Wisconsin State Life Insurance Fund: Features & Regulations, Exams of Insurance law

Download Wisconsin State Life Insurance Fund: Features & Regulations and more Exams Insurance law in PDF only on Docsity! Life insurance exam questions WI What is the purpose of the Wisconsin State Life Insurance Fund? a) to offer low-cost life insurance to state residents b) To protect insured against insolvent insurers c) To advertise different types of life insurance policies available in the state d) To provide life insurance through licensed intermediaries - ANS; a An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a) The premium for individual coverage will be based upon the insured's attained age b) The insured may choose to convert to term or permanent individual coverage c) The insured would not need to prove insurability for a conversion policy d) The insured may convert coverage to an individual policy within 31 days - ANS; b During a life insurance policy replacement, the insurer is required to provide the policyowner a free-look period of at least a) 10 days b) 20 days c) 30 days d) 90 days - ANS; c Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) the former wife of the deceased insured b) a minor son of the insured c) a business partner of the insured d) the wife of the deceased insured - ANS; b All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a) The policy is owned by the company b) Any type of insurance policy may be used c) The employer pays a bonus to a selected employee to fund the policy d) It is considered a nonqualified employee benefit - ANS; a Which of the following is NOT true regarding policy loans? a) Policy loans can be repaid at death b) an insurer can charge interest on outstanding policy loans c) a policy loan may be repaid after the policy is surrendered d) Money borrowed from the cash value is taxable - ANS; d A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a) The amount of the distribution is reduced by the amount of a 20% withholding tax b) No taxes are due since the plan participant is over age 59 1/2 c) There is a 10% early withdrawal penalty d) The amount distributed is subject to ordinary income tax - ANS; a All of the following are true regarding the guaranteed insurability rider EXCEPT a) this rider is available to all insureds with no additional premium b) The insured may purchase additional coverage at the attained age c) The insured may purchase additional insurance up to the amount specified in the base policy d) It allows the insured to purchase additional amounts of insurance without providing insurability only at specified dates or events - ANS; a A claimant, whi is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of a) 24 months b) 0 months c) 5 months d) 12 months - ANS; c In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to a) the policy owner b) the insurance company c) The contingent beneficiary d) the insured's spouse - ANS; c All of the following are beneficiary designations EXCEPT a) Contingent b) primary If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than a) upon issuance of the policy b) within 30 days after the first premium payment was collected c) prior to filling out an application for insurance d) with the policy - ANS; d The two types of assignments are a) absolute and partial b) complete and partial c) complete and proportionate d) absolute and collateral - ANS; d An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe? a) reduction of premium b) accumulation at interest c) cash option d) flexible premium - ANS; a Which of the following statements regarding HIV testing for life insurance purposes is NOT true? a) The testing practices must meet the criteria of the U.S. Department of Health and Human Services b) HIV testing is regulated at the state level c) insurers are barred from requesting HIV testing d) Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant - ANS; c Who does the Interstate Insurance Product Regulation Compact serve? a) Commissioner b) NAIC c) Insurers d) Insured - ANS; c Which is TRUE about the cash surrender nonforfeiture option? a) After the cash surrender, the insured is covered for a grace period of one month b) the policy remains active for some time after the policyholder opts for cash surrender c) the policyholder receives the original cash value of the policy d) funds exceeding the premium paid are taxable as ordinary income - ANS; d Which of the following applicants would NOT qualify for a Keogh plan? a) someone who works 400 hours per year b) someone who has been employed for more than 12 months c) someone who is over 25 years of age d) someone who works for a self-employed individual - ANS; a An individual buys a flexible premium deferred life annuity with a 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? a) payments for 15 years b) payments for 20 years c) payments for life d) nothing - ANS; a Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) interest-sensitive whole life b) life annuity with period certain c) increasing term d) limited pay whole life - ANS; d For how long is an insurance company allowed to defer policy loan requests? a) 30 days b) 60 days c) 6 months d) 1 year - ANS; c An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will the coverage begin? a) When the agent submits the application to the company and the company issues a conditional receipt b) when the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health c) on the designated effective date d) on the application date - ANS; b If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT a) erase the incorrect answer and record the correct answer b) Draw a line through the first answer, record the correct answer, and have the applicant initial the change c) note on the application the reason for change d) destroy the application and complete a new one - ANS; a Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase? a) Withdrawn amounts are taxed on a last in, first out basis b) Withdrawn amounts are taxed on a first in, last out basis c) taxes are deferred on withdrawn amounts, but a flat penalty is charged d) taxes are deferred on withdrawn amounts - ANS; a Which of the following is NOT an allowable 1035 exchange? a) A whole life insurance policy is exchanged for a term insurance policy b) A whole life insurance policy is exchanged for a Universal life insurance policy c) an annuity is exchanged for another annuity d) a life insurance policy is exchanged for an annuity - ANS; a The Ownership provision entitles the policyowner to do all of the following EXCEPT a) set premium rates b) receive a policy loan c) assign the policy d) designate a beneficiary - ANS; a All of the following statements concerning dividends are true EXCEPT a) dividend amounts are guaranteed in the policy b) lower insurance company costs generate higher dividends c) they stem from favorable underwriting experience d) favorable investment results generate higher dividends - ANS; a The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a) joint and survivor b) fixed amount option c) Interest only option d) life income with period certain - ANS; c c) listing of the insured's former insurer(s) for incontestability provisions d) a copy of the original application for insurance - ANS; d An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called a) reduction of premiums b) paid-up additions c) one-year term purchase d) accumulation at interest - ANS; b An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $10,000, no tax consequence b) $8,000, no tax consequence c) $8,000, tax on growth only d) $10,000, tax on growth only - ANS; a An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a) recession of the policy b) adjustment in the amount of death benefit c) no change whatsoever d) automatic laps - ANS; b A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the a) Revocable beneficiary b) Secondary beneficiary c) Contingent beneficiary d) Irrevocable beneficiary - ANS; a If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an a) Nonqualified annuity b) Modified endowment contract c) Accelerated benefit policy d) Endowment - ANS; b The mode of premium payment a) is the factor that determines the amount of dividends in a policy b) is the method used to compute the cash surrender value of the policy c) does not affect the amount of premium paid d) is defined as the frequency and the amount of the premium payment - ANS; d The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage begin? a) as of the policy delivery date b) as of the first month after the policy issue c) as of the policy issue date d) as of the application date - ANS; d All of the following information about a customer must be used in determining annuity suitability EXCEPT a) financial experience b) annual income c) beneficiary's age d) tax status - ANS; c Concerning Juvenile Life insurance, which of the following statements is INCORRECT? a) usually a parent or guardian is the applicant for insurance on the life of a minor b) it can be a limited premium payment policy c) juvenile life is classified as any life insurance written on the life of a minor d) juvenile life is classified as any life insurance purchased by a minor - ANS; d A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a) pay the policy proceeds up to an established unit b) not pay the policy proceeds under any circumstances c) automatically pay the policy proceeds d) pay the policy proceeds only if it would have issued the policy - ANS; d The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? a) reduction of premium b) paid-up addition c) accumulation at interest d) cash option - ANS; a All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a) the annual dividend is retained by the company b) the interest is credited at a rate specified by the policy c) the policyholder has the right to withdraw the accumulations at any time d) the interest is not taxable since it remains inside the insurance policy - ANS; d Which of the following is the best reason to purchase life insurance rather than annuities? a) to create regular income payments b) to liquidate a sum of money over time c) to create an estate d) to liquidate a sum of money over a period of years - ANS; c What is the penalty for IRA distributions that are below the required minimum for the year? a) 10% b) 25% c) 50% d) 60% - ANS; c Which of the following best describes annually renewable term insurance? a) it requires proof of insurability b) neither the premium nor the death benefit is affected by the insured's age c) it provides an annually increasing death benefit d) it is level term insurance - ANS; d A provision in a life or health insurance policy that may assist an insurance company in determining the cause of death of an insured is called a) attending physician's report b) medical exam c) autopsy d) inspection - ANS; c An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of report is that? a) agent's report b) underwriter's report a) group life insurance b) estate creation c) retirement plans d) variable life insurance - ANS; c Which of the following characteristics applies to defined benefit plans but not defined contribution plans? a) they are qualified plans b) employers can choose not to make contributions for a particular year c) they are subject to the rules of ERISA d) the amount of contributions made by the employer is determined by an actuarial formula - ANS; d Which policy component decreases in decreasing term insurance? a) face amount b) cash value c) dividend d) premium - ANS; a Which of the following is TRUE about nonforfeiture values? a) policyowners do not have the authority to decide how to exercise nonforfeiture values b) they are required by state law to be included in the policy c) they are optional provisions d) a table showing nonforfeiture values for the next 10 years must be included in the policy - ANS; b When replacing a policy, an insurer must maintain a file containing copies of all statements for a) 10 years b) As long as the insurer remains in business c) 3 years d) 5 years - ANS; d Which of the following statements is correct regarding a whole life policy? a) cash values are not guaranteed b) the policy premium is based on the attained age c) the death benefit may increase or decrease during the policy period d) the policyowner is entitled to policy loans - ANS; d If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to a) live at least to his life expectancy b) die before his life expectancy c) name a beneficiary d) name another annuitant - ANS; a In a group life insurance policy, the employer may select all of the following EXCEPT a) the amount of insurance b) the premium payor c) the beneficiary d) the type of insurance - ANS; c Under the 401(k) bonus or thrift plan, the employer will contribute a) all of the money to the plan b) 30% of what the employee contributes c) 70% of what the employee contributes d) an undetermined percentage for each dollar contributed by the employee - ANS; d The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a) the money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary b) the beneficiary will receive the greater of the money paid into the annuity or the cash value c) the owner's estate will receive the money paid into the annuity d) the insurance company will retain the cash value and pay back the premiums to the owner's estate - ANS; b An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? a) one-year term b) reduction of premium c) accumulation at interest d) paid-up option - ANS; d All of the following are nonforfeiture options EXCEPT a) extended term b) reduced paid-up c) interest only d) cash surrender - ANS; c Which of the following is TRUE of a qualified plan? a) it may allow unlimited contributions b) it has a tax benefit for both employer and employee c) it does not need to have a vesting schedule d) it may discriminate in favor of highly paid employees - ANS; b If an insured continually uses the automatic premium loan option to pay the policy premium, a) The insurer will increase the premium amount b) the policy will terminate when the cash value is reduced to nothing c) the face amount of the policy will be reduced by the automatic premium loan amount d) the cash value will continue to increase - ANS; b Traditional IRA contributions are tax deductible based on which of the following? a) owner's age b) IRA limit c) owner's income d) how long the plan has been in force - ANS; c No individual life insurance policy may be contested after it has been in force for a) 1 year b) 2 years c) 3 years d) 5 years - ANS; b What type of insurance would be used for a Return of Premium rider? a) decreasing term b) annually renewable term c) increasing term d) level term - ANS; c During replacement of life insurance, a replacing insurer must do which of the following? a) designate a new producer for a replaced policy b) send a copy of the notice regarding replacement to the department of insurance c) obtain a list of all life insurance policies that will be replaced d) guarantee a replacement for each existing policy - ANS; c c) lump sum d) life income - ANS; c A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) IRS has no jurisdiction b) the benefit is received as taxable income c) the benefit is received tax-free d) the benefit is subject to the exclusionary rule - ANS; c Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a) signed waiver of premium b) statement of good health c) payment of premium d) delivery receipt - ANS; a What is the advantage of reinstating a policy instead of applying for a new one? a) the cash values have gained interest while the policy was lapsed b) the original age is used for premium determination c) proof of insurability is not required d) the face amount can be increased - ANS; b Which of the following best describes fixed-period settlement option? a) only the principal amount will be paid out within a specified period of time b) the death benefit must be paid out in a lump sum within a certain period of time c) income is guaranteed for the life of the beneficiary d) both the principal and interest will be liquidated over a select period of time - ANS; d What is the benefit of choosing extended term as a nonforfeiture option? a) it can be converted to a fixed annuity b) it has the highest amount of insurance protection c) it matures at age 100 d) it allows for coverage to continue beyond maturity date - ANS; b which component increases in the increasing term insurance? a) interest on the proceeds b) premium c) death benefit d) cash value - ANS; c The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the a) entire contract b) total contract c) aleatory contract d) complete contract - ANS; a Which of the following is NOT typically excluded from life policies? a) death that occurs while a person is committing a felony b) death due to war or military service c) death due to plane crash for a fare-paying passenger d) self-inflicted death - ANS; c What is the waiting period on a waiver of premium rider in life insurance policies? a) 30 days b) 3 months c) 5 months d) 6 months - ANS; d Annuities differ from life insurance in all of the following ways EXCEPT a) the annuitant must be living to collect b) they are purchased with premiums c) there is no stated amount of death benefit d) they can be used in a qualified retirement plan - ANS; b When is the earliest a policy may go into effect? a) after the underwriter reviews the policy b) when the application is signed and a check is given to the agent c) when the first premium is paid and the policy has been delivered d) when the insurer approves the application - ANS; b All of the following are characteristics of group life insurance EXCEPT a) individuals covered under the policy receive a certificate of insurance b) certificate holders may convert coverage to an individual policy without evidence of insurability c) premiums are determined by the age, sex and occupation of each individual certificate holder d) group life insurance is written as a master policy - ANS; c An insured buys a 5-year level premium term policy with a face amount of $100,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years, what will happen to the premium? a) it will decrease for the new 5-year term since the insured is now a lesser risk to the company b) it will increase each year during the next 5 years as the face amount increases each year c) it will increase because the insured will be 5 years older than when the policy was originally purchased d) it will remain the same for the new 5-year term - ANS; c Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? a) variable life b) adjustable life c) universal life d) flexible life - ANS; c If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for 10 years, which of the following would be taxable annually? a) $10,000 b) $7,000 c) $3,000 d) $13,000 - ANS; c Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? a) Universal life b) variable life c) decreasing term d) straight whole life - ANS; a An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a) pay nothing; there was a misrepresentation on the application b) pay the full death benefit and refund excess premium c) pay a reduced death benefit d) pay the full death benefit - ANS; c b) 3 years c) 5 years d) 7 years - ANS; b The Commissioner conducts an examination of a domestic insurer and believes that the costs of examination places an unreasonable financial burden on the insurer. Which of the following will happen? - ANS; The Commissioner's office may pay all or part of the costs Which of the following may NOT be included in an insurance company's advertisement? - ANS; That its policies are covered by a state Insurance Security Fund Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce - ANS; Without receiving written consent from an insurance regulatory authority. Which of the following persons is not required to complete CE? - ANS; A property insurance intermediary with 40 years of continuous licensure b)Any licensee over 65 with more than 25 years of continuous licensure c)A limited lines intermediary with 40 years of continuous licensure d)A life insurance intermediary with 18 years of continuous licensure correct answer: C The Commissioner issues an order without having conducted a hearing. Within how many days of receiving the order can the person aggrieved by the order request a trial? - ANS; a)60 b)90 c)15 d)30 D) 30 Which of the following is not a limited line of insurance? - ANS; A) Legal expense insurance b) Life insurance c) Credit insurance d) Title insurance B) life Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? - ANS; 3 days A policy may be issued for a term longer than one year or for an indefinite term as long as there is a clause in the policy providing for cancellation by giving how much notice prior to the anniversary date? - ANS; 60 days Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? - ANS; A)It does not guarantee that the entire principal amount will be paid out. b)It is a life contingency option. c)The beneficiary receives the remainder of the principal amount upon the annuitant's death. d)Payments can be made in installments and as a single cash refund. A) What is the maximum life insurance coverage available to the state residents through the Wisconsin State Life Insurance Fund? a)$10,000 b)$50,000 c)$100,000 d)The amount of coverage is unlimited. - ANS; A Which of the following is FALSE regarding variable contracts? a)The contract must provide for nonforfeiture of benefits. b)The contract must state when it can be amended. c)The contract must explain how the benefits are determined. d)The rate of return must be guaranteed. - ANS; D An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? a)The policy will be reduced to an extended term option. b)The policy will terminate when the loan amount with interest equals or exceeds the cash value. c)The insurer will increase the interest rate on the loan and charge a penalty. d)The insurer will not permit the policy-owner to take out any more loans. - ANS; B An Adjustable Life policyowner can change which of the following policy features? a)The insured b)The coverage period c)The mortality expense d)The investment account - ANS; B Annually renewable term policies provide a level death benefit for a premium that a)Decreases annually. b)Remains level. c)Fluctuates. d)Increases annually. - ANS; D An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? a)Sue for the right to not pay the death benefit b)Pay the death benefit c)Refuse to pay the death benefit because of the misstatement on the application d)Pay a decreased death benefit - ANS; B Which of the following can surrender a deferred annuity contract?a)Only the insurance company for nonpayment of premiums b)The beneficiary after the owner's death c)A deferred annuity cannot be surrendered. d)Only the annuity owner - ANS; D Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be a)Discounted. b)Adjusted to the insured's age at the time of renewal. c)Determined by the health of the insured. d)Based on the issue age of the insured. - ANS; B If a retirement plan or annuity is "qualified," this means a)It has a penalty for early withdrawal .b)It accepts after-tax contributions. c)It is noncancellable. d)It is approved by the IRS. - ANS; D A qualified retirement plan is approved by the IRS, which then gives both the employer and employee benefits such as deductible contributions and tax-deferred growth. Which of the following will be included in a policy summary? a)Comparisons with similar policies b)Primary and secondary beneficiary designations c)Premium amounts and surrender values d)Copies of illustrations and application - ANS; C Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? a)The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. b)The beneficiary will only receive payments of the interest earned on the death benefit c)The beneficiary must pay interest to the insurer. d)The beneficiary will receive the lump sum, plus interest. - ANS; B An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? a)Nothing b)$50,000 c)$100,000