2. Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
C) Withdrawals are not taxable.
3. Adverse selection is a concept best described as:
D) Risks with higher probability of loss seeking insurance more often than other risks
4. Which of the following best describes taxation during the accumulation period of an annuity?
D) Taxes are deferred
5. Which of the following is true regarding a single life settlement option?
B) It provides income the beneficiary cannot outlive.
6. What do individuals use to transfer their risk of loss to a larger group?
7. By what date in each licensing period are agents required to renew their license?
B) By the last day of their birth month
8. A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
A) The amount of the distribution is reduced by the amount of a 20% withholding tax.
9. An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?
B) The policy will terminate when the loan amount with interest equals or exceeds the cash value.
10. If an insured changes his payment plan from monthly to annually, what happens to the total premium?
11. According to the entire contract provision, what document must be made part of the insurance policy?
D) Copy of the original application
12. Which of the following is usually true of a participating life insurance policy?
A) It pays dividends to policyowners.
13. What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?
C) It determines who receives policy benefits if the primary beneficiary is deceased.
14. The LEAST expensive first-year premium is found in which of the following policies?
C) Annually Renewable Term
15. An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
D) It will increase because the insured will be 5 years older than when the policy was originally purchased.
16. An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an
A) Authorized insurer.
17. An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
A) 50% tax on the amount not distributed as required
18. Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
C) Law of large numbers
19. If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to
D) Charge a higher premium.
20. What type of insurance would be used for a Return of Premium rider?
A) Increasing Term
21. In Ohio, a temporary license may be issued for any of the following reasons EXCEPT
B) Agent's retirement
22. When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?
B) The insurance company’s general account
Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination?
C) An applicant who is a smoker
24. An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
B) Common Disaster
25. Which of the following will be included in a policy summary?
B) Premium amounts and surrender values
26. During partial withdrawal from a universal life policy, which portion will be taxed?
27. If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
28. A producer who fails to separate premium monies from his own personal funds is guilty of:
29. An insurance agent licensed in another state may apply for a prelicensing education exemption within how many days of establishing a principle place of business in Ohio?
A) 90 days
30. Stranger-originated life insurance policies are in direct opposition to the principle of
B) Insurable interest.
31. In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT
D) The Type of Investment
32. Which of the following is NOT a characteristic of variable annuities?
D) They offer guaranteed stock performance.
33. A Universal Life insurance policy has two types of interest rates that are called
C) Guaranteed and Current.
34. Death benefits payable to a beneficiary under a life insurance policy are generally
D) Not subject to income taxation by the Federal Government.
35. All of the following are characteristics of group life insurance EXCEPT
D) Premiums are determined by the age, sex and occupation of each individual certificate holder.
36. Which of the following is NOT typically excluded from life policies?
B) Death due to plane crash for a fare-paying passenger
37. Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
B) Limited pay whole life
38. All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
A) It is a life contingency option.
39. Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a
C) Premium receipt
40. After being penalized previously for making false statements on advertisements regarding the insurer’s financial condition, the insurer continues to knowingly commit the same offense. What is the maximum penalty that may be imposed on the insurer?
41. Which of the following is TRUE about a class designation?
D) Beneficiaries are not identified by name.
42. Which of the following statements concerning buy-sell agreements is true?
C) Buy-sell agreements are normally funded with a life insurance policy.
43. Who is a person, other than a viator, that enters into a viatical settlement contract?
44. What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
C) War or military service
45. Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
B) Universal life
46. An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?
47. Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?
A) Predicted needs of the family after the insured's death.
48. Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?
A) A debtor has an insurable interest in the life of a lender
49. Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?
50. Which of the following is NOT true regarding the annuitant?
C) The annuitant cannot be the same person as the annuity owner.
51. Who can make a fully deductible contribution to a traditional IRA?
B) An individual not covered by an employer-sponsored plan who has earned income
52. A person filed a report about an insurance fraud practice. The person could be sued for civil damages by which of the following?
D) No one
53. All of the following are personal uses of life insurance EXCEPT
B) Buy-sell agreement.
54. Which of the following best describes what the annuity period is?
D) The period of time during which accumulated money is converted into income payments
What is the maximum civil penalty for violating the Director's cease and desist order?
56. An annuity owner 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)
A) Equity Indexed Annuity.
57. When may an insurance company use suicide as a defense against paying a death claim?
D) When death occurs within a specified period of time after the policy was issued
58. When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy?
D) Return of premium
59. According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?
A) Guaranteed surrender value
60. An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
D) Inspection report.
61. An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario?
62. Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
B) Making comparisons between different policies
63. Which of the following authorities is responsible for assessing the financial ability of insurers?
64. Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?
A) Medical Information
65. Agents who change their state of residence must notify the Director within how many days of any change in address?
66. Which of the following is NOT allowed in credit life insurance?
D) Creditor requiring that a debtor buys insurance from a certain insurer
67. When will fraud be considered a felony?
D) When the amount of the claim is above $1,000
68. Which of the following will NOT be an appropriate use of a deferred annuity?
B) Creating an estate
69. What insurance concept is associated with the names Weiss and Fitch?
B) Guides describing company financial integrity
70. When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?
C) Distributions are taxable.
71. Which of the following statements is TRUE concerning the Accidental Death Rider?
A) It will pay double or triple the face amount
72. Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called
C) Material misrepresentations.
73. J transferred his life insurance policy to his son two years before his death. Which of the following is true?
B) The entire face value of the policy will be included in J's taxable estate.
74. Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
C) Fraternal benefit society
75. The authority granted to an agent through the agent's contract is referred to as
B) Express authority.
76. When an insured purchased a life insurance policy, he stated on the application that he was 40 years old. When he died 5 years later, upon reviewing the claim, the insurer has discovered that the insured was actually 45 years old at the time of policy issue, and not 40, as stated on the application. What will the company do?
A) Pay a reduced death benefit
77. A couple owns a life insurance policy with a Children’s Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
A) Proof of insurability is not required.
78. Which of the following is NOT true about a joint and survivor annuity benefit option?
C) Payments stop after the first death among the annuitants.
79. An applicant who receives a preferred risk classification qualifies for
D) Lower premiums than a person who receives a standard risk.
80.When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
C) It is reduced to the amount of what the cash value would buy as a single premium.
81.Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?
C) Cost comparison methods
82. A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
D) If the father is disabled for more than 6 months
83. Which of the following is TRUE about credit life insurance?
A) Creditor is the policyowner.
84. If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
C) Jumping juvenile policy
85. The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
C) Entire contract.
86. An insured gets a notice about converting group coverage to individual coverage 5 days before the end of the conversion period. In this situation, how long will the insured have to convert the policy?
A) 15 days
87. Who assumes control over an insurance company's funds and management if they become insolvent?
A) Department of Insurance
88. All of the following are true of an annuity owner EXCEPT
B) The owner must be the party to receive benefits.
89. Which of the following is NOT an allowable 1035 exchange?
B) A whole life insurance policy is exchanged for a Term insurance policy.
90. An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?
D) Paid-up option
91. Which of the following is NOT true regarding policy loans?
A) Money borrowed from the cash value is taxable
92. An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?
C) The interest will continue to accumulate tax deferred.
93. What happens if a deferred annuity is surrendered before the annuitization period?
D) The owner will receive the surrender value of the annuity.
94. Peril is most easily defined as
D) The cause of loss insured against
95. If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
A) Guaranteed insurability rider.
96. What must happen when an individual policy or annuity has been personally delivered to the policyowner?
A) The policyowner must sign a delivery receipt.
97. Which of the following is an example of a producer's fiduciary duty?
B) The trust that a client places in the producer in regard to handling premiums.
98. Which of the following best describes fixed-period settlement option?
D) Both the principal and interest will be liquidated over a selected period of time.
99. An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
B) The insured will need a written consent of the insurer.
100. Each person licensed as an agent or solicitor is required to complete how many hours of approved continuing education instruction every 2 years?
101. An insured states her age as 40 on the application. When she dies, the insurer discovers that she was actually only 37 at the time of application. What will the insurance company do?
D) Pay the death benefit in the amount that the premium at the correct age would have purchased
102. An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
B) The insured may choose to convert to term or permanent individual coverage
103. Which of the following is NOT the consideration in a policy?
C) The application given to a prospective insured
104. Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?
C) Long-term Care
105. What method do insurers use to protect themselves against catastrophic losses?
106. If an agent has an administrative action taken against him or her in another jurisdiction, how many days does the agent have to report this to the Director after the final disposition?
D) 30 days
107. An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
108. All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
D) The interest is not taxable since it remains inside the insurance policy
109. A rider attached to a life insurance policy that provides coverage on the insured's family members is called the:
D) Other-insured rider
110. The premium of a survivorship life policy compared with that of a joint life policy would be
111. When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will
A) Issue the policy anyway and pay the face value to the beneficiary
112. The hearing for a cease and desist order must occur within how many days of the order date?
113. Children's riders attached to whole life policies are usually issued as what type of insurance?
114. An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?
115. What is the purpose of a conditional receipt?
D) It is intended to provide coverage on a date prior to the policy issue
116. What kind of policy allows withdrawals or partial surrenders?
C) Universal Life
117. Which of the following may NOT be included in an insurance company's advertisement?
C) That it's policies are covered by a State Guaranty Association
118. Which of the following is true about the mandatory free look in a Life Insurance policy?
B) It commences when the policy is delivered
119. Which type of insurance is based on mutual agreements among subscribers?
C) Reciprocal Insurance
120. Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
B) Option B
121. An insured committed suicide 6 months after his life insurance policy was issued. The insurer will:
B) Refund the premiums paid
122. Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as:
D) Contracts of adhesion
123. What are the two components of a universal policy?
B) Insurance and cash account
124. Under an extended term nonforfeiture option, the policy cash value is converted to
D) The same face amount as in the whole life policy
125. Which of the following is TRUE regarding the accumulation period of an annuity?
B) It is a period during which the payments into the annuity grow tax deferred.
126. In Ohio, all life insurance policy illustrations must include all of the following EXCEPT
B) Name, age, and sex of the insurance producer
127. An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
128. If an agent has an administrative action taken against him or her in another jurisdiction, how many days does the agent have to report this to the Director after the final disposition?
C) 30 days
129. An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
130. A viatical settlement is arranged between a viatical company and a/an
B) Terminally ill insured
131. Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?
C) Only written statements can be considered fraud