Life Insurance Basics: Understanding Annuities, Policies, and Riders, Exams of Nursing

Download Life Insurance Basics: Understanding Annuities, Policies, and Riders and more Exams Nursing in PDF only on Docsity! Michigan life insurance state exam-with 100% verified solutions 2024-2025 Tutor verified Which is TRUE regarding the annuitant, when the annuitant is NOT the policy owner? 1. The annuitant has the right to name the beneficiary 2. The annuitant is the person paying the premiums 3. The cash value is available to the annuitant for withdrawals 4. Annuity payments will be based on the annuitants life expectancy Annuity payments will be based on the annuitants life expectancy Signing an applicants name for insurance is known as...? 1. Concealment 2. Defamation 3. Coercion 4. Forgery 4. Forgery Rewind 10 second Failure to pay a penalty assessed by the commissioner may result in...? 1. Revoked or suspended license 2. Require the license to retake the examination 3. Complete 5 extra hours of continuing education 4. Pay a late charge of 1.5% 1. Revoked or suspended license Two business business partners own life insurance, which or the following allows the surviving partner to use death benefit to purchase the deceased owners share? 1. Buy-sell agreement 2. Key employee life insurance 3. Business continuation 4. Accidental death 1. Buy-sell agreement Policy owner surrenders a policy for its cash value, when is tax liability incurred? 1. The cash value exceeds all premiums paid 2. The cash value is less than premiums paid 3. The policy is exchanged for a policy of equal value 4. The party is transferred to a third party 1. The cash value exceeds all premiums paid When is insurable interest required? 1. At time of claim 2. At time of application 3. In event of a policy loan 4. Within the first year of death 2. At the time of application 1. Insurance 2. Survivorship policy 3. Joint life contract 4. Single life insurance 4. Single life Insurance An Insurance policy lapsed due to nonpayment of premium to activate the reinstatement clause... 1. Play the premium within 15 days of the grace period. 2. Provide the insurer with the evidence of insurability 3. Apply for a new life insurance policy 4. Demonstrate the incontestable clause can be invoked 2. Provide the insurer with the evidence of insurability Term life insurance differs from permanent life insurance in that MOST often, term life insurance... Remains in force for a specific period of time Which activity does NOT require an insurance producer's license? Underwriting Which nonforfeiture option allows the policy owner to purchase less coverage for life? 1. Reduced paid-up insurance 2. Cash surrender value 3. Settlement value 4. Extended term 1. Reduced paid-up insurance If the annuitant dies before the annuity start date, the interest earned is... 1. Taxable 2. Nontaxable 3. Never taxed 4. Taxed if the beneficiary is a spouse 1. Taxable Which type of annuity guarantees a level benefit payment? 1. Variable 2. Universal 3. Limited life 4. Fixed 4. Fixed For a contract to be valid it MUST... Include an offer and acceptance Which of the following not an example of a producer duties? 1. Selling insurance 2. Issuing and countersigning policies 3. Collecting premiums 4. Represent the insured 4. Represent the insured If a producer is found guilty of signing an applications name, the commissioner can do all of the following EXCEPT... 1. Place the producer on probation 2. Levy a civil fine on the producer 3. Suspend or revoke license 4. Require the producer to tell the client 4. Require the producer to tell the client If an annuitant is making premium payments on a periodic which type of annuity? 1. Deferred 2. Immediate 3. Fixed period 4. Fixed amount 1. Deferred Generally If an application is not prepaid, the effective date of begins on the date the... 1. Application is signed 2. Application is postmarked and mailed to the insurer 3. Company underwriter approves the risk 4. Producer delivers the policy and collects the premium 4. Producer delivers the policy and collects the premium 2. Misrepresentation 3. Fraud 4. Defamation 2. Misrepresentation Insurer's intentional relinquishment of a known right is...? 1. An estoppel 2. A privilege 3. A wavier 4. A choice 3. A waiver Which type of life insurance policy is characterized by premiums that are fully paid within a stated period, after which no further premiums are REQUIRED... 1. Vanishing premium 2. Continues premium 3. Endowment insurance 4. Limited payment insurance 4. Limited payment insurance Human life value approach measures which of the following...? 1. Total lifetime earnings 2. Total lifetime benefits 3. Total lifetime family needs 4. Total lifetime dividends 3. Total lifetime family needs If a premium is NOT submitted with a life insurance application producer MUST have the applicant sign which of the following when delivering a policy? A replacement form Which of the following is a provision is an interest- sensitive life policy which allows the policy owner to withdraw the policies cash value interest fee? 1. Partial surrender 2. Automatic premium waiver 3. Waiver of premium 4. Spendthrift clause 1. Partial surrender Group life underwriting protects from? 1. Risk selection 2. Medical underwriting 3. Adverse selection 4. Risk underwriting 3. Adverse selection A license can disclose a consumer's policy account number to all of the following EXCEPT...? 1. Member in an affinity program that was identified to the consumers 2. Service provider marketing on behalf of the license 3. Consumer reporting cause 4. Nonaffiliated third party 4. Nonaffiliated third party Insurance applicants with an average life expectancy who represent the same risk classification as the majority of people with similar lifestyles are considered which type of risk? 1. Declined 2. Preferred 3. Standard 4. Substandard 3. Standard It early withdrawal before age 59 1/2 from a qualified plan is taxed in additional...? 10% ABC insurance agency is entering each applicant who purchases insurance through their agent into a drawing to win a free trip. This is an example of ...? 1. Illegal inducement 2. False advertising 3. Concealment 4. Fraud 1. Illegal inducement 3. In physician maintained database accessible by insurance companies and medical practitioners Which approach considers the future needs of the survivors in determining amounts of life insurance? 1. Human life approach 2. Cost of comparison approach 3. Living benefits approach 4. Needs approach 1. Human life approach What is insurable interest required? 1. At the time of a claim 2. At time of application 3. In the event of a policy loan 4. Within the first year of death 2. At time of application Which of the following is NOT an illegal inducement? 1. Giving the insured tickets to a sporting event valued at $100 2. Giving the insured a return of a premium excess of $25 3. Giving the insured an article of merchandise printed with the producers name costing $5 4. Giving the insured a free policy of insurance resulting from the resulting sale of a related policy of insurance 3. Giving the insured an article of merchandise printed with the producers name costing $5 Which of the following is NOT true about converting a group policy to an individual policy...? 1. The conversion amount must be the same amount as the group policy 2. Group policies must include a guaranteed of conversion period 3. Coverage continues during the conversion period 4. Proof of insurability will be required 4. Proof of insurability will be required The period during which an annuitant begins to receive income payments from an insurer is known as...? Annuitization period All of the following are examples of flexible life insurance policies EXCEPT...? 1. Whole life 2. Variable life 3. Universal life 4. Adjustable life 1. Whole life Which is the simplest type of life insurance plan that provides protection for a specific period of time and pays a benefit only if the insured dies during that period? 1. Whole life insurance 2. Level term life insurance 3. Variable term life insurance 4. Ordinary life insurance 1. Level term life insurance Which of the following is the time period which is life insurance policy is considered incontestable, assuming otherwise in good standing...? 1. Period ends after 3 years 2. Period ends after 2 years 3. Period ends after 2 months 4. For majority of the policies there is no contestability period 2. Period ends after 2 years Which of the following statement BEST describes a single premium cash value policy? It requires one payment to make the policy paid up Which of the following giraffe from a producer would NOT be considering rebating? $5 pen When a beneficiary inherits a traditional IRA, which of the following is TRUE about taxation when the money is withdrawn? The beneficiary pays...? 1. No tax 2. An estate tax 3. Capital gains tax 4. Income tax 4. Income tax 2. It can be used for cash value 3. It matches the level amount of protection on the insureds life expectancy 4. The cost of insurance is averaged throughout the life of the contract 3. It matches the level amount of protection on the insureds life expectancy Consumer privacy regulations permits the release of an insured's financial information when? 1. A distant relative requests financial info in writing 2. The depth of energy labor and economic growth makes a written request to the insurer for employment purposes 3. A creditor requests info in writing to approve a line of credit 4. An authorized agency makes a written request to the insurer during an insurance fraud investigation 4. An authorized agency makes a written request to the insurer during an insurance fraud investigation Which of the following is the concept of term life insurance? 1. Term life insurance accumulates cash value 2. Term life insurance pays an annual divided 3. Term life insurance provides low cost pure protection 4. Term life insurance provides for a permanent death benefit 3. Term life insurance provides low cost pure protection Which of the following is the time period after which a life insurance policy is considered incontestable? 1. The contestability period ends after 3 years 2. The contestability period ends after 2 years 3. The contestability period ends after 2 months 4. For the majority of policies there is no contestability period 2. The contestability period ends after 2 years When if ever are the earnings on a non-qualified annuity taxed... 1. Upon withdrawals of the contract value 2. Upon the death of the beneficiary 3. As payments are contributed 4. Earnings are not taxable 1. Upon withdrawals of the contract value Prior to annuitization what is the non-forfeiture value of an annuity? 1. Only premium vested in the account for 3 years 2. All premiums paid 3. As payments are contributed 4. Earnings are not taxable 4. All premiums paid minus any withdrawals and surrender charges Which of the following is true of a payor benefit rider... 1. Waives premiums on a juvenile policy if the policy owner becomes disabled or dies 2. Pays a monthly income to the policy owner if the insured is totally disabled 3. Waives policy premiums if the insured become totally disabled 4. Increases the value of the policy if the policy owner dies 1. Waives premiums on a juvenile policy if the policy owner becomes disabled or dies Which term describes naming a contingent beneficiary as "all of my children"? 1. Successive beneficiary 2. Tertiary designation 3. Class designation 4. Trust arrangement 3. Class designation Which of the following does NOT describes a defining characteristics of a whole life policy? 1. The policy accumulates cash value 2. The policy is designed to provide coverage for life 3. The face amount of the policy remains the same over time 4. The death benefit is in force for a specific period of time 4. The death benefit is in force for a specific period of time When an insured desires to give specific directions on how proceeds are distributed including to minors most appropriate beneficiary? 1. Class 2. Estate 3. Individual 4. Trust 3. Mutual insurer 4. Stock insurer 4. Stock insurer How can the insured prevent the face amount of a life insurance policy from being subjected to the federal estate tax? 1. By assigning the policy at least 3 years before death 2. By naming the insured estate as the beneficiary 3. By remaining the policy holder until death 4. By taking policy loans from cash value 2. By naming the insured estate as the beneficiary An insurance policy is a on lateral contract because ONLY the...? 1. Insured pays the premium 2. Insured is legally bound 3. Insurer is legally bound 4. Insurer can cancel the policy 3. Insurer is legally bound Providing incorrect, misleading, incomplete, or materially untrue information... 1. Twisting 2. Redlining 3. Misappropriation 4. Misinterpretation 4. Misinterpretation A whole life policy is replaced with an annuity without incurring a tax penalty? 1. Cross purchase plan 2. An endowment contract 3. A transfer of value 4. A 1035 exchange 4. A 1035 exchange Which of the following is NOT a right if the insurance policy owner? 1. Assign or transfer the policy 2. Borrow from the cash value 3. Select and chance a beneficiary 4. Revoke an absolute assignment 4. Revoke an absolute assignment Which of the following statements is TRUE concerning classifications of risk? 1. Substandard applicants are never issued policies 2. Rated policies merit lower terms 3. A preferred individual is issued a rated policy 4. Preferred risks pay a lower premium than standard risks 4. Preferred risks pay a lower premium than standard risks If an applicant purchases a life insurance policy to avoid forced sale of his assets what is this called? 1. Buy-sell funding 2. Capital retention 3. Capital liquidation 4. Estate conservation 4. Estate conservation Not required for credit insurance? 1. Charge for each type of insurance being purchased 2. Type of insurance being purchased 3. Post claim underwriting date 4. Insurer name 2. Type of insurance being purchased A type of life Insurance policy that offers the policy owner the options to adjust the policies face amount, and premium without having to complete a new application or have a new policy inssued? 1. A modified whole life policy 2. A modified term life policy 3. An adjustable life policy 4. A variable life policy 3. An adjustable life policy Which statement is NOT true about the waiver of premium rider? 1. An additional premium is charged for the rider 2. Was a licensed producer at the time of the sale 3. Passed the examination and applied for a producer license at the time of the sale 4. Passed the examination and applied for a solicitor license at the time of the sale 2. Was a licensed producer at the time of the sale In contract law, legal purposes refer to the fact that...? 1. The contract must be personal 2. There must be consideration on the part of both parties 3. The reason for entering into a contract must be lawful 4. The parties entering the contract must be competent 3. The reason for entering into a contract must be lawful Option that allows proceeds to remain with the insured and earnings to be paid to a beneficiary on a monthly basis...? 1. Interest only 2. Lump sum 3. Fixed period 4. Fixed amount 1. Interest only A deliberate lie by an insured to the insurer to obtain a lower premium is an example of...? 1. Omission 2. Fraud 3. Concealment 4. Aleatory 2. Fraud Which rider would allow additional insurance to be purchased at specific dates or events, without additional underwriting? 1. Guaranteed renewability 2. Guaranteed insurability 3. Cost of living 4. Disability income 2. Guaranteed insurability Which type of policy is used to add addition insured riders? 1. Term life 2. Whole life 3. Variable life 4. Adjustable life 1. Term life The entity that has the power to revoke a producer's insurance license is the...? 1. Producer agency manager 2. Underwriting insurance company 3. National association of insurance commissioners (NAIC) 4. State department of insurance and financial services (DIFS) 3. National association of insurance commissioners (NAIC) An owner of a life insurance policy may transfer ownership temporarily with...? 1. A collateral assignment 2. A beneficial assignment 3. An absolute assignment 4. A transfer assignment 1. A collateral assignment Generally, what are the tax implications of life insurance proceeds to the beneficiary? 1. Taxed as earned income 2. Taxed according to the income of the beneficiary 3. Tax deductible to the estate of the insured 4. Tax free at the time of the insured's death 4. Tax free at the time of the insured's death The unfair trade practice of using threat or forced restrict fair trade in the transaction of insurance is called...? 1. Twisting 2. Defamation 3. Intimidation 4. Misrepresentation 3. Intimidation A reinstatement clause outlines conditions that include...? 4. It has a lower premium for the duration of the policy 4. It has a lower premium for the duration of the policy Who can terminate a producer's appointment? 1. The insurer 2. The producer 3. The policy owner 4. The insured 1. The insurer Term Life Insurance, what's true? 1. Accumulates a much smaller cash value 2. Has a longer premium payment period 3. Remains in force for a specific period of time 4. Automatically renewable at the end of its term 3. Remains in force for a specific period of time Premium payments for a universal Life policy are NOT used for which of the following? 1. Loading cost 2. Death protection 3. Cash value accumulation 4. Separate account investments 3. Cash value accumulation A method of handling risk such as having a sprinkler system installed in a building...? 1. Transfer 2. Loss retention 3. Risk reduction 4. Avoidance 3. Risk reduction What does a limited payment whole life policy provide? 1. Protection to age 65 2. Lifetime protection 3. A lower premium 4. Pure protection 2. Lifetime protection Each of the following are characteristics of a fixed annuity contract EXCEPT? 1. Funds are invested in a separate account 2. The minimum interest rate is guaranteed in the contract 3. Benefit payments remain level 4. It may be sold as an immediate or deferred annuity 1. Funds are invested in a separate account Annuities purchased with a series of premium payments that vary year to year are called...? 1. Yearly premium insurance annuities 2. Flexible premium deferred annuities 3. Flexible premium insurance annuities 4. Level premium deferred annuities 2. Flexible premium deferred annuities What is withholding of material fact called? 1. Fraud 2. Concealment 3. Obstruction 4. Misrepresentation 2. Concealment Betty has a 200,000 whole life policy with a 50,000 cash value she wants to take out 30,000 to buy a van... 1. Whole life policies do not have any provisions 2. The net death benefit is increased by the amount of the loan 3. If the loan is not repaid the new death benefit will be reduced 4. This type of loan is interest free if used for hardship or medical purposes 3. If the loan is not repaid the new death benefit will be reduced Which of the following factors are used in life insurance premium determination EXCEPT? 1. Expense 2. Morbidity 4. The federal income tax levies from state to state 3. There are no federal income tax on the life insurance proceeds Earnings in a Roth IRA are taxed... 1. At distribution 2. Prior to contribution 3. Upon a premature distribution 4. During the accumulation period 3. Upon a premature distribution Which reimburse expenses incurred in a convalescent of nursing home... 1. Disability 2. Long term care 3. Accidental death 4. Cost of living 2. Long term care Whole life policy that allows for delinquent premiums to be paid...? 1. Term rider 2. Fixed period installments 3. Automatic premium loan option 4. Spendthrift clause 3. Automatic premium loan option Annuity is designed to make its first benefit payment to the Annuitant typically...? 1. When accumulation period of at least 24 months ends 2. In form of a lump sum payment 3. Only after all cash surrender value is with interest have been calculated 4. One month from annuitys purchase date 4. One month from annuity's purchase date Portions of cash value in a whole life policy result in which of the following? 1. Lapsed policy 2. Higher premium 3. Lower interest rate 4. Reduced death benefit 4. Reduced death benefit When if ever are the earnings on a non-qualified annuity taxed? 1. Upon withdrawal of the contract value 2. Upon the death of the beneficiary 3. As payments or contributed 4. Earnings are not taxable 1. Upon withdrawal of the contract value Receipts of an application to accelerate benefits, an insurer MUST provide the policy owner with...? Period tax advisor The settlement option that allows proceeds to remain with the insurer and the earnings to be paid to the beneficiary on a monthly basis is called...? 1. Interest only 2. Lump sum 3. Fixed period 4. Fixed amount 1. Interest only How can the insured prevent the face amount of a life insurance policy from being subject to federal tax? 1. But signing the policy at least three years before death 2. By naming the insured's estate as the beneficiary 3. By remaining the policy owner until death 4. By taking policy loans from the cash value 2. By naming the insured's estate as the beneficiary Rogers life insurance representative advised he buy a whole life policy for all of the following reasons EXCEPT...? 1. The policy will build cash value over time 2. The policy premiums will diminish overtime 3. The policy will pay death benefit upon his death 4. The policy premiums will remain level while the policy is in force 2. The policy premiums will diminish overtime 3. Location of the insured's business 4. Proximity of the insured location to emergency services 2. Amount the insured charged for services All of the following characteristics of fixed annuity contract EXCEPT? 1. Funds are invested in a separate account 2. The minimum interest rate is guaranteed in the contract 3. Benefit payments remain level 4. It may be sold as an immediate or different annuity 1. Funds are invested in a separate account Which type of insurer is sometimes referred to as a participating company? 1. Authoritative insurer 2. Reciprocal insurer 3. Mutual insurer 4. Stock insurer 3. Mutual insurer DOES NOT describe a defining characteristics of a whole life policy? 1. The policy accumulates cash value over time 2. The policy is designed to provide coverage 3. The face amount of the policy remains the same over time 4. The death benefit is in force for a specific period of time 4. The death benefit is in force for a specific period of time Which of the following changes to an adjustable life policy REQUIRE proof of insurability? 1. Universal life coverage to term coverage 2. Term coverage to whole life coverage increase the death benefit 3. Term coverage to equal whole life coverage, with premium increase 4. Whole life coverage to equal term coverage decrease the death benefit 2. Term coverage to whole life coverage increase the death benefit Insurance producer shall NOT act as an agent of an insurer until that producer has become...? 1. An independent agent of that insurer 2. A verified agent of that insurer 3. An appointed agent of that insurer 4. A certified agent of that insurer 3. An appointed agent of that insurer If the insured and primary beneficiary are in the same accident, the policy proceeds will be paid to the...? 1. Beneficiary determined by the insurer 2. Contingent beneficiary of the insured 3. Primary beneficiary's children 4. Estate of the primary beneficiary 2. Contingent beneficiary of the insured Annuity products linked to a market-related index are called...? 1. Deferred-indexed annuity 2. Equity-indexed annuity 3. Market-adjusted annuity 4. Fixed annuity 2. Equity-indexed annuity When individuals purchased life insurance to enable their heirs to pay estate taxes, this is called..? Submitted an application and received an insurance producer license All of the following would trigger an accelerated death proceeds to remain with the insurer and the earning to be paid to the beneficiary...? 1. Death of the insured 2. Diagnosed with terminal illness 3. Diagnosed with a catastrophic illness 4. Confinement to a long term care facility 2. Diagnosed with terminal illness