Alabama State Insurance Exam FX If a producer changes his residential address who must he she notify verified answer This change will need to be reported to the Commissioner Which of the following is NOT true regarding minors purchasing insurance policies in this state verified answer Minors at the age of 14 are allowed to buy their own policies What is the penalty for IRA distributions that are below the required minimum for the year verified answer 50 All of the following are business uses of life insurance EXCEPT verified answer Funding against general company financial loss Which of the following is called a second to die policy verified answer Survivorship life The term fiduciary capacity deals with a producer s verified answer Position of financial trust Which is NOT true about beneficiary designations verified answer The beneficiary must have insurable interest in the insured An IRA purchased by a small employer to cover employees is known as a verified answer All of the following applicants for an insurance producer license are exempt from prelicensing education requirements EXCEPT verified answer An applicant for a dealer s license An agent accepts the premium payment 35 days after it is due telling the insured that there will not be a problem keeping the policy in force This is an example of what type of agent authority verified answer apparant Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option verified answer Size of each installment What is a major problem with naming a trust as the beneficiary of a life insurance policy verified answer They are expensive to administer Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as verified answer Contracts of adhesion All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT verified answer The policy is owned by the company Which of the following is considered to be a morale hazard verified answer Driving recklessly When transacting business in this state an insurer formed under the laws of another country is known as a an verified answer Alien Insurer When a reduced paid up nonforfeiture option is chosen what happens to the face amount of the policy verified answer It is reduced to the amount of what the cash value would buy as a single premium The policyowner wants to make sure that upon his death the life policy will pay a portion of the proceeds annually to his spouse but that the principal will be paid to their children when they reach a certain age Which settlement option should the policyowner choose verified answer Interest only option Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner verified answer Cash surrender An insured has a Modified Endowment Contract He wants to withdraw some money in order to pay medical bills Which of the following is true verified answer He will have to pay a penalty if he is younger than 59 When would a misrepresentation on the insurance application be considered fraud verified answer If it is intentional and material In Alabama an insurance company certificate of authority is issued for what period of time verified answer Perpetual If an application for an annuity is gathered any way other than face to face within how many days after the insurer receives the completed application must the applicant be given a Buyer s Guide verified answer 5 business days An insured committed suicide one year after his life insurance policy was issued The insurer will verified answer Refund the premium payments The death benefit under the Universal Life Option B verified answer Gradually increases each year by the amount that the cash value increases The type of policy that can be changed from one that does not accumulate cash value to the one that does is a verified answer Convertible Term Policy All of the following entities regulate variable life policies EXCEPT verified answer The Guaranty Association A family s income need is greatest during which period verified answer Family Income Dependency A rider attached to a life insurance policy that provides coverage on the insured s family members is called the verified answer Other insured rider What type of insurance would be used for a Return of Premium rider verified answer Increasing Term Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity verified answer Insurer s guaranteed minimum rate of interest in order to qualify for conversion from a group life policy to an individual policy of the same coverage a person must have been insured under the group plan for how many years verified answer 5 Which of the following is TRUE about nonforfeiture values verified answer They are required by state law to be included in the policy In classifying a risk the Home Office underwriting department will look at all of the following EXCEPT verified answer Risk Classifacation Methods used to pay the death benefits to a beneficiary upon the insured s death are called verified answer Settlement Options If the owner of a whole life policy who is also the insured dies at age 80 and there are no outstanding loans on the policy what portion of the death benefit will be paid to the beneficiary verified answer A full death benefit What does liquidity refer to in a life insurance policy verified answer Cash values can be borrowed at any time A deferred annuity is surrendered prior to annuitization Which of the following best describes the nonforfeiture value of the annuity verified answer The surrender value should be equal to 100 of the premium paid minus any prior withdrawals and surrender charges In a group life insurance policy the employer may select all of the following EXCEPT verified answer The beneficiary Which of the following is TRUE regarding variable annuities verified answer The annuitant assumes the risks on investment How long will the beneficiary receive payments under the single life settlement option verified answer Until the beneficiary s death All of the following are true of key person insurance EXCEPT verified answer The plan is funded by permanent insurance only What instrument is available to the Commissioner to prevent a licensee from performing specific acts or using certain methods of conducting the business of insurance before any