General Insurance Principles
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1.1 Insurance Concepts
-Which of the following conditions must exist for a risk to be considered insurable?
--Loss must be ascertainable. (Explanation:
An ascertainable loss can be covered because it can be measured and determined with some degree of certainty)
-In classifying
1.2 Insurers
-Which of the following set of terms is used to categorize insurers by their location or domicile?
--domestic, foreign, and alien (Insurers are categorized by their location or domicile as either foreign, domestic, or alien.(
-ABC Insurance Company is dom
1.3 Producers (Agents) and Rules of Agency & Responsibilities
-If an agent proposes to replace an insurance policy with another policy, the agent must discuss all of the following with the prospect EXCEPT:
the terms of the new policy
Notice Regarding Replacement of life insurance
--a comparison of costs among simila
1.4 Insurance Contracts
-Under an insurance contract, which of the following best describes the difference between a representation and a warranty?
--A representation is not part of a contract, while a warranty becomes part of a contract.
A representation is always part of a con
Life Insurance
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2.1 Life Insurance Basics
Allen's insurance agent thinks Allen's habits and personal character should be examined further than is possible through the application alone. He believes Allen might have left out information to get a more favorable rating. What would the agent use to e
2.1.1 Insurable Interest
-The requirement that insurable interest must exist prevents people buying life insurance from doing which of the following?
overusing life insurance
misusing life insurance for criminal purposes
--using life insurance for wagering or betting
using life i
2.1.2 Individual Underwriting by the Insurer
-The review process between the time an insurance producer takes the application of a proposed insured and the time the policy is delivered to the new policyowner is known as which of the following?
policy review
--underwriting
risk classification
applica
2.2 Types of Life Insurance Policies
Which type of life insurance policy would most likely be used to insure the declining balance of a home mortgage?
Correctdecreasing term
Which one of the following statements about the conversion provision in group life insurance policies is most correct?
2.2.1 Classification of Life Insurance Policies
-All of the following statements about the regulation of the sale of variable products are correct, EXCEPT:
--Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license.
Agents who sel
2.2.2 Individual Life Insurance Policies
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2.2.2.1 Term Life
-Under the re-entry method, an insured can renew a level term insurance policy at the end of the specified term at a lower rate than the guaranteed rate by doing what?
proving that he or she is under age 50
--proving insurability
submitting to a medical e
2.2.2.2 Whole Life
-Which one of the following is most correct with respect to the contract charges and fees charged by variable life and traditional whole life policies?
Both charge investment advisory fees.
Both charge a fee for expenses incurred by the separate investmen
2.2.2.4 Specialized Life Insurance Policies
-A married couple is insured under a joint life policy. The first spouse dies. What can the surviving spouse do with the policy?
The surviving spouse can renew the policy.
The surviving spouse can convert the policy if he or she proves insurability.
--Cor
2.2.3 Group Life Insurance Policies
-Insureds under a group life insurance plan have all of the following rights EXCEPT
the right to name a beneficiary
the right to assign the death benefit
--the right to convert to an individual policy at any time
the right to use the coverage for a viatic
2.2.5 Life Settlements
-Which of the following life insurance settlement options is the least complicated?
Correctstraight life
life income with period certain
life income with refund
joint and survivor
Explanation:
The straight life income option is the least complicated of th
2.3 Life Insurance Policy Provisions, Options and Riders
The owner of a policy can either be a natural person or a non-natural person.
-Policies under extended term insurance are not normally eligible to receive dividends.
Policyowners can buy additional permanent life insurance without proof of insurability un
2.3.1 Required, Standard or Common Provisions
-What rule lets a policyowner return a policy for a refund of premiums paid for a certain period of time after the policy is issued?
--right to examine (free look)
grace period
get-acquainted period
consideration
Explanation:
All insurance policies requir
2.3.2 Policy Exclusions, Limitations, or Restrictions
-All the following statements about standard policy exclusions are correct EXCEPT,
If an insurer excludes a risk from coverage, then it is not covered, and the insurer will not pay the policy's benefit if death results from that risk.
Standard exclusions
2.3.3 Life Insurance Premiums
-The expense component of the pricing process is known as the loading. It reflects the costs, other than mortality costs, that the insurance company can expect to incur for all of its operations. All of the following are among the considerations that guid
2.3.4 Life Insurance Policy Beneficiaries
-A life insurance policyowner who has named a beneficiary irrevocably must observe all the following restrictions, EXCEPT:
no taking a policy loan without the consent of the irrevocable beneficiary
no changing the beneficiary without his or her signed con
2.3.6 Policy Nonforfeiture Options
-Jerry asks his insurance company to pay him the cash value of his permanent life insurance and cancel the policy. Jerry is using which of the following nonforfeiture options?
--cash surrender option
extended term option
reduced paid-up insurance option
p
2.3.7 Policy Loans and Withdrawal Provisions
-Henry, age 34, has a SIMPLE IRA account with his employer; the account has increased in value to $80,000. He is fully vested in the account and decides to take a $10,000 distribution to use as a down payment on his first house. Which of the following sta
2.3.8 Policy Dividends and Dividend Options
What type of life insurance company is owned by its stockholders?
universal insurance company
mutual company
privately held company
--stock company
Explanation:
Stock companies are owned by stockholders, just like other public companies.
-What type of lif
2.3.9 Policy Riders
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2.3.9.1 Policy Riders for Disability
-Joe, age 35, has a limited payment life insurance policy that will be paid up at age 60. Under the waiver of premium rider with this policy, should Joe become totally and permanently disabled tomorrow, premiums will be waived
for 10 years
until the polic
2.3.9.3 Living Benefit Riders
-All of the following statements about long-term care riders and long-term care policies under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 are correct, EXCEPT:
An insured who bought an long-term care rider becomes eligible for
2.3.9.4 Other Common Policy Riders
-Jane has a life policy with a cost of living rider. How does the rider protect Jane against the effects of inflation?
Premiums stay stable even when interest rates rise.
--As prices increase, so does the coverage amount.
Premiums are guaranteed to rise n
2.4 Annuities
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2.4.1 Annuity Principles and Concepts
Sam is planning to buy a deferred annuity. When will he select a settlement option?
The choice of settlement option is built into the contract; the owner chooses a contract with the preferred settlement option.
IncorrectHe can only choose the settlement o
2.4.1.1 Nature and Purpose of Annuities
-What is the name of the period during which premium funds are paid into an annuity contract?
the annuity period
the benefit period
--the accumulation period
the annuity payout
Explanation:
The period during which premium funds are paid into the contract
2.4.1.2 Parties to an Annuity
-Ann is the beneficiary of an annuity owned by Jim. Jim intended to annuitize the contract at retirement but died shortly before retiring. What benefits will Ann receive from the annuity?
--Ann will receive the annuity's accumulated value and may select a
2.4.1.3 Annuity Income Payment Options
-What type of annuity option pays income over a set number of years or in specified amounts?
--annuity certain income option
life contingent payout option
annuity contingent income option
life annuity certain option
Explanation:
An annuity certain income
2.4.2 Types of Annuity Products
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2.4.2.1 Immediate vs. Deferred Annuities
-Which one of the following can be funded only with a single lump-sum premium payment, but it distributes income payments over time beginning soon after purchase?
--immediate annuity
deferred annuity
variable annuity
nonforfeiture annuity
Explanation:
Imm
2.5 Suitability and Use of Life Insurance and Annuities
If the business that owns the entity plan is a close corporation, the buy-out agreement is also called a stock redemption agreement.
In a cross-purchase buy-sell agreement involving three partners, what portion of the partnership does the business itself
2.5.1 Personal Uses of Life Insurance
-If a group policy allows for the insurance coverage to be used for a viatical settlement, what might that settlement be used for?
the benefit of the surviving spouse
the benefit of an unemployed insured
the benefit of the insured's children
--the benefit
2.5.2 Business Uses of Life Insurance
-Which statement about basic split-dollar plans is NOT correct?
A permanent life insurance policy is bought on the life of a key executive.
Either the executive or employer owns the policy.
--The amount of the premium paid by the employer is not taxable i
2.5.3 Uses of Annuities
-For what purpose are annuities used most often?
income accumulation
short-term savings
Correctretirement planning
income protection
Explanation:
People use annuities most often for retirement planning purposes: to accumulate retirement savings and/or to
2.6 Federal Tax Considerations for Life Insurance and Annuities
The group term life insurance premiums an employer pays are fully tax deductible to the employer. For a covered employee, the value of coverage under $50,000 is not taxable
-When a deferred annuity is annuitized, which one of the following most correctly
2.6.1 Taxation of Personal Life Insurance
-Tom owns several life insurance policies (none of which are modified endowment contracts). In which of the following events associated with his policies will their be a tax consequence?
He surrenders a policy, and the cash value does not exceed his premi
2.6.2 Taxation of Group Life Insurance
-Sally is a 25-year-old clerk employed by Acme, Inc. Under Acme's employer-pay-all group life plan, Sally's coverage is $60,000. The premiums for what portion of that coverage are taxable to Sally?
--$10,000
$20,000
$30,000
$40,000
Explanation:
The cost o
2.6.3 Taxation of Annuities
-If Sam, who owns a deferred annuity, withdraws funds as a full or partial surrender before the contract annuitizes, what happens?
Fifty percent of Sam's withdrawals are taxable income.
Up to $40,000 of Sam's withdrawals are tax free.
--Withdrawals are ta
2.6.4 Section 1035 Exchanges
-All of the following are permitted as tax-free transactions under a Section 1035 exchange EXCEPT:
the exchange of a life insurance contract for a life insurance contract
the exchange of a life insurance contract for an annuity contract
--the exchange of
2.7 Qualified Plans and Social Security
Which of the following statements is true if a traditional IRA owner is covered by an employer-sponsored qualified plan?
The amount that he or she can contribute to the IRA will be limited.
No deduction can be taken for amounts contributed to the IRA.
Con
2.7.1 General Requirements for Qualified Plans
-To be considered qualified, a retirement plan must meet all of the following requirements EXCEPT:
The plan must be in writing and communicated to employees.
--The plan must cover all employees.
The employer, the employees, or both must contribute to the
2.7.2 Types of Qualified Plans
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2.7.2.1 Types of Qualified Plans
-Defined benefit plans provide a specific, defined benefit for plan participants when they reach retirement age. Which of the following statements regarding defined benefit plans is NOT correct?
Tax laws limit the amounts that plan participants can receiv
2.7.2.2 Section 529 Plans
-Diane invested $6,000 two years ago in a Section 529 college savings plan for her daughter, Cathleen, age 5. The account earned $400 the first year and $450 the second year. Which of the following statements is correct?
Income tax on the earnings must be
2.7.5 Social Security
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2.7.4 Individual Retirement Plans
-Teddy's 403(b) plan account was worth $200,000 when he was laid off from his job. He plans to roll over the entire amount into an IRA and has asked the plan administrator to distribute his account balance directly to him. What amount will Teddy receive f
2.7.5.1 The Basics of Social Security
-A worker who is considered fully insured is entitled to all of the following benefits under Social Security EXCEPT:
retirement benefits
--medical care benefits
survivor benefits
disability benefits
Explanation:
Fully insured status entitles a worker to f
2.7.5.2 Types of Social Security Benefits
-Fred, age 65, never married and has been working for more than 40 years. He provided more than 80 percent of his elderly mother's financial support. He died a year after he began caring for her. Which of the following statements is correct?
His mother wi
3 Georgia Insurance Laws & Regulations
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3.1 Georgia General Insurance Laws
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3.1.1 State Regulation of Insurance
-Which of the following penalties may the Commissioner impose if, after a hearing, he or she determines that an agent has committed an unfair trade practice?
termination of the agent's appointment
lawsuit in federal court
imposition of civil damages and r
3.1.2 State Regulation of Insurance Producers
-To qualify for a resident insurance agent's license in Georgia, a person must comply with all of the following EXCEPT
--earning a college degree.
passing the licensing exam.
paying the licensing fee.
being at least 18 years old.
Explanation:
To qualify f
3.2 Georgia Life Insurance Laws
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3.1.3 Marketing Practices
- when comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What has Melanie engaged in?
--twi
3.2.1 Marketing and Sales Practices
-When selling a life insurance policy that replaces an existing policy, the agent must leave all of the following items with the applicant EXCEPT:
Notice Regarding Replacement signed by the producer and applicant
originals or copies of marketing communica
quizzes
Question 1
The mathematical concept of probability that helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age is called the
law of large numbers
underwriting principle
actuarial principle
law of probability
B