ca life exam

Which one of the following does NOT affect the insured’s life insurance premium?
A) Expense
B) Reserves
C) Mortality
D) Interest

Which of the following settlement options does NOT guarantee that the entire death benefit will be paid out to the beneficiary?
A) Life income
B) Fixed-amount installments
C) Lump-sum payment
D) Fixed-period installments

In reinsurance, the insurance company that transfers its loss exposure to another insurer is the
A) Reciprocal insurer.
B) Primary insurer.
C) Reinsurer.
D) Secondary insurer.

In comparing the purchase of individual life insurance to group life, which statement is NOT true?
A) Group insurance has a nondeductible premium while individual insurance has a tax-deductible premium to the payor.
B) Group life tends to have a lower premium per person than individual life.
C) Both types of coverage provide a tax-free death benefit.
D) Group insurance is automatic and requires less medical information than the individual coverage.

In a group life insurance plan, unmarried children who are attending college may be covered as eligible dependents until they reach the age of
A) 21.
B) 24.
C) 20.
D) 25.

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's salary and years until retirement?
A) A traditional planning approach
B) The needs analysis approach
C) An estate planning approach
D) The human life value approach

Which of the following premium payment modes would result in the highest overall premium for life insurance?
A) Quarterly
B) Semi-annual
C) Monthly
D) Annual

A person has a history of DUIs. To his insurer, this presents what type of hazard?
A) Physical
B) Morale
C) Legal
D) Moral

Two individuals are partners in a law firm together. If one of them were to pass away, they want to make sure that their surviving family will receive a fair value for their stake in the business. What life insurance arrangement would be most suited for transitioning the business during this time of loss?
A) Split-dollar Agreement
B) Executive Bonus Plan
C) Buy-sell Agreement
D) Deferred Compensation Plan

According to the California Insurance Code, any person legally capable of making an insurance policy is considered
A) An insurer.
B) An underwriter.
C) A broker.
D) An agent.

An adjustable life policy allows the policyowner to do any of the following EXCEPT
A) Shorten the premium paying period.
B) Change the period of protection.
C) Decrease the premium amount.
D) Skip premium payments.

Which of the following is a characteristic of a revocable beneficiary designation?a)Beneficiary may return control of policy to owner with written approval
b)Beneficiary has a vested interest in the policy
c)Policyowner requires beneficiary’s permission to borrow against the cash value
d)Policyowner can change beneficiary designation anytime without consent of beneficiary

All of the following are true about the Social Security System EXCEPT
A) The majority of workers in the U.S. are required to pay into the system.
B) The system has been largely privatized.
C) Meant to supplement other retirement income, it provides a minimum floor of income.
D) Benefits are prescribed by law, not by contract.

An applicant for an insurance license has had a previous application for a professional license denied for cause within the last 5 years. The insurance Commissioner may
A) Accept or deny the application after an exploratory hearing.
B) Accept the application as other licenses have no bearing on this application.
C) Deny the application without a hearing.
D) Accept the application for a 2-year provisional license.

Which of the following is NOT an IRS requirement for a qualified retirement plan?a)The plan must be formally communicated to the employees.
b)The plan must be permanent and approved by the IRS.
c)The plan must satisfy vesting requirements.
d)The plan must favor shareholders.

An individual planning for retirement wants to completely pay up his life insurance policy before age 100. Which of the following life insurance products will best meet those requirements?
A) Universal life
B) Limited pay whole life
C) Term life
D) Modified whole life

For the purposes of life insurance underwriting, a 35-year-old male who is in excellent physical condition with no known medical problems would most likely be classified as a
A) Standard risk.
B) Rated risk.
C) Substandard risk.
D) Preferred risk.

For a flexible premium deferred annuity, the time during which the owner makes premium payments and the time before benefit payments begin is known as the
A) Activity period.
B) Annuitization period.
C) Annuity period.
D) Accumulation period.

An insured covered by a life insurance policy with an accidental death rider was injured in an accident and died 15 weeks later. The policy had $50,000 coverage with triple indemnity. The insurer will pay the beneficiary
A) The amount equal to the cash value.
B) $100,000.
C) The face amount.
D) $150,000.

As guaranteed under HIPAA, which of the following is NOT a requirement a person must meet in order to be eligible to convert health coverage from a group plan to an individual health policy?
A) Become eligible for Medicare or Medicaid
B) Apply for individual insurance within a specified period of time after losing group coverage
C) Have been continuously covered under the group plan for 18 months
D) Use up all COBRA coverage

Which action by an insurer or its representatives is NOT considered an unfair claims violation?
A) The claims department fails to affirm or deny coverage within a reasonable period of time after proof of loss has been submitted.
B) An agent does not respond to a claimant’s communication concerning a claim where a response is required.
C) A claims adjustor misrepresents pertinent policy provisions to dissuade an insured from making a claim.
D) An agent advises a claimant to obtain the services of an attorney.

After a policy was in effect for 18 months, the insured submitted a claim. The underwriters determined that the insured had made a material misstatement on the application for coverage. The insurer will probably do which of the following?
A) Contest the claim
B) Cancel the policy
C) Adjust any future premiums
D) Pay the claim

In life insurance, an insurable interest between the policyowner and the insured must exist
A) At the time of death.
B) On the date specified in the policy.
C) At the time of application.
D) When the policy is delivered.

Every admitted insurer in California must maintain a unit or a department responsible for investigating which of the following?a)Unfair trade practices by the insurers
b)Possible arson activity
c)Ratings and claims abuses by the insurers
d)Possible fraudulent claims by the insureds

Because the insurer is the party who controls the language used in the policy, and the insured cannot change that wording, an insurance policy is considered what type of contract? a)Conditional b)Unilateral c)Aleatory d)Adhesion

Which of the following insurance principles states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be?
a)Underwriting
b)The law of large numbers
c)Adverse selection
d)Exposure units

What is the purpose of key-person insurance?a)To give senior managers the ability to purchase shares in the business
b)To cover decreased business revenues as a result of the death or disability of a key employee
c)To provide key employees with life insurance coverage
d)To provide retirement benefits to key employees

Which of the following riders would provide for an insured to increase the face amount of their life insurance policy without proof of insurability? a)Waiver of premium b)Double indemnity rider c)Accelerated death benefit d)Guaranteed insurability

Which of the following disability riders in life insurance allows the policyowner to keep coverage in force without paying policy premiums?
A) Waiver of cost of insurance
B) Accelerated benefit
C) Waiver of premium
D) Disability income benefit

A person purchases an annuity that pays a monthly amount for the remainder of the person’s life. If death occurs before the principal is exhausted, the difference is paid to a designated beneficiary. Which payment option has this person selected?
A) Pure life
B) Life only
C) Life with guaranteed minimum
D) Fixed-period installments

Which of the following characteristics would NOT stop an insurance company from accepting an insurance risk?
A) The insured is part of a large group of homogeneous exposure units.
B) The insured faces high catastrophic loss exposure.
C) The item to be insured presents no hardship to the owner should it be lost or damaged.
D) The item to be insured presents a market value that is difficult to determine.

The Medical Information Bureau (MIB) helps insurers compare medical information they have collected on a potential insured with the information received from
A) Other insurers.
B) Insured.
C) Doctors.
D) Hospitals.

Which of the following transactions would most likely be declined due to lack of insurable interest?
A) A local hospital insures its chief of surgery.
B) A spouse insures the other spouse.
C) A parent buys insurance on their adult child.
D) An employee insures the employer in the fear of losing a job.

Which of the following best represents what is meant by “life insurance creates an immediate estate”?
A) The policy has cash values and nonforfeiture values.
B) The death benefit will always be paid to the estate of the insured.
C) The face value of the policy is payable to the beneficiary upon the death of the insured.
D) The policy generates immediate cash value.

The Spendthrift Clause of a life insurance policy is designed to do all of the following EXCEPT
A) Protect policy proceeds from creditors of the policyowner.
B) Prevent the beneficiary’s reckless spending of the death benefit.
C) Allow the beneficiary to change to another option when insured dies.
D) Pay the death benefit in fixed-amount or fixed-period payments.

The policyowner chooses the annual mode for the payment of the life insurance premium. For the year, the owner will pay
A) Less as compared to the other payment modes.
B) More as compared to the other payment modes.
C) More in the first policy year, and then less in consequent years.
D) The same as compared to the other payment modes.

All of the following are true about key-person insurance EXCEPT
A) The business is the beneficiary.
B) The business is the applicant and owner.
C) The employee must give written consent by signing the application.
D) The death benefit is taxable to the business.

Why is having a large number of similar exposure units important to insurance companies?
A) The larger the number insured, the more accurately the insurer can predict losses and set appropriate premiums.
B) The larger the number insured, the larger the market share for the insurer. This is very important for advertising purposes.
C) The larger the number insured, the more premium collected, the more profitable the company.
D) None of the above is the most important reason.

Which of the following is NOT excluded from the California Life and Annuity Replacement Law?
A) Purchasing a new policy that will take the place of an existing policy
B) Purchasing credit life insurance for the purchase of a second home
C) Purchasing group life insurance from a part-time employer
D) Converting a convertible term policy to whole life insurance

Slippery floors, a habit of lying, or reckless driving are examples of which of the following?a)Causes of loss
b)Perils
c)Hazards
d)Pure risks

What is the term for features such as cash values, loan provisions, and tax-deferred growth in life insurance policies?
A) Nonforfeiture Options
B) Policy Provisions
C) Dividend Options
D) Living Benefits

What is the minimum number of members required for group life insurance in this state?a)10
b)15
c)25
d)100

Which of the following statements is true regarding an annuitant?
A) The annuitant must also be the owner of the annuity.
B) The annuitant must be a natural person.
C) The annuitant is also the beneficiary under the annuity.
D) The annuitant may be a corporation.

Which of the following is a characteristic of an equity indexed annuity?
A) Annuitants cannot share in excess interest.
B) Interest rates are not guaranteed.
C) It is a variable annuity.
D) Interest rates are often associated with a stock index.

Which of the following principles describes restoring the insured to his or her original financial status after a loss?
A) Indemnity
B) Utmost good faith
C) Reasonable expectations
D) Warranty

Which of the following class designations for naming beneficiaries means “by the bloodline”?
A) Per capita
B) Revocable
C) Irrevocable
D) Per stirpes

Over several years, a policyowner paid $10,000 in premiums for his insurance policy. When he suffered a loss, the insurance company paid out $50,000 in benefits. What characteristic of an insurance contract does this describe?
A) Conditional
B) Unilateral
C) Aleatory
D) Adhesion

The insurance component of a Universal Life policy is what type of insurance?
A) Flexible Premium Adjustable Life
B) Annual Renewable Term
C) Convertible Term
D) Modified Whole Life

According to the Fair Credit Reporting Act, consumer reports are prohibited from reporting negative information about a customer after how many years?
A) 6 years
B) 3 years
C) 7 years
D) 5 years

In comparing the purchase of individual life insurance to group life, which statement is NOT true?
A) Group insurance is automatic and requires less medical information than the individual coverage.
B) Both types of coverage provide a tax-free death benefit.
C) Group insurance has a nondeductible premium while individual insurance has a tax-deductible premium to the payor.
D) Group life tends to have a lower premium per person than individual life.

At age 72, an individual is considering applying for MediCal so she can afford her medical bills. Today an agent is visiting the applicant's home in order to sell her an annuity product. Which of the following is true?
A) The agent cannot allow the applicant to purchase an annuity if after the purchase, she wouldn’t qualify for MediCal.
B) The agent should recommend an annuity instead of MediCal.
C) It is permissible for the agent to visit the applicant for the first time without providing a 24-hour advanced notice in writing.
D) The agent should recommend the annuity purchase to generate a commission.

For federal tax purposes, which of the following is true regarding lump-sum life insurance benefits?
A) It is taxed as a percentage of income.
B) It is taxed as ordinary income.
C) It is received tax free.
D) It is subject to capital gains tax.

A fixed annuity has a guaranteed interest rate of 4%. This means that the annuitant will
A) Never receive less than 4% interest.
B) Never receive more than 4% interest.
C) Always receive the current interest rate adjusted for inflation.
D) Always receive the current interest rate plus 4%.

Life settlement contracts are put into effect by which of the following?
A) A collateral assignment
B) A nonforfeiture provision
C) An absolute assignment
D) The settlement options listed in the policy

Which of the following nonforfeiture options of a life insurance policy allows a policyowner to use the cash value to purchase more insurance of the same type?
A) Extended term
B) Cash surrender
C) Reduced paid-up
D) One-year term

In comparing the purchase of individual life insurance to group life, which statement is NOT true?
A) Group life tends to have a lower premium per person than individual life.
B) Group insurance is automatic and requires less medical information than the individual coverage.
C) Group insurance has a nondeductible premium while individual insurance has a tax-deductible premium to the payor.
D) Both types of coverage provide a tax-free death benefit.