Quiz Answers And Notes

is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.

any confusing language would be interpreted in the favor of the insured.

the insurance company makes the legally enforceable promises.

As the premium payment period shortens, cash values increase faster

"Variable Life". Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts.

The cash value and death benefits of a Variable Life policy can fluctuate according to the performance of its underlying investment portfolio.

"Decreasing term". A decreasing term policy has a death benefit that adjusts periodically and is written for a specific period of time.

The correct answer is "Family Maintenance Policy". A policy that provides an income for a specific period starting at the death of the insured is a Family Maintenance Policy

"upon death of the last insured". A Joint Life and Survivor policy pays benefits after the death of the last insured.

Correct. Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.

Correct answer is "$20,000 death benefit". If the insured dies before the endowment's maturity, the policy's face value — also known as the "death benefit" — is paid in a lump sum to any beneficiaries.

"Modified Endowment Contract". A policy that is overfunded to where it does not meet the 7-pay test is considered a Modified Endowment Contract.

"Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract". Policies that do not meet the 7-pay test are considered MEC's and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period.

"Modified Whole Life". A producer must have proper FINRA securities registration to sell all of these products EXCEPT Modified Whole Life.

the cash value". In a Universal Life Policy, income is usually directed toward the cash value

"Level term". Life insurance written to cover a need for a specified period of time at the lowest premium is called level term insurance.

"Policyowner directs where the investment will go and selects the amount of the premium payment". With Variable Universal Life, the policyowner controls the investment of cash values and chooses the timing and amount of premium payments.

Term". The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance

The correct answer is "Entire contract provision". The entire contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract

"Deducted when the policy is discontinued". In a policy with a rear-end loaded provision, surrender charges are deducted when the policy is discontinued.

"Who the policyowner is and what rights the policyowner is entitled to". The ownership clause in a life insurance policy is a provision that indicates who is the policyowner and provides a general description of the owner's rights.

"Full face amount minus any past due premiums". If an insured dies during the Grace Period of a life insurance policy before paying the required premium, the beneficiary will receive the face amount of the policy less any past due premiums.

"Decreasing Term". The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term.

"Entire contract provision". The entire contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract.

"Interest on accumulations is taxed". If the dividends exceed the total premium payments for the insurance policy, the excess dividends are considered taxable income

"Deducted when the policy is discontinued". In a policy with a rear-end loaded provision, surrender charges are deducted when the policy is discontinued.

"contest a claim during the contestable period". The incontestable clause or provision specifies that after a certain period of time (usually two years from the issue date), the insurer no longer has the right to contest the validity of the life insurance policy so long as the contract continues in force.

Term rider". Term riders allow an applicant to have excess life insurance coverage

"Cash value provision". The Cash value provision makes a policy loan possible.

"automatically add the amount of interest due to the loan balance". Unpaid interest from a policy loan is added to the loan balance if not paid by the due date

"Assign policy ownership to the bank". A policyowner may assign ownership of the policy to a bank as collateral.

"Normally, a guardian is required to be appointed in the Beneficiary clause of the contract". In most cases, insurers require that a guardian be appointed in the Beneficiary clause of the policy or that a guardian be designated in the will

Mode of Premium". The Mode of Premium provision permits an insured to pay premiums more than once every year.

"Conditional". A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.

Set up a meeting with the applicant to answer the remaining questions". In this situation, the producer should schedule another appointment with the applicant to complete the unanswered questions.

detect and deter terrorism". The purpose of the U.S.A. Patriot Act is to detect and deter terrorism.

"exclusion for the medical condition". In this situation, the policy may be issued with an exclusion for the medical problem.

"Application will be returned to the writing agent". If the company discovers a mistake or incompletion, it usually returns the application to the producer.

"Indexed annuity owners receive credited interest tied to the fluctuations of the linked index". An indexed annuity differs from a fixed annuity in that indexed annuity owners receive credited interest tied to the fluctuations of the linked index.

"Keogh Plan". A Keogh Plan may be used by a sole proprietor only if the employees of the business are included.

"It is used extensively in estate-planning as well as business circumstances". Third-party ownership of a life insurance policy is widely used in business settings and estate-planning situations.

10%

15

Group Life coverage can be converted to an individual policy at regular rates on an attained-age basis". Conversion at regular rates on an attained-age basis without a medical exam is a standard provision for conversion privileges in Group Life policies.

Commerce". All of these areas of state regulation are protected by the savings clause in ERISA EXCEPT for commerc

Florida Replacement Rule". The Florida Replacement Rule sets forth the requirements and procedures to be followed by insurance companies and producers when replacing existing life insurance contracts.

"once each year". A variable annuity policyholder must be informed at least once each year of the accumulated value of the contract during the premium payment period.

Risk management advisers". Risk management advisers do not qualify as a legal entity for selling life insurance.

"Moody's corporate bond index". Adjustable rates for life insurance policy loans in Florida are based on Moody's corporate bond index.

"First degree misdemeanor". All of these are possible consequences for placing business with an unauthorized insurer EXCEPT the conviction of a first degree misdemeanor.

conditional receipt". A conditional receipt is normally given to an applicant who pays the initial premium at the time of application.

"An agent's commission". The payment of commissions to the agents is not classified under the four principal areas of Florida insurance law.

"Needing written documentation of claim details". All of these are unfair claim settlement practices except "Needing written documentation of claim details".

Interest Only

"once each year"

"broker dealer". An agent marketing variable life insurance must be licensed and appointed as a life and variable contract agent and a broker dealer.

Office of Insurance Regulation (OIR)". The insurance policy forms used in Florida are approved by the Office of Insurance Regulation (OIR).

he possible tax ramifications as a result of the transaction". An agent must disclose the possible tax consequences of replacing or exchanging an existing annuity or life insurance policy.