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Order by
- 257 terms
- Terms Definitions
- Indemnity Which provision states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
- The uncertainty or chance of loss For the purpose of insurance, risk is defined as
- The loss must be catastrophic. Which of the following is NOT a characteristic of pure risk?
- A peril A tornado would be an example of which of the following?
- Hazards Events or conditions that increase the chances of an insured loss occurring are referred to as
- Speculative Wagering on a sporting event is known as what type of risk?
- Race Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance?
- Pure risk Units with the same or similar exposure to loss are referred to as
- Speculative risk Which of the following is an example of an uninsurable risk?
- The larger the group When are the group's reported losses more likely to become equal to the statistical probability of loss?
- Preferred risks and poor risks are balanced, with average risks in the middle. To achieve the profitable distribution of exposures,
- Pure risk A situation in which a person can only lose are have no change represents
- Insurance What mechanism allows individuals to transfer their risk of loss to a larger group?
- A written instrument in which a contract of insurance is set forth Insurance policy is
- If the representation is false in a material point The key factor of representation that allows the injured to rescind the contract is
- Charge a higher premium If an applicant for a life insurance policy is fount to be a substandard risk, the insurance company is most likely to
- When an insurer approves a pre-paid application In forming an insurance contract, when does an acceptance usually occur?
- Lower premiums than a person who receives a standard risk. An applicant who receives a preferred risk classification qualifies for
- The materiality of a given concealment An importance of misrepresentation is determined by
- Conditional When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
- The policy may be voided if the applicant was not capable of making a buying decision at the time of application. An agent tries to sell insurance over the phone. One of the applicants appears to be somewhat confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, it was discovered that the insured have been under the influence at the time of application. Which of the following is true?
- Substandard risk Which of the following types of risk will result in the highest premium?
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- (The following must be identified: the parties to the contract; the property or persons being insured; a statement of the insurable interest that exists if the insured is not the owner; the risk(s) being covered; the time period during which the policy will be in force or continue; the stated premium or manner to calculate premium.) According to the Code, how many separate requirements should an insurance policy have?
- The purpose of the act is to protect the consumer's right to privacy by making certain that underwriting data is confidential, accurate, relevant, and properly used. Which of the following is true of the Fair Credit Reporting Act?
- The financial rating of the insurer All of the following must be specified in an insurance policy EXCEPT
- Misdemeanor, a fine not to exceed $25,000 and/or a possible 1-year imprisonment According to the California Insurance Code, any agent violating the regulations relating to misrepresentation will be charged with a
- 5 days If a consumer request additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply?
- Fine three times the amount of the fraud All of the following are possible punishments for individuals involved in fraudulent insurance claims activities EXCEPT
- Negligence What other term is used to refer to unintentional torts?
- Representations Statements made by an applicant for an insurance policy which are true to the best of the applicant's knowledge are referred to as:
- Handling insurer funds in a trust capacity Concerning insurance, the definition of fiduciary responsibility is
- ABC Insurance Services
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(The fictitious name cannot indicate that the licensee is an underwriter or insurance company). If a licensee conducts insurance business under a name, other than their true name, the fictitious name must be approved by the commissioner. Which of the following names may be approved for use?
- Group "Discontinuance" is a term used to describe the termination of what type of insurance?
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(There is an assumption of responsibility by an insurer if they sell a new policy to a group within 60 days of discontinuane). A new insurance must be treated as a replacement if a new insurer sells a policy to a group which discontinued its group medical insurance within how many days?
- To provide protection for the clients by requiring producers to maintain professional standards of conduct. What is the purpose of the California laws regulating production agencies?
- Insurer The insured provides a proof of claim to the
- 15 days Applicant Ann writes a letter to Agent Dan to receive more information about a claim that is currently being settled. Within what span of time must Agent Dan respond?
- Not more than $10,000, imprisonment not to exceed one year or both Any person who knowingly and willfully obtains information about an individual from an insurance company, agent or organization supporting insurance under false pretenses shall be fined.
- Direct response system In which distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer?
- Admitted Which of the following is the most precise synonym for an "authorized" insurer?
- A mutual insurer becomes a stock company. De-mutualization happens when
- The Commissioner has all of these powers. In a conservation or liquidation effort, what powers does the commissioner have?
- One or more fire and casualty broker-agents can employ a solicitor simultaneously According to California Insurance Code, the duties and requirements of solicitor, agent and broker are all distinct from one another. Which of the following is TRUE?
- Puerto Rico An example of foreign insurer is one formed under the laws of
- Independent agent Which of the following persons represents several insurance companies but owns the records of the policies sold?
- Insurance broker
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(insurance broker refers to a person who, for compensation & on behalf of a person other than an insurer, transacts insurance other than life) Which of the following terms would be used for someone who transacts fire insurance on behalf of the insured, and for compensation?
- Without receiving written consent from an insurance regulatory authority Federal law makes it illegal for any individual convicted of a crime involving dishonesty or break of trust to work in the business of insurance affecting interstate commerce
- The company Which of the following entities does a producer represent?
- The principal An agent is a legal person who acts on behalf of
- The way each is compensated What is the main difference between a life agent and a life analyst?
- A bill must be approved by both houses of the California legislature. In order for the California Insurance Code to be changed in any way, what is required?
- Authorized If an insurer meets the State's financial requirements and is approved to transact business in the same state, it is considered to be
- His appointment will expire Arnie worked for Evermore Life Insurance for many years and became their top selling agent. However while Arnie was out of the country enjoying his earnings, he forgot to send in his renewal for his life license and his license expired. In addtion to Arnie's license expiring, what else will happen to Arnie?
- Analyzing a contract of insurance The code defines the term "transact" as all of the following EXCEPT
- June 30th An insurer received a claim on May 1st. On May 31st, the claim was approved in its entity. By what date can the claimant expect the payment?
- Marketing Department Who is responsible for advertising, promoting, and distributing an insurer's products to the public?
- To delegate the power to approve a settlement. According to the California Insurance Code, all of the following are general powers and duties of the Commissioner of insurance EXCEPT
- California Administrative Code of Regulations The set of regulations issued by the California Insurance Commissioner that identifies the standards for the insurance code an how it is to be administered is
- Dividends
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(Dividends are the return of premiums in mutual policies) Each of the following factors are used in determining insurance rates EXCEPT
- File a surety bond with the Commissioner To make sure that an agent's license stays active, the agent of an insurer must see that all of the following are done EXCEPT
- 21 If the Department of Insurance request information from an agent regarding a claim, this must be provided within how many days?
- Actuarial Which of the following departments is responsible for developing mortality and morbidity tables?
- Reasonable When a discontinued policy contained a death benefit, what term is used in the CIC to describe the length of the applicable extension of benefits?
- Retrocession Which of the following terms describes the phenomenon of reinsurance companies reinsuring risks for other reinsurance companies?
- Stock Insurers are classified according to the legal form of their ownership. The type of insurer organized to return a profit to the stockholder is
- Not paying a claim based on research of the medical history of a hospitalized patient who has filed the claim Which of the following is the illegal act of post claims underwriting?
- Institutional source Any person or governmental entity that provides information about an individual to an agent insurance company, or insurance-support organization is known as:
- In the investigation of a claim suspected as a fraudulent When would the insurer be allowed to use the information obtained through a pretext interview?
- $500 per incident and $100 additionally for every month he continues such action. Expect when performing the role of a surplus lines broker, any agent that acts to solicit business for a nonadmitted insurer shall be guilty of a misdemeanor and shall be fined
- Apparent Which type of authority is based on the actions, words, or deeds of the principal?
- Employment with an insurance company Which of the following is NOT a required licensing qualification for a Life and Disability Insurance Analyst in this state?
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Single premium whole life An insurance policy that only requires a payment of premium at its inception and no further premiums contributions, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100, is called
- a. Adjustable death benefit
- b. Policy's cash value is dependent on the performance of the equity index
- **c. Sale of this product requires a securities license
- d. Flexible premium The following are features of the Equity Indexed Universal life EXCEPT:
- Universal Life A life insurance policyowner has the flexibilty to increase the amount of premium and then decrease it at a later date. The person is also allowed to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount. What type of policy is this?
- 19 years and 8 months A 20-year family income policy was purchased effective April 1, 2001. The insured died four months later on August 1, 2001. The beneficiary receives monthly income for
- The premium will increase because the insured will be 5 years older than when the policy was originally purchased An insured buys a 5-year level premium term policy with a face amount of $100,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years
- Payor benefit Which of the following riders provides for a waiver of premium when the policyowner and the insured are not the same person?
- Universal life What kind of policy allows withdrawals or partial surrenders?
- ... Which of the following riders would
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Ann is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)
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An annuitant died after receiving $200 monthly for 10 years ($24,000 total) from a $30,000 installment refund annuity. His wife, as beneficiary, will now receive the same monthly benefit until her payments total
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They earn lower interest rates than fixed annuities
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Which of the following is NOT true regarding Equity Indexed Annuities?
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Flexible Premium Deferred Annuity
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The annuity purchased with multiple payments, whose benefit is paid more than one year after the purchase is known as which type of annuity?
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The annuitant cannot be the same person as the annuity owner.
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Which of the following is NOT true regarding the annuitant?
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a. Contributions grow tax deferred.
- b. They do not qualify for special tax treatment by the IRS.
- **c. Contributions are tax exempt.
- d. Increases of funds are not taxed until received.
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All of the following statements are true of a nonqualified retirement plan EXCEPT
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a. Employer contributions made to a qualified plan are tax deductible as ordinary business expense.
- b. Funds accumulate on a tax-deferred basis.
- c. Contributions made to a qualified plan are not counted as income to the employee for income tax purposes.
- **d. At distribution, all amounts received by the employee are free of taxes.
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All of the following are true of the federal tax advantages of a qualified plan, EXCEPT
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An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin 2 years after the annuity was purchased. What type of annuity is it?
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Which of the following is another term for the accumulation period of an annuity?
1 year
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If a person purchases a Flexible Premium Deferred Annuity, when is the soonest that income payouts will begin?
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Priscilla won the state lottery. The state will send Priscilla a check each month for the next 25 years. What type of investment are they likely to use to provide these benefits?
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What do annuities provide for annuitants?
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An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin 2 years after the annuity was purchased. What type of annuity is it?
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Who bears all of the investment risk in a fixed annuity?
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a. Minimum guaranteed rate of interest.
- b. Future income payments.
- **c. Hedge against inflation.
- d. Equal monthly payments for life.
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Fixed annuities provide all of the following EXCEPT
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Distributions are tax-free if an account has been open five years. What is the main advantage of a Roth IRA?
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It may last for the lifetime of the annuitant or for a shorter period of time.
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Which of the following is true regarding the annuity period?
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a. Part-time classroom aide.
- b. State Superintendent of Public Instruction's receptionist.
- **c. CEO of private corporation.
- d. School bus driver.
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All of the following employees may use a 403(b) plan (TSA) for their retirement EXCEPT
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What do the accumulation units of variable annuities convert to upon annuitization?
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Your client has a contract that will provide him with a certain amount of income for the rest of his life. This is not, however, an insurance policy. What kind of contract does your client have?
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a. The annuity could be obtained through a group of people identified by their relationship to a single entity buying a contract.
- b. Group annuity could be considered qualified.
- c. The employer may be the owner of the contract.
- **d. The annuity must be purchased by a group, but could be owned by an individual.
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Which of the following is NOT true about a group annuity?
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Who bears all of the investment risk in a fixed annuity?
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Tax deductible contributions.
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The advantage of qualified plans to employers is
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a. The owner has the right to name the beneficiary.
- b. The owner is the party who may surrender the annuity.
- **c. The owner must be the party to receive benefits.
- d. The owner must pay the premiums on the annuity.
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All of the following are true of an annuity owner EXCEPT
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a. The insurance company keeps a percentage of the returns.
- b. They have guaranteed minimum interest rates.
- c. They are less risky than variable annuities.
- **d. They earn lower interest rates than fixed annuities.
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Which of the following is NOT true regarding Equity Indexed Annuities?
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**a. Contributions are tax deductible.
- b. Contributions may continue beyond attainment of age 70½.
- c. Distributions may be deferred beyond the attainment of age 70½.
- d. Qualified distributions at the time of retirement are not taxed as income.
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Which of the following features is NOT a unique advantage to the Roth IRA?
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In an annuity, the accumulated money is converted into a stream of income during which time period?
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Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?
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Which of the following is NOT a legitimate use of annuities by businesses?
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The 5th year of the account's existence if the owner has reached age 59 1/2.
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Qualified distributions from a Roth IRA cannot be made until
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Current interest rate at the time of surrender
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Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that that annuity owner will have to pay?
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What do annuities provide for annuitants?
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A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
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Every individual life insurance policy must provide for a free-look provision that lasts for at least
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All insurance policies and annuity contracts, other than variable contracts and modified guaranteed contracts, marketed to senior citizens in the State of California are subject to a cancellation period of at least
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If it's returned during the free look period, the agreement will be void.
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Which of the following is true regarding a policy with a face value less than $10,000?
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a. Mutual funds (only upon the investor's request).
- **b. Value funds.
- c. Fixed-income investments.
- d. Money-market funds.
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During the free-look period, the premium for a variable annuity may be invested in all of the following EXCEPT
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a. Present to the applicant a "Notice Regarding Replacement of Life Insurance" as described by the Code.
- b. Have the applicant sign a copy of the "Notice Regarding Replacement of Life Insurance" as described by the Code.
- c. Sign a copy of the "Notice Regarding Replacement of Life Insurance" as described by the Code and leave the copy with the applicant.
- **d. Do all of these. When replacement of existing coverage is involved, extra requirements apply. The agent must
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A refund of premium and policy fees
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Jenn purchased an annuity contract on March 1st, but after carefully reviewing its limitations, she returned it to the insurer on March 15th. The insurer didn't have any specific instructions from the policyowner on how to invest the premium. What should Jenn expect from the insurance company?
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Every policy of individual life insurance must include a notice of right to cancel the policy, stating the specific time frame for the free-look period. Once the insured has cancelled the policy, within how many days must the insurer refund all premiums and policy fees?
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The policy's account value at the time the policy is returned
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Tom purchased a variable life insurance contract and instructed the insurance company to invest the premium into stocks right away. Twenty five days later he decided to return the policy. What will Tom receive as a refund from the insurance company?
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**a. Value funds.
- b. Fixed-income investments.
- c. Money-market funds.
- d. Mutual funds (only upon the investor's request).
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During the free-look period, the premium for a variable annuity may be invested in all of the following EXCEPT
The interest credited under this option is not taxable since it remains inside the insurance policy.
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All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
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Peter wants to utilize the cash value from his life insurance policy to buy another policy. He opts to use the cash value as a single premium to buy a policy that has a lesser face amount than the original, which will accumulate in cash value until it matures or Peter dies. What type of policy does Peter have?
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Which nonforfeiture option has the highest amount of insurance protection?
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Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option?
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Sam has a life insurance policy from a participating company and receives quarterly dividends. Sam has instructed the company to apply his dividends to the policy to increase the death benefit. The dividend option that Sam has chosen is called
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A copy of the original application for insurance.
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To meet the "entire contract" provision of the Code, a policy must contain
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Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
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The cash value in a policy belongs to the insured even if the policy lapses or is surrendered.
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Which of the following is guaranteed to the policyowner through nonforfeiture values?
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Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
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a. First class mail with a delivery receipt.
- b. Personal delivery by a trained employee of the insurer, with a delivery receipt.
- c. Certified mail.
- **d. Priority mail.
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A life insurance policy can be delivered by all of the following means, EXCEPT
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The two types of assignments are
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a. Self-inflicted death
- b. Death that occurs while involved in a felony
- c. Death due to war or military service
- **d. Death due to plane crash for a fare-paying passenger
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Which of the following is NOT typically excluded from life policies?
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a. The agent should explain the nature and type of any receipt he/she is giving to the applicant.
- b. The agent should probe beyond the stated questions if he/she feels the applicant is misrepresenting or concealing information.
- c. The agent should check to make sure that there are no unanswered questions on the application.
- **d. The agent should change an incorrect statement on the application by personally initialing next to the corrected statement.
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Which of the following is INCORRECT regarding the agent's duties and responsibilities at the time of the application?
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The insured's coverage will be effective immediately.
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When an insured receives a written binder,
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Facility of payment clause
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What provision in a life insurance policy would allow the insurer, after the death of the insured, to pay benefits to a person not named in the policy as beneficiary?
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To purchase a smaller amount of the same type of insurance as the original policy.
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The paid-up addition option uses the dividend
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Each must sign the application.
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Fred's brother-in-law Tony, who lost his job last year, is having some financial difficulties. Fred agrees to loan Tony $10,000 to help him out until he is able to find work. Fred decides to insure Tony's life for the amount of $10,000 while the loan is outstanding. Who will be required to sign the application for this policy?
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An insured receives an annual life insurance dividend check. What term best describes this arrangement?
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Which of the following individuals must show insurable interest as a condition of obtaining a life insurance policy?
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a. Extended term
- b. Reduced paid-up
- **c. Interest only
- d. Cash surrender
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All of the following are Nonforfeiture options EXCEPT
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If a beneficiary wanted a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what option would a beneficiary select?
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"Probability of disability" and the "average severity of the disability."
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In underwriting health and disability insurance, two major considerations that have the potential to affect the proposed insured's' probability of experiencing a loss are
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To provide a guaranteed income for a certain amount of time
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What is the purpose of a fixed period settlement option?
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The insurer might require a medical examination by a professional.
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Which of the following is true regarding an application for a large amount of insurance?
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The surviving beneficiary will continue receiving 2/3 of the benefit paid when the insured was alive.
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An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
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Under what circumstances would a life insurance contract qualify as a "standard policy?"
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Who is protected by a Temporary Insuring Agreement?
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To purchase a smaller amount of the same type of insurance as the original policy
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The paid-up addition option uses the dividend
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When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
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An agent wants to include an illustration written by his insurance company. Which of the following best describes the conditions under which he may use the illustration?
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The illustration must stay exactly as it is.
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According to California Insurance Code, an insurable event is defined as
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a. Any event past or future.
- b. Causes loss or damage to a person.
- c. One in which insurable interest exists.
- **d. All of these
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A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
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An insurance policy specifies that it will pay $600 for a specific loss. The policyowner suffers a loss of $500. How much will the policy pay?
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Concealed relevant health issues on an insurance application.
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The insurer may suspect that a moral hazard exists if the policyholder
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Events or conditions that increase the chances of an insured loss occurring are referred to as
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If a consumer requests additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply?
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Rescind the policy with no refund of premiums.
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When either party to a contract violates a material warranty or other material provision of a policy, the other party is entitled to
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The price of insurance for each exposure unit is known as
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