Life Insurance MCQs

P wants to name her husband as the beneficiary of her life policy. However, she wishes to retain all of the rights of ownership. P should have her hus...

irrevocable beneficiary
revocable beneficiary
secondary beneficiary

A contract that has as its basic function the systematic liquidation of accumulated assets through periodic payments is called an:

indemnity contract
investment contract
endowment
annuity

An insurance producer takes an application for a life insurance policy but does not collect the initial premium. On delivery of the policy to the prop...

A copy of the MIB report
The insured’s signed statement of continued good health
A copy of the conditional receipt
A copy of the temporary insurance agreement that covered the period between the application date and the delivery date.

An employer can deduct premium payments as an ordinary business expense for which of the following life coverages?

Buy and Sell Agreements
Group
Key Employee
Joint Life, if the business is named as the beneficiary

A producer takes applications from identical twins who want to buy the same type of policy in the same amount. The insurer issues the policies as appl...

Incontestability
Insurable interest
Consideration
Risk classification

In the event of an insured's death, which of the following provides an income for the family during a designated period of time followed by a lum...

Family Income rider
Survivorship Life policy
Joint Life policy
Modified Life policy

Which of the following statements is CORRECT about Group Life conversion privileges?

Under the COBRA law, a departing employee may elect to remain a member of the Group Life plan for a limited period of time.
Death during the conversion period is covered even if the departing employee chose not to convert the policy.
A departing employee must individually pay the premium if the employee elects to be covered during the conversion period.
If a departing employee elects to convert a life insurance policy, the insurer must offer Term insurance as one of the choices.

Which of the following policies is an interest-sensitive form of permanent protection?

Universal Life
Limited-Pay Life
Graded Premium Whole Life
Modified Whole Life

Reinstatement of a life insurance policy requires an insured to take all of the following actions EXCEPT:

provide evidence of insurability
make collateral assignment to the insurer
pay back interest on any outstanding policy loan
pay all past-due premiums

Which of the following statements about a Renewable Term policy is CORRECT?

It is renewable at the option of the insurer.
It is renewable at the option of the insured.
It is renewable at the option of the insurer, with proof of insurability.
It is renewable at the option of the insured, with proof of insurability.

If an insured commits suicide after the Suicide clause in the insured's life insurance policy has expired, the insurer will take which of the fol...

Refuse to pay the Death benefit or refund any premiums
Refund only the premiums paid
Refund the premiums paid plus interest
Pay the Death benefit

Which of the following policy provisions provides for continuation of coverage despite nonpayment of premiums?

Entire Contract
Ownership clause
Nonforfeiture Option
Insuring clause

An applicant for life insurance may question the validity and source of any consumer information developed under the

Medical Information Bureau Disclosure Act
Fair Credit Reporting Act (Insurance Information and Privacy Protection Act)
Equal Employment Opportunity Act
Medicare Act

The PRIMARY reason for selecting a Variable Whole Life policy instead of a traditional Whole Life policy is that the Variable Whole Life policy:

provides flexible premium payments
allows the policyowner to borrow a larger percentage of the cash value
has the potential to earn a higher rate of return on the cash value
allows the policyowner more flexibility in naming and changing beneficiaries

A policyowner names his wife as the primary beneficiary of his Universal Life policy on a revocable basis. He also names his three children as his sec...

The children
The policyowner's estate
The primary beneficiary's estate
The tertiary beneficiary

The Waiver of Premium provision of a life policy allows the insurer to take which of the following actions?

Waive an insured’s premiums if the insured becomes totally disabled before a certain age
Waive an insured's premiums if the insured becomes partially disabled for a minimum time
Increase an insured's coverage at an attained age without imposing a premium increase
Reduce an insured's premiums if the insured pays them annually instead of monthly

Under the Social Security Retirement Benefits, all of the following factors will influence how much a retiring individual will receive as a monthly in...

age
"primary insurance amount"
"fully insured" or "currently insured" status
sex

The PRIMARY purpose of an inspection report is to assess an applicant's:

credit rating
personal characteristics
job performance
health profile

If a policy contains a Guaranteed Insurability rider, the insured has the right to purchase:

additional coverage when the insured reaches retirement age
additional coverage whenever the insured changes jobs
additional coverage at specified ages
coverage on the insured's children within thirty-one days after they are born

Which of the following statements is NOT correct about representations?

They can be a part of the contract.
They are true in every respect.
They are assumed to be accurate.
They influence the insurer's acceptance of the risk.

If an Adjustable Life policyowner makes an additional premium payment, the policy may be affected in all of the following ways EXCEPT the:

premium paying period may decrease
value of the Nonforfeiture Options may decrease
face amount may increase
length of coverage may increase

An insured owns a $10,000 policy with a $4,000 cash value and a 6 percent interest rate. On January 1, the insured borrows $500 and pays one year'...

$3,500
$6,000
$9,470
$9,500

Which of the following retirement plans is tax-qualified? A. B. C. D.

Key-person
Defined contribution
Section 457 deferred compensation
Split dollar life insurance

A life insurance application is incomplete if it is missing the signature of which of the following?

A revocable beneficiary
The president of the insurer
The proposed insured's primary care physician
The proposed adult insured

The right to change a beneficiary designation is reserved for the:

beneficiary
policyowner
insurer
insured

All of the following policies may be examples of third party ownership EXCEPT:

Modified Life
Group Life
Split-dollar Life
Key Employee Life

In life insurance, insurable interest must exist at the time the

producer delivers a policy
proposed insured has a medical examination
producer writes an application on a proposed insured
beneficiary files a claim

A payor benefit rider provides which of the following benefits

A disability income benefit payable to the payor if the payor becomes disabled
A permanent waiver of premium should the payor die
A temporary waiver of premium should the payor die, until the insured reaches a predetermined age
A double indemnity Death benefit payable to the beneficiary upon the death of the payor

Two business partners own life insurance on each other. If one partner dies, which of the following contracts will allow the other partner to buy 100 ...

Buy and Sell Agreement
Key Employee Life policy
Survivorship Life
Joint and Several Annuity

If life insurance policy applicant is classified as a substandard risk, the insurance company will MOST likely:

issue the policy with riders
charge an extra premium
require an annual medical examination
lower the rate per thousand charged

When a producer submits an insurance application to the company, the producer must take all of the following actions EXCEPT:

submit the initial premium, if it was collected
ensure any changes on the application were initialed by the applicant
submit a completed medical information report
complete the producer's report

In life insurance, the Free Look provision begins on the:

effective date of coverage
policy delivery date
date of application
date that the insurer issues the policy

A client needs a substantial amount of protection but has limited financial resources. Which of the following insurance policies would BEST meet the c...

Term Life
Adjustable Life
Whole Life
Limited-Pay Life

A life policy is usually contestable due to material misrepresentation on the application for a period of:

30 days
6 months
2 years
5 years

Which of the following statements is CORRECT about the Paid-Up Additions in a participating Whole Life policy?

They are subject to underwriting approval.
They do not generate dividends.
They are considered Term policies.
They are purchased on an attained age basis.

In which of the following contracts is the Death benefit called the principal sum?

Survivorship Annuity
Accidental Death and Dismemberment (AD&D)
Decreasing Term
Joint Life

At which of the following times MUST a life insurance applicant be informed of their rights under the Fair Credit Reporting Act?

During the initial appointment
When the insured's application is completed
When the policy is delivery
Upon initial premium receipt

R has just graduated from law school. R knows that R's future earnings will be much higher than they are now, but wants to purchase a permanent p...

Return of Premium Life
Life Paid-Up at 65
Modified Whole Life
Annual Renewable Term

Federal income tax laws generally treat proceeds of life insurance policies as:

graduated taxes
deferred taxes
nontaxable
tax credits

Which of the following policy provisions states that the application is part of the policy?

Entire contract
Ownership clause
Nonforfeiture option
Assignment clause

What are the personal uses of life insurance?

Insured protection, estate creation and cash accumulation
Survivor protection, estate creation and conservation, cash accumulation and liquidity
Cash accumulation, estate depletion and liquidity
Beneficiary protection, liquidity, estate creation, and cash accumulation

Which of the following features allows an insurance policy to remain in force for a specified number of days beyond the premium due date?

Reinstatement provision
Nonforfeiture Option
Grace Period provision
Consideration clause

Which of the following provisions in a life policy specifies the manner in which proceeds will be paid to a beneficiary on the death of the insured?

Nonforfeiture Options
Settlement Options
Conditions
Modes of Payment

An applicant's statements on an application are considered to be legal:

warranties
representations
guarantees
waivers

Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another? ...

Nonforfeiture
Endorsement
Transfer for value
Assignment

A contract that promises to pay an income to an insured until his/her death is called:

Family Income
Modified Endowment
Survivorship Life
Life Annuity

Which of the following group life plans requires at least 75 percent of the eligible members to participate?

Contributory
Noncontributory
Participating
Nonparticipating

An insured intentionally understates her age on her application for a life policy. At death, the insurer will take which of the following actions?

Refuse to pay the claim based on material misrepresentation on the application
Pay the face amount of the policy if the death occurred after the end of the incontestable period
Pay a reduced Death benefit based on the insured’s actual age
Pay the stated Death benefit less the unpaid premium owed to the company as a result of the understated age.

Which of the following annuities would BEST suit the needs of a 35-year-old factory worker who is concerned about inflation and wants to establish a r...

A Single Premium Deferred Annuity
A Single Premium Immediate Annuity
A Level Premium Fixed Annuity
A Flexible Premium Variable Annuity

A type of annuity in which the cash values are invested in securities is called:

Variable
Deferred
Fixed
Joint and survivorship

Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit?

Within 2 years pf the date of loss
On the next anniversary of the policy
After the estate of the insured has been settled
Immediately after receiving written proof of loss

Which of the following is the closet term to an "authorized" insurer?

Admitted
Certified
Legal
Licensed

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 their children ...

Life income with period certain
Interest only option
Joint and survivor
Fixed amount option

When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?

There are no distributions
Distributions are nontaxable
Distributions are taxable
Distributions can't begin prior to age 70 1/2

Insurance is the transfer of

Risk
Peril
Hazard
Loss

An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the...

Pay the death benefit
Pay a decreased death benefit
Refuse to pay the death benefit because of the fraud
Sue for the right to not pay the death benefit

An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This i...

Express
Assumed
Implied
Apparent

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary , what will occur?

The interest will continue to accumulate tax deferred
Interest will become immediately taxable
Premiums will increase
Premiums will decrease

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will only receive the guaranteed minimum specified in the contract
The annuitant will receive the lower of either the guaranteed minimum rate or current rate
The annuitant will receive the higher of either the guaranteed minimum rate or current rate
The annuitant will always receive the current interest rate

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of his policy is significantly lower this month th...

Variable
Term
Securities
Stock

Which of the following riders would not cause the Death benefit to increase?

Guaranteed Insurability Rider
Payor Benefit Rider
Cost of Living Rider
Accidental Death Rider

Which of the following is true for both equity indexed annuities and fixed annuities?

They invest on a conservative basis
Both tied to a equity index
Both are considered to be more risky than variable annuities
They have a guaranteed minimum interest rate

Who can make a fully deductible contribution to a traditional IRA?

A person who contributions are funded by a return on investment
An individual not covered by an employer-sponsored plan who has earned income
Anybody: all IRA contributions are fully deductible regardless of income level
Someone making contributions to an educational IRA

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Reduced paid-up
Cash surrender
Paid-up options
Extended term

Which of the following are generally not considered when underwriting group insurance?

Nature of Group
Groups medical history
Groups past claim experience
Size of group

Because of financial obligations, John felt that he needed more insurance than the insurer was willing to issue. John's insurance procedure told ...

Return of Premium
Automatic premium loan
Waiver of premium rider
Payor Rider

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? ...

Policy's cash value
Refund of premiums
Full death benefit
Nothing, since the insured was killed as a result of a war

Are insurance company underwriters allowed to discriminate?

No, higher risks pay higher premiums
Yes, but not unfairly
No, discrimination is an unfair practice
Yes, but only for gender

Which of the following is true regarding the insurance amount in a credit life insurance policy?

Creditor may insure the debtor for an unlimited amount of coverage
Creditor can only insure the debtor for the amount owed
The amount of coverage can be greater than the amount owed
Allowable amount of coverage is determined by the State Insurance Commissioner

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Policy illustrations
Buyer's Guide and Policy Summary
Notice Regarding Replacement
Disclosure Authorization Form

Which of the following has the authority to issue a cease and desist order?

Federal Insurance Regulation Board
Department of Insurance
State police
Superintendent

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 pers...

Survivor protection
Juvenile protection provision
Life Planning
Survivorship insurance

Which of the following is true regarding a waiver of a surrender charge on an annuity contract?

Surrender charge can only be waived if the annuitant needs the funds for medical expenses
The surrender charge waiver only applies to immediate annuity
The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days
The charge can only be waived if the annuitant needs the funds for medical expenses

An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her...

$8,000, 30 days
$8,000, 60 days
$10,000, 30 days
$10,000, 60 days

A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. The nontaxable trans...

Rollover
Premature Distribution
1035 Exchange
Qualified Distribution

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured ...

Older
Larger
Smaller
More Active

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent mos...

Nonforfeiture option guarantees that the owner will receive a surrender value of the contract
It is not possible to surrender an annuity before the annuitzation period
The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned.
The owner will receive some of the money back, which will depend on the surrender value established by the insurer at the time the contract is terminated

In which of the following situations is it legal to limit coverage based on martial status?

Excessive number of divorces, as defined by the insurance code
Divorce within the last 6 months of applying for the insurance
Legal separation during the application process
It is never legal to limit coverage based on martial status

Who makes up the Medical Information Bureau?

Physicians and paramedics
Insurers
Hospitals
Former insured

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The insurer will not permit the policyowner to take out any more loans
The policy will be reduced to an extended term option
The insurer will increase the interest rate on the loan and charge a penalty
The policy will terminate when the loan amount with interest equals or exceeds the cash value

Which of the following statements is true concerning the Accidental Death Rider?

It will pay double or triple the face amount
Also known as the triple indemnity rider
It is only available in group insurance
The rider is only available to insureds over the age of 65

Which of the following statements about a suicide clause in a life insurance policy is true?

Suicide is excluded as long as the policy is in force
Suicide is excluded for a specific period of years and covered thereafter
Suicide is covered for a specific period of years and excluded thereafter
Suicide is covered as long as the policy is in force

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are considered income for tax purposes
Dividends are taxable in some life insurance policies and nontaxable in others
Dividends are nontaxable
Dividends are taxable only after a certain amount is accumulated annually

Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information in his/her report, the reporting agency must

Respond to the consumers complaint
Send an actual certified copy of the entire report to the consumer
Change the report
Defend the report if the agency feels it is accurate

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit cannot be decreased
Death benefit can be increased with proof of insurability
The death benefit can be increased only when the policy has developed a cash value
The death benefit will be increased only by exchanging the existing policy for a new one

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insura...

Subrogation
Aleatory
Adhesion
Warranty

Which of the following is NOT a goal of risk retention?

To reduce expenses and improve cash flow
To fund losses that cannot be insured
To increase control of claim reserving and claims settlements
To minimize the insured’s level of liability in the event of a loss

The superintendent may examine books and records of all authorization insurers in Ohio. Who is responsible for paying for the exam?

The NAIC
The Department of Insurance
The Insurer
The Superintendent

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 wou...

Term Insurance only
Any form of life insurance
Universal Life insurance
Permanent insurance only

All of the following are rewuirements for life insurance illustrations except

They may only be used as approved
They must identify nonguranteed values
They must differentiate between guaranteed and projected amounts
They must be part of the contract

Julie pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. Julie has decided that she would rathe...

Reduction of premium option
Cash option
Dividend-to-premium option
Accumulation at interest

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premium must be paid

For 20 years
Until the policyowners age 65
Until the policyowners age 100, when the policy matures
For 20 years or until death, whichever occurs first

If an agent fails to obtain an applicant's signature on the application, the agent must

Return the application to the applicant for a signature
Send the application to the insurer with a note explaining the absence of signature
Sign the application for the applicant
Sign the application, stating it was the agent

A deferred annuity is surrendered prior to annuitzation. Which of the following best describes the nonforfeiture value of the annuity?

The surrender value will not be more than 80% of the cash value in the annuity after the time of surrender
The surrender value should be equal to 100% of the premium paid, minus any prior withdraws and surrender charges
A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments.
The surrender value will be based on current interest rates

All of the following information about a customer must be used in determining annuity sutability except

Financial experience
Beneficiary’s age
Annual income
Tax status

A universal life insurance policy has two types of interest rate that are called

Guranteed and current
Minimum and target
Fixed and variable
Option A and B

All of the following statements are true regarding installments for a fixed amount except

The annuitant may select how big the payments will be
Value of the account and future earnings will determine the time period for the benefits
The payments will stop when the annuitant dies
The option pays specific amount until the funds are exhausted

An insolvent insurer is one who is unable to pay its obligations when they are due or has fewer assets than liabilities for a period of

6 years
3 years
2 years
4 years

Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds?

Vacation travel expenses
Travel expenses for family members to come to the funeral
Day care
Debt cancelation

Admitted life insurance must pay interest, at a rate specified by life, on death benefits from the date of the insured's death, through how many ...

15 days
20 days
30 days
31 days

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Life Insurance MCQs