The rules related to replacement do not apply to any of the following EXCEPT:
B) Whole life
*Replacement rules do not apply when replacing credit life, group life or variable annuities.
Forms relating to a replacement transaction must be kept by the replacing insurer for how long?
A) Three years
*When a policy is replaced, the replacing insurer must keep records relating to this transaction for three (3) years
How long must the free look be on a replacement policy?
A) 20 days
*Life insurance policies that replace existing life policies must contain a 20 day free look during which the policyowner is able to return the policy for a full refund.
Which of the following statements regarding replacement is correct?
C) A statement signed by both applicant and the agent regarding the knowledge of replacement status is required
*Insurers require a statement signed by the applicant as to whether proposed insurance or annuity will replace existing life insurance or annuity. Insurers also require a statement signed by the producer as to whether he or she knows replacement is involved in the transaction.
All of the following transaction would fall under replacement regulations EXCEPT:
C) Purchasing an additional policy
*Borrowing cash value from an existing policy to purchase another one, lapsing a policy to purchase another one, or taking cash surrender out of an existing policy to purchase another policy requires following replacement regulations. Simply purchasing an additional policy without affecting an existing one is not a replacement.
All of the following statements are true EXCEPT:
B) Conservation is illegal
*Conservation is any attempt by the existing insurer to discourage a policyholder from engaging in a replacement transaction. It is a perfectly legal act.
In a replacement transaction all of the following are duties of the agent EXCEPT:
D) Make sure the replacing insurer receives a copy of the replacement notice via first class mail within a month of the date of the application
*Replacing insurers must send the existing insurer a copy of the Notice Regarding Replacement within there (3) business days.
Which of the following would be allowed regarding conservation effort?
A) An existing insurer may send a policyholder a Policy Summary for the existing policy within 20 days of receiving the replacement materials from the replacing insurer
*When their existing policy has been replaced, the existing insurer may make a “conservation” effort by giving their policyholder a Policy Summary within 20 days.
All of the following are true regarding a replacement transaction EXCEPT:
A) The free look for a replacement transaction must be 20 days from date of application
*The free look for a replacement transaction must be 20 days from policy delivery, not the date of application
What are the required disclosures to be given to a prospective purchaser?
A) A Policy Summary and a Buyer’s Guide
*The two disclosure documents that must be given to the client are the Policy Summary and a Buyer’s Guide
All of the following are correct regarding the Policy Summary and Buyer’s Guide EXCEPT:
A) These documents must be kept on file by insurers for five (5) years
*Insurers must keep copies of the Buyer’s Guide and Policy Summary on file and available for the inspection of the Commissioner for three (3) years, not five (5).
Which of the following statements regarding policy dividends is correct?
D) References to policy dividends are allowed, so long as a statement is included that dividends are not guaranteed
*Remember, you can never guarantee dividends! Not all policies may pay dividends to policyholders, only those issued by mutual insurers. Stock insurance companies do not pay dividends to policyholders, only to stockholders
A Policy Summary must include all of the following EXCEPT:
A) The name and address of nearest agent
*Name and address of nearest agent would not appear on a Policy Summary. This summary is created to provide an overview, in plain language, of the policy’s main features and term.
Policy summaries must include all of the following values EXCEPT:
A) The guaranteed dividends based upon the company’s current dividend scale
*A policy summary would never include guaranteed dividends, since dividends cannot be guaranteed. It may reflect future dividends based upon an insurer’s current dividend scale, as long as they are not guaranteed.
The disclosure requirements (Policy Summary and Buyer’s Guide) do not apply to any of the following transaction in the state of WA EXCEPT:
D) Individual life insurance policies
*WA life insurance “disclosure rules” require producers to give to all life insurance applicants, except for annuities, variable life, credit life and group life, both a Buyer’s Guide and Policy Summary prior to accepting the initial premium
All of the following are true regarding the regulations related to policy illustrations EXCEPT:
A) Illustration regulation apply to life insurance policies of $10,000 or less
*The illustration regulation applies to all group and individual life insurance policies and certificates, but there are exceptions. It does not apply to variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies with no illustrated death benefits on any individual exceeding $10,000.
The rules related to illustrations do not apply to any of the following EXCEPT:
C) Individual life insurance with a death benefit of over $10,000
*The illustration regulation applies to all group and individual life insurance policies and certificates with the exception of variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies with no illustrated death benefits on any individual exceeding $10,000.
A basic illustration would not include which of the following
D) A guarantee as to dividend payments
* A basic illustration included the premium, mode of payment guaranteed death benefit, and guaranteed cash surrender value. There is never a guarantee as to future dividend payments.
All of the following are prohibited when using an illustration in the sale of life insurance EXCEPT:
D) Providing the applicant a statement attesting to the fact that the nonguaranteed elements of the illustration are assumed to be unchanged for the purpose of the illustration, and that this is a very unlikely event to occur
*Providing the applicant a statement attesting to the fact that the nonguaranteed elements of the illustration are assumed to be unchanged for the purpose of the illustration, and that this is a very unlikely event to occur, would not be considered a prohibited act when using an illustration in the sale of life insurance.
The free look on individual policies issued in the state of WA is how long?
D) 10 days
*The free look for life insurance in the state of WA is 10 days. It means that from the date of policy delivery, through the next 10 days, the insured has the right to return the policy to the producer or the insurer for a full refund of all the premium paid. No coverage will have ever existed.
If an insured exercise the free look, the insurer must refund 100% of the premium paid within how many days to avoid owing any interest?
A) 30 days
*If a policyowner returns a new life insurance policy within 10 days of delivery (free look), the insurer must make a full refund of the premium within 30 days, or a 10% penalty applies.
If an insurer does not refund the premium under the free look provision timely, what is the penalty?
C) 10%
*Failure to refund the premium under the free look provision in a timely manner will result in a 10% penalty.
If an employee is covered by a group life policy for a minimum of five (5) years before the employee loses group coverage, such employee would have the right to convert his or her policy. The application and first premium must be sent to the insurer within how many days of the termination?
D) 31 days
*When coverage for an employee who has been covered for at least five (5) years on a group life insurance policy is terminated, the employee is entitled to convert to an individual life insurance policy issued by the same insurer, without a physical exam, within 31 days of termination (application and first premium must be submitted to the insurer)
Typically, when a terminated employee converts his or her life insurance, he or she is eligible to purchase which type of coverage?
D) Whole life
*When an insured is covered by group life and loses their job, a 31-day period is given to convert to an individual whole life policy, without a physical exam, so long as they have been insured by the group for at least five (5) years prior to the date they lose their coverage. Group life policies are usually term insurance contacts. The right of conversion is only allowed to a more expensive policy. Such as whole life (never to another term life).
Which of the following is true about converting a group policy to an individual policy?
A) The conversion premium is based upon attained age
*The new policy’s premium is based upon attain age (current age), not the original age insurers must allow conversion, but only up to the group policy’s face value. An employee cannot convert to an individual policy of a higher death benefit than the group coverage he or she is converting from.
The most that an insurer must allow a terminated employee to purchase when converting fro group coverage to individual coverage is how much?
D) Whatever face amount the group policy was
*Terminated employee converting their group life insurance policy to an individual one is allowed to get coverage of up to the same death benefit (face value) as the group policy they are converting from. IF you had a group coverage of $100,00, you would not be allowed to convert it to an individual policy of $200,000-$100,000would be the maximum limit.
What is the maximum interest rate that an insurer can charge on a policy loan?
A) 8%
*Although adjustable loan interest rates are allowed, the maximum fixed interest rate insurers may charge on policy loans is 8%
What is the maximum amount available for a loan, including interest, on a new life insurance policy?
B) Cash surrender value at the end of the policy year
*For new policies, the sum, including any interest to the end of the current policy year, may not exceed the cash surrender value at the end of the current policy year.
If a cash value policy should lapse due to the amount of a loan, including interest, becoming equal to the policy’s cash value, the insurance company is required to notify the insured how many days before the policy termination can become effective.
B) 30 days
*If cash value policy should lapse due to the amount of a loan, including interest, becoming equal to the policy’s cash value, the insurance company is required to notify the insured 30 days before the policy termination can become effective
Should an insurer charge an adjustable interest rate on a loan against a policy cash value, all of the following are true EXCEPT:
D) The maximum interest rate cannot be adjustable under any circumstances
*Although the maximum fixed inter3est rate insurers may charge on policy loans is 8% adjustable loan interest rates are allowed. If the interest rate is adjustable, the Policy Summary must indicate that the annual percentage rate will be determined by the company in accordance with the provisions of the policy and the applicable law.
Interest owed on life insurance proceeds begins to accrue as of which date
B) Date of Death
*Insurers must pay interest on life insurance death benefits, commencing on the date of death, at the rate of not less than 8%, until the claim is paid.
All of the following are true regarding the interest owed by the insurance company on life insurance proceeds EXCEPT:
B) Insurers may not subtract policy loans from the face amount owed
*When an insured dies and a policy loan has not been paid back, the insurer may deduct any policy loans plus interest from the face amount owed to the beneficiary.
Which of the following is true regarding a person’s right to assign ownership rights of a group policy?
D) A person covered by a group policy has the right to assign his owner’s rights to his spouse, children, parents, or a trust for the benefit of any of them
*Even though in a group contract the employer is the owner of the policy and the employee are the insureds, the employee still have some owner’s rights (such as naming the beneficiary). A person covered by a group policy has the right to assign their owner’s rights to their spouse, children, parents, or a trust for the benefit of any of them.
How many people must be covered for an employer to secure group life insurance?
C) 2 employee
*In WA, group life policies must cover at least two(2) employees as of the date of issue.
IN a noncontributory group, the employer pays how much of the premium?
C) 100%
*In a noncontributory group, the employer pays 100% (all) of the premium, the employees are “-contributing” to the premium payments and 100% (all) of eligible employees must participate. In a contributory plan, the cost of premium is shared between the employer and participation requirements – to prevent adverse selection.
Replacing insurers must send the existing insurers a copy of the Notice Regarding Replacement within ____ business days?
D) 3
*Replacing insurers must send the existing insurer a copy of the Notice Regarding Replacement within three (3) business days.
When replacing exiting life insurance, replacing insurers must provide their new policyholder with a ____ day free look
C) 20
* Replacing insurers must grant customers a 20-day free look, starting at the time of policy delivery.
The rules regarding replacement apply when replacing which of the following?
C) Universal life
* Replacement rules do not apply when replacing credit life, group life or variable annuities. Replacing a universal life policy would require following the replacement rules.
All of the following are true regarding a Policy Summary EXCEPT:
D) It must follow the format recommended by the NAIC
* It is the disclosure document titled the Buyer’s Guide, not Policy Summary, that follows the format recommended for use by the National Association of Insurance Commissioners (NAIC)
Which of the following is not true regarding the Buyer’s Guide?
B) It is also known as a Policy Summary
*The Buyer’s Guide and The Policy Summary are two different disclosure documents. The Buyer’s Guide is a generic document, which helps purchasers understand how much insurance they need as well as the type of policy that best fits their needs. A Policy Summary provides an overview of the policy’s main features and returns.
All of the following are true regarding life insurance illustrations EXCEPT
A) They must be given to all Life insurance applicants
*The illustration regulation applies to all group and individual life insurance policies and certificate with the exception of variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies with no illustrated death benefit on any individual exceeding $10,000.
Which of the following is true regarding Life insurance policy loan?
B) The maximum fixed annual interest rate is 8%
*Life insurance policy loans are not available on all life insurance policies: term life is a “no cash value” type of policy, therefore no possibility to take out a loan. Even though there is no requirement of paying back a policy loan, they will be paid back when the insured dies, along with interest. That sum will be taken out of the death amount given to the beneficiary. The maximum fixed annual interest rate is 8%. The maximum amount of a policy loan is not limited to the face amount of the policy-it is less than that. The amount of the loan and interest to the end of the current policy year cannot exceed the cash surrender value of the policy at the end of the current year.
If an insured with a $100,000 life insurance policy dies and the insurer does not pay the claim until the 90th day after death, the beneficiary will receive:
A) 108,000
*Life insurance must pay 8% annual interest on death claims from the date of death. If a life insurer does not pay a death claim within 90 days they must pay a 3% penalty. Payment of claim on or after the 91st day after death would include an additional 11% (interest and penalty)
When a new life insurance policy is returned to the insurer within 10 days of delivery, the insurer must return the premium within ____ days or a 10% penalty will apply.
C) 30
*If a policyowner returns a new life insurance policy within 10 days of delivery, the insurer must make a full refund of the premium within 30 days, or a 10% penalty applies.
All of the following are true r3egarding the conversion feature of a group life insurance policy upon termination of employment EXCEPT:
A) Only employees who have been covered for at least three (3) years may convert
*If a group life insurance policy is terminated, every individual who has been covered for at least five (5) years is entitled to convert to an individual life insurance policy issued by the same insurer, without a physical exam, within 31 days of termination.
