WA Life Law Practice Exam

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WA Life Law Practice Exam
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2015-10-27 16:37:11
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Washington Life Law Practice Exam
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  1. The rules related to replacement do not apply to any of the following EXCEPT:
    A) Credit life
    B) Group life
    C) Whole life
    D) Variable annuities
    • C) Whole life
    • *Replacement rules do not apply when replacing credit life, group life or variable annuities.
  2. Forms relating to a replacement transaction must be kept by the replacing insurer for how long?
    A) One year
    B) Two years
    C) Fife years
    D) Three years
    • D) Three years
    • *When a policy is replaced, the replacing insurer must keep records relating to this transaction for three (3) years
  3. How long must the free look be on a replacement policy?
    A) 15 days
    B) 20 days
    C) 25 days
    D) 5 days
    • B) 20 days
    • *Life insurance policies that replace existing life policies must contain a 20 day free look during which the policyowner is able to return the policy for a full refund.
  4. Which of the following statements regarding replacement is correct?
    A) The replacement statement must only be signed by the applicant
    B) The replacement statement must only be signed by the agent
    C) A statement signed by both applicant and the agent regarding the knowledge of replacement status is required
    D) The agent has no responsibility in determining replacement status
    • C) A statement signed by both applicant and the agent regarding the knowledge of replacement status is required
    • *Insurers require a statement signed by the applicant as to whether proposed insurance or annuity will replace existing life insurance or annuity. Insurers also require a statement signed by the producer as to whether he or she knows replacement is involved in the transaction.
  5. All of the following transaction would fall under replacement regulations EXCEPT:
    A) Borrowing 50% of a policy’s cash value to purchase another policy
    B) Lapsing a policy to purchase a policy
    C) Taking cash surrender out of an existing policy to purchase a different policy
    D) Purchasing an additional policy
    • D) Purchasing an additional policy
    • *Borrowing cash value from an existing policy to purchase another one, lapsing a policy to purchase another one, or taking cash surrender out of an existing policy to purchase another policy requires following replacement regulations. Simply purchasing an additional policy without affecting an existing one is not a replacement.
  6. All of the following statements are true EXCEPT:
    A) Replacement is perfectly legal, if all of the rules are followed
    B) Policy replacement is highly discouraged by law
    C) Conservation is illegal
    D) Conservation is the attempt by an existing insurer to dissuade a policyholder from replacing an existing policy or annuity
    • C) Conservation is illegal
    • *Conservation is any attempt by the existing insurer to discourage a policyholder from engaging in a replacement transaction. It is a perfectly legal act.
  7. In a replacement transaction all of the following are duties of the agent EXCEPT:
    A) Give the applicant any printed communications that were used in the presentation
    B) Give the replacing insurer a list of all of the applicant’s existing life insurance and/or annuities to be replaced
    C) Present to the applicant a notice regarding replacement, which must be signed by both the applicant and the agent
    D) Make sure the replacing insurer receives a copy of the replacement notice via first class mail within a month of the date of the application
    • D) Make sure the replacing insurer receives a copy of the replacement notice via first class mail within a month of the date of the application
    • *Replacing insurers must send the existing insurer a copy of the Notice Regarding Replacement within there (3) business days.
  8. Which of the following would be allowed regarding conservation effort?
    A) An existing insurer may send a policyholder a Policy Summary for the existing policy within 20 days of receiving the replacement materials from the replacing insurer
    B) A conservation effort may be made for up to 3 years
    C) A conservation effort may not be undertaken in any circumstances
    D) An existing insurer may not contact a client that is going through with a replacement transaction
    • A) An existing insurer may send a policyholder a Policy Summary for the existing policy within 20 days of receiving the replacement materials from the replacing insurer
    • *When their existing policy has been replaced, the existing insurer may make a “conservation” effort by giving their policyholder a Policy Summary within 20 days.
  9. All of the following are true regarding a replacement transaction EXCEPT:
    A) The free look for replacement policy must be 20 days from policy delivery
    B) In a replacement transaction, the replacing insurer must send each existing insurer a written communication advising of the replacement within three working days of receiving the application
    C) The replacing insurer must maintain all paperwork related to a replacement transaction for at least three years
    D) The free look for a replacement transaction must be 20 days from date of application
    • D) The free look for a replacement transaction must be 20 days from date of application
    • *The free look for a replacement transaction must be 20 days from policy delivery, not the date of application
  10. What are the required disclosures to be given to a prospective purchaser?
    A) A conditional receipt and Policy Summary
    B) A free look receipt and Policy Summary
    C) A Policy Summary and a Buyer’s Guide
    D) A statement of policy and a supplement guide
    • C) A Policy Summary and a Buyer’s Guide
    • *The two disclosure documents that must be given to the client are the Policy Summary and a Buyer’s Guide
  11. All of the following are correct regarding the Policy Summary and Buyer’s Guide EXCEPT:
    A) They must be given to all prospective purchasers before accepting the initial premium
    B) They may be given at or before policy delivery, only if the policy has a minimum 10 day free look
    C) They must be given out to any prospective purchaser upon request
    D) These documents must be kept on file by insurers for five (5) years
    • D) These documents must be kept on file by insurers for five (5) years
    • *Insurers must keep copies of the Buyer’s Guide and Policy Summary on file and available for the inspection of the Commissioner for three (3) years, not five (5).
  12. Which of the following statements regarding policy dividends is correct?
    A) References to policy dividends are prohibited
    B) References to policy dividends are allowed, so long as a statement is included that dividends are not guaranteed
    C) Dividends may be projected on all policies
    D) Dividends are only payable to policyholders that have face amount over $1,000,000
    • B) References to policy dividends are allowed, so long as a statement is included that dividends are not guaranteed
    • *Remember, you can never guarantee dividends! Not all policies may pay dividends to policyholders, only those issued by mutual insurers. Stock insurance companies do not pay dividends to policyholders, only to stockholders
  13. A Policy Summary must include all of the following EXCEPT:
    A) The name and address of nearest agent
    B) The date the Policy Summary was prepared
    C) The generic name of the policy and each rider
    D) The name and home office address of the insurer
    • A) The name and address of nearest agent
    • *Name and address of nearest agent would not appear on a Policy Summary. This summary is created to provide an overview, in plain language, of the policy’s main features and term.
  14. Policy summaries must include all of the following values EXCEPT:
    A) The total guaranteed cash surrender values at the end of the year
    B) The guaranteed dividends based upon the company’s current dividend scale
    C) The annual premium for the basic policy and each optional rider
    D) The guaranteed amount payable on death at the beginning of the policy year
    • B) The guaranteed dividends based upon the company’s current dividend scale
    • *A policy summary would never include guaranteed dividends, since dividends cannot be guaranteed. It may reflect future dividends based upon an insurer’s current dividend scale, as long as they are not guaranteed.
  15. The disclosure requirements (Policy Summary and Buyer’s Guide) do not apply to any of the following transaction in the state of WA EXCEPT:
    A) Individual life insurance policies
    B) Variable life insurance policies
    C) Annuities
    D) Credit life insurance
    • A) Individual life insurance policies
    • *WA life insurance “disclosure rules” require producers to give to all life insurance applicants, except for annuities, variable life, credit life and group life, both a Buyer’s Guide and Policy Summary prior to accepting the initial premium
  16. All of the following are true regarding the regulations related to policy illustrations EXCEPT:
    A) Illustration regulation apply to life insurance policies of $10,000 or less
    B) Each insurer is required to notify the Commissioner whether a policy form is to be marketed with or without a policy illustration
    C) If a policy form is to be marked without an illustration, the use of an illustration is prohibited
    D) If a policy form is to be marketed with an illustration, a basic illustration must be submitted to the commissioner
    • A) Illustration regulation apply to life insurance policies of $10,000 or less
    • *The illustration regulation applies to all group and individual life insurance policies and certificates, but there are exceptions. It does not apply to variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies with no illustrated death benefits on any individual exceeding $10,000.
  17. The rules related to illustrations do not apply to any of the following EXCEPT:
    A) Credit life
    B) Variable life
    C) Individual life insurance with a death benefit of over $10,000
    D) Individual and group annuity contracts
    • C) Individual life insurance with a death benefit of over $10,000
    • *The illustration regulation applies to all group and individual life insurance policies and certificates with the exception of variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies with no illustrated death benefits on any individual exceeding $10,000.
  18. A basic illustration would not include which of the following
    A) The policy premium
    B) Policy features, riders, and options
    C) Definition of terms
    D) A guarantee as to dividend payments
    • D) A guarantee as to dividend payments
    • * A basic illustration included the premium, mode of payment guaranteed death benefit, and guaranteed cash surrender value. There is never a guarantee as to future dividend payments.
  19. All of the following are prohibited when using an illustration in the sale of life insurance EXCEPT:
    A) Representing the policy as anything other than life insurance
    B) Providing an applicant an incomplete illustration
    C) Providing the applicant a statement attesting to the fact that the nonguaranteed elements of the illustration are assumed to be unchanged for the purpose of the illustration, and that this is a very unlikely event to occur
    D) Describing the nonguaranteed elements in a misleading manner
    • C) Providing the applicant a statement attesting to the fact that the nonguaranteed elements of the illustration are assumed to be unchanged for the purpose of the illustration, and that this is a very unlikely event to occur
    • *Providing the applicant a statement attesting to the fact that the nonguaranteed elements of the illustration are assumed to be unchanged for the purpose of the illustration, and that this is a very unlikely event to occur, would not be considered a prohibited act when using an illustration in the sale of life insurance.
  20. The free look on individual policies issued in the state of WA is how long?
    A) 5 days
    B) 10 days
    C) 15 days
    D) 20 days
    • B) 10 days
    • *The free look for life insurance in the state of WA is 10 days. It means that from the date of policy delivery, through the next 10 days, the insured has the right to return the policy to the producer or the insurer for a full refund of all the premium paid. No coverage will have ever existed.
  21. If an insured exercise the free look, the insurer must refund 100% of the premium paid within how many days to avoid owing any interest?
    A) 10 days
    B) 15 days
    C) 20 days
    D) 30 days
    • D) 30 days
    • *If a policyowner returns a new life insurance policy within 10 days of delivery (free look), the insurer must make a full refund of the premium within 30 days, or a 10% penalty applies.
  22. If an insurer does not refund the premium under the free look provision timely, what is the penalty?
    A) 10%
    B) 8%
    C) 15%
    D) 3%
    • A) 10%
    • *Failure to refund the premium under the free look provision in a timely manner will result in a 10% penalty.
  23. If an employee is covered by a group life policy for a minimum of five (5) years before the employee loses group coverage, such employee would have the right to convert his or her policy. The application and first premium must be sent to the insurer within how many days of the termination?
    A) 10 days
    B) 15 days
    C) 30 days
    D) 31 days
    • D) 31 days
    • *When coverage for an employee who has been covered for at least five (5) years on a group life insurance policy is terminated, the employee is entitled to convert to an individual life insurance policy issued by the same insurer, without a physical exam, within 31 days of termination (application and first premium must be submitted to the insurer)
  24. Typically, when a terminated employee converts his or her life insurance, he or she is eligible to purchase which type of coverage?
    A) Whole life
    B) Level term insurance
    C) Increasing term insurance
    D) Decreasing tern insurance
    • A) Whole life
    • *When an insured is covered by group life and loses their job, a 31-day period is given to convert to an individual whole life policy, without a physical exam, so long as they have been insured by the group for at least five (5) years prior to the date they lose their coverage. Group life policies are usually term insurance contacts. The right of conversion is only allowed to a more expensive policy. Such as whole life (never to another term life).
  25. Which of the following is true about converting a group policy to an individual policy?
    A) The insurer must allow the terminated employee to convert no matter how long he or she was covered by the group
    B) The conversion premium is based upon attained age
    C) The conversion premium is based upon original age
    D) The insurer does not ever have to allow for conversion
    • B) The conversion premium is based upon attained age
    • *The new policy’s premium is based upon attain age (current age), not the original age insurers must allow conversion, but only up to the group policy’s face value. An employee cannot convert to an individual policy of a higher death benefit than the group coverage he or she is converting from.
  26. The most that an insurer must allow a terminated employee to purchase when converting fro group coverage to individual coverage is how much?
    A) Whatever face amount the group policy was
    B) However much coverage the employee wish for
    C) The smaller of the amount of life insurance the individual had with the group minus the amount of any life insurance for which he becomes eligible under any group policy issued or reinstated by another insurer within 31 days of the termination or $2,000
    D) The greater of the amount of coverage the individual had with the group or $2,000
    • A) Whatever face amount the group policy was
    • *Terminated employee converting their group life insurance policy to an individual one is allowed to get coverage of up to the same death benefit (face value) as the group policy they are converting from. IF you had a group coverage of $100,00, you would not be allowed to convert it to an individual policy of $200,000-$100,000would be the maximum limit.
  27. What is the maximum interest rate that an insurer can charge on a policy loan?
    A) 6%
    B) 8%
    C) 10%
    D) 15%
    • B) 8%
    • *Although adjustable loan interest rates are allowed, the maximum fixed interest rate insurers may charge on policy loans is 8%
  28. What is the maximum amount available for a loan, including interest, on a new life insurance policy?
    A) Cash value minus 10%
    B) Cash surrender value at the end of the policy year
    C) Cash value plus interest
    D) Cash surrender value at the end of the policy
    • B) Cash surrender value at the end of the policy year
    • *For new policies, the sum, including any interest to the end of the current policy year, may not exceed the cash surrender value at the end of the current policy year.
  29. If a cash value policy should lapse due to the amount of a loan, including interest, becoming equal to the policy’s cash value, the insurance company is required to notify the insured how many days before the policy termination can become effective.
    A) 10 days
    B) 15 days
    C) 30 days
    D) 31 days
    • C) 30 days
    • *If cash value policy should lapse due to the amount of a loan, including interest, becoming equal to the policy’s cash value, the insurance company is required to notify the insured 30 days before the policy termination can become effective
  30. Should an insurer charge an adjustable interest rate on a loan against a policy cash value, all of the following are true EXCEPT:
    A) The maximum interest rate must be determined at least once every 12 month
    B) The maximum interest rate may be determined no more frequently than once every 3 months
    C) The maximum interest rate cannot exceed the higher of the published monthly average for the calendar month ending two months before the date on which the rate is determined (Moody’s Corporate Bond Yield Average) or the rate used to compare the cash surrender value under the policy plus 1% per annum.
    D) The maximum interest rate cannot be adjustable under any circumstances
    • D) The maximum interest rate cannot be adjustable under any circumstances
    • *Although the maximum fixed inter3est rate insurers may charge on policy loans is 8% adjustable loan interest rates are allowed. If the interest rate is adjustable, the Policy Summary must indicate that the annual percentage rate will be determined by the company in accordance with the provisions of the policy and the applicable law.
  31. Interest owed on life insurance proceeds begins to accrue as of which date
    A) 30 days after death
    B) Date of death
    C) 10 days after death
    D) 31 days after death
    • B) Date of Death
    • *Insurers must pay interest on life insurance death benefits, commencing on the date of death, at the rate of not less than 8%, until the claim is paid.
  32. All of the following are true regarding the interest owed by the insurance company on life insurance proceeds EXCEPT:
    A) Interest of 8% is owed from date of death until the payment of proceeds
    B) After 90 days have passed, an additional 3% penalty is owed
    C) Insurers may not subtract policy loans from the face amount owed
    D) Insurers may deduct any unpaid premiums and policy loans from the face amount owed
    • C) Insurers may not subtract policy loans from the face amount owed
    • *When an insured dies and a policy loan has not been paid back, the insurer may deduct any policy loans plus interest from the face amount owed to the beneficiary.
  33. Which of the following is true regarding a person’s right to assign ownership rights of a group policy?
    A) A person covered by a group policy can never assign his owner’s right
    B) A person covered by a group policy has the right to assign his owner’s rights to his spouse, children, parents, or a trust for the benefit of any of them
    C) The right to assign owner’s rights does not include the ability to designate a beneficiary
    D) The right to assign owner’s rights does not include the right to have a converted policy
    • B) A person covered by a group policy has the right to assign his owner’s rights to his spouse, children, parents, or a trust for the benefit of any of them
    • *Even though in a group contract the employer is the owner of the policy and the employee are the insureds, the employee still have some owner’s rights (such as naming the beneficiary). A person covered by a group policy has the right to assign their owner’s rights to their spouse, children, parents, or a trust for the benefit of any of them.
  34. How many people must be covered for an employer to secure group life insurance?
    A) 1 employee
    B) 2 employee
    C) 25 employee
    D) 50 employee
    • B) 2 employee
    • *In WA, group life policies must cover at least two(2) employees as of the date of issue.
  35. IN a noncontributory group, the employer pays how much of the premium?
    A) 25%
    B) 50%
    C) 75%
    D) 100%
    • D) 100%
    • *In a noncontributory group, the employer pays 100% (all) of the premium, the employees are “-contributing” to the premium payments and 100% (all) of eligible employees must participate. In a contributory plan, the cost of premium is shared between the employer and participation requirements – to prevent adverse selection.
  36. Replacing insurers must send the existing insurers a copy of the Notice Regarding Replacement within ____ business days?
    A) 3
    B) 5
    C) 7
    D) 10
    • A) 3
    • *Replacing insurers must send the existing insurer a copy of the Notice Regarding Replacement within three (3) business days.
  37. When replacing exiting life insurance, replacing insurers must provide their new policyholder with a ____ day free look
    A) 10
    B) 15
    C) 20
    D) 30
    • C) 20
    • * Replacing insurers must grant customers a 20-day free look, starting at the time of policy delivery.
  38. The rules regarding replacement apply when replacing which of the following?
    A) Credit life
    B) Universal life
    C) Group life
    D) Variable Annuities
    • B) Universal life
    • * Replacement rules do not apply when replacing credit life, group life or variable annuities. Replacing a universal life policy would require following the replacement rules.
  39. All of the following are true regarding a Policy Summary EXCEPT:
    A) Insurers must provide it no later than the time of policy delivery
    B) It is specific to the policy being purchased
    C) It cannot refer to nonguaranteed elements of the policy
    D) It must follow the format recommended by the NAIC
    • D) It must follow the format recommended by the NAIC
    • * It is the disclosure document titled the Buyer’s Guide, not Policy Summary, that follows the format recommended for use by the National Association of Insurance Commissioners (NAIC)
  40. Which of the following is not true regarding the Buyer’s Guide?
    A) It must be provided prior to accepting an application
    B) It is a generic document
    C) It is also known as a Policy Summary
    D) Insurers must maintain copies for three (3) years
    • C) It is also known as a Policy Summary
    • *The Buyer’s Guide and The Policy Summary are two different disclosure documents. The Buyer’s Guide is a generic document, which helps purchasers understand how much insurance they need as well as the type of policy that best fits their needs. A Policy Summary provides an overview of the policy’s main features and returns.
  41. All of the following are true regarding life insurance illustrations EXCEPT
    A) They must be given to all Life insurance applicants
    B) They illustrate the nonguaranteed elements of the policy
    C) They must contain a warning that actual results may vary
    D) They must be signed by both the Producer and the applicant
    • A) They must be given to all Life insurance applicants
    • *The illustration regulation applies to all group and individual life insurance policies and certificate with the exception of variable life insurance, individual and group annuity contracts, credit life insurance, and life insurance policies with no illustrated death benefit on any individual exceeding $10,000.
  42. Which of the following is true regarding Life insurance policy loan?
    A) The maximum fixed annual interest rate is 8%
    B) They never have to be paid back
    C) They are limited to the face amount of the policy
    D) They are a feature of all life insurance policies
    • A) The maximum fixed annual interest rate is 8%
    • *Life insurance policy loans are not available on all life insurance policies: term life is a “no cash value” type of policy, therefore no possibility to take out a loan. Even though there is no requirement of paying back a policy loan, they will be paid back when the insured dies, along with interest. That sum will be taken out of the death amount given to the beneficiary. The maximum fixed annual interest rate is 8%. The maximum amount of a policy loan is not limited to the face amount of the policy-it is less than that. The amount of the loan and interest to the end of the current policy year cannot exceed the cash surrender value of the policy at the end of the current year.
  43. If an insured with a $100,000 life insurance policy dies and the insurer does not pay the claim until the 90th day after death, the beneficiary will receive:
    A) $100,000
    B) $102,000
    C) $108,000
    D) $111,000
    • C) 108,000
    • *Life insurance must pay 8% annual interest on death claims from the date of death. If a life insurer does not pay a death claim within 90 days they must pay a 3% penalty. Payment of claim on or after the 91st day after death would include an additional 11% (interest and penalty)
  44. When a new life insurance policy is returned to the insurer within 10 days of delivery, the insurer must return the premium within ____ days or a 10% penalty will apply.
    A) 20
    B) 30
    C) 60
    D) 90
    • B) 30
    • *If a policyowner returns a new life insurance policy within 10 days of delivery, the insurer must make a full refund of the premium within 30 days, or a 10% penalty applies.
  45. All of the following are true r3egarding the conversion feature of a group life insurance policy upon termination of employment EXCEPT:
    A) Only employees who have been covered for at least three (3) years may convert
    B) Employees must apply for conversion within 31 days of termination
    C) Conversion to an individual policy is permitted regardless of health
    D) The premium for the converted coverage is based upon the employee’s current age
    • A) Only employees who have been covered for at least three (3) years may convert
    • *If a group life insurance policy is terminated, every individual who has been covered for at least five (5) years is entitled to convert to an individual life insurance policy issued by the same insurer, without a physical exam, within 31 days of termination.

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