The Ultimate Life & Health Practice Test III

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Quizzes Created: 7 | Total Attempts: 76,786

Questions: 150 | Attempts: 9,286 | Updated: Mar 22, 2023

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The Ultimate Life & Health Practice Test III - Quiz

Life & Health - Practice Exam 3

Questions and Answers

1.

Which of the following is not an example of what insurance policy can provide an insured?
- A.
  
  Help protect from the possibility of a loss.
- B.
  
  Reduce the uncertainty of financial loss
- C.
  
  Eliminate the risk of sickness
- D.
  
  Replace a large possible loss with that of a small certain loss (Premium).
Correct Answer
C. Eliminate the risk of sickness

Explanation
An insurance policy cannot eliminate the risk of sickness. Insurance policies provide financial protection against the risk of sickness by covering medical expenses and providing income replacement in case of disability, but they cannot completely eliminate the possibility of falling sick. Sickness is a natural occurrence and insurance can only mitigate the financial impact, not prevent it entirely.

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2.

Select from the choices below the best description of a speculative risk.
- A.
  
  Insuring someone over the age of 90
- B.
  
  Involving the possibility of a gain in addition to the uncertainty of loss
- C.
  
  Insuring against a situation that offers no possibility of gain
- D.
  
  The purchase of an insurance policy to protect from gambling losses
Correct Answer
B. Involving the possibility of a gain in addition to the uncertainty of loss

Explanation
A speculative risk refers to a situation where there is a possibility of both gain and loss, making it different from pure risk where only the possibility of loss exists. In this case, the answer "Involving the possibility of a gain in addition to the uncertainty of loss" accurately describes a speculative risk as it highlights the potential for both positive and negative outcomes.

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3.

The best description of a hazard is a/an:
- A.
  
  Condition that may increase the chance that a loss may occur
- B.
  
  Cause of a loss
- C.
  
  Pure risk
- D.
  
  Uncertainty of a financial loss
Correct Answer
A. Condition that may increase the chance that a loss may occur

Explanation
A hazard can be defined as a condition that has the potential to increase the likelihood of a loss occurring. It refers to any factor or situation that poses a threat to people, property, or the environment. Hazards can include physical hazards (such as fire or natural disasters), environmental hazards (such as pollution or climate change), or even human hazards (such as negligence or unsafe practices). By identifying and managing hazards, individuals and organizations can take preventive measures to reduce the chances of a loss or mitigate its impact.

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4.

Intentionally submitting false information on a life application is an example of a moral hazard.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
Intentionally submitting false information on a life application is considered a moral hazard because it involves dishonesty and deception. By providing false information, the individual is attempting to gain an advantage or benefit that they may not be entitled to. This behavior creates a risk for insurance companies and undermines the integrity of the application process. Therefore, the statement is true.

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5.

The owner of an office building recognizes the hazards of the building because of its age. He decides to finally get insurance to protect him from a possible legal suit. This would be an example of avoidance of risk.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
This statement is false because the owner of the office building is not avoiding risk, but rather taking a proactive step to protect himself from a potential legal suit by getting insurance. Avoidance of risk would involve not taking any action to address the potential hazards or not acquiring insurance at all.

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6.

Choose from the following selections the best description of a premium.
- A.
  
  Funds received by an insured from an insurer to realize the benefits of the policy.
- B.
  
  Funds received by an insurer from an insured to realize the benefits of the policy.
- C.
  
  A bonus paid to an agent for high insurance sales production.
- D.
  
  The amount an insured pays for each unit of coverage. $7 for every $1,000 of coverage is an example.
Correct Answer
B. Funds received by an insurer from an insured to realize the benefits of the policy.

Explanation
The correct answer is "Funds received by an insurer from an insured to realize the benefits of the policy." This is the best description of a premium because it accurately reflects the payment made by the insured to the insurer in order to obtain the benefits of the insurance policy. The premium is the amount that the insured pays for the coverage provided by the policy, and it is received by the insurer to cover the costs of providing that coverage.

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7.

Which of these is the best way to define the concept of "indemnity?"
- A.
  
  It's only when concealed facts are material that an insurer can rescind or cancel a policy.
- B.
  
  Only the insurance company makes a legally enforceable promise.
- C.
  
  An insured cannot receive more than an actual economic loss in the event of a claim.
- D.
  
  If there is an unclear statement in a contract of insurance the courts will rule in favor of the insured.
Correct Answer
C. An insured cannot receive more than an actual economic loss in the event of a claim.

Explanation
The best way to define the concept of "indemnity" is that an insured cannot receive more than an actual economic loss in the event of a claim. This means that the purpose of insurance is to compensate the insured for their actual financial loss and not to provide them with a profit or gain from the claim. The principle of indemnity ensures that the insured is restored to the same financial position they were in before the loss occurred.

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8.

The principle of indemnification is best described below as:
- A.
  
  Protecting from any past legal situation.
- B.
  
  A hazard not specifically defnied in the code.
- C.
  
  A form of insurance that insurance companies buy to decrease exposure from investment losses
- D.
  
  Restoring an individual to a condition they enjoyed in the past, thus making them whole
Correct Answer
D. Restoring an individual to a condition they enjoyed in the past, thus making them whole

Explanation
The principle of indemnification refers to the act of restoring an individual to the condition they were in prior to a loss or damage. This means that the person is compensated in such a way that they are made whole again, as if the loss or damage never occurred. It is a form of insurance that aims to provide financial protection and ensure that the insured is not left in a worse position after a loss.

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9.

When is the insurable interest required to exist with a life insurance policy?
- A.
  
  At the time of death.
- B.
  
  At the time the policy is written but not at the time of death.
- C.
  
  At the time the policy is written and at the time of death.
- D.
  
  At all times during the policy life.
Correct Answer
B. At the time the policy is written but not at the time of death.

Explanation
Insurable interest is required to exist at the time the policy is written but not necessarily at the time of death. This means that the policyholder must have a financial or emotional interest in the life of the insured individual when the policy is purchased, but this interest does not need to continue until the insured person's death. This requirement ensures that life insurance is not used for speculative purposes and that the policyholder has a legitimate reason to be insured.

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10.

All the following statements regarding policy dividends are true except:
- A.
  
  Non-participating policies generally pay large dividends.
- B.
  
  Dividends cannot be guaranteed.
- C.
  
  Not all dividends are taxable.
Correct Answer
A. Non-participating policies generally pay large dividends.
11.

Sam's insurance policy pays a dividend. the agent that sold Sam the policy refers to the shareholders of the company as "participating," therefore it is a(n) ______________insurer.
- A.
  
  Assessment
- B.
  
  Foreign
- C.
  
  Stock
- D.
  
  Mutual
Correct Answer
D. Mutual

Explanation
The correct answer is "Mutual" because a mutual insurance company is owned by its policyholders, who are referred to as "participating" shareholders. This means that the policyholders have the potential to receive dividends from the company's profits.

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12.

Which of the following would be considered an alien insurer?
- A.
  
  An unauthorized company that underwrites undocumented workers.
- B.
  
  A company located in England and doing business in California.
- C.
  
  A company that is organized in Nevada but maintains branch offices in this state.
- D.
  
  All the above are alien insurers.
Correct Answer
B. A company located in England and doing business in California.

Explanation
An alien insurer refers to a company that is located outside of the jurisdiction where it is doing business. In this case, a company located in England doing business in California would be considered an alien insurer because it is operating in a jurisdiction different from its location. The other options do not meet the criteria of being located outside of the jurisdiction where they are doing business.

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13.

Julie is a licensed insurance salesperson who represents the Silver Dollar Insurance Company. If you were to look at the front of her office you would see a sign that reads: SILVER DOLLAR INSURANCE COMPANY Julie Insurance Agency If Julie performs acts that are not specifically named in the written contract she has the Silver Dollar she is exercising her _____________authority.
- A.
  
  Principal
- B.
  
  Implied
- C.
  
  Express
- D.
  
  All the above
Correct Answer
B. Implied

Explanation
Julie is exercising her implied authority if she performs acts that are not specifically named in the written contract with Silver Dollar Insurance Company. Implied authority refers to the authority that is not explicitly stated in the contract but is reasonably assumed to be granted based on the nature of the agency relationship. In this case, Julie's position as a licensed insurance salesperson representing Silver Dollar Insurance Company implies that she has the authority to perform certain acts necessary for her role, even if they are not explicitly mentioned in the contract.

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14.

Agents must act on behalf of their clients in such a way that uphold their "fiduciary duty". Select the best emple of this duty from the choices below.
- A.
  
  Assuring a claim form is forwarded to the insurer in a timely manner.
- B.
  
  Reviewing the insurance needs and coverage for a client periodically.
- C.
  
  Quickly sending an insured's premium to the home office.
- D.
  
  Assisting a client to choose the best policy for their situation
Correct Answer
C. Quickly sending an insured's premium to the home office.
15.

The Fair Credit Reporting Act mandates that a credit reporting company responds to a consumer complaint when that company's credit report inaccurately reflects information about the consumer.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The Fair Credit Reporting Act is a federal law that requires credit reporting companies to investigate and respond to consumer complaints regarding inaccuracies in their credit reports. This means that if a consumer finds incorrect information on their credit report, the credit reporting company must take action to rectify the error. Therefore, the statement that the Fair Credit Reporting Act mandates a response to consumer complaints when credit reports inaccurately reflect information about the consumer is true.

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16.

In the process of applying for insurance an applicant is asked questions that do not relate to underwriting but are clearly meant for attaining marketing information. Under the code this practice is allowable assuming the person aplying for coverage is informed of such practices.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The explanation for the given correct answer is that according to the code, it is allowable for insurance companies to ask questions that are not related to underwriting but are intended to gather marketing information from the applicant. However, it is important for the insurance company to inform the person applying for coverage about such practices. This implies that the insurance company must disclose their intention of collecting marketing information and obtain the applicant's consent for doing so.

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17.

The term "consideration" applies to the issuance of an insurance policy. Choose the best description of this term from the choices below.
- A.
  
  The amount of death benefit.
- B.
  
  The time the underwriting department gives the application.
- C.
  
  The face amount of the policy one year from the date of issue.
- D.
  
  None of the above
Correct Answer
D. None of the above

Explanation
The term "consideration" refers to the payment made by the insured to the insurance company in exchange for the insurance policy. It can be in the form of premium payments. None of the options provided in the question accurately describe the term "consideration" in relation to the issuance of an insurance policy.

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18.

The doctrine of "utmost good faith" applies to the business of transacting insurance. Which of the following is an example of its application ?
- A.
  
  Each party is entitled to rely upon the representations of the other party.
- B.
  
  Answers to application questions are provided to the best of one's knowledge.
- C.
  
  Each party to a contract must give valuable consideration.
- D.
  
  Any unclear or ambiguous statement in a contract of insurance is decided in favor of the insured.
Correct Answer
A. Each party is entitled to rely upon the representations of the other party.

Explanation
The doctrine of "utmost good faith" in insurance means that both parties involved in the insurance contract are expected to provide complete and accurate information to each other. This includes any representations or statements made by either party. By stating that "each party is entitled to rely upon the representations of the other party," it emphasizes the importance of trust and honesty in the insurance transaction. Both parties can rely on the information provided by the other party and make decisions based on that information.

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19.

Fraud is an intentional act to deceive and induce another to part with something of value. Which of the following would describe fraud in the process of applying for insurance ?1. intentionally distorting the truth to get an insurance policy 2. making a misrepresentation that has no material effect and displays no intent to lie.
- A.
  
  1 only
- B.
  
  2 only
- C.
  
  Both 1 and 2
- D.
  
  Neither 1 nor 2
Correct Answer
A. 1 only
20.

Choose the correct answer. The California Insurance Code: 1. includes laws and regulations the Commissioner has issued. 2. is basically the body of laws governing insurance business in this state. 3. is broken into five sections. They are: life, health, personal lines, commercial property and commercial liability insurance.
- A.
  
  1 only
- B.
  
  2 only
- C.
  
  1 and 3
- D.
  
  1, 2 and 3
Correct Answer
B. 2 only

Explanation
The correct answer is 2 only. This is because the California Insurance Code is essentially the body of laws that govern the insurance business in the state. It does not include any regulations issued by the Commissioner or specific sections related to different types of insurance.

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21.

The Commissioner has numerous responsibilities and wide-ranging authority concerning the California Insurance Code. Should he deem it necessary, he can rewrite certain sections of the code to better serve the insuring public.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
The statement suggests that the Commissioner has the power to rewrite certain sections of the California Insurance Code. However, this is not true. While the Commissioner does have numerous responsibilities and authority related to the Insurance Code, rewriting sections of the code is not within their jurisdiction. They can enforce and interpret the code, but any changes or revisions must go through the legislative process. Therefore, the answer is False.

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22.

Which of the following is required to be included in the writing of an insurance contract ?
- A.
  
  The parties between whom the contract is made
- B.
  
  The risks insured against
- C.
  
  The period in which the insurance is to continue
- D.
  
  All the above
Correct Answer
D. All the above

Explanation
An insurance contract must include the parties involved in the contract, the risks that are being insured against, and the duration of the insurance coverage. Including all of these elements is necessary to ensure that both parties understand the terms and conditions of the insurance agreement. By including the parties, risks, and period in the contract, it helps to establish clear expectations and obligations for both the insurer and the insured.

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23.

Neglecting to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision is known as:
- A.
  
  Concealment
- B.
  
  Material information
- C.
  
  Boycotting
- D.
  
  None of the above
Correct Answer
A. Concealment

Explanation
Concealment refers to the act of deliberately withholding or not disclosing important information that one party knows and should communicate to the other party. This lack of communication prevents the other party from making an informed decision, potentially leading to negative consequences. It is a form of deception where relevant information is intentionally hidden, which can result in legal and ethical issues.

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24.

From the following, identify that which applies to an applicant's misstatement on an application for insurance. 1. Should the misstatement be made with express intent to mislead the insurer it is considered fraud. 2. Should the misstatement not be material to the Company's decision it may not affect the application.
- A.
  
  1 only
- B.
  
  2 only
- C.
  
  1 and 2
Correct Answer
C. 1 and 2

Explanation
If an applicant makes a misstatement on an insurance application with the intention to deceive the insurer, it is considered fraud. This implies that the applicant deliberately provided false information to obtain insurance coverage. On the other hand, if the misstatement is not significant or material to the insurance company's decision-making process, it may not impact the application. In this case, the misstatement is not considered fraudulent, as it does not have a substantial effect on the insurer's assessment of the applicant's risk. Therefore, both statements 1 and 2 apply to an applicant's misstatement on an insurance application.

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25.

All of the following statements are correct regarding a "warranty" except:
- A.
  
  It is a statement merely made to the best of one's knowledge, and can only be express.
- B.
  
  Should either party violate a warranty it entitles the other party to cancel the contract.
- C.
  
  Warranties can be made about events in the past, present or future.
- D.
  
  Warranties made at or during the execution of a policy must be contained in the policy, signed by the insured and attached to the contract
Correct Answer
A. It is a statement merely made to the best of one's knowledge, and can only be express.

Explanation
The given correct answer states that a warranty is not merely made to the best of one's knowledge and can be both express and implied. Warranties can be made about events in the past, present, or future, and if either party violates a warranty, it entitles the other party to cancel the contract. However, warranties made at or during the execution of a policy must be contained in the policy, signed by the insured, and attached to the contract.

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26.

Which of the following is correct about the term "transact" as it applies to the field of insurance and the various penalties for insurance transactions in violation of the code ?1. Solicitation is a part of transacting insurance. 2. Negotiations preliminary to the execution of a policy falls within the definition of transacting insurance. 3. Should a person tranact insurance without a valid license he/she is guilty of a misdemeanor.
- A.
  
  1 and 2
- B.
  
  2 and 3
- C.
  
  1 and 3
- D.
  
  1, 2 and 3
Correct Answer
D. 1, 2 and 3

Explanation
The term "transact" as it applies to the field of insurance includes solicitation (option 1) and negotiations preliminary to the execution of a policy (option 2). This means that both soliciting potential customers and engaging in discussions or negotiations before finalizing an insurance policy are considered part of transacting insurance. Additionally, option 3 states that transacting insurance without a valid license is a misdemeanor, indicating that it is illegal to engage in insurance transactions without the proper licensing. Therefore, all three options are correct.

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27.

According to the code, "transact", as it applies to insurance does not include negotiations preliminary to the execution of a contract of insurance.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
The given statement is false because according to the code, "transact" does include negotiations preliminary to the execution of a contract of insurance. This means that any negotiations or discussions that happen before the insurance contract is officially signed are considered part of the "transact" process in the context of insurance.

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28.

The California Insurance Code cites a specific definition for a "life agent". A life agent is:
- A.
  
  An insurance broker
- B.
  
  An insurance agent
- C.
  
  A person authorized to aid an insurance agent to solicit life insurance
- D.
  
  A, b and c are false
Correct Answer
D. A, b and c are false

Explanation
The correct answer is a, b and c are false. The California Insurance Code defines a "life agent" as none of the options provided. It is not an insurance broker, an insurance agent, or a person authorized to aid an insurance agent to solicit life insurance. Therefore, all options a, b, and c are incorrect.

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29.

In the California Insurance Code there is a definition that reads, in short, "....a person who, for a fee, offers to advise any insured having any interest in life or disability insurance contracts..." This is the definition of :
- A.
  
  An insurance broker paid on a fee-for-service
- B.
  
  A solicitor
- C.
  
  A life and disability analyst
Correct Answer
C. A life and disability analyst

Explanation
The correct answer is A life and disability analyst. This is because the definition given in the California Insurance Code specifically mentions a person who offers to advise any insured with an interest in life or disability insurance contracts. This aligns with the role of a life and disability analyst who provides advice and analysis regarding life and disability insurance policies.

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30.

Of the items listed below, which are requirements for a life and disability insurance analyst license ?
- A.
  
  The applicant must have a good general reputation and good business reputation
- B.
  
  The applicant must be 18 years of age, minimum.
- C.
  
  The applicant must have a thorough knowledge of life and disability insurances.
- D.
  
  These are all required
Correct Answer
D. These are all required

Explanation
The requirements for a life and disability insurance analyst license include having a good general reputation and good business reputation, being at least 18 years of age, and having a thorough knowledge of life and disability insurances. All of these requirements must be met in order to obtain the license.

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31.

To protect (subject to statutory limitations) life and health owners and insureds in the event of impairment or insolvency of a member insurer. This is a description of:
- A.
  
  Medi-Cal
- B.
  
  The California Life and Health Insurance Guarantee Association
- C.
  
  OBRA
- D.
  
  None of the above
Correct Answer
B. The California Life and Health Insurance Guarantee Association

Explanation
The California Life and Health Insurance Guarantee Association is described as an organization that aims to protect the life and health owners and insureds in the event of impairment or insolvency of a member insurer. This means that if an insurance company becomes financially unstable or unable to fulfill its obligations, the association will step in to ensure that policyholders are still provided with coverage and benefits.

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32.

An agent mostly sells long-term care insurance to individuals. He obtained his insurance license (life and health) in January of 1998. In 1998 he must:
- A.
  
  Complete 25 hours of life and health continuing education only
- B.
  
  Complete 25 hours of life and health continuing education and, in addition, complete 8 hours of LTC specific continuing education, a total of 33 hours
- C.
  
  Complete 25 hours of life and health continuing education, 8 of which are LTC specific
- D.
  
  None of the above
Correct Answer
C. Complete 25 hours of life and health continuing education, 8 of which are LTC specific

Explanation
In 1998, the agent must complete 25 hours of life and health continuing education, 8 of which are specific to long-term care (LTC) insurance. This is because the agent sells LTC insurance to individuals, so it is necessary for them to have a deeper understanding of this specific type of insurance. By completing the required hours of continuing education, the agent can stay updated on any changes or developments in the industry and provide the best service to their clients.

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33.

The license of an agent is considered inactive when:
- A.
  
  All renewal fees are paid but there is a termination of all appointments
- B.
  
  The license has not been renewed
- C.
  
  Transactions of insurance are no longer executed following a 1 year period.
- D.
  
  None of the above
Correct Answer
A. All renewal fees are paid but there is a termination of all appointments

Explanation
When all renewal fees are paid but there is a termination of all appointments, the license of an agent is considered inactive. This means that even though the agent has fulfilled their financial obligations by paying the renewal fees, they no longer have any active appointments to execute transactions of insurance. Therefore, their license is inactive until new appointments are made.

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34.

Ben is a life agent who would like to do business with the rock Solid Insurance Company but he doesn't have an appointment to sell their policies. Assuming Rock solid does not require exclusive representation, can Ben submit an application to them from a prospect ?
- A.
  
  No, appointments are always required to be filed prior to submitting applications.
- B.
  
  Yes, and the application need not be approved by the underwriting department.
- C.
  
  Yes, and if the insurer approves the application they must appoint Ben within 14 days.
- D.
  
  All the above are false.
Correct Answer
C. Yes, and if the insurer approves the application they must appoint Ben within 14 days.

Explanation
The correct answer is "Yes, and if the insurer approves the application they must appoint Ben within 14 days." This means that Ben can submit an application to Rock Solid Insurance Company without having an appointment. If the application is approved by the insurer, they are required to appoint Ben within 14 days. This suggests that Rock Solid Insurance Company does not require exclusive representation and is open to working with agents who do not have prior appointments.

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35.

Assuming CE requirements have been met, how is the life agent's license renewed ?
- A.
  
  Pay the renewal billing notice the Department sends out about 60 days before the renewal date.
- B.
  
  Pay the renewal billing notice the Department sends out 90 days before the renewal date.
- C.
  
  Pay the renewal fee, at which time the Department will send the renewal notice.
- D.
  
  Licenses are automatically renewed assuming no disciplinary action has been taken.
Correct Answer
B. Pay the renewal billing notice the Department sends out 90 days before the renewal date.

Explanation
The correct answer is to pay the renewal billing notice the Department sends out 90 days before the renewal date. This indicates that the life agent's license is renewed by paying the renewal fee after receiving the renewal billing notice from the Department 90 days before the renewal date.

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36.

Chuck Harris has earned a Chartered Life Underwriter designation. From the selections below choose the one that the California Insurance Code would find acceptable when publishing his name:
- A.
  
  Harris Insurance Services
- B.
  
  Chuck Harris, CLU and Company
- C.
  
  Chuck Harris, Insurance Company
- D.
  
  All the above are acceptable
Correct Answer
A. Harris Insurance Services

Explanation
The California Insurance Code would find "Harris Insurance Services" acceptable when publishing Chuck Harris's name because it does not include any misleading or false information about his designation or imply that he is an insurance company or part of one.

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37.

Every licensee must indicate on which of the following documents his or her license number ?
- A.
  
  Print advertisements
- B.
  
  Business cards
- C.
  
  Written price quotations
- D.
  
  All the above
Correct Answer
D. All the above

Explanation
All the above options (print advertisements, business cards, and written price quotations) require licensees to indicate their license number. This is important for transparency and to ensure that customers can easily verify the legitimacy and qualifications of the licensee. By including the license number on these documents, licensees are providing a clear and easily accessible way for customers to confirm their credentials.

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38.

When any change in residence address occurs, every licensee and every applicant for a license must notify the Commissioner _______________. (Select the most correct response)
- A.
  
  Within 6 months after the move has taken place
- B.
  
  Within 6 months before the license is to expire
- C.
  
  30 days before submitting a continuing education certificate.
- D.
  
  Immediately
Correct Answer
D. Immediately

Explanation
When any change in residence address occurs, every licensee and every applicant for a license must notify the Commissioner immediately. This means that as soon as the change in address happens, it is the responsibility of the licensee or applicant to inform the Commissioner without delay. This ensures that the Commissioner has up-to-date and accurate information regarding the licensee's or applicant's residence address. This prompt notification allows for effective communication and ensures that any necessary actions or updates can be taken in a timely manner.

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39.

An agent makes a misleading comparison of a policy he is selling in order to convince a prospect to lapse an old insurance policy. What is this called ?
- A.
  
  Intimidation
- B.
  
  Rebating
- C.
  
  Boycotting
- D.
  
  Twisting
Correct Answer
D. Twisting

Explanation
Twisting is when an insurance agent uses misleading or deceptive tactics to convince a prospect to cancel their existing insurance policy and purchase a new one. In this scenario, the agent is making a misleading comparison of the policies in order to convince the prospect to lapse their old policy. This unethical practice is known as twisting.

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40.

Which of the following is not legal when determining premium rates for life or disability insurance ?
- A.
  
  Gender
- B.
  
  Age
- C.
  
  Nationality
- D.
  
  All the above may not be used
Correct Answer
C. Nationality

Explanation
When determining premium rates for life or disability insurance, it is not legal to consider an individual's nationality. Discrimination based on nationality is prohibited in insurance practices. However, factors such as gender and age may be considered in determining premium rates, although there are regulations in place to prevent unfair discrimination based on these factors as well.

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41.

Generally, it is unfair to discriminate against any one class of individuals in the business of insurance. However, the code does permit the charging of a higher premium if such such premiums can be supported by mortality tables segregated by sex (gender)
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The explanation for the given correct answer is that while it is generally unfair to discriminate against any one class of individuals in the business of insurance, the code does allow for the charging of higher premiums based on mortality tables segregated by sex or gender. This means that if there is statistical evidence to support the higher risk associated with a particular gender, insurance companies are allowed to charge higher premiums for that gender. Therefore, the statement that it is generally unfair to discriminate against any one class of individuals is true, but there is an exception when supported by mortality tables.

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42.

Which of the following is not legal activity in this state ?
- A.
  
  Participating in a plan to offer free insurance if a person buys some form of service.
- B.
  
  Disregarding age in the determination of insurance rates.
- C.
  
  Refusing to apply the practice of twisting in sales.
- D.
  
  All the above are legal in the state of California
Correct Answer
A. Participating in a plan to offer free insurance if a person buys some form of service.

Explanation
The given answer is the only option that is not a legal activity in the state of California. The other options, such as disregarding age in insurance rates and refusing to apply the practice of twisting in sales, are legal activities in the state.

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43.

Employees that have group life or health policies covering them are required to be issued a/an ______.
- A.
  
  Estimate of employers premiums
- B.
  
  Certificate of insurance
- C.
  
  Master policy
- D.
  
  Monthly premium notification on a non-participating plan
Correct Answer
B. Certificate of insurance

Explanation
When employees have group life or health policies covering them, they are typically required to be issued a certificate of insurance. This certificate serves as proof that the employee is covered under the policy and outlines the details of their coverage. It may include information such as the policy number, effective dates, and the types of benefits provided. This certificate is important for employees to have as it can be used to verify their coverage with healthcare providers or in the event of a claim.

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44.

Jerry is using a new time management technique in his insurance sales presentation. In order to cut the amount of time he spends at each appointment he no longer answers questions when they are first asked. Instead he answers them only if they are asked twice. He feels this will allow him to get to his next meeting quicker. Most insurance professionals would consider this:
- A.
  
  An unethical practice
- B.
  
  A clever and ethical practice
Correct Answer
A. An unethical practice

Explanation
Jerry's new time management technique of only answering questions if they are asked twice is considered an unethical practice. This is because it prioritizes Jerry's time and convenience over the needs and concerns of his clients. By intentionally withholding information and not addressing questions immediately, Jerry is not acting in the best interest of his clients and is potentially misleading them. Insurance professionals are expected to provide honest and transparent information to their clients, making Jerry's approach unethical.

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45.

In the life insurance planning process, the "blackout period" is considered:
- A.
  
  The period of time after a life insurance application is written and the date the coverage takes effect.
- B.
  
  The period of time when there is not enough income agailable as required by the insured's beneficiaries
- C.
  
  The period of time when a surviving spouse does not receive any Social Security benefits
- D.
  
  None of the above
Correct Answer
C. The period of time when a surviving spouse does not receive any Social Security benefits

Explanation
The "blackout period" in the life insurance planning process refers to the period of time when a surviving spouse does not receive any Social Security benefits. This means that there is a gap in the receipt of these benefits, which can have financial implications for the surviving spouse. It is important to consider this blackout period when planning for life insurance coverage to ensure that the surviving spouse is adequately protected during this time.

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46.

All of the following are reasons for an individual to purchase personal life insurance, except:
- A.
  
  To have funds that can supplement Social Security at retirement
- B.
  
  To cover a buy/sell agreement.
- C.
  
  For the creation of an immediate estate
- D.
  
  To have cash available for emergencies.
Correct Answer
B. To cover a buy/sell agreement.

Explanation
Personal life insurance is typically purchased to provide financial protection for the policyholder's loved ones in the event of their death. It can help replace lost income, cover funeral expenses, pay off debts, and provide for the policyholder's dependents. However, covering a buy/sell agreement is not a reason for an individual to purchase personal life insurance. A buy/sell agreement is a legal contract between business owners that outlines what will happen to a business in the event that one of the owners dies or leaves the business. In this case, life insurance would be purchased by the business, not the individual, to fund the buyout of the deceased owner's share of the business.

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47.

Why would a business use a key person life insurance policy ?
- A.
  
  To provide the key employee's surviving family members with funds to live on after the death of the employee.
- B.
  
  To help the employee's spouse supplement her Social Security benefits.
- C.
  
  To better allow the employee qualify for a bank loan
- D.
  
  To protect the company from the financial consequences of the death of a vice president
Correct Answer
D. To protect the company from the financial consequences of the death of a vice president

Explanation
A business would use a key person life insurance policy to protect the company from the financial consequences of the death of a vice president. This policy ensures that the company receives a payout in the event of the key employee's death, which can be used to cover any financial losses, such as loss of revenue, recruitment and training costs for a replacement, or paying off debts. It provides financial stability and safeguards the business from potential disruptions caused by the loss of a key individual.

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48.

Identify the statement that is true about contributory group life insurance.
- A.
  
  The employer will make a cash contribution to the estate of a deceased employee.
- B.
  
  The employer will contribute the full amount of the premium
- C.
  
  The employee will contribute to the premium payments.
- D.
  
  None of the above
Correct Answer
C. The employee will contribute to the premium payments.

Explanation
Contributory group life insurance is a type of insurance where both the employer and the employee contribute to the premium payments. This means that the employee will have to pay a portion of the premium, usually deducted from their paycheck, in order to maintain the coverage. The employer may also contribute to the premium, but the employee's contribution is a necessary part of the insurance arrangement. Therefore, the statement "The employee will contribute to the premium payments" is true.

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49.

Select the correct statement about the Social Security system
- A.
  
  If is, for the most part, a voluntary program.
- B.
  
  It is only meant to be a supplement to an individual's major income; it only supplies a minimum floor of income
- C.
  
  The system is completely and fully funded.
- D.
  
  The amount each person gets out is nearly exactly what they put in.
Correct Answer
B. It is only meant to be a supplement to an individual's major income; it only supplies a minimum floor of income

Explanation
The Social Security system is designed to provide a minimum level of income as a supplement to an individual's main source of income. It is not intended to be the sole source of income for individuals, but rather to provide a safety net and ensure a basic level of financial support. The system is not fully funded, meaning that the amount received by individuals may not be exactly equal to what they have contributed.

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50.

Which of the following is true regarding the government's social insurance program known as Social Security ?
- A.
  
  The majority of workers in the U.S. must pay into the program
- B.
  
  The contributions paid in closely match the benefits received.
- C.
  
  Participants sign a contractual agreement with the insurer.
- D.
  
  Both A and B above are true
Correct Answer
A. The majority of workers in the U.S. must pay into the program

Explanation
The correct answer is that the majority of workers in the U.S. must pay into the program. This means that a large number of employees are required to contribute a portion of their income to the Social Security program. This is done through payroll taxes, which are deducted from their wages. The program is designed to provide financial support to retired workers, disabled individuals, and the families of deceased workers. The contributions paid by workers are intended to fund these benefits. Therefore, the statement accurately reflects the requirement for most workers to contribute to the Social Security program.

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The Ultimate Life & Health Practice Test III

Which of the following is not an example of what insurance policy can provide an insured?

Select from the choices below the best description of a speculative risk.

The best description of a hazard is a/an:

Intentionally submitting false information on a life application is an example of a moral hazard.

The owner of an office building recognizes the hazards of the building because of its age. He decides to finally get insurance to protect him from a possible legal suit. This would be an example of avoidance of risk.

Choose from the following selections the best description of a premium.

Which of these is the best way to define the concept of "indemnity?"

The principle of indemnification is best described below as:

When is the insurable interest required to exist with a life insurance policy?

All the following statements regarding policy dividends are true except:

Sam's insurance policy pays a dividend. the agent that sold Sam the policy refers to the shareholders of the company as "participating," therefore it is a(n) ______________insurer.

Which of the following would be considered an alien insurer?

Agents must act on behalf of their clients in such a way that uphold their "fiduciary duty". Select the best emple of this duty from the choices below.

The Fair Credit Reporting Act mandates that a credit reporting company responds to a consumer complaint when that company's credit report inaccurately reflects information about the consumer.

In the process of applying for insurance an applicant is asked questions that do not relate to underwriting but are clearly meant for attaining marketing information. Under the code this practice is allowable assuming the person aplying for coverage is informed of such practices.

The term "consideration" applies to the issuance of an insurance policy. Choose the best description of this term from the choices below.

The doctrine of "utmost good faith" applies to the business of transacting insurance. Which of the following is an example of its application ?

The Commissioner has numerous responsibilities and wide-ranging authority concerning the California Insurance Code. Should he deem it necessary, he can rewrite certain sections of the code to better serve the insuring public.

Which of the following is required to be included in the writing of an insurance contract ?

Neglecting to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision is known as:

All of the following statements are correct regarding a "warranty" except:

According to the code, "transact", as it applies to insurance does not include negotiations preliminary to the execution of a contract of insurance.

The California Insurance Code cites a specific definition for a "life agent". A life agent is:

In the California Insurance Code there is a definition that reads, in short, "....a person who, for a fee, offers to advise any insured having any interest in life or disability insurance contracts..." This is the definition of :

Of the items listed below, which are requirements for a life and disability insurance analyst license ?

To protect (subject to statutory limitations) life and health owners and insureds in the event of impairment or insolvency of a member insurer. This is a description of:

An agent mostly sells long-term care insurance to individuals. He obtained his insurance license (life and health) in January of 1998. In 1998 he must:

The license of an agent is considered inactive when:

Ben is a life agent who would like to do business with the rock Solid Insurance Company but he doesn't have an appointment to sell their policies. Assuming Rock solid does not require exclusive representation, can Ben submit an application to them from a prospect ?

Assuming CE requirements have been met, how is the life agent's license renewed ?

Chuck Harris has earned a Chartered Life Underwriter designation. From the selections below choose the one that the California Insurance Code would find acceptable when publishing his name:

Every licensee must indicate on which of the following documents his or her license number ?

When any change in residence address occurs, every licensee and every applicant for a license must notify the Commissioner _______________. (Select the most correct response)

An agent makes a misleading comparison of a policy he is selling in order to convince a prospect to lapse an old insurance policy. What is this called ?

Which of the following is not legal when determining premium rates for life or disability insurance ?

Generally, it is unfair to discriminate against any one class of individuals in the business of insurance. However, the code does permit the charging of a higher premium if such such premiums can be supported by mortality tables segregated by sex (gender)

Which of the following is not legal activity in this state ?

Employees that have group life or health policies covering them are required to be issued a/an ______.

In the life insurance planning process, the "blackout period" is considered:

All of the following are reasons for an individual to purchase personal life insurance, except:

Why would a business use a key person life insurance policy ?

Identify the statement that is true about contributory group life insurance.

Select the correct statement about the Social Security system

Which of the following is true regarding the government's social insurance program known as Social Security ?