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ALABAMA LIFE AND HEALTH INSURANCE
EXAM 2024-2025 TEST BANK WITH 400
EXAM PRACTICE QUESTIONS AND
CORRECT ANSWERS (100% CORRECT
VERIFIED ANSWERS)
Jill, whose policy contains a waiver of premium rider, becomes disabled for two years during which time the company pays over $400 in premiums. Jill recovers
and now must: - ANSWER-Begin paying the premiums as they become due
A is the insured under a $100,000 10 year term life insurance policy with her spouse named as her beneficiary. If she dies in year 9, what will her spouse receive? - ANSWER-The face amount of the policy
XYZ Insurer has decided to issue a policy to a particular applicant. What is the next step in this insurance transaction? - ANSWER-XYZ will send the policy to the producer for delivery to the insured
Which of the following would be considered a speculative risk? - ANSWER-The possibility the painting you bought might be a long-lost masterpiece
A speculative risk is one in which there is a chance for either loss or gain.Example: Gambling, Casino's, Lottery, etc. All of the other choices describe pure risk, where there is no chance of gain, only a chance of loss exists.
Which is the proper term for a company owned by its policy owners? - ANSWER- A mutual insurance company
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A producer who is acting as an agent is representing: - ANSWER-Always the
insurer
Incidental limitations refer to which of the following? - ANSWER-The amount of life insurance that may be included in a qualified retirement plan
If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000, how much of the policy's cash surrender value would be subject to federal income tax? - ANSWER-$3,000 Any proceeds from a surrendered or matured life insurance policy that exceed policy costs are subject to federal income tax. This is referred to as the cost recovery rule.
All of the following are elements of a contract, except: - ANSWER-Authority
All enforceable contracts must include these characteristics: offer and acceptance (agreement), considerations, competent parties, and legal purpose. Authority is not considered one of the elements of a legal contract.
All of the following are situations in which the insurer is obligated to pay out a
death benefit after the insured has died, except: - ANSWER-The premiums have
not been paid and have been overdue for 3 years
Why should a policyowner be especially careful when deciding to increase the amount of an outstanding policy loan? - ANSWER-If the outstanding loan balance, plus interest, equals or exceeds the cash value of the policy, the company could cancel the insurance
The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following, except: - ANSWER- 2 / 4
pg. 3 Purchasing a new car once the claim has been settled and proceeds have been paid out according to the beneficiary designations
If an insured has an outstanding loan of $5,000 on a policy with a face amount of
$25,000, at death the company will: - ANSWER-Pay the beneficiary $20,000, after
subtracting the amount of the outstanding loan
A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has ______days to review and return the policy to receive a full refund for any reason. - ANSWER-10
An annuitant has a temporary annuity certain, and dies shortly after the payments start but before the certain period of 10 years has elapsed. Any money remaining
is: - ANSWER-Paid to the beneficiary for the rest of the certain period
The type of annuity that guarantees to pay total income at least equal to the
purchase price of the contract is a: - ANSWER-Refund life annuity
'Annuity Period' refers to which of the following? - ANSWER-The time during which payments are made to the annuitant The annuity period begins when the annuitant starts to receive payments from the accumulated funds in the annuity policy. This is also referred to as 'the Annuitization period'.
An annuity owner can change all of the following in an annuity, except: -
ANSWER-Mortality Table
Which of the following will receive the smallest monthly income benefit check if an annuity is annuitized? - ANSWER-50 year old female 3 / 4
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Which of the following Annuities is generally not backed by the insurer's general account assets? - ANSWER-Variable
When converting a group life policy to an individual policy, the departing group
member's new policy must be a: - ANSWER-Permanent or whole life policy
When underwriting group life insurance: - ANSWER-The underwriter generally
focuses on the group as a whole, rather than on individual members
Which of the following statements is NOT true about the tax treatment of Social Security? - ANSWER-Employee paid payroll deductions for Social Security are tax deductible to the employee
Split-dollar plan - ANSWER-Divides the cost of additional insurance for an employee between that employee and the company
George, who has a group policy, may upon leaving his place of employment: -
ANSWER-Convert it to permanent insurance without proof of insurability, within a specified period
The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives. This benefit is not available to other retirees of
the company. This is an example of a: - ANSWER-Non-qualified plan
Each of the following would be an element in the definition of fraud, except: -
ANSWER-An individual warrants a fact stated on the applicationA warranted fact is one guaranteed to be true. Although no statement on an application is regarded as warranty, no fraud is involved if a statement is guaranteed to be true.
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