PSI Life Exam with complete solutions

What kind of retirement plan can a 75-employee for profit corporation establish? - ANSWER Simple IRA The taxable portion of a monthly income benefit paid during the annuity phase from a nonqualified annuity is calcula ...

What kind of retirement plan can a 75-employee for profit corporation establish? - ANSWER Simple IRA The taxable portion of a monthly income benefit paid during the annuity phase from a nonqualified annuity is calculated using the - ANSWER Exclusion ratio Unfair claims settlement methods and practices by an insurance company include all of the following acts EXCEPT - ANSWER failure to pay all claims that are reported within 90 days after a loss occurs The settlement option that allows proceeds to remain with the insurer and the earnings to be paid to the beneficiary on a monthly basis is called - ANSWER Interest only Regulations on life insurance advertising apply to which of the following insurance company materials? - ANSWER A radio commercial that promotes the benefits of a specific company's life insurance products An insurance company may contest a life policy within a MAXIMUM of how many years after the policy's effective date? - ANSWER 2 All of the following factors are used in life insurance premium determination EXCEPT - ANSWER Morbidity The authorization used to obtain the applicant's medical information that will be used by the insurer for the primary purpose of determining eligibility must include: - ANSWER the time frame in which the insurer must release the eligibility decision to the agent An intermediary who omits information on an insurance application without the applicant's knowledge and submits the application to the insurer may be guilty of: - ANSWER Misrepresentation Dividends are NOT subject to taxation because - ANSWER Paying dividends is equivalent to returning a premium The XYZ Insurance Company cancels an intermediary's contract. XYZ could be bound by the intermediary's later acts if it: - ANSWER Continues to pay the intermediary deferred commissions Which of the following products is designed to pay benefits that can provide a stream of retirement income to the purchaser? - ANSWER tax-deferred growth Which of the following guarantees that the annuitant CANNOT outlive their benefits? - ANSWER Guaranteed lifetime withdrawal benefit Which of the following statements is CORRECT about an insured's failure to report a claim in a timely manner based on the advice of an intermediary? - ANSWER It does not affect the insurance company's obligations In Wisconsin, an "intermediary" is defined as a representative of: - ANSWER A Solicitor All of the following statements regarding a group annuity are correct EXCEPT - ANSWER Each employee signs and receives an individual contract Statements by an application concerning personal health history, family health history, occupation, and hobbies are referred to as - ANSWER Representations Which of the following entities is responsible for notifying an insurance company of a disability insurance claim? - ANSWER 1. Insured 2. Insured's physician An insurer may cancel a policy midterm for all of the following reasons EXCEPT when the insured: - ANSWER Has a change in marital status An accelerated death benefit - ANSWER Pays a portion of the face amount when a policyowner is determined to be terminally ill Upon annuitization, which of the following will have the HIGHEST monthly payout? - ANSWER Straight Life Backdating on a life insurance policy is the practice of - ANSWER Making the policy effective on an earlier date then the present Wisconsin insurance law requires intermediaries to keep policyholder records for at least how many years after termination or lapse of the policy? - ANSWER 3 When underwriting group life insurance, the underwriter - ANSWER Typically evaluates the group as a whole When using the needs approach to determine the amount of life insurance needed, it is necessary to determine all of the following EXCEPT - ANSWER project lifetime earnings in the stock market, including dividends and growth account Which of the following is permitted under the proper exchange of business? - ANSWER Splitting a commission between two intermediaries licensed in the same line of insurance the life insurance illustration rule applies to: - ANSWER Universal Life Which of the following is NOT subject to the Wisconsin annuity suitability law? - ANSWER Fixed settlement options Without written consent, a policyowner CANNOT change the beneficiary if he has named - ANSWER An irrevocable beneficiary What element of a contract does the application represent? - ANSWER Offer An life insurance policy is required to contain which of the following provisions? - ANSWER A reinstatement provision during which the interest may be charge for late payments In which of the following fixed annuity features is the surrender value tied to interest rates? - ANSWER Market value adjustments Which of the following policies allows for partial surrender? - ANSWER Universal Life Any form that becomes part of an insurance contract must be filed at the Office of the Commissioner of Insurance - ANSWER Prior to its use Keogh (HR 10) plans were designed to provide retirement benefits for - ANSWER Self-employed individuals Which statements is NOT a characteristic of Group Life insurance plan? - ANSWER Individual underwriting Insurance applications with an AVERAGE life expectancy without higher than normal risk factors are considered which type of risk? - ANSWER Standard Which of the following dividend options is taxable? - ANSWER Accumulation at interest Which nonforfeiture option allows the policyowner to purchase less coverage for life? - ANSWER Reduced Paid-Up Insurance Who is allowed to make changes to a life insurance contact terms? - ANSWER An officer of the company Which of the following policies allows the policyowner to change two policy features? - ANSWER Adjustable Life Which of the following provides a death benefit if the spouse of the insured dies? - ANSWER Family term insurance rider Which of the following states BEST describes a single premium cash value policy? - ANSWER It provides for only one premium to be paid without evidence of insurability Universal life and variable life insurance policies contain many similar features. Which of the following features is unique to variable universal life insurance? - ANSWER It includes the right to select the investment which will provide the greatest return Which of the following is a potential DISADVANTAGE of a fixed annuity? - ANSWER Annuitants could experience a decrease in the purchasing power of their payments over a period of years due to inflation A premium is due on a life insurance policy the first of each month. The policyowner failed to pay the premium and 20 days later the insured died. Under which of the following provisions would the death benefit be paid? - ANSWER a nonforfeiture clause The period after an annuity is purchased but before distributions begin is referred to as the - ANSWER accumulation phase In order to ensure compliance with the law, the Insurance Commissioner may issue - ANSWER orders As a form of level premium permanent insurance, ordinary life insurance accumulates a reserve that eventually - ANSWER equals the face amount of the policy An intermediary is employed by an insurance agency affiliated with a lending institution. As a condition for a loan, the institution requires placement of insurance on the applicant's life with the affiliated agency. In this situation the institution's action is referred to as: - ANSWER Twisting If Term Life is renewable, the policyowner is purchasing the right to renew the policy - ANSWER without showing proof of insurability An important goal of the Interstate Insurance Product Regulation Compact is to - ANSWER Provide insurers a single point of filling for review and approval of certain policy forms Events or conditions the increase the likelihood of an insured's loss are referred to as - ANSWER hazards What type of insurance is the cheapest option to pay off a 30-year mortgage balance? - ANSWER Decreasing term life Under a Universal Life Insurance policy, a corridor represents the - ANSWER gap between the total death benefit and the policy's cash value How many days does a terminated employee have to covert to his group life insurance policy to an individual policy? - ANSWER 31 If an insurer determines the insured is totally disabled, the policyowner is relieved of paying the policy premiums as long as the disability continues. The statement describes the - ANSWER waiver of premium rider The insurance security fund protects insureds from an insurer's - ANSWER liquidation Which rider would allow additional insurance to be purchased at specified dates of events, without additional underwriting? - ANSWER Guaranteed insurability Which of the following is an element of insurable risks? - ANSWER the loss must be calculable Upon the death of an insured individual, what does life insurance guarantee to deliver to the beneficiary? - ANSWER a specified sum of money Specific statements made on an application that the insured guarantees to be TRUE are - ANSWER warranties Which of the following statements is CORRECT about an insurance company that discovers collusion between a policyholder and an intermediary? - ANSWER the company is relieved of its obligation to pay a claim Which of the following is NOT a requirement of a qualified plan? - ANSWER It must discriminate as to who can participate An immediate annuity begins making payments after the - ANSWER first premium has been paid If an annuitant is making premium payments on a periodic basis, which type of annuity have they purchased? - ANSWER Deferred The accumulated cash value of a whole life insurance policy becomes the - ANSWER amount used to purchase paid up additions to the insured's policy The settlement option that pays a specified amount to an annuitant, but pays no residual value to a beneficiary is known as - ANSWER Life income What kind of retirement plan can a 1,500 employee for-profit corporation establish? - ANSWER 401(k) Which of the following authorities is required to examine the business records of domestic insurance companies and licensed rate-services organizations in Wisconsin? - ANSWER The Office of commissioner of insurance Which of the following dividend options will increase the death benefit? - ANSWER Guaranteed insurability Under a executive bonus plan, premiums paid by the employer are - ANSWER only tax deductible when the bonus is an insurance plan An intermediary should determine whether replacement is involved in a transaction no later than when the - ANSWER Insurance company issues the policy In Wisconsin the intermediary holding which of the following licenses is exempt from continuing education requirements? - ANSWER credit insurance Contributions made to a Roth IRA are - ANSWER Not tax deductible Who can surrender an annuity during the accumulation period? - ANSWER the policyowner An annuity that guarantees a given number of income payments, whether or not the annuitant is alive to receive them, is referred to as - ANSWER a life annuity certain Which term describes naming a contingent beneficiary as "all of my children"? - ANSWER Class designation A contract in which the company would be legally obligated to perform is considered - ANSWER conditional Which type of insurance policy is characterized by premiums that are fully paid-up within a stated period, after which no further premiums are REQUIRED? - ANSWER Limited payment life insurance What is it called when an insurer writes only insureds who have known risks ? - ANSWER Predictable loss Disclosure requirements for the sale of annuities do NOT apply to - ANSWER Immediate annuities Sam had a $100,000 5-year, non-renewable level term life insurance policy with his wife as the beneficiary. Sam dies 8 years after the inception date of the policy. How much will be paid to Sam's wife? - ANSWER Nothing One of the MAIN responsibilities of an underwriter is to protect the insurer against - ANSWER adverse selection The purpose of a variable contract is to - ANSWER provide benefits that may change according to the investment experience of any separate account A common purpose for purchasing a fixed annuity is to - ANSWER provide future economic security, as payments do not fluctuate