Life Insurance: Types, Provisions, and Regulations, Exams of Insurance law

Download Life Insurance: Types, Provisions, and Regulations and more Exams Insurance law in PDF only on Docsity! 1 Page | 1 West Virginia State Life Insurance Exam verified 2024 A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a: - ANS; Risk retention group Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated? - ANS; 1970-Fair Credit Reporting Act Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? - ANS; Aleatory The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called: - ANS; Reserves All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: - ANS; Bilateral What year was the McCarran-Ferguson Act enacted? - ANS; 1945 Which of the following consists of an offer, acceptance, and consideration? - ANS; Contract Who elects the governing body of a mutual insurance company? - ANS; Policyholders Insurance policies are considered aleatory contracts because: - ANS; Performance is conditioned upon a future occurrence Who makes the legally enforceable promises in a unilateral contract? - ANS; Insurance company Insurance contracts are known as _____ because certain future conditions or acts must occur before any claims can be paid. - ANS; Conditional A life insurance arrangement which circumvents insurable interest statutes is called: - ANS; Investor-Originated Life Insurance In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this? - ANS; Unilateral 2 Page | 2 When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: - ANS; Insurable interest in the proposed insured Which of these arrangements allows one to bypass insurable interest laws? - ANS; Investor-Originated Life Insurance When must insurable interest exist for a life insurance contract to be valid? - ANS; Inception of the contract If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? - ANS; Insured Which of these is an element of a Variable Life policy? - ANS; A fixed, level premium A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision? - ANS; Payor provision Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies? - ANS; Policyowner Which of the following actions is NOT possible with a Universal Life policy? - ANS; Premiums may be applied as a credit against income tax Which of the following policies is characterized by a flexible premium and death benefit and allows the policy owner control of the investment aspect of the plan? - ANS; Variable universal life A term life insurance policy matures: - ANS; upon the insured's death during the term of the policy What type of life policy covers two people and pays upon the death of the last insured? - ANS; Survivorship When is the face amount paid under a Joint Life and Survivor policy? - ANS; Upon the death of the last insured Variable Whole Life Insurance can be described as: - ANS; Both an insurance and securities product All of these characteristics of an Adjustable Life policy, EXCEPT: - ANS; Face amount can be adjusted using policy dividends Term insurance has which of the following characteristics? - ANS; Expires at the end of the policy period 5 Page | 5 A policy owner is allowed to pay premiums more than once a year under which provision? - ANS; Mode of premium When can a policyowner change a revocable beneficiary? - ANS; Anytime Which of the following statements is CORRECT regarding the tax treatment of a lump- sum payment paid to a life insurance policy's primary beneficiary? - ANS; All proceeds are income tax in the year they are received Which statement regarding the Change of Beneficiary provision is true? - ANS; The beneficiary can only be charged with the consent of the insurer A policy owner's rights are limited under which beneficiary designation? - ANS; Irrevocable The common disaster clause provides that if both the insured and the sole name beneficiary were to die in a common accident, which of the following is true? - ANS; this clause provides the payment of proceeds to the insured's estate A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies? - ANS; Proceeds will go to the contingent beneficiary On a life insurance policy, who is qualified to change the beneficiary designation? - ANS; policy owner Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? - ANS; life income P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to - ANS; P only P completes an application for a $10,000 life policy, but does not give the producer the initial premium. P's coverage becomes effective when: - ANS; P receives the policy and pays the premium J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used? - ANS; Revocable The reason for backdating a policy is - ANS; to obtain a premium rate based on an earlier age Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policy owner? - ANS; Irrevocable beneficiary 6 Page | 6 An insurance company may NOT reject a prospective insured's life application on the basis of which the following factors? - ANS; Gender In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and - ANS; the initial premium What is the underlying concept regarding level premiums? - ANS; The early years are charged more than what is needed Before a life insurance policy is issued, which of these components of the contract is required? - ANS; Applicant's signature on application An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the: - ANS; applicant's physician P is a producer who notices 5 questions on a life application were not answered. What actions should P take? - ANS; Set up a meeting with the applicant to answer the remaining questions When an insurance application is taken by a producer, which of these statements is true? - ANS; Any changes made on the application require the applicant's initials ___________ ___________ insurance is life or health insurance offered through direct- response solicitation by a sponsoring organization - ANS; Mass marketed A(n) ________ insurance company is one formed in a country other than the United States - ANS; Alien If a life insurance policy's cash value is subject to loans exceeding ______, replacement is said to have occurred - ANS; 25% One definition of replacement is "the act of replacing an existing insurance policy with another." Replacement is - ANS; Closely regulated and requires full disclosure A life policy loan in WV cannot charge a fixed rate of interest higher than - ANS; 8% What must be signed by both the producer and applicant when an existing life insurance policy is being reissued with a reduction in cash value? - ANS; Notice regarding replacement What does the West Virginia Life and Health Insurance Guaranty Association provide? - ANS; claim payments of admitted, insolvent insurance companies When recommending a purchase or exchange of an annuity, the producer or insurer must have a reasonable basis for believing that a recommendation is suitable based on 7 Page | 7 all the following facts disclosed by an applicant EXCEPT the applicant's - ANS; county of residence When an employee is terminated, how long does this employee have to convert group life coverage to an individual plan? - ANS; 31 days Which of these contracts fall under replacement regulations? - ANS; Ordinary life ABC Insurance company failed to accept a valid proof of loss statement. This is considered to be a(n) - ANS; Unfair claims practice B the producer is scheduled for a pretrial hearing in a criminal prosecution. Which of the following does NOT need to be submitted to the insurance commissioner prior to B's hearing? - ANS; The posted bond Which of the following is NOT a situation that involves life insurance policy replacement? - ANS; Converting a term policy to a permanent policy with the same insurer An example of an unfair claims settlement practice is: - ANS; Making it mandatory that proof of loss be provided for each claim A prelicensing course must be successfully completed for which of the following? - ANS; resident producer A producer who is a resident in another state but licensed to transact insurance in West Virginia is called a(n) ______ producer - ANS; nonresident A labor union must have at LEAST ____ members to be issued a group life policy - ANS; 25 A(n) ___________ sells, solicits, or negotiates insurance companies - ANS; producer In WV, an insurer licensed to conduct business in WV, but domiciled in NJ, is called a(n): - ANS; Foreign company Life insurance death benefits up to ______ are guaranteed by the West Virginia Life and Health Guaranty Association - ANS; $300,000 A producer is making a sales presentation for a whole life insurance policy. Which of the following statements may the producer guarantee during the presentation? - ANS; "I will guarantee a return of my commissions as an incentive" Which of these is a requirement for obtaining a resident insurance producer license in this state? - ANS; complete a prelicensing examination 10 Page | 10 Assignment of group life insurance benefits is allowed in the state of West Virginia. However, assignment is NOT allowed to the insured's - ANS; employer Which of these factors does NOT influence an applicant's need for life insurance? - ANS; Self-maintenance expenses A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies? - ANS; 6 B is a licensed producer who sells multiple lines of insurance. Which of these products requires B to complete continuing education in order to maintain the license? - ANS; life insurance Replacement can be defined as - ANS; exchanging an existing policy for a new policy A group life insurance policy insured may assign up to _____ of the insured's coverage - ANS; 100% P is an employee covered under his employer's group life policy for $25,000. He quits after 1 year on the job. Which statement about his conversion options is NOT true? - ANS; P can convert to a $25,000 term policy A producer must notify the insurance commissioner within ____ days following the final deposition of an administrative action by any government agency - ANS; 30 The insurance commissioner must give at least ____ days notice prior to holding a hearing regarding a producer's license - ANS; 30 N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase? - ANS; fixed deferred How does an indexed annuity differ from a fixed annuity? - ANS; Indexed annuity owners receive credited interest tied to the fluctuations of the linked index Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT? - ANS; The income from the TSA received income tax-free T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this? - ANS; Life annuity with period certain S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation? - ANS; single premium 11 Page | 11 Equity indexed annuities are invested in which of the following: - ANS; S&P 500 The annuity that represents the largest possible monthly payment to an individual annuitant is a(n): - ANS; Straight life annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities? - ANS; Flexible installment deferred Which type of contract liquidates an estate through recurrent payments? - ANS; Annuity Which of the following statements concerning an individual straight life annuity is accurate? - ANS; payments are made to an annuitant for life To be eligible for social security benefits, an employee must be able to perform: - ANS; any occupation Which of the following factors affects the amount of monthly disability benefits payable under social security? - ANS; the amount of the benefits available from other sources One becomes eligible for Social Security disability benefits after having been disabled for: - ANS; 5 months Which of the following does social security NOT provide benefits for? - ANS; Dismemberment What determines the full amount of social security retirement benefits a qualified individual is entitled to receive? - ANS; Primary Insurance Amount (PIA) In a qualified retirement plan, the yearly contributions to an employee's account: - ANS; Are restricted to maximum levels set by the IRS An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age? - ANS; 59 1/2 Traditional Individual Retirement Account (IRA) distributions must start by: - ANS; April 1st of the year following the year the participant attains age 70 1/2 Premature IRA distributions are assessed a penalty tax of: - ANS; 10% What is being delivered during a policy delivery? - ANS; Insurance contract to the proposed insured In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and - ANS; the initial premium 12 Page | 12 When an insurance application is taken by a producer, which of these statements is true? - ANS; Any changes made on the application require the applicant's initials An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n): - ANS; Exclusion for the medical condition An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the: - ANS; Applicant's physician Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of: - ANS; $10,000 A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following? - ANS; Aviation exclusion A Medical Information Report (MIB) report may disclose which of the following: - ANS; Prior use of marijuana Why is an applicant's signature required on a health insurance application? - ANS; To attest that the statements on the application are accurate to the best of the applicant's knowledge Which of the following statements about noncontributory employee group life insurance is FALSE? - ANS; A minimum number of employees is required to participate When a policy owner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n): - ANS; Anti-Money laundering violation A person who is insured within a group contract will be given a - ANS; certificate An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a - ANS; $25,000 individual whole life policy S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits? - ANS; Full benefits are payable under the master contract An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be: - ANS; Converted to an individual permanent policy at an individual rate A noncontributory group term life plan is characterized by: - ANS; The entire cost of the plan is paid for by the employer