5/18/13

Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

Assignment 4 - Life Insurance Basics Practice Exam - 48

Questions - 90 Minutes

Exit test

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You scored: 88.00%

Score Report
QUESTIONS YOU ANSWERED CORRECTLY
#1

Question #2226

All of the following should be considered when determining the amount of life insurance a client needs, EXCEPT:
Correct Answer: Self-maintenance costs

#2

Question #2223

All are true about the agents duties, EXCEPT:

Correct Answer: The agent must cash the applicant's check prior to delivering the policy

#3

Question #2231

Which of the following would have the highest mortality rate:

Correct Answer: 60 year old male

#4

Question #2210

Which of the following, if any, is the basic coverage issued to an eligible member under the Servicemen's Group Life Insurance (SGLI)
program?
Correct Answer: Term insurance

#5

Question #2244

Investment income earned by Life insurance companies:

Correct Answer: Helps offset the premiums that insurance companies charge

#6

Question #2222

All are true about a preferred risk for life insurance, EXCEPT:
Correct Answer: The rates and benefits of the policy are based on the 1980 Standard Mortality Table

#8

Question #2215

Insurance may be considered to be in force when the:

Correct Answer: Insurance company mails a policy to the producer and the producer delivers it to the proposed insured and collects the first
premium

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Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

#9

Question #2202

On May 8, a prospect filled out an application for a life insurance policy but paid no premium. The insurance company approved the application
on May 14 and issued the policy on May 15. The producer delivered the policy on May 26 and collected the first premium. The coverage
became effective on:
Correct Answer: May 26

#10

Question #2241

Producers should be very concerned about possible Errors and Omissions when:
Correct Answer: Replacing Life insurance

#11

Question #2219

In life insurance, insurable interest must exist at which point in time:

Correct Answer: The time of application only

#13

Question #2198

Dividend projections may be included in a proposal for life insurance when which of the following is true:
Correct Answer: There is a clear statement that payment of future dividends is not guaranteed

#14

Question #2217

All of the following are true about Social Security benefits, EXCEPT:
Correct Answer: Monthly payments must remain the same once benefits commence

#15

Question #2236

Key Person life insurance:

Correct Answer: Helps pay for the cost of training a new employee

#16

Question #2230

Life insurance sold to fund a small partnership buy/sell agreement is also called:
Correct Answer: Cross purchase plan

#17

Question #2237

Under Privacy Protection laws regarding the insurers release to an unrelated third party of the insureds non-public personal information, all of
the following are true EXCEPT:
Correct Answer: The insured must agree to the release of such information

#19

Question #2247

A person who is in good health and does not drink or smoke is known as a:

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Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

Correct Answer: Preferred risk

#20

Question #2197

A prospect's statements made in the application for insurance, constitute a part of which of the following:
Correct Answer: Consideration Clause

#21

Question #2220

An insurable interest exists in all of the following situations, EXCEPT:

Correct Answer: A son-in-law on the life of his father-in-law

#22

Question #2224

Which of the following avocations is not important when underwriting an individual policy:
Correct Answer: Fire fighting

#23

Question #2199

An insurable interest must exist when:

Correct Answer: A life insurance policy is issued

#24

Question #2233

A preferred risk has a(an):

Correct Answer: Longer than average life expectancy

#25

Question #2207

Fixed life insurance products are guaranteed by the insurance companies:

Correct Answer: General account

#26

Question #2213

A plan, usually funded by Life insurance, to purchase a deceased partner's share of a business is known as a:
Correct Answer: Buy and Sell Agreement

#27

Question #2212

If a proposed insured has a hazardous occupation, the insurance company may:

Correct Answer: Rate the insured

#29

Question #2235

Insurable interest does not exist on a:

Correct Answer: Life long friend

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Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

#30

Question #2206

An applicant has been denied insurance coverage because of information contained in a consumer report. According to the Fair Credit
Reporting Act, all of the following statements are true about this situation, EXCEPT:
Correct Answer:
The applicant has the right to obtain a copy of the consumer report directly from an insurance company that used the report

#31

Question #2229

If a customer is rejected due to adverse information contained in a consumer report, under the Fair Credit Reporting Act, all are true, EXCEPT:
Correct Answer: The client must get a court order to be able to access such reported information

#32

Question #2211

When insuring substandard life-insurance risks, provision is usually made for the expected higher death rate by:
Correct Answer: Charging an extra premium

#33

Question #2203

A producer takes an application from a proposed insured without receiving payment of the first premium. The insurance company issues the
policy and, when the producer visits the proposed insured to deliver it, the producer realizes that the health of the applicant has deteriorated
significantly since the application was taken. The producer should:
Correct Answer: Refuse to deliver the policy or to accept any premium offered

#35

Question #2240

When an insured with a terminal illness sells their Life insurance policy to an investor, it is known as:
Correct Answer: Viatical settlement

#36

Question #2239

The Human Life Value approach to Life insurance mainly considers the insureds:
Correct Answer: Future earnings

#37

Question #2209

Which of the following is true of the duties of the Securities and Exchange Commission (SEC):
Correct Answer: They are responsible for enforcing federal securities laws

#38

Question #2227

The interest adjusted cost comparison index includes all of the following factors, EXCEPT:
Correct Answer: The earnings in the separate account

#39
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Question #2248

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Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

Mary brings in a business partner instead of operating as a sole proprietor. This is a form of risk:
Correct Answer: Sharing

#40

Question #2246

The average person is known as a:

Correct Answer: Standard risk

#41

Question #2238

In the absence of a monetary interest, insurable interest may be based upon:

Correct Answer: Close kinship

#43

Question #2216

Which of the following applicants for Life insurance is most likely to obtain coverage as a standard risk?
Correct Answer: A traveling heavy-equipment salesperson

#44

Question #2200

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to:
Correct Answer: Charge an extra premium

#45

Question #2228

All are true regarding replacement of life insurance, EXCEPT:

Correct Answer: Replacement is illegal

#46

Question #2242

Industrial Life insurance is typically sold by:

Correct Answer: Debit agents

#47

Question #2232

A producer uses the needs approach when selling life insurance to determine:
Correct Answer: How much coverage is necessary to cover final expenses

#48

Question #2221

If the initial premium is not received along with the application, the agent upon delivery of the policy must obtain it as well as:
Correct Answer: A statement that the applicant's health has not changed since initial application

QUESTIONS YOU ANSWERED INCORRECTLY

#7
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Question #2208

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Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

Which of the following is true of the duties of the Financial Industry Regulatory Authority (FINRA):
Wrong Answer: They are responsible for creating federal securities laws
Correct Answer: They are responsible for making sure that their members follow federal laws and rules

Explanation:
The Financial Industry Regulatory Authority (FINRA) is a nonprofit self regulatory organization that is responsible for oversight of its members (broker/dealers and
registered representatives). The main objective of FINRA is to self regulate the over-the-counter securities market. Since variable insurance products are considered
to be securities under federal law, insurance producers must also obtain a FINRA license in order to sell them.
Although FINRA is responsible for Securities Licensing exams, the state Department or Division of Insurance is responsible for insurance licensing and administering
licensing exams, in addition to regulating insurance agencies.
Audio Explanation:

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#12

Question #2234

All of the following are false about insurable interest on life insurance, EXCEPT:
Wrong Answer: A son-in-law has an insurable interest in his father-in-law
Correct Answer: It must exist at the time of the application

Explanation:
Insurable interest must exist at the time of application, and is based upon either immediate family relationships or economics. In other words, if you would benefit
if another person continues to live, you have an insurable interest in that person. The purpose of insurable interest is to prevent gambling. If insurable interest was
not required, you could buy a policy on anyone with a dangerous hobby and name yourself as beneficiary.
However, insurable interest need not exist at the time of death. For example, you buy a policy on your spouse. You are the owner of the policy and your spouse is
the insured. If you should get divorced, the policy is still valid as long as you continue to pay the premiums.
Audio Explanation:

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#18

Question #2205

In the formation of a life insurance contract, the special significance of a Conditional Receipt is that it:
Wrong Answer: Guarantees the applicant that a policy will be issued in the amount applied for in the application
Correct Answer: Is intended to provide coverage on a date earlier than the date of the issuance of the policy

Explanation:
The Conditional Receipt is just that, conditional. This means that coverage is conditional upon the applicant meeting all of the underwriting requirements of the
company and paying the premium. If the applicant does meet all the conditions, then it is possible that coverage could begin as early as the date of application.
Audio Explanation:

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#28

Question #2204

The time period covered by the 10-Day Free Look Provision of a life insurance contract starts:
Wrong Answer: When the contract is issued and mailed to the agency office from the home office of the insurance company
Correct Answer: When the insured receives the contract and makes the first premium payment, if needed

Explanation:
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Insurance and Securities School of California - Online California Insurance Exam Prep Licensing School

The 10-day Free Look never begins until the policy is actually delivered. Even if the premium had been paid previously, the 10-day Free Look would not have
begun until policy delivery. The client then has 10 days to rescind the policy and get all of the money back.
Audio Explanation:

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#34

Question #2214

The Fair Credit Reporting Act provides:

Wrong Answer: For the availability of Credit Life insurance on a fair and impartial basis
Correct Answer: That the applicant for insurance be informed that a consumer report may be requested

Explanation:
The Fair Credit Reporting Act is a federal law that is designed to protect applicants from unfair investigative reporting. It requires that an investigative reporting
agency have the applicant's written consent prior to ordering a report (pre-notification) and it also requires that if adverse underwriting action is taken based on
the information found in this report, the applicant has the right to obtain a copy of the report from the reporting agency involved (post-notification).
Audio Explanation:

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#42

Question #2245

When the initial premium is paid along with the application for Life insurance, the agent or producer should give the applicant a:
Wrong Answer: Binder
Correct Answer: Conditional receipt

Explanation:
Most Life insurers require their agents to give clients a Conditional Receipt as evidence of the first premium payment. Although this receipt is given, coverage is still
conditional upon the applicants ability to pass a physical exam.
Some Life insurers utilize Binding Receipts instead, which provide a limited amount of coverage between the date of application and the date of the physical
exam. Full coverage does not apply until the underwriter approves the results of the physical exam. Binders are used in Property/Casualty insurance, not in Life &
Health. Binders are temporary coverage until superceded by the policy, and may be written or oral.
Audio Explanation:

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