Life insurance exam questions WI Questions with Answers 2024, Exams of Law

Download Life insurance exam questions WI Questions with Answers 2024 and more Exams Law in PDF only on Docsity! Life insurance exam questions WI Questions with Answers 2024 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 d) business partners in each other ✔ c All of the following statements are true regarding tax-qualified annuities EXCEPT a) annuity earnings are tax deferred b) they must be approved by the IRS c) withdrawals are taxed d) employer contributions are not tax deductible ✔ d All other factors being equal, which of the following individuals would receive the largest monthly check from a single premium straight life immediate annuity? a) a 60-year-old man b) a 60-year-old woman c) a 50-year-old man d) a 50-year-old woman ✔ a 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 ✔ d The two types of assignments are a) absolute and partial b) complete and partial c) complete and proportionate d) absolute and collateral ✔ 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 ✔ 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 ✔ c Who does the Interstate Insurance Product Regulation Compact serve? a) Commissioner b) NAIC c) Insurers d) Insured ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 Which of the following us used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are comparatively priced? a) policy cost guides b) consumer price indices c) policy cost indices d) cost comparison methods ✔ d What determines the penalty for surrendering a market value adjusted annuity prematurely? a) the current interest rate at the time of surrender b) the flat fee determined by an index of interest gains and the amount of time the annuity would take to mature c) there are no penalties imposed for surrendering annuities prematurely d) the guaranteed minimum interest rate provided in the contract ✔ a An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a) 401(k) plan b) Tax-sheltered account plan c) HR 10 plan d) profit sharing plan ✔ d Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) premiums are not tax-deductible as a business expense b) premiums are tax-deductible as a business expense c) premiums are tax-deductible by the key employee d) premiums are taxable to the employee ✔ a Which of the following settlement options in life insurance is known as straight life? a) single life b) life with period certain c) fixed amount d) life income ✔ d According to the entire contract provision, a policy must contain a) a declarations page with a summary of insureds b) Buyer's guide to life insurance c) listing of the insured's former insurer(s) for incontestability provisions d) a copy of the original application for insurance ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ 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 ✔ d a) the death benefit will be smaller b) the death benefit will be forfeited c) the death benefit will be the same as the original face amount d) the death benefit will be larger ✔ a Which nonforfeiture option provides coverage for the longest period of time? a) paid-up option b) accumulated at interest c) reduced paid-up d) extended term ✔ c The paid-up addition option uses the dividend a) to reduce the next year's premium b) to accumulate savings for retirement c) to purchase a smaller amount of the same type of insurance as the original policy d) to purchase a one-year term insurance in the amount of the cash value ✔ c A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? a) inflation rider b) cost of living rider c) value adjustment rider d) return of premium rider ✔ b If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a) cost of living provision b) nonforfeiture option c) guaranteed insurability rider d) paid-up additions option ✔ d Which of the following does NOT apply to variable contracts? a) insurers must submit a statement containing the essential features of how the dollar amount will be determined and that the benefit dollar amount will vary b) insurers do not have to provide any financial information or history of the company c) insurers must be licensed and authorized to transact life insurance and annuity business d) insurers may establish one or more separate accounts for allocation of settlement or dividend options ✔ b Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? a) state education waiver b) viatical settlement c) estate conversion d) life insurance proceeds ✔ d Employer contributions are made to a qualified plan a) may discriminate in favor of highly paid employees b) are after-tax contributions c) are taxed annually as a salary d) are subject to vesting requirements ✔ d An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated information during the application process. What can they do? a) refuse to pay the death benefit because of the misstatement on the application b) pay a decreased death benefit c) sue for the right to not pay the death benefit d) pay the death benefit ✔ d Annuities can be used to fund which of the following? a) group life insurance b) estate creation c) retirement plans d) variable life insurance ✔ 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 ✔ d Which policy component decreases in decreasing term insurance? a) face amount b) cash value c) dividend d) premium ✔ 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 ✔ 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 ✔ 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 ✔ 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 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 ✔ c In the event the key employee quits or is terminated, what provision allows the policyowner to transfer coverage to the replacement employee, provided the new employee provides evidence of insurability? a) consideration b) misstatement of age c) free look d) change of insured ✔ d Which of the following is usually true of a participating life insurance policy? a) it may be converted to a term life policy b) it pays dividends to stockholders c) it assesses premiums against stockholders d) it pays dividends to policyowners ✔ d A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? a) proof of insurability is not required b) medical exam c) her parents' federal income tax receipts d) medical exam and parents' medical history ✔ a Variable whole life insurance is based on what type of premium? a) graded b) level fixed c) increasing d) flexible ✔ b Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the workers' earnings and retirement age? a) FICA b) OASDI c) QC d) PIA ✔ d Which nonforfeiture option provides coverage for the longest period of time? a) accumulated at interest b) reduced paid up c) extended term d) paid-up option ✔ b In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a) the length of coverage b) the premium c) the amount of insurance d) the type of investment ✔ d An illustration used to sell a life insurance policy must be labeled as a) illustrations do not need labels b) life insurance illustration c) general insurance illustration d) example illustration ✔ b When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) the same as the original policy minus the cash value b) equal to the original policy for as long as the cash values will purchase c) in lesser amounts for the remaining policy term of age 100 d) equal to the cash value surrendered from the policy ✔ b Under what circumstances may an irrevocable beneficiary be changed? a) with written consent of the policyowner b) with written consent of the beneficiary c) with written consent of the insurer d) none of the above ✔ b Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a) until the policyowner's age 100, when the policy matures b) for 20 years or until death, whichever occurs first c) until the policyowner reaches age 65 d) for at least 20 years ✔ b If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? a) fixed period b) fixed amount c) lump sum d) life income ✔ 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 ✔ 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 ✔ 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 ✔ b Which of the following best describes fixed-period settlement option? b) adjustable life c) universal life d) flexible life ✔ 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 ✔ 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 ✔ 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 ✔ c The Insurer must maintain copies of signed illustrations for a minimum of how many years after policy is no longer in force? a) 1 b) 3 c) 5 d) 10 ✔ b The LEAST expensive first-year premium is found in which of the following policies? a) level term b) annually renewable term c) increasing term d) decreasing term ✔ b Which is true about a spouse term rider? a) the rider is decreasing term insurance b) coverage is allowed up to age 75 c) the rider is usually level term insurance d) coverage is allowed for an unlimited time ✔ c A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a) survivor protection b) life planning c) survivorship protection d) juvenile protection provision ✔ a What happens when a policy is surrendered for its cash value? a) coverage ends but the policy can be reinstated at any time b) the policy can be reinstated by paying back all policy loans and premiums c) the policy can be converted to term coverage d) coverage ends and the policy cannot be reinstated ✔ d Which of the following describes the tax advantage of a qualified retirement plan? a) employer contributions are not taxed when paid out to an employee b) the earnings in the plan accumulate tax deferred c) distributions prior to age 59 1/2 are tax deductible d) employer contributions are deductible as a business expense when the employee receives benefits ✔ b A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the insured. Which policy is that? a) second-to-die b) family income policy c) joint life policy d) survivorship life policy ✔ c An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information? a) interviews b) state records c) medical records d) application ✔ d Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? a) it must be assumed that the death of the insured will occur immediately b) need is predicted using the number of years until the insured's retirement c) coverage is based on the predicted needs of that family d) the death of an insured must be premature ✔ b In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? a) the annuitant will receive the higher of either the guaranteed minimum rate or current rate b) the annuitant will always receive the current interest rate c) the annuitant will receive the lower of either the guaranteed minimum rate or current rate d) the annuitant will only receive the guaranteed minimum specified in the contract ✔ a What kind of policy allows withdrawals or partial surrenders? a) 20-pay life b) term policy c) variable whole life d) universal life ✔ d records of replacement suitability inquiries must be kept in the agent's file for at least a) 1 year b) 3 years c) 5 years d) 7 years 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 ✔ 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 ✔ 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. ✔ 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. ✔ 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 ✔ 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. ✔ 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 d)$200,000 ✔ C Which of the following does NOT apply to variable contracts? a)Insurers must submit a statement containing the essential features of how the dollar amount will be determined and that the benefit dollar amount will vary. b)Insurers do not have to provide any financial information or history of the company. c)Insurers must be licensed and authorized to transact life insurance and annuity business. d)Insurers may establish one or more separate accounts for allocation of settlement or dividend options. ✔ B All of the following are requirements for life insurance illustrations EXCEPT a)They must identify nonguaranteed values. b)They must differentiate between guaranteed and projected amounts c)They must be part of the contract. d)They may only be used as approved. ✔ C An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a)The insurer will pay a reduced death benefit to the beneficiary. b)The insurer will pay the death benefit minus one month's premium. c)The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. d)The insurer will pay the full death benefit from the group policy to the beneficiary. ✔ D Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? a)They are tax free to terminally ill insured. b)They are always taxable to chronically ill insured. c)They are always taxed. d)There is a 10% penalty for early distribution of the death benefit. ✔ A The policyowner of a life insurance policy forgets to pay his monthly premium and then dies 10 days later. Which of the following is true?a)The policy will pay full death benefits. b)The policy will pay full death benefits, less the premiums that were due, in addition to a penalty. c)The policy will not pay death benefits. d)The policy will pay full death benefits, less the premiums that were due. ✔ D When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a)The same as the original policy minus the cash value b)Equal to the original policy for as long as the cash values will purchase. c)In lesser amounts for the remaining policy term of age 100. d)Equal to the cash value surrendered from the policy ✔ B