California Insurance Code: Key Concepts and Definitions in Life Insurance, Exams of Nursing

Download California Insurance Code: Key Concepts and Definitions in Life Insurance and more Exams Nursing in PDF only on Docsity! CA LIFE INSURANCE EXAM QUESTIONS WITH DETAILED AND VERIFIED ANSWERS LATEST 2024 A $50,000 whole life policy with a cash value of $10,000 has been in force for eleven years. The policyowner is unable to continue the premium payments. Which of the following describes the reduced paid-up nonfordeiture option? - ANS-The cash value is used to select a $20,000 paid-up policy. A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments MUST the insurer make? - ANS-60 payments. A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments will the insurer make? - ANS-60 payments. A beneficiary wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should be chosen? - ANS- Interest option. A contract in which one party promises to indemnify another against loss that arises from an unknown event is - ANS-an insurance policy. A contract of indemnity is one in which - ANS-one party is restored to the same financial position the party was in before the loss occurred. A group life policy is issued on a contributory basis. This means that the - ANS- insured employees will pay part of the premium. A husband and wife have a disabled child who is financially dependent upon them. The death of one parent would not result in financial disaster for the disabled child, but the death of both parents would. Which policy should they purchase? - ANS- Second-to-die policy. A life insurance policy dividend is - ANS-legally defined as a return of excess premium and not taxable. A life insurance policy written after 1988 that fails to meet the seven-pay test is known as - ANS-a modified endowment contract. A life insurance policy's waiver of premium takes effect if an insured - ANS- becomes totally disabled. A participating life insurance policy is defined as a contract that - ANS-allows the policyowner to receive a share of surplus in the form of policy dividends. A person authorized by and on behalf of an insurer who transacts life, disability or life and accident and health insurance is defined as a - ANS-life agent. A person owns a life annuity. He elects to receive his annuity payments monthly for the remainder of his life with "ten years certain". The annuity will make payments - ANS-for a minimum of 120 months and a maximum of the remainder of his life. A situation in which there is a possibility of loss or a gain is a - ANS-speculative risk. According to the California Insurance Code, an insurance policy must specify all of the following EXCEPT the - ANS-financial rating of the insurer. According to the California Insurance Code, governing the use of life insurance policy illustrations, the term illustration means - ANS-a presentation of policy features that includes non-guaranteed elements. According to the California Insurance Code, if an insurer's certificate of authority is revoked, the Commissioner can proceed with any of the following actions EXCEPT - ANS-using Guarantee Funds to pay salaries. According to the California Insurance Code, the Commissioner can disapprove a licensee's request to use a fictitious name for any of the following reasons EXCEPT that the - ANS-name is the licensee's actual name. All of the following are benefits of insurance EXCEPT it - ANS-eliminates fraudulent losses. All of the following are characteristics of reinsurance EXCEPT it - ANS-increases the unearned premium reserve. hat is the definition of premium? - ANS-Money an insured pays an insurer to obtain the benefits provided in the policy. How can partners guarantee a market for their share of the business in the event of death? - ANS-Buy-sell agreements. How can partners guarantee a market for their share of the business in the event of death? - ANS-Buy-sell agreements. How does the cost recovery rule apply when a life insurance policy is surrendered for its cash value? - ANS-The cost basis of the policy is exempt from taxation. How long is the free cancellation period for the life insurance offered to individuals who are 60 or older? - ANS-30 days. How much employer-provided group term life insurance is exempt from income taxation? - ANS-$50,000 How often MUST an insurer file the National Association of Insurance Commissioners (NAIC) financial statement? - ANS-Annually. If a life agent sells a whole life policy to a prospect on behalf of an insurer without an appointment, the - ANS-insurer must submit a notice of appointment to the Commissioner. If a term life insurance policy is renewable, the renewal provision usually states that: - ANS-a higher premium is payable at each renewal. If an insurer must have its rates accepted by the insurance Department prior to using them, the insurer would be operating in which of the following types of jurisdictions? - ANS-Prior approval. If you have been convicted of a misdemeanor and that misdemeanor conviction is later expunged pursuant to California Penal Code Section 1203.4, which of the following is true? - ANS-Even though your misdemeanor conviction was expunged, you must still disclose your misdemeanor conviction on your individual application for an insurance license. In a 5-year vesting schedule, what percentage of employer contributions MUST be vested after 5 years of service? - ANS-100% In a group life insurance policy, who are the parties to the master contract? - ANS- The insurer and the employer. In financial planning, the human life value concept is based on an individual's - ANS-income In group life insurance, who is issued a certificate of insurance? - ANS-The participant. In insurance terminology, "indemnity" means - ANS-make whole. Individual life insurance policies sold to seniors in the State of California must include a prominently placed statement that divulges all of the following information EXCEPT - ANS-proof of surrender must be notarized at the agent's principal office. Insureds are entitled to recover an amount NOT greater than the amount of their loss under the principle of - ANS-indemnity. Insurer policy expenses include all of the following EXCEPT - ANS-premiums. It is considered an unfair method of competition for an agent to advertise that the insurer the agent is appointed with is - ANS-a member of the Insurance Guarantee Association. It is Federal offense for an insurance agent to do all of the following EXCEPT - ANS-misrepresent facts on an insurance application. Life insurance policies written without a physical examination are called - ANS- non-medical. Life insurers must include all of the following in their financial statements EXCEPT - ANS-policy summary description. Loss retention is an effective risk management technique when all of the following conditions exist EXCEPT the - ANS-probability of loss is unknown. Making an insured whole by restoring them to the same condition as before a loss is an example of - ANS-the principle of indemnity. Moral hazard can be defined as the increase - ANS-chance of a loss occurring due to an insured's dishonest tendencies. People commonly purchase an annuity to protect against the risk of: - ANS- outliving their financial resources. Risk can be defined as all of the following EXCEPT - ANS-the cause of loss Section 1729.2 of the California Insurance Code requires insurance producer applications and licensees to notify the Insurance Commissioner in writing, within ___days of charges in background information after an application has been submitted or a license has been issued. - ANS-30 The accidental benefit rider is also known as - ANS-double indemnity. The additional premium charged by an insurer for adding the accidental death benefit to a whole life policy - ANS-does not affect the policy's cash value. The adjustments that insurers make to the cash value account in a - ANS- The California Insurance Code requirements regarding the return of life or annuity contracts issued to seniors - ANS-gives a senior at least 30 days to return specified life and/or annuity contracts for a full refund. The components of determining policy premiums include all of the following EXCEPT - ANS-dividends. The conversion privilege allows a terminating employee to convert - ANS-term insurance into permanent insurance. The cost of employer-provided group life insurance above $50,000 is - ANS- taxable as income to the employee. The direct distribution of insurance utilizes all of the following to promote the sale of insurance EXCEPT - ANS-telephone call from an agent. The direct response distribution of Insurance utilizes all of the following to promote the sales of insurance EXCEPT - ANS-telephone call from the agent. What does the statement "Life insurance creates an immediate estate" mean? - ANS-The total death benefit is paid whenever the insured's dies. What factor determines the difference between deferred and immediate annuities? - ANS-When annuity benefit payments begin. What is an ESOP? - ANS-Employee Stock Ownership Plan. What is meant by referring to an insurance policy as a unilateral contract? - ANS- Only one party makes a legally enforceable promise. What is one difference between group life an individual life underwriting? - ANS- Individual life insurance requires the applicant to answer medical questions. What is REQUIRED when an application reveals conditions that require more information? - ANS-Attending physician's statement. What is the difference between a conditional premium receipt and a binding premium receipt? - ANS-Only a binding receipt always provides insurance that is effective from the date the receipt is given. What is the difference between deferred annuities and immediate annuities? - ANS-Deferred annuities have longer accumulation periods. What is the goal of the underwriting process? - ANS-to avoid selecting a disproportionate number of bad risks. What is the limit of liability on a life insurance policy? - ANS-The face amount of the policy. What is the penalty tax imposed on amounts received from a modified endowment contract? - ANS-10% what is used to determine the amount of an annuity distribution that is exempt from taxation? - ANS-The exclusion ratio. What rule is used to determine the importance of a representation? - ANS-The materiality of concealment. What rule is used to determine the importance of a representation? - ANS-The materiality of concealment. What type of insurance policy provides a death benefit that matches the projected outstanding debt on an individual's home? - ANS-Mortgage redemption. What would a person be guilty of who refuses to deliver any books, records, or assets to the commissioner once a seizure order has been executed? - ANS-A misdemeanor When a family policy covers children, all of the following are true EXCEPT - ANS-evidence of insurability is required to convert coverage for children to permanent insurance. When a family policy covers children, all of the following are true EXCEPT - ANS-evidence of insurability is required to convert coverage for children to permanent insurance. When are parties to a contract REQUIRED to communicate information solely based on personal judgment for a matter in question? - ANS-Never When does an individual have an insurable interest in the life of another person? - ANS-The individuals depends on the other person for financial support. When must insurance records of insurance agents and brokers be made available to the Insurance Commissioner? - ANS-At all times. Which benefits are provided by key employee insurance? - ANS-Payment to a business when an important employee dies. Which component of a life insurance premium is based on the insured's age and gender? - ANS-Mortality Which distribution from an annuity would be subject to a penalty tax? - ANS-A single payment made to a taxpayer who is age 55. Which government regulation prevents retirement plans from favoring highly compensated employees? - ANS-Nondiscrimination. Which if the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay? - ANS-A misdemeanor. Which is an agreement in which an insurer contacts with a third party to insure itself against losses from insurance policies it issues? - ANS-Reinsurance Which of the following contracts provides benefits that fluctuate automatically with investment results? - ANS-Variable life insurance. Which of the following information is not required to be communicated in a Life insurance contract? - ANS-Personal judgment. Which of the following is a characteristic of nonqualified annuities? - ANS-Tax- deferred earnings. Which of the following is a characteristic of nonqualified annuities? - ANS-Tax- deferred earnings. Which of the following is a correct statement about the premium payment modes? The total premium paid by a life policyowner for one policy year is: - ANS-greater if the premium is paid semiannually rather than annually. Which of the following is a hazard? - ANS-A condition that may increase the likelihood of a loss occurring. Which of the following is a requirement of a contract? - ANS-There must be an offer and acceptance of the contract terms. which of the following is NOT an option for the use of the policy dividends? - ANS-Fund the distribution of monthly income payments. Which of the following statements about policy dividends is TRUE? - ANS- Insureds elect a dividend option at the time of policy purchase. Which of the following statements regarding risk is TRUE? - ANS-Only pure risks are insurable. Which of the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay? - ANS-A misdemeanor