Texas General Lines - Life, accident and health insurance PRACTICE EXAM Questions and Answers with complete solutions

Texas General Lines - Life, accident and health insurance

PRACTICE EXAM Questions and Answers with complete

solutions

LIFE SECTION 1

1) Sandra Timms, age 27, is advised by her producer to purchase Life insurance to

cover a 20-year-amortized $50,000 business-improvement loan. Which of the following

plans would adequately protect Ms. Timms at the minimum premium outlay?

A- $50,000 Whole Life policy

B- $50,000 Level Term policy for 20 years

C- $50,000 20 Pay Life policy

D- $50,000 Decreasing Term policy for 20 years ✔✔ D—A $50,000 Decreasing Term

policy for 20 years

Explanation: The key here is "minimum premium". Term is the most inexpensive type of

coverage. Since Sandra's $50,000 loan will be paid off over 20 years and the loan

balance will decrease each year, Decreasing Term makes sense. Decreasing Term is

not renewable.

2) A 45-year old customer who is seeking to supplement his retirement income at age

65 would not buy a:

A- Deferred Annuity

B- Equity Indexed Annuity

C- Variable Annuity

D- Immediate Annuity ✔✔ B- Equity Indexed Annuity

3) John Livingston owns a 30-Pay Life policy that he purchased at the age of 30. The

cash value will equal the face amount of the policy when he reaches the age of:

A- 60

B- 70

C- 100

D- 30 ✔✔ C- 100

Explanation: Limited Pay Life insurance policies such as Life Paid Up at 65 or 20-Pay

Life are simply variations of Whole Life policies. The cash value will equal face amount

of the policy (at least) at the maturity of the policy, which is always age 100 on Whole

Life policies. These limited-pay policies are designed so that the insured may pay his or

her premiums faster and be "paid up" at a certain age. However, just because the

premiums are paid up doesn't mean the policy has matured.

4) Which of the following is an example of a Limited-Pay Life policy?

A- Universal life

B- Whole Life

C- Life Paid-Up at Age 65

D- Renewable Term to Age 70 ✔✔ C- Life Paid-Up at Age 65

5) Which of the following policies provides the greatest amount of protection for an

insured's premium dollar as well as some cash accumulation?

A- Annuity

B- Whole Life

C- Term

D- Limited-Pay Life ✔✔ B- Whole Life

If we had not mentioned cash accumulation, the answer would have been Term.

However, Term has no cash value, so the answer is Whole Life, which is the most

inexpensive type of permanent insurance and is required to have a cash value after the

third policy year. Although Limited Pay Life is a type of Whole Life, it is incorrect since it

is usually quite expensive due to the shortened pay-in period. Annuities have no cash

value except the money the annuitant paid in. Since there is no death benefit, no

protection is offered.

6) Which of the following individual policy conversions is usually permitted without any

evidence of insurability? ✔✔ C- Conversion from a Term policy to a Whole Life policy

7) Which of the following is NOT correct regarding Ordinary Whole Life policies?

A- The premiums payments are owed annually until you die or reach age 100

B- The cash value grows more quickly in the beginning years of the policy

C- Coverage lasts for your own life

D- Ordinary Whole Life is a type of permanent insurance ✔✔ D- Ordinary Whole Life is

a type of permanent insurance

8) Which of the following statements is true about the premium payment schedule for a

Whole Life policy?

A- Premiums are payable for a designated period of time only, after which coverage is

no longer provided

B- Premiums are payable until the insured's retirement only, after which coverage is

continued automatically until the insured's death

C- One premium, in the amount of the insured's choice, is payable at the time of

application, and the balance of the premiums is deducted from the face amount of the

policy at the time of the insured's death

D- Premiums are payable throughout the insured's lifetime, and coverage continues

until the insured's death ✔✔ D- Premiums are payable throughout the insured's

lifetime, and coverage continues until the insured's death

9) A life insurance policy that covers two parties, but only pays when the last party dies

is known as:

A- Joint Life

B- Contingent Life

C- Other insured Life

D- Survivorship Life ✔✔ D- Survivorship Life

10) Which of the following contracts requires that a series of benefit payments be made

at specified intervals?

A- 20-Pay Life

B- Modified Whole Life

C- Annuity

D- Ordinary Whole Life ✔✔ C- Annuity

11) If a client wants cash value life insurance with a flexible premium and an adjustable

death benefit that will allow the policy owner a choice of various cash value investment

options, he should buy:

A- Variable Life

B- Universal Life

C- Adjustable Life

D- Variable/Universal Life ✔✔ D- Variable/Universal Life

12) If a person wants to invest a lump sum in an annuity that may appreciate along with

market and economic conditions, they should buy a:

A- Flexible premium Annuity

B- Fixed Annuity

C- Deferred Annuity

D- Variable Annuity ✔✔ D- Variable Annuity

13) You have a client that is a real estate agent. Which of the following types of

permanent protection is best for this type of client?

A- Variable life

B- Universal life

C- Survivorship life

D- Adjustable life ✔✔ D- Adjustable life

14) In order to sell variable life insurance you must be registered with which of the

following?

A- The SEC

B- The State

C- The NYSE

D- The NASD ✔✔ D- The NASD

15) Which of the following is an example of a Limited-Pay Life policy:

A- Traditional Whole Life

B- Endowment at 65

C- 10 year Renewable Term Life

D- 20-Pay Life ✔✔ D- 20-Pay Life

16) An insurance producer selling a Variable Annuity whose cash value depends on the

performance of an underlying investment account must be registered with: ✔✔ D- The

Financial Industry Regulatory Authority (FINRA, formerly the NASD)

17) A business owner with a fluctuating income who wants a life insurance policy that

can be changed to suit economic conditions should buy:

A- Variable Life

B- Modified Whole Life

C- Adjustable Life

D- Interest-sensitive Whole Life ✔✔ C- Adjustable Life

18) An Annuity is designed to provide which of the following financial features?

I. The liquidation of principal and interest

II. Favorable tax treatment

III. The creation of an estate ✔✔ B- I and II

19) Which of the following statements about a Renewable Term policy is true?

A- It is renewable at the option of the insurance company

B- It is renewable at the option of the insured

C- It is renewable at the option of the insurance company, with proof of insurability

D- It is renewable at the option of the insured, with proof of insurability ✔✔ B- It is

renewable at the option of the insured

20) Most Term Life insurance:

A- Is convertible to permanent Whole Life without a physical exam

B- Has a guaranteed cash value

C- Is renewable with evidence of insurability

D- Is renewable to age 100 ✔✔ A- Is convertible to permanent Whole Life without a

physical exam

21) A life insurance policy whose cash value will fluctuate depending upon the

performance of a separate account is:

A- Limited-pay Life

B- Universal Life

C- Ordinary Life

D- Variable Life ✔✔ D- Variable Life

22) A life insurance policy that combines term insurance protection, a flexible premium,

and cash value accumulation is:

A- Increasing Term Life

B- Variable/Universal Life

C- Universal Life