ALABAMA LIFE AND HEALTH INSUARANCE

EXAM COMPLETE AND ACCURATE

A __________ is when a participant withdraws and receives funds from a qualified
plan and places it into another plan. ANSWER -Rollover

A annuity is a contract that ANSWER -Provides a lifetime income through

periodic payments to the annuitant

A beneficiary that can be changed is called ANSWER -A revocable beneficiary

A business entity in Alabama may be licensed as: ANSWER -A producer

A child may be a dependent beyond the ages of 19 or 21 ANSWER -Only if the

child is permanently mentally or physically disabled before that age

A company is domiciled: ANSWER -In the state where its home office is
located

A company that has not received permission from an Insurance Commissioner to

do business in his or her state is called a/an: ANSWER -Unauthorized company

A company that is licensed to sell insurance in a particular state is: ANSWER -

An authorized company

A Continuous-Premium/Straight Life policy ANSWER -Requires the insured to

pay the premium for life and endows at age 100
A deferred annuity pays a death benefit to a beneficiary ANSWER -When the
annuitant dies before receiving any annuity payments

A father did not reveal that his daughter suffers from asthma on the application for
a health policy. In order to avoid paying a claim the insurer must ANSWER -
prove this was both intentional and material

A flexible premium annuity provides for a flexible ANSWER -Premium

payment amount

A group life policy will generally have all the following e ANSWER -1. be
associated with ones employment
2. have benefit levels set by the master contract
3. be term insurance

A joint life policy can have many uses some of these could include? ANSWER -
1. To cover two lives on the same policy
2. To pay estate taxes when the second spouse dies
3. To pay off a home mortgage should one of the working spouses die

A lapsed policy may usually be reinstated ANSWER -Within three years after
the policy lapses

A licensed producer may procure insurance in an unauthorized company:

ANSWER -If the insurer is an eligible surplus line insurer and has been placed on
the Commissioner's approved list of unauthorized insurers.

A licensed producer must keep records of all insurance transactions for at least how
many years? ANSWER -3 years
A life annuity with period certain pays the annuitant ANSWER -Until death and
then the beneficiary if the certain period has not been exceeded.

A life insurance policy is a unilateral contract because: ANSWER -Only the

insurance company is bound to live up to its side of the agreement

A life policy has a $500 premium outstanding and a $5,000 loan,if the reduced
paid-up non-forfeiture option were used how much coverage would exist?
ANSWER -the amount the cash value would purchase minus the $5,000 loan

A limited pay life policy ANSWER -requires premium payments for a specified
number of years or until a specified age is reached

A nonexclusive agent: ANSWER -Is an independent businessperson.

A participating policy is likely to have which of the following? ANSWER -A

higher premium than a nonparticipating policy

A payor rider is used to keep what type of policy in force? ANSWER -A

juvenile insurance policy

A plan that allows employees to defer compensation for retirement is called?

ANSWER -CODA

A policy owner allows a policy to lapse and the insurance company converts the
policy to the extended term option. Which of the following from the original policy
will automatically carry over into the new policy ANSWER -Face value
A producer must hold how many license/licenses to market a variable product?
ANSWER -1. a life license
2. a variable life license
3. a Series 6 or 7 Securities license

A producer offered to give half his commission to a client if he would buy a policy
from him,this is illegal and is called? ANSWER -Rebating

A producer who allows his license to lapse, may reinstate the license if the request
is made within how many months from the due date of the renewal fee?
ANSWER -12 months.

A producer who is acting as an agent is representing: ANSWER -Always the

insurer

A producer who is subject to the continuing education requirement will be required

to show they have complete at least ___ ____ of continuing education every two
years. ANSWER -24 hours.

A pure risk ANSWER -generally presents no possibility of financial gain.

A qualified plan available to the self-employed and their employees is a:

ANSWER -Keogh Plan

A qualified plan in which a specified amount is invested each year but does not
define the amount to be paid out in the future is known as ANSWER -A defined
contribution plan
A qualified plan that promises a specific benefit to an employee at retirement is
called: ANSWER -Defined Benefit Plan

A rated policy will ANSWER -have higher premiums

A rollover refers to which of the following? ANSWER -A transfer of funds

from an IRA to another qualified type account.

A Roth IRA provides: ANSWER -No IRS rules as to when payouts must begin

A solicitor: ANSWER -Is appointed by a company as an agent to solicit

applications for insurance as a representative of another agent

A state insurance department licensed company that is permitted to do business in

the state is called: ANSWER -An authorized company.

A straight life annuity pays a periodic income ANSWER -During the annuitant's
lifetime with no refund upon his or her death

A temporary license may be issued for a period not to exceed: ANSWER -180
days (6 months)

A term to 65 life policy will mature when ANSWER -when the insured dies.

A term used in referring to retirement accounts is vesting and this relates to?
ANSWER -1. Defining the time at which the retirement account belongs to the
employee.
2. Defining the time at which the employee may withdraw funds from the account
if employment is terminated.
3. IRS rules concerning the length of time before it must belong to the employee.

A universal life policy may be surrendered for its cash value ANSWER -At any
time

A universal life policy with a back=end load ANSWER -Makes a service charge
when the policy is surrendered

A variable life policy ANSWER -Death benefit varies to reflect the investment
results of the underlying separate account, but never falls below a guaranteed
minimum

A Variable Life policy would guarantee all the following except? ANSWER -
cash value

A violation of the Alabama Insurance Code may result in the following:

ANSWER -1. Denial of an insurance license.
2. Suspension of an insurance license.
3. Revocation of an insurance license.

A willful violation of the Alabama State Insurance Code may result in the
following: ANSWER -1. Up to $1,000 fine for each violation.
2. Imprisonment for up to one year.
3. Both fine and imprisonment.
ABC Insurance Company, agents are employees of the company who are paid a
salary plus commissions. This an example of what type of insurance marketing
system? ANSWER -Direct Writer.

Adelaide dies without having paid the $500 premium on her $50,000 policy that
was due a week before her death. With no outstanding policy loans, Adelaide's
beneficiary can expect to receive ANSWER -$49,500 which is the face amount
less the premium owed

Alabama Insurance Guaranty Association may? ANSWER -1. Guarantee or

reinsure policies of a impaired insurer.
2. Provide money or guarantees to assure payments or obligations of impaired
insurers.
3. Loan money to the impaired insurer.

Alabama law exempts the following from license requirement except:

ANSWER -Salaried service representatives who receive commissions

Alabama law requires an applicant for an insurance producers license to:

ANSWER -1. Be a U. S. citizen.
2. Be an Alabama resident for at least 6 months
3. Be of good moral character and not convicted of any felony.
4. Have satisfied the 40 hour pre-licensing educational requirement

Alabama law requires that an applicant for an insurance agents license must be at
least: ANSWER -18 years of age.

Alan purchases an estate-builder (jumping, juvenile) policy for his five-year-old

son, Donald. Suppose that when Donald reaches age 21 his father presents him
with the policy as a gift. Which of the following statements is NOT correct?
ANSWER -Donald does not have to continue to make the premium payments to
keep the policy in force

All of the following are alternatives an insurer has when asked to insure a
substandard risk ANSWER -1. Charge a higher than standard premium
2. Attach a rider to the policy excluding certain coverages or conditions
3. Reject the risk

All of the following are duties of a producer except: ANSWER -Evaluate an

insured's financial condition.

All of the following are elements of a contract ANSWER -1. Legal purpose
2. Offer and acceptance
3. Consideration

All of the following are factors used to determine annuity premiums ANSWER
-1. Income amount and payment guarantee
2. Annuitant's age
3. Assumed interest rate

All of the following provisions of an adjustable life policy may be changed to meet
the policyholder's needs ANSWER -1. The period of insurance protection
2. The amount and/or frequency of premium payments
3. The face amount of the policy

All the following are true regarding business uses of individual life policies
ANSWER -1. A business can buy a life policy to insure a key executive.
2. A business can buy a policy on an executive and name the business as
beneficiary.
3. The premiums on a Key-Person life policy are not tax deductible to the business.

All the following statements are true with respects to a qualified plan except:
ANSWER -Senior management is exempt from qualified retirement plans

All the following statements concerning Group Life on employees is ANSWER

-2. If the coverage is $50,000 or less the premiums are not taxable to the employee.
3. They are considered a normal business expense.
4. Noncontributory groups do not require employees to pay any premiums

Amounts paid out under the accelerated benefit rider ANSWER -1. Are
authorized to pay expenses associated with a terminal illness
2. Are deducted from the policy's death benefit
3. Can be used to pay expenses in a nursing home

An accounting measure used to determine a contract owner's interest in the

separate account of a variable annuity before payments begin is called a/an
ANSWER -Accumulation unit

An annuitant has a annuity certain, and dies shortly after the payments start but
before the certain period of 10 years has elapsed. Any money remaining is
ANSWER -Paid to the beneficiary for the rest of the certain period

An annuity that is purchased by a lump sum from a CD or some other source and
annuity payments to the annuitant begin in less than one year is called:
ANSWER -Single Premium Annuity
An annuity that provides a guaranteed floor to the annuity's value , but may
provide more than
the guaranee through the stock market indices is called:\ ANSWER -Equity
Indexed Annuity

An applicant that does not meet normal underwriting standard may be insured by
some insurers by ANSWER -accepting a rated or rated up policy with higher
premiums.

An applicant who has failed to pass the examination for the second time:
ANSWER -Must wait 3 months from the date of the last unsuccessful examination
and pay another filling fee and examination fee.

An application for group coverage is signed by the ANSWER -employer, who

then receives and retains a master policy

An expense loading is added to the net premium in order to do all of the following
ANSWER -1. Spread cost equally among insureds
2. Have funds for expenses when needed
3. Cover all expenses and contingencies

An insurance contract is an aleatory contract. This means: ANSWER -Equal

value is not necessarily given by both parties to the contract

An insured allows a permanent policy to lapse. Unless otherwise instructed, the

insurance company ANSWER -Will automatically institute the extended term
option
An insured may select which of the following dividend options should the insurer
declare a dividend? ANSWER -1. Cash or accumulate the dividend at interest
2. Apply the dividend to reduce the premiums
3. Apply some of the additions to buy paid up additions and the rest to one-year
term coverage.

An insurer will have how many days to respond to the state under obligations from
the Alabama Insurance Guarantee Association? ANSWER -30 days.

Any extra premium charged for the waiver of premium rider ANSWER -Does
not apply to the policy's cash value

Arthur purchased a $100,000 policy naming his wife Louise as primary beneficiary
and his only son Michael to receive any proceeds if Louise dies before Arthur but
before receiving all of the policy proceeds. Arthur elected the interest only option
for Louise with the rights of withdrawal after 5 years. No settlement option was
stipulated for Michael. Arthur dies May 6,1990. Louise's vintage automobile gasps
its last breath on July 4, 1996, and Louise decides $15,000 will be adequate to
purchase a newer model. Louise ANSWER -May withdraw the $15,000 or
more, if she desires

Arthur purchased a $100,000 policy naming his wife Louise as primary beneficiary
and his only son Michael to receive any proceeds if Louise dies before Arthur or if
he dies after Arthur but before receiving all of the policy proceeds. Arthur elected
the interest only option for Louise ,with the right of withdrawal after 5 years. No
settlement option was stated for Michael. Arthur dies May 6,1990. In November, of
1994, Louise is laid off of work. With Christmas approaching, Louise wants to
withdraw $1,500 from the insurance company to cover holiday expenses. Louise
ANSWER -Must look elsewhere for her holiday money
Arthur purchased a $100,000 policy naming his wife Louise as primary beneficiary
and his only son Michael to receive any proceeds if Louise dies before Arthur or if
she dies after Arthur but before receiving all of the policy proceeds. Arthur elected
the intreset only option for Louise with the right to with draw after 5 years. No
settlement option was stipulated for Michael.Soon after purchasing her new car,
Louise is involved in a fatal accident. The remaining proceeds of the insurance
policy will be paid to ANSWER -Michael, in any manner he chooses

Arthur purchased a $100,000 policy naming his wife Louise as primary

beneficiary, and his only child Michael, to receive any proceeds if Louise dies
before Arthur, or if she dies after Arthur but before receiving all of the policy
proceeds Arthur elected the interest settlement option for Louise, with the right of
withdrawal after five years. No settlement option was stipulated for Michael.
Arthur dies May 6, 1990. Arthur's insurance company will make settlement by
paying? ANSWER -Interest in periodic payments to Louise

As a general rule, most insurance companies will allow the insured to change to
another type of insurance policy without a medical examination if the
ANSWER -New premium is higher than the original

Assuming a deductible with your insurance policy is which type of risk

management technique? ANSWER -Assumption of risk

Bob is 24 and would like to take advantage of variable interest rates and
investment performances and be able to vary his premium payments throughout the
year.Which policy would you recommend? ANSWER -variable universal life

Calvert names his wife, Katrina, as the primary beneficiary of $100,000 whole life
policy with a common disaster provision. Their son, Jake, is the contingent
beneficiary. Calvert and Katrina are involved in a serious private airplane accident.
Calvert is killed immediately but Katrina lives for another two months before she,
too, dies. Which of the following is likely to occur? ANSWER -Katrina receives
the proceeds of the policy, which in turn are paid to her estate upon her death

Can states require insurance companies to use certain forms or rates in connection
with certain types of insurance? ANSWER -Yes, some states have mandatory
forms or rates for certain coverage's.

Collateral for a policy loan is ANSWER -The cash value of the policy itself

Commissioner of Insurance has all of the following authority except: ANSWER

-Set fire and casualty rates charged in Alabama

Contract law terms unilateral and adhesion have a common element? ANSWER
-One promiser unilateral and one author adhesion.

Dan and Mary both take out a Straight Life Annuity and start receiving benefits
when they reach age 65.Which is true about their monthly benefits? ANSWER -
Dan will receive a larger monthly benefit

Dillon has a $50,000 policy with cash values of $10,000. A $2,000 loan is
outstanding, as well as a past-due premium of $1,000. Dillon finds he can no
longer make premium payments on this policy. If Dillon chooses the cash
surrender value option, he will receive ANSWER -$8,000

Dividends left to accumulate at interest ANSWER -Can be withdrawn without

affecting the cash value of the policy

Divides the cost of additional insurance for an employee between that employee
and the company ANSWER -split-dollar plan
Domestic insurance companies must be examined by the Commissioner's office at
least every: ANSWER -3 years

Each of the following is a factor in computing the premium for a life insurance
policy ANSWER -1. Operating expenses
2. Investment experience
3. The mortality rate

Each of the following is a source of life insurance policy dividends ANSWER -

1. Reduction in operating expenses
2. Additional interest earnings
3. Savings in mortality

Each of the following statements about policy loans is correct. ANSWER -1. A
policy loan cannot be made on a policy until it has been enforce long enough to
accumulate some cash value
2. If a policy has cash value, the insurance company can refuse to lend the policy
owner money
3. The loan value of a policy cannot exceed the current cash value

Each of the following would be an element in the definition of fraud ANSWER

-1. Statements relied upon by a second party who then suffers a loss
2. Intent to gain advantage
3. An intentional misrepresentation made by the applicant

f a new mode of premium payments calls for less frequent payments, the total
annual dollar outlay by the policy owner will ANSWER -Decrease
For the insurance company to pay the accidental death benefit, most companies
require that the insured ANSWER -Die within 90 days of the accident

Ford begins work on March 18 at the Watts Electric Company. Watts offers
noncontributory group life insurance to its employees after a probationary period
and provided the other usual requirements are met. If the probationary period is the
usual length, Ford will be eligible for group life insurance on ANSWER -June
18

Gavin has named each of his three sons as per capita primary beneficiaries of a
$30,000 life insurance policy. If all three sons are living at the time of Gavin's
death, which statement best describes the amount each will receive? ANSWER
-Each son receives $10,000

Good cause as grounds for refusal, revocation or suspension of a license includes

all the following except: ANSWER -Being over 45 days late in remitting funds
to an insurer.

he most effective way to ensure that the applicant will accept the policy when it is
issued is: ANSWER -To have the applicant pay the initial premium at the time
of application

How many hours of education are required for a certificate to take the Life license
exmination? ANSWER -20

If a group insurance plan is noncontributory ANSWER -All individuals become

immediately covered after completing the probationary period
If a policy contains an accidental death benefit and the insured also has an
outstanding policy loan, in the event of accidental death ANSWER -Twice the
face amount is paid with a deduction equal to the size of the policy loan

If a policy is lapsed or surrendered the insured may elect which of the following
options? ANSWER -1. Cash
2. Reduced Paid-Up coverage
3. Extended Term

If a policy owner has a $100,000 policy with an accumulated cash value of $6,000,
the policy owner can borrow up to ANSWER -The entire accumulated cash
value of $6,000 less interest for one year

If a proposed insured dies before the policy is issued but while in possession of a
conditional receipt, the company ANSWER -Will pay the policy proceeds only
if it would have issued the policy to the proposed insured had he or she been living

If a universal life policy with the increasing death benefit option has an initial face
amount of $75,000 and a cash value of $10,000 the actual death benefit would be
ANSWER -$85,000

If an agent is called a producer what is another name for the insurer? ANSWER
-Principal

If an annuitant paid $18,000 in premiums for an annuity and started receiving

benefits when the accumulation stage ended and the account was worth $21,000
how much of the value would be subject to federal income tax? ANSWER -
$3,000 plus on any additional interested earned during the annuity stage.
If an insured commits suicide within the time specified by the suicide clause, the
insurance company may do all of the following ANSWER -1. Refund to the
beneficiary only the amount of premium paid to date
2. Void the policy
3. Refuse to pay a death benefit

If an insured currently has a policy with a waiver of premium rider and should
change to a more hazardous occupation, the insurance company will ANSWER
-Continue the waive of premium rider

If an insured makes a collateral assignment to secure a loan ANSWER -only the

amount of the loan is assigned.

If an insured's policy included the waiver of premium rider, what happens when the
age is reached where the rider no longer applies? ANSWER -The premium for
the policy is reduced

If an insurer should decide to terminate a producer, they must give the Insurance
Commissioner___ days notice and the producer __ days notice. the producer will
then have____ to respond if they so chose. ANSWER -30,15,30

If and insured has an outstanding loan of $5,000 on a policy with a face amount of
$25,000 at death, the company will ANSWER -Pay the beneficiary $20,000
after subtracting the amount of the outstanding loan

If Jonathan names his estate as the beneficiary of his life insurance policy and dies
without a will ANSWER -A court will distribute the proceeds strictly according
to state law
If one of the named beneficiaries has died, and the deceased beneficiary's heirs
receive a portion of the proceeds of the policy, this is call a ANSWER -Per
stripes beneficiary designation

If Peyton's policy on his life has a guaranteed insurability rider, it means that he
can purchase more insurance ANSWER -On his own life at certain specified
ages without proof of insurability

If the annuitant selects a Straight Life Annuity payments will be made for the life
of the annuitant however ANSWER -all benefits will cease once the annuitant
dies.

If the insurance company accepts a special class risk ANSWER -The premium
will be higher than for a normal risk

If the insured is killed in an airplane accident, the accidental death benefit

ANSWER -Applies if it is a regularly scheduled commercial airline

If the insured's age has been overstated at the time the policy was purchased, and
the error is discovered prior to the death of the insured, the company will
ANSWER -Reduce future premium payments

If the policy owner has chosen the reduced premium dividend option, dividends
will ANSWER -Be applied to the premium due

In a universal life policy, the two adjustments usually made to the cash value
account are ANSWER -Cost of insurance protection is charged and current
interest is credited
In a whole life insurance policy ANSWER -The cash value is greatest at the end
of the policy period, and the insurance protection is greatest at the start of the
policy

In Alabama any individual who is appointed by a company to solicit applications

for insurance as representative of another producer/agent is called a: ANSWER
-Solicitor.

In Alabama any person who is authorized or acknowledged by an insurer to act in

the solicitation of, negotiation for, or pronouncement of making of a contract of
insurance is termed: ANSWER -A producer.

In group insurance, the evidence of a contract between the insurer and the
employer or association ANSWER -The policy

In insurance and contract law in general the term consideration means?

ANSWER -1. statements made on the on the application
2. premium
3. promise to pay if a loss occurs

In life insurance the insurable interest requirements is generally satisfied if:

ANSWER -the policy owner must expect to suffer a loss if the insured dies.

In many jurisdictions, permanent policies are required to have some cash value by
the end of ANSWER -The policy's third year

In order to be valid, a contract must be between individuals considered legally able

to enter into an agreement. This principle is known as: ANSWER -competent
parties
In the Health-Disability area we use what type data to produce rates? ANSWER
-Morbidity tables

Incidental limitations refer to which of the following? ANSWER -The amount

of life insurance that may be included in a qualified retirement plan

Independent agents generally may do all the following except: ANSWER -

Receive good salaries from insurance companies.

Insurance companies incorporated under Alabama state law are: ANSWER -

Domestic companies.

Insurance companies incorporated under the laws of foreign countries are:

ANSWER -Alien companies.

Insurance contracts found to have ambiguous language will all ways have the
ambiguous language interpreted in the favor of the policyholder. This is know as
ANSWER -Contract of Adhesion concept

Insurance is a method risk is transferred to an insurer for consideration up to

ANSWER -a predetermined limit.

Insurance licenses generally expire unless renewed on what date? ANSWER -

The producer's birth month.

Insurers in Alabama authorized and approved to do business in this state receive

this in a: ANSWER -Certificate of Authority.
It is you personal responsibility to report to the insurance department a change in
your address or legal name within 30 days of the change. A failure to do so could
result ANSWER -in a 50$ fine

Jim is a 56 year old engineer with a wife and 3 children, he has a 20 year level
premium term policy with a $300.00 monthly premium.He is considering early
retirement and is maximizing his tax deductible retirement contributions, if Jim
leaves his job he ANSWER -can convert it to permanent insurance without
proof of insurability, within 30 days of leaving his employment

Jim wants to receive the largest monthly benefit possible from his annuity. Which
settlement option should he choose? ANSWER -A Straight Life Annuity

Johnny Mach Brown has placed a large sum of money with an annuity company
that has
guaranteed Johnny that , should he deposit his funds into an annuity and leave
those funds
in the annuity for 5 years, the company will guarantee a certain return for those 5
years.
This type annuity is called: ANSWER -Market Value Adjusted Annuity

Life insurance that does not require a medical exam is known as ANSWER -
Simplified issue

Life-Health and Disability policies written or subjects of insurance in Alabama

must be issued by and through a: ANSWER -Licensed Alabama Producer.

Living a healthy life style is an example of which risk management technique?

ANSWER -Reduction of risk
Lloyd's of London is involved ANSWER -1. in marine insurance
2. in insuring famous people
3. in the reinsurance business

Loan values and retirement income are ANSWER -Called the living benefits of
life insurance

Major sources of regulation of the insurance industry include all the following
except: ANSWER -Federal government.

Mary wants to make a loan against the cash value of her life insurance policy on
which she has named Sally as an irrevocable beneficiary. ANSWER -Sally is
required to agree to the loan in writing before Mary will be allowed to receive the
loan.

Minors over the age of fifteen would be allowed to buy which of the following
insurance policies? ANSWER -1. life insurance
2. Homeowners Policy
3. An annuity

Misrepresentation is: ANSWER -A written or oral statement which is false

Money collected by a producer is held by that producer in what capacity?

ANSWER -Fiduciary accounts.

Money provided under the automatic premium loan provision ANSWER -Is
generally charged interest
Mortality figures are normally developed by studying and interpreting statistics:
ANSWER -Developed from the deaths of millions of persons over long periods of
time.

Mr. and Mrs. Burden receive annuity payments. Mr. Burden dies, but Mrs. Burden
continues to receive payments. The Burdens have a ANSWER -Joint life and
survivorship annuity

ncome payments made from an annuity are ANSWER -Only partly subject to
federal taxation

Offering any inducement of valuable consideration whatever not specified in the

terms of the contract. ANSWER -Rebating

Once a policy has lapsed, the insured usually can reinstate the policy, provided
proof of insurability is shown, if ANSWER -All back premiums due plus
interest have been repaid and less than three years have elapsed

One of the following is considered misrepresentation and is illegal ANSWER -

Issuing a statement which is not entirely true about the terms of a policy.

Policies are considered incontestable after ANSWER -Two years

Porter dies before his annuity has paid out an amount at least equal to the purchase
price of the annuity, so Porter's beneficiary continues to receive annuity payments
until that amount has been reached. This type of annuity is a ANSWER -Refund
life annuity

Premium payments made into a variable universal life policy ANSWER -Are
invested in one or more investment portfolios at the policy owner's option
Premiums for a variable universal life policy ANSWER -Can vary in amount as
well as payment schedule

Producer terminations require the insurer to notify the Commissioner's office and
the producers in how many days? ANSWER -3o days and 15 days

Purchasing a life policy is a good example of: ANSWER -A transfer of risk

Regulation 69 under Alabama law concerning marketing practices would apply to

all the following except ANSWER -A client's birthday card

Risk may be defined as: ANSWER -The uncertainty of loss

Select the correct statement. ANSWER -A producer is never permitted to make

a change in policy wording

Should an insured become totally and permanently disabled two months before the
cut-off date for the waiver of premium rider ANSWER -The insured remains
eligible for all provisions

Solicitors may not: ANSWER -1. Issue or countersign policies.

2. Sell insurance unless they are licensed.
3. Sign an insurance policy.

T/F Misrepresentation is a deliberate false representation on the part of the agent or

insurer as to the terms and conditions of the policy its terms and benefits.
ANSWER -True
T/F Misrepresentations on the part of an applicant as to the health or other
conditions of the applicant must be deliberate and material for an insurer to avoid
coverage. ANSWER -True

T/F Warranties are not used in the life-health-disability area. ANSWER -True

Term insurance differs from permanent insurance in that term ANSWER -

Builds no cash value, pays a death benefit only

The ABC Corporation decides to take out a key person policy on its CEO. ABC
will fill out the application, pay the premium, and receive the proceeds if the CEO
should die. The corporation will fill all of the following roles ANSWER -1.
Policy owner
2. Applicant
3. Beneficiary

The Alabama Guaranty Association is obligated to pay covered claims of

insolvency except for workers' compensation claims within what amounts?
ANSWER -$100,000 in cash value or $300,000 on one life.

The applicant, if other than the proposed insured, must have ANSWER -An
insurable interest in the life of the insured

The bank suggest that Bob purchase a life insurance policy that will pay off his
mortgage in the event of his premature death.Which of the following would best
help him achieve this purpose? ANSWER -Decreasing term policy
The cash value accumulation in a life-insurance policy ANSWER -Can be used
for loans or later as retirement income

The cash value of a permanent life insurance policy can be used for all of the
following ANSWER -1. Cash withdrawals
2. Policy loans
3. Nonforfeiture options

The cash value of a variable life policy ANSWER -Is determined by the
investment

The chance that a person who anticipates a loss will purchase insurance is:
ANSWER -Adverse Selection

The Commissioner may issue a cease and desist order if one is suspected of
violating any of the
unfair trade practices a hearing will be held no sooner than: ANSWER -10 days
of the notice.

The Commissioner of insurance in Alabama may do all the following except:

ANSWER -Change the law to meet the public's best interest

The Commissioner of Insurance specific duties are all of the following except:
ANSWER -the promulgation of insurance laws

The Commissioner of Insurance, who is the chief officer and head of the
department of insurance, is: ANSWER -Appointed by the governor for a four
year term.
The company will normally pay the face amount of the policy to the beneficiary of
an insured who commits suicide after the policy has been in effect for
ANSWER -Two years

The concept of due process requires which of the following elements?

ANSWER -Hearings, Notice

The coverage type most often used with Group Life insurance is? ANSWER -
Annually renewable term

The current rate of interest paid to the cash value account of a universal life policy
consists of ANSWER -Guaranteed interest plus excess interest

The death benefit of a variable life policy ANSWER -May go up or down but
will never fall below the face amount

The extended term nonforfeiture option provides ANSWER -Term coverage

equal to that of the original policy with premiums based on the insured's attained
age

The factors that determine the amount of each payment under the fixed period
settlement option are ANSWER -Length of the fixed period, face amount of the
policy, and interest

The Fair Credit Reporting Act guarantees which of the following? ANSWER -
Applicants' right to information held about them by any reporting agency

The initial payment for an insurance policy can be described in an advertisement

only as a(n) ANSWER -premium
The Insurance Commissioner may hold a hearing upon written demand of an
aggrieved person within how many days? ANSWER -30 days

The Kalamazoo Stove and Screen Door Company applies for life insurance on its
key vice president, Harold. Kalamazoo S and SD Company is the premium payer
and beneficiary, and controls all rights to the policy. Which following is true?
ANSWER -Harold is the proposed insured; his company is the applicant.

The legal concept of Adhesion is a bit of a problem to insurers because.

ANSWER -the insured does have to accept the contract as written by the insurer so
all ambiguities will be resolved in favor of the insured.

The Lucrative Lozenge Company provides a $5,000 monthly income to retirees

who served as senior executives. This benefit is not available to other retirees of
the company. This is an example of a ANSWER -Nonqualified Plan

The main purpose of the spendthrift clause contained in a settlement option is to

prevent the beneficiary from doing all of the following ANSWER -1.
Encumbering the proceeds of the policy
2. Commuting the proceeds of the policy
3. Transferring the proceeds of the policy

The Medical Information Bureau is a nonprofit organization supported by

ANSWER -Insurance companies

The National Association of Insurance Commissioners exists: ANSWER -To

standardize the regulation of insurance in the various states.
The nonforfeiture option that provides the most life insurance protection is the
ANSWER -Extended term option

The normal waiting period for benefits under the disability income rider is
ANSWER -six months

The number of years excluded from the conversion privilege on a on a convertible

term policy ANSWER -Varies among insurance companies

The payment of the proceeds of a policy in other than a lump-sum cash payment is
called a ANSWER -A settlement option

The penalty for a producer who over charges or fails to return premiums to persons
so entitled is: ANSWER -1. A fine.
2. Imprisonment.
3. Suspension or revocation of license.

The penalty for soliciting insurance in Alabama without a license could be:
ANSWER -1. Fine.
2. Imprisonment.
3. Revocation of license.

The policy conditions represent the obligations of: ANSWER -Both the insured
and the insurer

The portion of the premium that is based only on mortality rates and assumed
interest is called the ANSWER -Net premium
The practice of twisting: ANSWER -Involves inducing any policyholder to
lapse a contract of insurance for the purpose of replacing the policy to the
detriment of the policyholder.

The premium paid and the statements on the application to the insurance company
is called ANSWER -consideration

The premium that reflects mortality rates, assumed interest, and the policy's share
of the company's operating expenses is called the ANSWER -Gross premium

The provision which states that policy will stay in force a certain period of time
after the premium due is the ANSWER -Grace period provision

The punishment for fraud or making false statements may include: ANSWER -
Fines, imprisonment or both

The purpose of the Alabama Insurance Guarantee Association is to: ANSWER -

1. Assist in the detection and prevention of insolvencies.
2. To avoid delays in the payment of claims by insolvent insurers.
3. To provide a method of paying claims for insolvent insurers.
4. To provide a method of assessment of cost of claims due to insolvent insurers.

The settlement option that provides for the proceeds plus interest to be paid in
installments for a specified period of time is the ANSWER -Fixed period option

The settlement option under which the principal never decreases unless the
beneficiary withdraws it is the ANSWER -Interest option
The situation below that most likely calls for the purchase of term insurance is
ANSWER -George has two years of medical school to complete. He and his wife
have one child

The time period between when a widow can collect Social Security benefits after
the last child is beyond the age limit allowing the widow to collect survivorship
benefits to is known as: ANSWER -Blackout Period

The type of annuity in which the values grow according to the performance of the
investment medium, and in which benefits may fluctuate according to the market
performance, is called ANSWER -A variable annuity

The type of annuity that guarantees to pay total income at least equal to the
purchase price of the ANSWER -Refund life annuity

The type of insurance that provide life insurance automatically for Federal
employees unless they choose not to be included in the plan is ANSWER -
FEGLI

The type of policy that can be changed from one that does not accumulate cash
values to one that does is a ANSWER -Convertible term policy

The waiver of premium rider normally expires at age ANSWER -60

The written examination given to applicants for a nonresident producer's license

can be waived provided that: ANSWER -The applicant is a resident of state
which permits the licensing of Alabama residents under basically the same
conditions as provided for the licensing of nonresidents of Alabama.
To be able to start operations, a mutual company must have all of the following
ANSWER -1. The advanced premium payment for each application
2. Minimum number of applications for insurance
3. A surplus as specified by the state

To waive an insured's premium, most companies require an individual's disability

to be ANSWER -Total and permanent

To what does the statement spreading the result of financial loss created by an
individual's death among many persons, so the cost for each individual is small
refer? ANSWER -The principle of life insurance

TSAs are tax-sheltered retirement programs for employees of all of the following
kinds of organizations ANSWER -1. Religious
2. Educational
3. Charitable

Turning over all rights in a life policy to an assignee is referred to as ANSWER

-An absolute assignment

Under the provisions of the fixed period settlement option, the ANSWER -
Principal amount gradually decreases to zero

Under your agency contract you are know as? ANSWER -the agent or producer

Using the policy dividends as a single premium to buy additional life insurance is
called the ANSWER -Paid-up additions option
Usually once a policy has been in force over two years, the company can
ANSWER -Void the policy only for nonpayment of the premium

Warren and Wilma have joint life policy. Warren dies and the policy pays nothing.
Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is
called a ANSWER -Survivorship or second to die policy

What are the two life stages to an annuity? ANSWER -Accumulation Stage and
Annuity Stage

What company department is responsible for accepting and rejecting applications

based on company standards? ANSWER -Underwriting.

What constitutes an entire insurance contract? ANSWER -The policy, its

endorsements, and any attached papers

What is a life insurance policy dividend? ANSWER -The policy's share of the
company's excess funds or divisible surplus

What is postmortem dividend? ANSWER -A dividend earned, but not yet paid,
in the year of the insured's death and paid with the death claim

What is the basic purpose of life insurance? ANSWER -1.estate creation

2.survivor protection
3.estate protection

What life insurance policy provision will allow automatically any available cash
values to be use to pay policy premiums once the grace period has ended?
ANSWER -automatic premium loan clause
What type of life insurance policy will pay the full face amount of the policy at
maturity even if the insured is still alive? ANSWER -an endowment policy

When a group plan is contributory, what percentage of employees must want and
be willing to pay for coverage? ANSWER -75%

When a producer is made aware of an insured's death, the first task is to

ANSWER -Notify the insurance company

When considering the adjustable death benefit on a current assumption policy the
most important consideration is ? ANSWER -the minimum allowable risk
corridor

When Linwood died, it was discovered that he was actually six years older than he
had claimed when applying for an insurance policy. As a result of this discovery,
the insurance company ANSWER -Will pay only the amount of insurance that
Linwood's premiums would have purchased at his correct age

When Sam, a widower, dies, his sons Mack and Jack share a monthly check of
$2,000. Mack dies and Jack continues to receive a check for $1,000 until he dies.
This life income settlement option is called ANSWER -Joint and survivor life
income option

When signing the application form, the proposed insured is: ANSWER -Making
a formal request to the company for an insurance policy.

When the annuitant buys an annuity and does not take any of the investment risk,
but does assume the inflation risk is called: ANSWER -A conventional or fixed
annuity.
When the cash value account of a universal life policy reaches zero, the policy
owner must make a premium payment after the grace period or ANSWER -The
policy will lapse

When the participant enters into the Annuity Stage of an annuity, the participants
can take annuity payments throughout the following option(s): ANSWER -1.A
Refund Annuity

2.Straight Life Annuity

3.Joint and Survivorship Annuity

When underwriting group life insurance ANSWER -The underwriter generally

focuses on the group as a whole, rather than on individual members

Which is the proper term for a company owned by its policy owner? ANSWER
-A mutual insurance company

Which of the following are exempt from the pre-qualification educational course?
ANSWER -Holders of the CLU CPCU and CIC designation.

Which of the following are settlement options that a beneficiary might choose in
the event that the insured has died an not designated any settlement option?
ANSWER -1. Cash,pay the full face amount of the policy.
2. Interest only paid on the death benefit amount or until another option is chosen.
3. A Fixed Time, Fixed Amount option or one of the life income options..
Which of the following can make a policy loan on a life policy? ANSWER -the
policy owner

Which of the following disabling act would NOT normally be excluded from the
waiver of premium rider? ANSWER -Injury sustained while a paying passenger
on a scheduled airline flight

Which of the following insureds would be the most suited for a Variable Universal
Life policy? ANSWER -30 year old professional with a professional spouse.

Which of the following is NOT a circumstance under which a company will pay a
death claim for less than the face amount? ANSWER -When the age of the
insured has been overstated at the time the policy was issued

Which of the following is not one of an insurance producer's duties? ANSWER

-Writing the provisions of a customer's policy.

Which of the following is not true? ANSWER -Contributions to a traditional

IRAs are not tax deductible.

Which of the following policies could be expected to have the lowest premium?
ANSWER -Whole life

Which of the following policies would most likely be a step-rated policy?

ANSWER -annual renewal term

Which of the following provides the basis for the benefit amount paid to an insured
under a disability income rider? ANSWER -The face amount of the policy
Which of the following riders require the insured being totally and permanently
disabled before it becomes effective? ANSWER -Waiver of premium rider

Which of the following rules are true concerning annuities? ANSWER -1. The
older the age the benefits start the higher the benefits will be.
2. If every thing is equal,males will receive a greater monthly benefit.
3. The longer the life expectancy the lower the benefit.

Which of the following statements about the average number of people who die
each year is true? ANSWER -It is called the mortality rate

Which of the following statements about Whole Life are true? ANSWER -1.
The face amount of the policy will remain the same as long as the policy is in
force.
2. The shorter the premium paying period the faster the cash value will grow.
3. The longer the premium paying period the lower the premium an the slower the
cash value build up.

Which of the following statements regarding the Medical Information Bureau are
true? ANSWER -1. It must be authorized by the applicant to give information to
member companies
2. It supplies member companies with information concerning insurability of
proposed insureds
3. It is a nonprofit agency established by insurance companies to aid their
underwriting

Which of the following would be considered a speculative risk? ANSWER -The

possibility the painting you bought might be a long lost masterpiece
Which of the following would be considered proper establishment of insurable
interest in the life insurance area? ANSWER -1. spouses in each other
2. parents in their children
3. creditors in their debtors

Which of the following would NOT be permitted as a Section 1035 policy

exchange? ANSWER -An annuity contract exchanged for life contract

Which statement best describes the provisions of the uniform simultaneous death
act? ANSWER -If the insured and the primary beneficiary should die
immediately in the same accident, the proceeds are paid as if the primary
beneficiary had died first

Which statement describes the term policyholder reserve? ANSWER -That

amount, when increased by future premiums on outstanding policies, and interest
on those premiums, will enable the company to meet future death claims

Which type of insurance person does not actually sell insurance but sells advice
about insurance? ANSWER -Consultant.

Who is responsible for licensing insurance producers? ANSWER -State

insurance department.

Who may hold a resident license? ANSWER -An applicant who is a resident of
a state that adjoins the state of Alabama and resides in a community or trade area
through which Alabama line runs or has his/her principal office for the conduct of
business in Alabama.

Who owns a Key-Man life policy? ANSWER -the corporation

Whole life policies provide coverage for life an at a certain age if the insured is
still living the policy will? ANSWER -Endow an pay the full face amount

Why should a policy owner be especially careful when deciding to increase the
amount of an outstanding policy loan? ANSWER -If the outstanding loan
balance, plus interest, equals or exceeds the cash value of the policy, the company
could cancel the insurance

With a modified premium whole life contract, premium payments ANSWER -

Are lower in the early years of the contract

With regard to life insurance policies, loading refers to ANSWER -Assignment

of the appropriate share of the company's operating expenses to each policy

With regard to the waiver of premium rider, after the disability a policy owner
normally ANSWER -Need not repay the premiums paid by the company