Download Wisconsin State Life Insurance: Key Features & Regulations and more Exams Insurance law in PDF only on Docsity!
Life insurance exam questions WI
What is the purpose of the Wisconsin State Life Insurance Fund? a) to offer low-cost life insurance to state residents b) To protect insured against insolvent insurers c) To advertise different types of life insurance policies available in the state d) To provide life insurance through licensed intermediaries - ANS; a An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a) The premium for individual coverage will be based upon the insured's attained age b) The insured may choose to convert to term or permanent individual coverage c) The insured would not need to prove insurability for a conversion policy d) The insured may convert coverage to an individual policy within 31 days - ANS; b During a life insurance policy replacement, the insurer is required to provide the policyowner a free-look period of at least a) 10 days b) 20 days c) 30 days d) 90 days - ANS; c Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) the former wife of the deceased insured b) a minor son of the insured c) a business partner of the insured d) the wife of the deceased insured - ANS; b All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a) The policy is owned by the company b) Any type of insurance policy may be used c) The employer pays a bonus to a selected employee to fund the policy
d) It is considered a nonqualified employee benefit - ANS; a Which of the following is NOT true regarding policy loans? a) Policy loans can be repaid at death b) an insurer can charge interest on outstanding policy loans c) a policy loan may be repaid after the policy is surrendered d) Money borrowed from the cash value is taxable - ANS; d 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 b) No taxes are due since the plan participant is over age 59 1/ c) There is a 10% early withdrawal penalty d) The amount distributed is subject to ordinary income tax - ANS; a All of the following are true regarding the guaranteed insurability rider EXCEPT a) this rider is available to all insureds with no additional premium b) The insured may purchase additional coverage at the attained age c) The insured may purchase additional insurance up to the amount specified in the base policy d) It allows the insured to purchase additional amounts of insurance without providing insurability only at specified dates or events - ANS; a A claimant, whi is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of a) 24 months b) 0 months c) 5 months d) 12 months - ANS; c In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to a) the policy owner b) the insurance company c) The contingent beneficiary d) the insured's spouse - ANS; c All of the following are beneficiary designations EXCEPT a) Contingent b) primary
d) Life insurance with a face amount of less than $10,000 - ANS; a The dividend option in which the policyowner uses dividends to purchase a term policy or one year is referred to as the a) accelerated endowment b) Paid-up additions c) One-year term option d) Paid-up option - ANS; c Which of the following is true regarding a market value adjusted annuity? a) the insurer bears all the market risk of changing interest rates b) there are no penalties for a premature surrender of the annuity c) it provides a level benefit payment d) the ownder is guaranteed a fixed interest rate for a specific period of time - ANS; d Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? a) Medical information b) Inspection report c) Agent's report d) General information - ANS; a Which of the following is NOT an example of an insurable interest? a) Employer in employee b) child in parent c) Debtor in creditor d) business partners in each other - ANS; c All of the following statements are true regarding tax-qualified annuities EXCEPT a) annuity earnings are tax deferred b) they must be approved by the IRS c) withdrawals are taxed d) employer contributions are not tax deductible - ANS; d All other factors being equal, which of the following individuals would receive the largest monthly check from a single premium straight life immediate annuity? a) a 60-year-old man b) a 60-year-old woman c) a 50-year-old man d) a 50-year-old woman - ANS; a
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than a) upon issuance of the policy b) within 30 days after the first premium payment was collected c) prior to filling out an application for insurance d) with the policy - ANS; d The two types of assignments are a) absolute and partial b) complete and partial c) complete and proportionate d) absolute and collateral - ANS; d An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe? a) reduction of premium b) accumulation at interest c) cash option d) flexible premium - ANS; a Which of the following statements regarding HIV testing for life insurance purposes is NOT true? a) The testing practices must meet the criteria of the U.S. Department of Health and Human Services b) HIV testing is regulated at the state level c) insurers are barred from requesting HIV testing d) Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant - ANS; c Who does the Interstate Insurance Product Regulation Compact serve? a) Commissioner b) NAIC c) Insurers d) Insured - ANS; c Which is TRUE about the cash surrender nonforfeiture option? a) After the cash surrender, the insured is covered for a grace period of one month b) the policy remains active for some time after the policyholder opts for cash surrender
a) erase the incorrect answer and record the correct answer b) Draw a line through the first answer, record the correct answer, and have the applicant initial the change c) note on the application the reason for change d) destroy the application and complete a new one - ANS; a Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase? a) Withdrawn amounts are taxed on a last in, first out basis b) Withdrawn amounts are taxed on a first in, last out basis c) taxes are deferred on withdrawn amounts, but a flat penalty is charged d) taxes are deferred on withdrawn amounts - ANS; a Which of the following is NOT an allowable 1035 exchange? a) A whole life insurance policy is exchanged for a term insurance policy b) A whole life insurance policy is exchanged for a Universal life insurance policy c) an annuity is exchanged for another annuity d) a life insurance policy is exchanged for an annuity - ANS; a The Ownership provision entitles the policyowner to do all of the following EXCEPT a) set premium rates b) receive a policy loan c) assign the policy d) designate a beneficiary - ANS; a All of the following statements concerning dividends are true EXCEPT a) dividend amounts are guaranteed in the policy b) lower insurance company costs generate higher dividends c) they stem from favorable underwriting experience d) favorable investment results generate higher dividends - ANS; a The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a) joint and survivor b) fixed amount option c) Interest only option d) life income with period certain - ANS; c
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a) the beneficiary's life expectancy b) projected interest rates c) face amount of the policy d) the insured's age at death - ANS; d Which type of life insurance policy generates immediate cash value? a) continuous premium b) single premium c) level term d) decreasing term - ANS; b Equity indexed annuities a) seek higher premiums b) are more risky than variable annuities c) are security instruments d) invest conservatively - ANS; a Which of the following is TRUE regarding variable annuities? a) the company guarantees a minimum interest rate b) a person selling variable c) the annuitant assumes the risks on investment d) the funds are invested in the company's general account - ANS; c Which of the following is NOT true regarding Equity Indexed Annuities? 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 - ANS; d All of the following statements are true regarding installments for a fixed amount EXCEPT a) value of the account and future earnings will determine the time period for the benefits b) this option pays a specific amount until the funds are exhausted c) the annuitant may select how big the payments will be d) the payments will stop when the annuitant dies - ANS; d
c) listing of the insured's former insurer(s) for incontestability provisions d) a copy of the original application for insurance - ANS; d An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called a) reduction of premiums b) paid-up additions c) one-year term purchase d) accumulation at interest - ANS; b An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $10,000, no tax consequence b) $8,000, no tax consequence c) $8,000, tax on growth only d) $10,000, tax on growth only - ANS; a An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a) recession of the policy b) adjustment in the amount of death benefit c) no change whatsoever d) automatic laps - ANS; b A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the a) Revocable beneficiary b) Secondary beneficiary c) Contingent beneficiary d) Irrevocable beneficiary - ANS; a If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an a) Nonqualified annuity b) Modified endowment contract c) Accelerated benefit policy d) Endowment - ANS; b
The mode of premium payment a) is the factor that determines the amount of dividends in a policy b) is the method used to compute the cash surrender value of the policy c) does not affect the amount of premium paid d) is defined as the frequency and the amount of the premium payment - ANS; d The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage begin? a) as of the policy delivery date b) as of the first month after the policy issue c) as of the policy issue date d) as of the application date - ANS; d All of the following information about a customer must be used in determining annuity suitability EXCEPT a) financial experience b) annual income c) beneficiary's age d) tax status - ANS; c Concerning Juvenile Life insurance, which of the following statements is INCORRECT? a) usually a parent or guardian is the applicant for insurance on the life of a minor b) it can be a limited premium payment policy c) juvenile life is classified as any life insurance written on the life of a minor d) juvenile life is classified as any life insurance purchased by a minor - ANS; d A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a) pay the policy proceeds up to an established unit b) not pay the policy proceeds under any circumstances c) automatically pay the policy proceeds d) pay the policy proceeds only if it would have issued the policy - ANS; d The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? a) reduction of premium b) paid-up addition c) accumulation at interest
c) inspection report d) medical information bureau's report - ANS; c What is the purpose of the Buyer's guide? a) to provide the name and address of the agent/producer issuing the policy b) to list all policy riders c) to provide information about the issued policy d) to allow the consumer to compare the costs of different policies - ANS; d An agent's advertisements for life insurance must be approved by a) the Governor b) the agent c) the agent's company d) the Commissioner - ANS; c If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? a) the death benefit will be smaller b) the death benefit will be forfeited c) the death benefit will be the same as the original face amount d) the death benefit will be larger - ANS; a Which nonforfeiture option provides coverage for the longest period of time? a) paid-up option b) accumulated at interest c) reduced paid-up d) extended term - ANS; c The paid-up addition option uses the dividend a) to reduce the next year's premium b) to accumulate savings for retirement c) to purchase a smaller amount of the same type of insurance as the original policy d) to purchase a one-year term insurance in the amount of the cash value - ANS; c A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? a) inflation rider b) cost of living rider
c) value adjustment rider d) return of premium rider - ANS; b 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) cost of living provision b) nonforfeiture option c) guaranteed insurability rider d) paid-up additions option - ANS; d Which of the following does NOT apply to variable contracts? a) insurers must submit a statement containing the essential features of how the dollar amount will be determined and that the benefit dollar amount will vary b) insurers do not have to provide any financial information or history of the company c) insurers must be licensed and authorized to transact life insurance and annuity business d) insurers may establish one or more separate accounts for allocation of settlement or dividend options - ANS; b Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? a) state education waiver b) viatical settlement c) estate conversion d) life insurance proceeds - ANS; d Employer contributions are made to a qualified plan a) may discriminate in favor of highly paid employees b) are after-tax contributions c) are taxed annually as a salary d) are subject to vesting requirements - ANS; d An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated information during the application process. What can they do? a) refuse to pay the death benefit because of the misstatement on the application b) pay a decreased death benefit c) sue for the right to not pay the death benefit d) pay the death benefit - ANS; d Annuities can be used to fund which of the following?
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to a) live at least to his life expectancy b) die before his life expectancy c) name a beneficiary d) name another annuitant - ANS; a In a group life insurance policy, the employer may select all of the following EXCEPT a) the amount of insurance b) the premium payor c) the beneficiary d) the type of insurance - ANS; c Under the 401(k) bonus or thrift plan, the employer will contribute a) all of the money to the plan b) 30% of what the employee contributes c) 70% of what the employee contributes d) an undetermined percentage for each dollar contributed by the employee - ANS; d The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a) the money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary b) the beneficiary will receive the greater of the money paid into the annuity or the cash value c) the owner's estate will receive the money paid into the annuity d) the insurance company will retain the cash value and pay back the premiums to the owner's estate - ANS; b 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? a) one-year term b) reduction of premium c) accumulation at interest d) paid-up option - ANS; d All of the following are nonforfeiture options EXCEPT a) extended term b) reduced paid-up
c) interest only d) cash surrender - ANS; c Which of the following is TRUE of a qualified plan? a) it may allow unlimited contributions b) it has a tax benefit for both employer and employee c) it does not need to have a vesting schedule d) it may discriminate in favor of highly paid employees - ANS; b If an insured continually uses the automatic premium loan option to pay the policy premium, a) The insurer will increase the premium amount b) the policy will terminate when the cash value is reduced to nothing c) the face amount of the policy will be reduced by the automatic premium loan amount d) the cash value will continue to increase - ANS; b Traditional IRA contributions are tax deductible based on which of the following? a) owner's age b) IRA limit c) owner's income d) how long the plan has been in force - ANS; c No individual life insurance policy may be contested after it has been in force for a) 1 year b) 2 years c) 3 years d) 5 years - ANS; b What type of insurance would be used for a Return of Premium rider? a) decreasing term b) annually renewable term c) increasing term d) level term - ANS; c During replacement of life insurance, a replacing insurer must do which of the following? a) designate a new producer for a replaced policy b) send a copy of the notice regarding replacement to the department of insurance c) obtain a list of all life insurance policies that will be replaced d) guarantee a replacement for each existing policy - ANS; c
c) extended term d) paid-up option - ANS; b In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a) the length of coverage b) the premium c) the amount of insurance d) the type of investment - ANS; d An illustration used to sell a life insurance policy must be labeled as a) illustrations do not need labels b) life insurance illustration c) general insurance illustration d) example illustration - ANS; b When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) the same as the original policy minus the cash value b) equal to the original policy for as long as the cash values will purchase c) in lesser amounts for the remaining policy term of age 100 d) equal to the cash value surrendered from the policy - ANS; b Under what circumstances may an irrevocable beneficiary be changed? a) with written consent of the policyowner b) with written consent of the beneficiary c) with written consent of the insurer d) none of the above - ANS; b Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a) until the policyowner's age 100, when the policy matures b) for 20 years or until death, whichever occurs first c) until the policyowner reaches age 65 d) for at least 20 years - ANS; b If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? a) fixed period b) fixed amount
c) lump sum d) life income - ANS; c A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) IRS has no jurisdiction b) the benefit is received as taxable income c) the benefit is received tax-free d) the benefit is subject to the exclusionary rule - ANS; c Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a) signed waiver of premium b) statement of good health c) payment of premium d) delivery receipt - ANS; a What is the advantage of reinstating a policy instead of applying for a new one? a) the cash values have gained interest while the policy was lapsed b) the original age is used for premium determination c) proof of insurability is not required d) the face amount can be increased - ANS; b Which of the following best describes fixed-period settlement option? a) only the principal amount will be paid out within a specified period of time b) the death benefit must be paid out in a lump sum within a certain period of time c) income is guaranteed for the life of the beneficiary d) both the principal and interest will be liquidated over a select period of time - ANS; d What is the benefit of choosing extended term as a nonforfeiture option? a) it can be converted to a fixed annuity b) it has the highest amount of insurance protection c) it matures at age 100 d) it allows for coverage to continue beyond maturity date - ANS; b which component increases in the increasing term insurance? a) interest on the proceeds b) premium c) death benefit d) cash value - ANS; c
