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When an individual purchases an annuity they are actually purchasing accumulation units. What is the purpose of accumulation units?


A) Accumulation units are the same as buying shares of stock in a company
B) Accumulation units are used to cover the sales charges and taxes prior to payments
C) Accumulation units are used to show how strong the insurance company is
D) Accumulation units are an accounting measure to determine the contract holder's interest in the account.

E) B) and C)
F) A) and D)

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What is the justification for the decreasing term life rider as part of the retirement income annuity?


A) If the annuitant dies before retirement, the beneficiary will receive annuity payments and the death insurance payments.
B) If the annuitant does before retirement, the premiums are refunded to the survivor
C) If the annuitant retires early, the premiums will pay for out of pocket expenses until benefits start
D) If the annuitant chooses not to retire, the annuity will expire.

E) A) and C)
F) A) and B)

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Why is the Securities and Exchange Commission (SEC) involved in annuities?


A) Annuities are an investment risk; therefore the SEC considers them to be securities rather than life insurance.
B) Annuities are an investment risk, therefore the SEC considers them to be variable insurance rather than life insurance
C) Annuities are a security, therefore the SEC regulates the amount and payments made
D) Annuities are a security, therefore the SEC regulates taxing and payments to the contract owner.

E) All of the above
F) C) and D)

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Jeff is issued a receipt for payment of his first premium and is informed that his coverage is effective immediately, until the policy is either issued or declined by the underwriters. What type of receipt did Jeff receive with his premium payment?


A) Premium receipt
B) Underwriters receipt
C) Conditional receipt
D) Binding receipt

E) A) and B)
F) None of the above

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What is the purpose of a flexible policy?


A) Allows for flexible premiums during periods of economic downturn
B) Allows for flexible premiums during periods of unemployment
C) Allows policy owner the ability to change one or more components if needed
D) Allows the policy owner to change the policy premium payment date

E) None of the above
F) A) and B)

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If an insured individual combines a whole life insurance policy with decreasing term coverage, what type of policy do they have?


A) An endowment
B) A joint life policy
C) Family income policy
D) Modified premium policy

E) C) and D)
F) A) and D)

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Which of the following explains a two-tiered annuity?


A) Two values available upon maturity
B) Two interest rates available to the annuitant
C) Two annuitants or survivors
D) Two payments made each month to the annuitant

E) B) and D)
F) All of the above

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Some policies come with a free look option. Although not required, most states offer a standard number of days for this free look. What is the standard length of time most states offer?


A) 3 days
B) 5 days
C) 7 days
D) 10 days

E) C) and D)
F) None of the above

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Which part of the annuity is taxable as income?


A) The interest portion of the annuity payment
B) The principal portion of the annuity payment
C) The principal and interest are taxable
D) Annuity payments are not taxable.

E) A) and D)
F) A) and C)

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An agent accepts the initial premium with the sale of a policy and then forwards it on to the company. If there is nothing in the agent's contract about continuing to accept premium payments, what type of authority does this agent have?


A) Apparent authority
B) Express authority
C) Implied authority
D) Lingering applied authority

E) All of the above
F) A) and D)

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Dependents are individuals that the insured can add to their policy. These can include which of the following?


A) Part-time student children of the insured
B) Step-children and foster children
C) Live-in help for individuals needing continuous care
D) Exchange students under the age of 21

E) A) and B)
F) A) and C)

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What is the purpose of a reentry term?


A) To apply for lower premiums
B) To apply for a larger policy
C) To miss one premium without forfeiture
D) To apply for better coverage after the wait period

E) B) and C)
F) A) and C)

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A

What is the purpose of the suicide clause?


A) To prevent people from committing suicide
B) To prevent fraudulent claims
C) To prevent people contemplating suicide from buying insurance
D) To prevent insurance fraud

E) A) and B)
F) A) and C)

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Alex receives a conditional receipt after paying the initial premium with his policy application. The next day Alex submits a clean bill of health report to his insurance agent. Later that night, Alex is killed in a hit and run accident while out jogging. What is the insurance agency's responsibility in this instance?


A) Return the premium to Alex's estate.
B) Pay the claim less the initial premium
C) Only pay a percentage of the claim
D) Pay the full claim.

E) None of the above
F) C) and D)

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D

When is a policy considered delivered?


A) When a signed receipt is returned to the underwriter
B) When the first premium is paid
C) When the policy is written
D) When the policy is mailed or turned over to the policy owner

E) All of the above
F) A) and D)

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Studies have indicated that people who drive red colored cars are more likely to receive traffic tickets. Bob refuses to drive red cars. Bob is managing the risk of traffic tickets through.


A) Transference
B) Retention
C) Reduction
D) Avoidance

E) A) and B)
F) A) and D)

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Enrique purchased a life insurance policy when he was 45 years old indicating his 50 year old wife as the sole beneficiary of his policy. When the insurer recorded the information he switched their ages. An audit of the files 10 years later reveals this mistake. What happens to Enrique's life insurance policy?


A) Nothing happens; the fault lies with the insurer and will be adjusted from the surplus funds.
B) Enrique's policy becomes void. He should have made sure the insurer correctly noted the ages.
C) The future premiums are adjusted to correct this mistake.
D) Because the mistake was not noticed for 10 years, the policy legally cannot change.

E) None of the above
F) A) and D)

Correct Answer

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Jane purchases a 15-year temporary annuity certain contract. When she retires at age 75, she begins receiving her annuity payments. When Jane reaches 90 years of age, what will happen to her annuity?


A) She will continue to receive her payments until her death
B) She will no longer receive any more payments
C) She will receive payments at a decreased amount
D) She will receive payments at an amount determined by the market value.

E) C) and D)
F) None of the above

Correct Answer

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When Eric and his wife divorced, Eric wanted to give the life insurance policy he has on his wife to their children, relinquishing all control of the policy. What type of assignment would Eric probably use to make this work?


A) Voluntary assignment
B) Collateral assignment
C) Conditional assignment
D) Partial assignment

E) None of the above
F) B) and C)

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A

If an individual wants to purchase $500,000 in whole life insurance but is only able to purchase $300,000, what option do they have to increase the value up to $500,000 of death insurance?


A) Purchase a limited payment policy to cover the extra $200,000
B) Wait until they can afford the full amount of the $500,000 policy
C) Increase the deductible to lower the premium amounts
D) Purchase term insurance for the remaining $200,000

E) A) and C)
F) B) and D)

Correct Answer

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