary to inform the Insurance Commissioner about the appointment of the agent and to ensure compliance with regulatory requirements.

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  • 36. 

    Listed below are descriptions for four types of policies. Which is the term policy?

    • The policy premium increases after three years and then it remains the same until the policy is paid up at age 55

    • The policy has a face amount of $100,000. The policy holder pats premiums annually. At the end of 10 years, the cash value $25,000

    • The policy premiums must be paid for 20 years. Afterwards, the policy continues with no additional premiums paid. The policy has non-forfeiture values.

    • The policy has a face amount of $100,000. Every five years, the premium paid increases. After ten years, the policyholder stops paying premiums and coverage stops. The policy has no cash value.

    Correct Answer
    A. The policy has a face amount of $100,000. Every five years, the premium paid increases. After ten years, the policyholder stops paying premiums and coverage stops. The policy has no cash value.
    Explanation
    The term policy is the one where the policyholder pays premiums for a specified period of time, and if they stop paying, the coverage stops. In this case, the policy has a face amount of $100,000, the premium paid increases every five years, and after ten years, the policyholder stops paying premiums and coverage stops. This indicates that it is a term policy. Additionally, the fact that the policy has no cash value further supports this conclusion.

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  • 37. 

    Any person who diverts or misappropriates fiduciary funds is guilty of 

    • Misrepresentation

    • Forgery

    • Fraud

    • Theft

    Correct Answer
    A. Theft
    Explanation
    The correct answer is "Theft" because when a person diverts or misappropriates fiduciary funds, they are essentially taking someone else's money without permission or legal right. This act constitutes theft as it involves unlawfully obtaining and using someone else's funds for personal gain. Misrepresentation refers to providing false information, forgery involves creating fake documents or signatures, and fraud encompasses deceptive acts to gain an unfair advantage. While these actions may sometimes be involved in cases of diverting fiduciary funds, the act itself is best described as theft.

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  • 38. 

    The Federal Act that is designed to protect group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is:

    • COBRA

    • DEFRA

    • TEFRA

    • ERISA

    Correct Answer
    A. ERISA
    Explanation
    ERISA stands for the Employee Retirement Income Security Act. This federal act is designed to protect group plan participants by establishing pension equality and imposing strict reporting and disclosure requirements. It ensures that employees receive the benefits they are entitled to and provides guidelines for the administration and management of employee benefit plans. ERISA also sets standards for fiduciaries who manage these plans, aiming to safeguard the interests of plan participants and beneficiaries.

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  • 39. 

    The person whose life is the object of a life insurance policy is

    • Applicant

    • Policy owner

    • Insured

    • Beneficiary

    Correct Answer
    A. Insured
    Explanation
    The person whose life is the object of a life insurance policy is referred to as the insured. This individual is the one who is covered by the policy and whose death or survival will determine the payment of the insurance benefits. The insured is typically the person whose life is being insured for financial protection in the event of their death.

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  • 40. 

    As an employer, the sudden death of an employee is considered a:

    • Body loss

    • Personal loss

    • Personel loss

    • Human loss

    Correct Answer
    A. Personel loss
    Explanation
    The sudden death of an employee is considered a personal loss for an employer. This is because the employer not only loses a valuable member of their team but also experiences the emotional impact of losing someone they may have known and worked closely with. The term "personel loss" likely refers to a misspelling of "personal loss" and does not accurately describe the situation. "Body loss" and "human loss" are not commonly used terms in this context and do not accurately convey the emotional impact experienced by the employer.

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  • 41. 

    All of the following statements regarding survivorship life insruance are true, except:

    • It is particularly well situated to provide cash to cover estate taxes

    • The policy face amounts are usually for more than $1,000,000

    • If offers premiums that are quite low compared to what you would be charged for separate policies

    • The policy face amount is made out based only on the death of the first to die

    Correct Answer
    A. The policy face amount is made out based only on the death of the first to die
    Explanation
    Survivorship life insurance is a type of policy that covers two individuals and pays out the death benefit only upon the death of the second insured person. This means that the policy face amount is not made out based only on the death of the first to die. Instead, it provides coverage for both individuals and pays out when the second insured person passes away. The other statements mentioned in the question are true, such as survivorship life insurance being well-suited for covering estate taxes, having high policy face amounts, and offering lower premiums compared to separate policies.

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  • 42. 

    All of the following are valid reasons for the Insurance COmmissioner to deny the appocant for an insruance license except:

    • Applicant does not have a good business reputation

    • Applicant is not properly qualified to perform duties

    • Applicant does not have a California business address

    • Applicant lacks integrity

    Correct Answer
    A. Applicant does not have a California business address
    Explanation
    The Insurance Commissioner may deny an applicant for an insurance license if they do not have a good business reputation, if they are not properly qualified to perform duties, or if they lack integrity. However, the lack of a California business address is not a valid reason for denial.

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  • 43. 

    All of the following would be considered unfair claim practices, except:

    • failing no acknowledge communications regarding claims arising from an insurance policy

    • Misrepresenting to a clamant policy provisions relating to a claim

    • Directly advising a clamant to obtain the services of an attorney

    • Failure to affirm or deny coverage of claims within a reasonable time frame after proof of loss requirements have been met and submitted by the insured

    Correct Answer
    A. Directly advising a clamant to obtain the services of an attorney
    Explanation
    Directly advising a claimant to obtain the services of an attorney is not considered an unfair claim practice. In some cases, it may be in the best interest of the claimant to seek legal advice to ensure their rights are protected and they receive a fair settlement. However, the other options listed are all examples of unfair claim practices. Failing to acknowledge communications, misrepresenting policy provisions, and delaying the affirmation or denial of coverage are all actions that can harm the claimant and are considered unfair.

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  • 44. 

    A person who spends $10,000 in a single premium annuity, and another $10,000 in a Certificate of Deposit (CD). Both pay 10% interest annually. The person is in a 31% income tax bracket. For 40 years, the person does not touch his annuity, and reinvests all income from the CD at 10%. Which of the following statement is true?

    • The CD would be worth several hundred thousand more because there is no commission paid on a CD

    • The annuity would be worth several hundred thousand more because of the tax deferral of the earnings

    • The CD would be worth several hundred thousand more because of tax deferral

    • They would be worth approximately the same amount after the payment of deferral income taxes

    Correct Answer
    A. The annuity would be worth several hundred thousand more because of the tax deferral of the earnings
    Explanation
    The annuity would be worth several hundred thousand more because of the tax deferral of the earnings. In this scenario, the person is in a 31% income tax bracket. By investing in an annuity, the person can defer paying taxes on the earnings until they withdraw the funds, potentially allowing the earnings to grow at a faster rate. On the other hand, the earnings from the CD would be subject to income tax each year, reducing the overall growth potential. Therefore, the annuity would accumulate more value over time due to the advantage of tax deferral.

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  • 45. 

    All the following would be considered one of the three major types of loss exposure except:

    • Liability loss exposure

    • Financial loss exposure

    • Human and personel loss exposure

    • Property loss exposure

    Correct Answer
    A. Financial loss exposure
    Explanation
    The correct answer is Financial loss exposure. This is because financial loss exposure is not one of the three major types of loss exposure. The three major types of loss exposure are liability loss exposure, human and personnel loss exposure, and property loss exposure. Financial loss exposure refers to the potential financial losses that a company may face, but it is not considered one of the three major types of loss exposure.

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  • 46. 

    With the cost of living rider, the life insurance polcy holder:

    • Must increase or decrease the face value of the policy as the index increases or decreases

    • Gets the automatic increase in the dace value if there is an increase in the cost of living index. There is an additional premium for the additional coverage

    • Gets the automatic increase in the face value if the index goes up. There is no charge except for the flat charge for the rider

    • All of the above are false

    Correct Answer
    A. Gets the automatic increase in the dace value if there is an increase in the cost of living index. There is an additional premium for the additional coverage
    Explanation
    The correct answer states that the life insurance policy holder gets an automatic increase in the face value of the policy if there is an increase in the cost of living index. This means that as the cost of living increases, the policy holder's coverage also increases. Additionally, there is an additional premium that needs to be paid for this additional coverage. This explanation aligns with the information provided in the question.

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  • 47. 

    How is Insurance Commissioner selected

    • An annual meeting of insurance professionals in the state

    • Appointed by the governor

    • A group of qualified applicants voted on by the legislature

    • An election by the people

    Correct Answer
    A. An election by the people
    Explanation
    The Insurance Commissioner is selected through an election by the people. This means that the citizens of the state have the opportunity to vote for their preferred candidate for the position of Insurance Commissioner. This democratic process allows for the selection of the commissioner to be determined by the will of the people, ensuring that the individual chosen for the position has the support and trust of the public.

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  • 48. 

    According to the CA Insurance Code, a judgment ageinst an applicant who entered a plea of "nolo contendere" is considered to be 

    • Innocent by code, but guilty by law

    • Innocent

    • Referred to the Insurance Commissioner fo option

    • Convicted

    Correct Answer
    A. Convicted
    Explanation
    According to the CA Insurance Code, a judgment against an applicant who entered a plea of "nolo contendere" is considered to be convicted. This means that even though the applicant did not technically admit guilt, the judgment still indicates a finding of guilt by the court. Therefore, the correct answer is convicted.

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  • 49. 

    All of the following would be cosiderd unfair trade pratices, except:

    • Making a statement tot he public about a person in the insurance business that is untrue or misleading

    • Committing an act of discrimination whether it be fair or unfair

    • Filing with any public official a false statement of financial condition concerning an insurer

    • Making any statement misrepresenting terms of any policy

    Correct Answer
    A. Committing an act of discrimination whether it be fair or unfair
    Explanation
    The correct answer is committing an act of discrimination whether it be fair or unfair. This is because unfair trade practices refer to deceptive or dishonest practices in business, such as making untrue statements, filing false financial statements, or misrepresenting policy terms. Discrimination, whether fair or unfair, falls under a different category of unethical behavior and is not specifically related to trade practices.

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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
  • Sep 06, 2012
    Quiz Created by
    Nailsexam123

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