Download CA Life Insurance Exam 2024/2025: Practice Questions and Answers and more Exams Insurance law in PDF only on Docsity!
CA LIFE INSURANCE EXAM 2024/
WITH 100% CORRECT ANSWERS
What is meant by referring to an insurance policy as a unilateral contract? - correct answer ✔✔Only one party makes a legally enforceable promise. When must insurance records of insurance agents and brokers be made available to the Insurance Commissioner? - correct answer ✔✔At all times. Any situation that presents the possibility of a loss is known as - correct answer ✔✔a loss exposure Which of the following information is not required to be communicated in a Life insurance contract? - correct answer ✔✔Personal judgment. The direct distribution of insurance utilizes all of the following to promote the sale of insurance EXCEPT - correct answer ✔✔telephone call from an agent. A contract in which one party promises to indemnify another against loss that arises from an unknown event is - correct answer ✔✔an insurance policy. All of the occurrences listed below are examples of an insurable event as defined by the California Insurance Code EXCEPT - correct answer ✔✔an insured suffers a financial loss in the state lottery All of the following statements about aleatory contracts are true EXCEPT - correct answer ✔✔the insured and insurer contribute equally to the contract. All of the following would be considered unfair trade practices EXCEPT - correct answer ✔✔committing any act of discrimination whether it be deemed fair or unfair.
As authorized by the California Insurance Code, the Insurance Commissioner has provided standards for names used by life insurance agents. Under these standards which, if any, of the following are automatically acceptable for Mary Brown, a holder of the CLU designation? - correct answer ✔✔Mary Brown Insurance Services. A contract of indemnity is one in which - correct answer ✔✔one party is restored to the same financial position the party was in before the loss occurred. In insurance terminology, "indemnity" means - correct answer ✔✔make whole. As defined in the California insurance Code, "insurance" is a - correct answer ✔✔contract. What would a person be guilty of who refuses to deliver any books, records, or assets to the commissioner once a seizure order has been executed? - correct answer ✔✔A misdemeanor An agent who is acting as an insurance agent, broker, solicitor, life agent, accident and health, or bail agent acts in which capacity when handling premiums or return premiums for an insured? - correct answer ✔✔Fiduciary Which of the following statements regarding risk is TRUE? - correct answer ✔✔Only pure risks are insurable. The purchase of an insurance policy may accomplish all of the following for the insured EXCEPT - correct answer ✔✔the elimination of risk. Insureds are entitled to recover an amount NOT greater than the amount of their loss under the principle of - correct answer ✔✔indemnity. What rule is used to determine the importance of a representation? - correct answer ✔✔The materiality of concealment.
Upon notification of a claim, a claimant must be given access to the California Fair Claims Settlement Practices resolution by all of the following means EXCEPT - correct answer ✔✔by interview appointment with the agent of record. hat is the definition of premium? - correct answer ✔✔Money an insured pays an insurer to obtain the benefits provided in the policy. What is the goal of the underwriting process? - correct answer ✔✔to avoid selecting a disproportionate number of bad risks. Insurer policy expenses include all of the following EXCEPT - correct answer ✔✔premiums. Unintentional concealment entitles the injured party to which course of action, if any? - correct answer ✔✔Rescission of the contract. Making an insured whole by restoring them to the same condition as before a loss is an example of - correct answer ✔✔the principle of indemnity. Risk can be defined as all of the following EXCEPT - correct answer ✔✔the cause of loss Which of the following is a requirement of a contract? - correct answer ✔✔There must be an offer and acceptance of the contract terms. Moral hazard can be defined as the increase - correct answer ✔✔chance of a loss occurring due to an insured's dishonest tendencies. According to the California Insurance Code, the Commissioner can disapprove a licensee's request to use a fictitious name for any of the following reasons EXCEPT that the - correct answer ✔✔name is the licensee's actual name. It is considered an unfair method of competition for an agent to advertise that the insurer the agent is appointed with is - correct answer ✔✔a member of the Insurance Guarantee Association.
All of the following are requirements of contract EXCEPT - correct answer ✔✔there must be equal consideration between the parties. If an insurer must have its rates accepted by the insurance Department prior to using them, the insurer would be operating in which of the following types of jurisdictions? - correct answer ✔✔Prior approval. It is Federal offense for an insurance agent to do all of the following EXCEPT - correct answer ✔✔misrepresent facts on an insurance application. How often MUST an insurer file the National Association of Insurance Commissioners (NAIC) financial statement? - correct answer ✔✔Annually. A person authorized by and on behalf of an insurer who transacts life, disability or life and accident and health insurance is defined as a - correct answer ✔✔life agent. An insurer entitled to transact business by complying with the California Insurance Code is known as an - correct answer ✔✔admitted carrier. Who are the members of the Medical Information Bureau? - correct answer ✔✔Life and Health insurers. If you have been convicted of a misdemeanor and that misdemeanor conviction is later expunged pursuant to California Penal Code Section 1203.4, which of the following is true? - correct answer ✔✔Even though your misdemeanor conviction was expunged, you must still disclose your misdemeanor conviction on your individual application for an insurance license. The direct response distribution of Insurance utilizes all of the following to promote the sales of insurance EXCEPT - correct answer ✔✔telephone call from the agent. The increase in the probability of a loss resulting from an insured's dishonest tendencies is known as - correct answer ✔✔moral hazard.
Which policy provision allows an insured to continue coverage under a previously lapsed policy? - correct answer ✔✔The reinstatement provision According to the California Insurance Code, governing the use of life insurance policy illustrations, the term illustration means - correct answer ✔✔a presentation of policy features that includes non- guaranteed elements. The life insurance grace period allows the insured to - correct answer ✔✔pay the premium after the due date without loss of coverage. When a family policy covers children, all of the following are true EXCEPT - correct answer ✔✔evidence of insurability is required to convert coverage for children to permanent insurance. An attempt by an agent to deter an insured from replacing an existing life insurance policy is called - correct answer ✔✔conservation Which of the following would an agent be guilty of for misrepresenting the amount of dividends a policy will pay? - correct answer ✔✔A misdemeanor The additional premium charged by an insurer for adding the accidental death benefit to a whole life policy - correct answer ✔✔does not affect the policy's cash value. How much employer-provided group term life insurance is exempt from income taxation? - correct answer ✔✔$50, How long is the free cancellation period for the life insurance offered to individuals who are 60 or older?
- correct answer ✔✔30 days. What does the statement "life insurance created an immediate estate" mean? - correct answer ✔✔The total death benefit is paid whenever the insured dies.
Which report of an insurance applicant's creditworthiness and personal characteristics may influence eligibility for life and health insurance? - correct answer ✔✔Consumer report. In group life insurance, who is issued a certificate of insurance? - correct answer ✔✔The participant. Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium? - correct answer ✔✔Renewable term. If a life agent sells a whole life policy to a prospect on behalf of an insurer without an appointment, the - correct answer ✔✔insurer must submit a notice of appointment to the Commissioner. Which component of a life insurance premium is based on the insured's age and gender? - correct answer ✔✔Mortality Which benefits are provided by key employee insurance? - correct answer ✔✔Payment to a business when an important employee dies. How can partners guarantee a market for their share of the business in the event of death? - correct answer ✔✔Buy-sell agreements. Which policy covering two or more individuals pays the face amount only when the first person dies? - correct answer ✔✔Joint life policy. Which two insurance products are commonly used to fund buy-sell agreements? - correct answer ✔✔Life insurance and disability insurance. Which policy provision protects the insurer against possible adverse selection? - correct answer ✔✔Suicide clause. Which type of insurance coverage has both a savings element and a flexible premium option? - correct answer ✔✔Universal life
The payor rider on a juvenile life policy provides that if the payor dies or becomes disabled before the insured juvenile reaches the age specified in the policy that the - correct answer ✔✔insurer will make the payments until the insured juvenile reaches a specified age-usually twenty-one or twenty-five. Which of the following contracts provides benefits that fluctuate automatically with investment results?
- correct answer ✔✔Variable life insurance. The theory of probability is applied to life insurance through the use of - correct answer ✔✔mortality tables. What is the difference between deferred annuities and immediate annuities? - correct answer ✔✔Deferred annuities have longer accumulation periods. which of the following is NOT an option for the use of the policy dividends? - correct answer ✔✔Fund the distribution of monthly income payments. The insured is totally and permanently disabled. The insured's policy continues in force without payment of further premiums because the policy contains a - correct answer ✔✔waiver of premium provision. Your client has just bought a new home which he has financed with a $150,000, 7.5% interest, 30 - year bank loan. He would like to be sure that if he dies that the unpaid balance of the mortgage would be paid. He wants a policy that will cover the mortgage balance-no more, no less-anytime during the life of the mortgage. Which policy is designed to meet this need? - correct answer ✔✔Decreasing term policy. Death benefits that are received by a beneficiary are generally - correct answer ✔✔exempt from federal income tax. An insured replaces an existing annuity with a new one and must pay a surrender charge for cancelling the existing annuity. The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of - correct answer ✔✔an unnecessary replacement.
What do we call the process whereby insurers decide which customers to insure and what coverage to offer? - correct answer ✔✔Underwriting. what is used to determine the amount of an annuity distribution that is exempt from taxation? - correct answer ✔✔The exclusion ratio. The number of deaths during a year compared with the total number of persons exposed in the class is known as the - correct answer ✔✔mortality rate The insured bought an annuity ten years ago. He will retire in five years. To determine the value of his annuity, he must multiply the value of the "accumulation units" he owns, times the value of the "separate account". This type of annuity is known as a - correct answer ✔✔variable annuity. All of the following are true about term life insurance policies EXCEPT the - correct answer ✔✔face amount is paid if the insured survives to the end of the policy period. A life insurance policy dividend is - correct answer ✔✔legally defined as a return of excess premium and not taxable. Life insurance policies written without a physical examination are called - correct answer ✔✔non- medical. Why is the delivery of a life insurance policy important? - correct answer ✔✔The free-look period begins on the policy delivery date. What is an ESOP? - correct answer ✔✔Employee Stock Ownership Plan. Which policy provision protects the insurer against possible adverse selection? - correct answer ✔✔Suicide clause.
The use of non-medical life insurance accomplishes all of the following EXCEPT - correct answer ✔✔insureds can avoid answering medical questions on the application. Who MUST sign a statement acknowledging that a life insurance policy illustration was given to an applicant? - correct answer ✔✔The applicant and the agent. In financial planning, the human life value concept is based on an individual's - correct answer ✔✔income When does an individual have an insurable interest in the life of another person? - correct answer ✔✔The individuals depends on the other person for financial support. The cost of employer-provided group life insurance above $50,000 is - correct answer ✔✔taxable as income to the employee. If a term life insurance policy is renewable, the renewal provision usually states that: - correct answer ✔✔a higher premium is payable at each renewal. Life insurers must include all of the following in their financial statements EXCEPT - correct answer ✔✔policy summary description. Common life insurance policy riders include all of the following EXCEPT - correct answer ✔✔extended term. In a group life insurance policy, who are the parties to the master contract? - correct answer ✔✔The insurer and the employer. Which statement is TRUE regarding employer contributions to qualified plans? - correct answer ✔✔They are tax deductible by the employer. Which of the following statements about policy dividends is TRUE? - correct answer ✔✔Insureds elect a dividend option at the time of policy purchase.
Which policy allows the insured to choose where the assets backing the cash value are invested? - correct answer ✔✔Variable life. Creditors have rights to life insurance policy proceeds when the beneficiary is the - correct answer ✔✔insured's estate. Which distribution from an annuity would be subject to a penalty tax? - correct answer ✔✔A single payment made to a taxpayer who is age 55. The adjustments that insurers make to the cash value account in a - correct answer ✔✔ universal life policy each time a payment is made includes all of the following EXCEPT - correct answer ✔✔subtract the policy surrender charges. The conversion privilege allows a terminating employee to convert - correct answer ✔✔term insurance into permanent insurance. Which government regulation prevents retirement plans from favoring highly compensated employees?
- correct answer ✔✔Nondiscrimination. What is the difference between a conditional premium receipt and a binding premium receipt? - correct answer ✔✔Only a binding receipt always provides insurance that is effective from the date the receipt is given. A life insurance policy's waiver of premium takes effect if an insured - correct answer ✔✔becomes totally disabled. A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments MUST the insurer make? - correct answer ✔✔60 payments.
The California Insurance Code requirements regarding the return of life or annuity contracts issued to seniors - correct answer ✔✔gives a senior at least 30 days to return specified life and/or annuity contracts for a full refund. When a family policy covers children, all of the following are true EXCEPT - correct answer ✔✔evidence of insurability is required to convert coverage for children to permanent insurance. An insurer's request for an attending physician's report MUST be accompanied by a copy of the - correct answer ✔✔signed authorization. What is REQUIRED when an application reveals conditions that require more information? - correct answer ✔✔Attending physician's statement. Which policy provision protects the policyowner from unintentional lapse of the contract? - correct answer ✔✔Grace period. Under which policy provision can a policy be surrendered for its net cash value? - correct answer ✔✔Nonforfeiture options. The policyowner, age 50, has been paying the premiums on his whole life policy for fifteen years. He needs the equivalent of one-third of his policy's cash value for two years. He wants to continue to have the same amount of life insurance protection and he can afford to continue to pay the policy's premium. Which of the following would appear to be his BEST course of action? - correct answer ✔✔Use the policy loan provision to borrow money from the policy, but keep making the premium payments to keep the policy in force. In a 5-year vesting schedule, what percentage of employer contributions MUST be vested after 5 years of service? - correct answer ✔✔100% Which of the following is a characteristic of nonqualified annuities? - correct answer ✔✔Tax-deferred earnings.
Which of the following is a correct statement about the premium payment modes? The total premium paid by a life policyowner for one policy year is: - correct answer ✔✔greater if the premium is paid semiannually rather than annually. What is the limit of liability on a life insurance policy? - correct answer ✔✔The face amount of the policy.
