SC Life Insurance Exam (100% Correct) Latest Version 2023 – 2024, A+ Rated, Exams of Real Estate Management

Download SC Life Insurance Exam (100% Correct) Latest Version 2023 – 2024, A+ Rated and more Exams Real Estate Management in PDF only on Docsity! SC Life Insurance Exam (100% Correct) Latest Version 2023 – 2024, A+ Rated If a policy has a automatic loan provision, what happens if the insured dies before the loan is paid back? - The balance of the loan will be taken out of the death benefit An insurer receives a report regarding potential insured that includes financial status, hobbies, and habits. What type of report is that? - Inspection Report The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as - Spendthrift Clause Children's riders attached to whole life policies are usually issued as what type of insurance? - Term An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation - Decreasing Term How many hours of CE must be completed every 2 years? - 24 total hours, including 8 hours approved for the line of licensing that the producer holds Which of the following statements is true concerning the creditors of the deceased insured? - The creditors have rights to the proceeds if they can show evidence of valid assignment A life insurance policy has a legal purpose if both of which of the following elements exist? - Insurable interest and consent A long stretch of national economic hardship causes a 7% rate of inflation. A policy owner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? - Cost of Living Rider Which of the following Life Insurance policies would be considered interest-sensitive? - Universal Life The authority granted to an agent through the agent's contract is referred to as - Express Authority What must happen when an individual policy or annuity has been personally delivered to the policyowner? - The policyowner must sign a delivery receipt In the event of an insurer's insolvency, the South Carolina Life and Health Guaranty Association will - Reinsure policies of the insolvent insurer through other companies Once the Director issues a cease and desist order, how soon must an insurer comply with the order? - within 30 days When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? - It is reduced to the amount of what the cash value would buy as a single premium All of the following are unfair claims settlement practices EXCEPT - Suggesting negotiations in settling the claim How many hours of continuing education in Ethics are required each compliance period - 3 In the transaction of insurance, which of the following is considered to be representing the client? - The Broker In a group life insurance policy, the employer may select all of the following EXCEPT - The beneficiary The premium of a survivorship life policy compared with that of a joint life policy would be - Lower Which of the following is TRUE about the 10- day-free=look period in a Life Insurance policy? - It begins when the policy is delivered. All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT - It is a life contingency option An insurance producer has not been appointed to an insurance company. Who is the producer considered to represent? - The Client Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement - Any form of life insurance Who is an insurance producer - Any person licensed to sell, solicit or negotiate insurance In life settlement contract, who does the life settlement broker represent? - The owner All of the following are true regarding a decreasing term policy EXCEPT - The payable premium amount steadily declines throughout the duration of the contract. Is it ever possible for more than one producer to split the commissions on an insurance transaction in this state? - Yes, it is possible as long as both are licensed for that line of business The type of insurance company organized to return to any surplus of money to its policyholders is known as what - Mutual Company An insurance policy paid a nontaxable dividend to the insured one year and nothing the next. From what type of insurer did the insured purchase the policy? - Mutual In insurance, when is the offer usually made on a contract? - When the insurance application is submitted When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what? - Adverse Selection What entities make up the Medical Information Bureau? - Insurers An insurance company that is formed under the laws of another state is known as what type of insurer? - Foreign What type of report provides information about the applicant's hobbies, habits, and financial status? - Inspection Report The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what? - Loss In forming an insurance contract, when does an acceptance usually occur? - When the insurer approves a prepaid application What type of risk is insurable? - Pure If an applicant does not receive his or her insurance policy, who would be held responsible? - The agent What type of insurer is formed under the laws of another country? - Alien What are the three types of agent authority? - Express, Implied and apparent When agents act within the scope of their contract, their actions will be assumed to be the acts of whom? - Insurer If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer? - Authorized or Admitted What are the four elements of an insurance contract? - Agreement (offer and acceptance), consideration, competent parties, and legal purpose An applicant conceals relevant health information on the application. The applicant presents what type of hazard? - Moral What do individuals use to transfer their risk of loss to a larger group? - Insurance A person who does not lock the doors to his or hers house shows an indifferent attitude. This person presents what type of hazard? - Morale Whom does an insurance agent represent? - Insurance Company According to the Law of Agency, a principal is represented by whom? - Agent or Producer Insurers are classified according to their domicile. What are the 3 types of insurers? - Domestic, foreign, and alien What are the strategies used by underwriters to prevent adverse selection? - Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate When does an insurance policy go into effect? - When the policy is delivered and the premium is paid Insurance is a contract that protects the insured from what? - Loss Wagering on a sporting event is known as what type of risk? - Speculative The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility? - Fiduciary What two elements are necessary for a life insurance contract to have a legal purpose? - Insurable interest and consent An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada? - Foreign In the agent/insurer relationship, who is considered the principal? - Insurer What is the best way to handle incomplete insurance applications? - Return the application to the applicant for completion A situation in which a person can only experience a loss and no gain presents what type of risk? - Pure Risk When would a misrepresentation on an insurance application be considered fraud? - When it is intentional and material What document is required for an insurance company to transact insurance? - Certificate Authority What are the 5 characteristics of an ideally insurable risk? - Loss must 1) due to chance 2) definite and measure 3) statistically predictable 4) not catastrophic 5) Coverage cannot be mandatory Who owns stock companies? - Stockholders What is the term for the causes of loss insured against in an insurance policy? - Peril When a change needs to be made on the application for insurance, which is the best method for correcting the information? - Complete a new application or ask the applicant to initial the correction on the original application Conditions that increase the chance of a loss are known as what? - Hazards If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do? - Send the application back to the applicant for signature Whose responsibility is it to determine that all the questions on an insurance application are answered? - The agent's For the purpose of insurance, what is risk? - uncertainty of loss The insurer organized to return a profit to the stockholders is what type of insurer? - Stock Company What are three types of Hazards? - Physical, moral and morale What is a warranty in an insurance contract? - An absolutely true statement upon which the validity of the insurance policy depends. What type of premium is charged on a straight life policy? - A level premium for the life of the insured What is the purpose of establishing the target premium for a universal life policy? - To prevent the policy from lapsing A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this? - 20 year level term What policy component must decrease in decreasing term insurance? - Face Amount What type of policy is typically without proof of insurability from the insured - Group Policy Who is insured under a juvenile life policy? - A minor What type of life insurance policy offers pure death protection? - term Regarding taxation, how does the cash value of a universal life policy accumulate? - tax deferred If an employee want to join group insurance coverage outside of the open enrollment period, what would the employee have to provide? - Evidence of insurability What are the characteristics of the group that underwriters will consider before issuing a group life policy? - Group's purpose, size, financial strength and turnover The death protection component of a universal life policy is expressed as what of coverage? - Annually Renewable Term What is the major difference between the most common types of whole life policies: Straight life, Limited Payment, and Single Premium? - Premium Payment Mode i an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage? - Whole Life What type of life insurance policy is Life Paid-up at Age 65? - Limited-pay Whole Life In variable universal life insurance, to what policy component does the term variable refer? - Cash value and death benefit In a joint life policy, when is the death benefit paid? - Upon the first death Universal life policies have two types of interest rates. What are they? - Guaranteed and current What type of life insurance is best suited to cover a mortgage? - Decreasing Term Why are policy loans not available on term insurance? - There is no cash value to borrow against If there is no name beneficiary for the annuity benefits, to which entity will the benefits be paid? - Annuitant's estate What type of annuity requires an agent to have a securities license? - Variable Annuity An individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy. What type of contract does this person have? - annuity What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives? - Straight Life An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity? - Flexible Premium Deferred Annuity What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and ceases at the annuitant's death? - Pure Life How long is income paid under a pure life annuity - Only for the life of the annuitant Who possesses all the rights in an annuity? - Annuity Owner Regarding annuity payments, what is the is the difference between the annuitant and the beneficiary of any annuity? - The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death What are the two classifications of annuities according to the time when annuity payments begin? - Immediate and deferred What type of annuity can be purchased with a single premium? - Immediate Annuity If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that? - Joint Life Annuity What are the two types of refund life annuities? - Cash refund and installment refund Who bears the investment risk in a fixed annuity? - The insurer What causes a variable annuity benefit to vary? - The annuity's underlying investments What are accumulation units in annuities? - Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units) What type of license(s) is/are required in order to sell variable annuities? - A life insurance license and a securities license How long will a life annuity with a 15-year period certain pay? - For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period: then the payments will last for 15 years. How soon can income payments begin in an immediate annuity? - No later than a year from the time of annuity purchase Whose life expectancy is taken into consideration in an annuity contract? - Annuitant What is the difference between a single premium and a flexible premium payment options in a deferred annuity? - The number of payments that purchased the annuity What is the disadvantage of owning a fixed annuity, as opposed to variable? - In times of inflation, the benefit of a fixed annuity will have decreased purchase power If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment? - current Can a business or a corporation be an annuitant? - No, an annuitant must always be a natural person who recieves income payments from an annuity? - Annuitant In flexible premium payment annuities, the term "flexible " refers to what - Amount of premium What is the main reason for purchasing an annuity? - To provide income that the annuitant cannot outlive What type of annuity credits its interest-based upon an index such as S&P 500? - Equity Indexed Annuity In an annuity, the accumulated money is converted into a stream of income during which phase? - Annuitization Period What are the two phases of an annuity? - Accumulation and annuitization for pay in and pay out If the annuitant dies before the annuitization period starts, what will the beneficiary receive? - Either the amount paid into the annuity or the cash value, whichever is greater With a single premium deferred annuity, when will the annuity payments become available? - No sooner than a 1 year after the annuity purchase how are annuities classified depending on how many lives they cover ? - Single life and multiple life annuities What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years? - Life income with period certain If the annuitant dies during the accumulation period, who will receive the annuity benefits? - beneficiary Which of the following best describes the aleatory nature of an insurance contract? - Exchange of unequal values An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? - She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. When a producer's appointment is canceled by the company, the Department of insurance must be notified within - 30 days Anyone who willfully violates a cease and desist order can be fined what maximum amount per day? - $100 What method do insurers use to protect themselves against catastrophic losses? - Reinsurance Who is responsible for covering the expenses associated with the examination of domestic insurers? - The examined insurer Which of the following best describes a bail-out provision? - It allows the owner to surrender the annuity without a charge Who is the owner and who is the beneficiary on a Key Person Life Insurance policy - The employer is the owner and beneficiary Which of the following best describes gross annual premium? - Net premium plus expenses What does "liquidity" refer to in a life insurance policy? - Cash values can be borrowed at any time The policy owner wants to make sure 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 policy owner choose? - Interest Only Option Another name for a substandard risk classification is - rated Which of the following policies would have an IRS required corrido or gap between the cash value and the death benefit - Universal Life Option A Upon policy delivery, the producer may be required to obtain any of the following EXCEPT - Signed waiver of premium Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as - Rebating An applicant wants to buy a policy that has cash value element. Which type should she buy? - permanent According to the entire contract provision, what document must be made part of the insurance policy? - Copy of the original application Death benefits payable to a beneficiary under a life insurance policy are generally - Not subject to income taxation by the Federal Government. When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by - A paramedic or examining physician at the insurer's expense Which of the following is TRUE regarding the annuity period? - It may last for the lifetime of the annuitant. All of the following are beneficiary designations EXCEPT - specified Which nonforfeiture option provides coverage for the longest period of time? - Reduced Paid-Up In order to become licensed as a nonresident producer in this state, a person must do which of the following? - Show proof of a valid license for the same line of authority in the home state Who can make a fully deductible contribution to a traditional IRA - An individual not covered by an employee-sponsored plan who has earned income When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is the money placed? - The insurance company's general account All of the following are factors that an underwriter could use to select and classify risk EXCEPT - National origin A licensed produer may be fined for nonwillful and for willful violations of insurance laws with the following respective fines - $2,500/$5,000 Which of the following is correct regarding credit life insurance - It insures the life of a debtor An insured receives an annual life insurance dividend check. What term best describes this arrangement - Cash option The interest earned on policy dividends is - taxable The producer who fails to segregate premium monies from his own personal funds is guilty of - Commingling Which of the following includes information regarding a person's credit, character, reputation, and habits? - Consumer Report A Universal Life Insurance policy is best described as a/an - Annually Renewable Term policy with a cash value account Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of - Twisting Which of the following is TRUE regarding variable annuities? - The annuitant assumes the risks on investment Which concept is associated with "exclusion ratio"? - Annuities payments A universal life insurance policy has two types of interest rates that are called - Guaranteed and current Fines levied by the director in lieu of license revocation or suspension must be paid within - 30 days How many hours of continuing education in Ethics are required in each compliance period? - 3 What type of licensee represents the insurance company? - Producer In order to transact insurance business in this state, an agency must meet all of the following except - Obtain an insurance agency license Which of the following insurance options would be considered a risk-sharing arrangement - reciporcal Which of the following policies would be classified as a traditionally level premium contract? - Straight Life All of the following are examples of risk retention Except - Premiums