Free Pennsylvania Life insurance exam practice test

Correct answer: C. As soon as the caller tries to get the data by a lie

• A. Incorrect. 6821(a)(1) makes it a violation to obtain or attempt to obtain the information by a false statement; no later use is needed.
• B. Incorrect. The violation does not depend on any loss to the client; the attempt by a false statement is enough.
• C. Correct. It is a violation for any person to obtain or attempt to obtain customer information of a financial institution relating to another person by making a false, fictitious, or fraudulent statement to an officer, employee, or agent of the institution.
• D. Incorrect. Passing the data on is not required; attempting to obtain it by a false statement is already a violation.

It shall be a violation of this subchapter for any person to obtain or attempt to obtain, or cause to be disclosed or attempt to cause to be disclosed to any person, customer information of a financial institution relating to another person [...] by making a false, fictitious, or fraudulent statement or representation to an officer, employee, or agent of a financial institution;

Correct answer: D. Its designated licensees hold good standing with the Department

• A. Incorrect. Section 310.6(b) requires one or more designated licensees, not that every owner pass the exam.
• B. Incorrect. Section 310.6(b) contains no requirement of prior licensure in another state.
• C. Incorrect. Section 310.6(b) lists no surety bond requirement.
• D. Correct. Section 310.6(b)(2) requires that the entity's designated licensees are licensees in good standing with the Department.

(b) Business entities.--The department shall review each application and may conduct an investigation of each business entity seeking licensure and its designated licensees. The department shall issue a resident or nonresident insurance producer license, as appropriate, to the business entity when the department determines that all of the following criteria have been met: (1) The business entity has one or more designated licensees. (2) The business entity's designated licensees are licensees in good standing with the department.

Correct answer: B. 6 credit hours

• A. Incorrect. The instructor earns twice the course hours, not the same number.
• B. Correct. The instructor earns twice the approved credit hours: 2 x 3 = 6 credit hours.
• C. Incorrect. Nine hours would be three times the course hours; the rule is twice.
• D. Incorrect. The instructor earns double, not half, the course hours.

(d) The instructor of an approved course shall earn twice the number of approved credit hours for that course. The instructor may not earn credit for instructing a subsequent offering of the same course within the same licensing period.

Correct answer: C. When the customer relationship begins

• A. Incorrect. The general rule is no later than when the relationship is established.
• B. Incorrect. Customer notice is required when the relationship is established.
• C. Correct. § 146a.11(a)(1) requires the notice not later than when the licensee establishes a customer relationship, except as provided in subsection (e).
• D. Incorrect. The notice is required without a request.

(a) Initial notice requirement. A licensee shall provide a clear and conspicuous notice that accurately reflects its privacy policies and practices to: [...] (1) Customer. An individual who becomes the licensee’s customer, not later than when the licensee establishes a customer relationship, except as provided in subsection (e).

Correct answer: A. No, since a gift promise lacks the needed exchange

• A. Correct. Wex says both parties must assume some binding obligation rather than make a gratuitous promise, and that pure gifts are not enforceable because they lack a sufficient detriment or exchange.
• B. Incorrect. A gratuitous promise to pay is not enforceable without consideration.
• C. Incorrect. A benefit to the recipient of a pure gift does not supply consideration; the promise lacks an exchange.
• D. Incorrect. The problem is the lack of consideration, not any need for court approval.

In other words, for a contract to be enforceable, both parties must assume some obligation that binds them, rather than make a promise that is gratuitous, meaning it leaves them free to perform or not at their own discretion. [...] Gratuitous promises (pure gifts) are not enforceable because they lack a sufficient detriment or exchange.

Correct answer: D. A is the ceding company; B is the reinsurer

• A. Incorrect. This reverses the roles; the buyer of reinsurance is the ceding company.
• B. Incorrect. A captive insures its parent's exposures, and B is the one assuming the risk.
• C. Incorrect. A is the buyer of reinsurance, so it is the ceding company.
• D. Correct. The NAIC defines a ceding company as an insurer that transfers risk by purchasing reinsurance and a reinsurer as the company assuming reinsurance risk.

Reinsurer - company assuming reinsurance risk. [...] Ceding Company - an insurance company that transfers risk by purchasing reinsurance.

Correct answer: A. A one-time four-credit course the insurance department has approved

• A. Correct. Section 7B(1)(a) requires a one-time four (4) credit training course approved by the department of insurance and provided by an approved education provider.
• B. Incorrect. The model requires a one-time course, not an annual one.
• C. Incorrect. The course is four (4) credits, not eight.
• D. Incorrect. The course is one-time and four (4) credits.

A producer who engages in the sale of annuity products shall complete a one-time four (4) credit training course approved by the department of insurance and provided by the department of insurance-approved education provider.

Correct answer: B. Nondeductible, because Acme is the beneficiary

• A. Incorrect. 264(a)(1) allows no deduction for these premiums.
• B. Correct. 264(a)(1) allows no deduction for premiums on a life insurance policy if the taxpayer is directly or indirectly a beneficiary under the policy.
• C. Incorrect. The $50,000 figure relates to employee group-term life, not to this rule.
• D. Incorrect. Retirement of the insured does not make the premiums deductible under 264(a)(1).

No deduction shall be allowed for [...] Premiums on any life insurance policy, or endowment or annuity contract, if the taxpayer is directly or indirectly a beneficiary under the policy or contract.

Correct answer: A. As the insurer's own statements

• A. Correct. § 51.31(a) says the company, in using a testimonial, makes as its own the statements contained in it, and the ad is subject to the chapter.
• B. Incorrect. The company adopts the statements as its own.
• C. Incorrect. The ad, including the statement, is subject to the chapter.
• D. Incorrect. The company, not the agent, adopts the statements.

(a) Testimonials used in advertisements shall be genuine, represent the current opinion of the author, be applicable to the contract advertised and be accurately reproduced. The company, in using a testimonial, makes as its own the statements contained therein, and the advertisement, including the statement, is subject to this chapter.

Correct answer: D. No later than when the application is signed

• A. Incorrect. Delivery is too late; § 83.4 ties the deadline to signing the application.
• B. Incorrect. The deadline in § 83.4 is the signing of the application.
• C. Incorrect. Section 83.4 requires the statement by the time the application is signed.
• D. Correct. Section 83.4 says the written disclosure statement shall be given no later than the time the application form is signed by the applicant.

Except as otherwise provided herein, the written disclosure statement shall be given no later than the time that the application form is signed by the applicant.

Correct answer: C. Prohibited for agents and member insurers

• A. Incorrect. Section 991.1717(a) bans using the association's existence to sell, whether or not the statement is accurate.
• B. Incorrect. The ban covers statements written or oral.
• C. Correct. No person, including a member insurer or its agent, shall make any statement which uses the existence of the association for the purpose of sales, solicitation or inducement to purchase.
• D. Incorrect. The section contains no approval exception for agents.

(a) No person, including a member insurer, agent or affiliate of a member insurer, shall make, publish, disseminate, circulate or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the association for the purpose of sales, solicitation or inducement to purchase any form of insurance or other coverage covered by this article, provided, however, that this section shall not apply to the association or any other entity which does not sell or solicit insurance, or coverage by a RANLI PPO, hospital plan corporation, professional health services plan corporation or health maintenance organization.

Correct answer: C. 120 days after separation

• A. Incorrect. Thirty-one days appears in other parts of 1968(a)(1); after separation the coverage runs 120 days.
• B. Incorrect. Coverage ceases 120 days after separation when the member is not totally disabled.
• C. Correct. Section 1968(a)(1)(A) says SGLI ceases 120 days after separation or release, unless the member is totally disabled on that date.
• D. Incorrect. Two years is the outer limit only for a member totally disabled at separation.

With respect to a member on active duty or active duty for training under a call or order to duty that does not specify a period of less than 31 days, insurance under this subchapter shall cease as follows: (A) 120 days after the separation or release from active duty or active duty for training, unless on the date of such separation or release the member is totally disabled, under criteria established by the Secretary, in which event the insurance shall cease on the earlier of the following dates (but in no event before the end of 120 days after such separation or release): (i) The date on which the insured ceases to be totally disabled. (ii) The date that is two years after the date of separation or release from such active duty or active duty for training.

Correct answer: A. No; term coverage has no investment side that builds cash value

• A. Correct. Wex explains that, unlike whole life, term life has no investment side that generates a cash value, so it cannot be traded in sooner for the value of the policy.
• B. Incorrect. Term life does not generate a cash value, so there is no surrender value to pay.
• C. Incorrect. Wex says a term policy cannot be traded in sooner for value; it has no cash value.
• D. Incorrect. A term policy does not build a cash value, so there is nothing to borrow against.

Unlike whole life insurance, term life insurance does not involve an investment side to the policy that generates a cash value, and so, a term life insurance policy can not be traded in sooner for the value of the policy.

Correct answer: C. 31 days

• A. Incorrect. Model 565 Section 5H allows thirty-one days, not ten.
• B. Incorrect. The period in Section 5H is thirty-one days.
• C. Correct. Section 5H requires application and payment of the first premium within thirty-one days after termination, with no evidence of insurability.
• D. Incorrect. Model 565 uses thirty-one days, not sixty.

The policy shall contain a provision that, if the insurance, or any portion of it, on a person covered under the policy or on the dependent of a person covered, ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, the person shall be entitled to have issued to him or her by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy shall be made, and the first premium paid to the insurer, within thirty-one (31) days after termination

Correct answer: B. State the conditions for requiring that evidence

• A. Incorrect. Section 5D expressly allows the insurer to reserve this right under stated conditions.
• B. Correct. Section 5D requires a provision setting forth the conditions, if any, under which the insurer reserves the right to require evidence of individual insurability as a condition to part or all of a person's coverage.
• C. Incorrect. Section 5D does not require a medical exam of every eligible person.
• D. Incorrect. Section 5D requires a policy provision, not case-by-case approval by the commissioner.

The policy shall contain a provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage.

Correct answer: B. Her use is unrestricted, since no limits on use are permitted

• A. Incorrect. The model permits no restrictions on use, so the money need not go to medical or nursing care.
• B. Correct. Section 5B, Restrictions on Use of Proceeds, states that no restrictions are permitted on the use of the proceeds.
• C. Incorrect. No restriction on use is permitted, including a requirement to pay premiums first.
• D. Incorrect. Requiring insurer approval would be a restriction, and none is permitted.

Restrictions on Use of Proceeds. No restrictions are permitted on the use of the proceeds.

Correct answer: B. At least every 12 months, and no more often than every 3 months

• A. Incorrect. Section 3D requires a determination at least once every twelve months, not every six, and no more than once in any three-month period.
• B. Correct. Section 3D says the maximum rate must be determined at least once every twelve (12) months, but not more frequently than once in any three-month period.
• C. Incorrect. A 24-month interval is too long; Section 3D requires at least one determination every twelve months.
• D. Incorrect. Section 3D limits determinations to no more than once in any three-month period.

The maximum rate for each policy must be determined at regular intervals at least once every twelve (12) months, but not more frequently than once in any three-month period.

Correct answer: A. The proceeds are exempt from creditor claims both before and after receipt

• A. Correct. The first sentence of 1970(g) exempts SGLI and VGLI payments from the claims of creditors and from attachment, levy, or seizure, either before or after receipt by the beneficiary.
• B. Incorrect. Section 1970(g) keeps the exemption in place after receipt by the beneficiary.
• C. Incorrect. Section 1970(g) sets no dollar cap on the exemption.
• D. Incorrect. The exemption covers payments made to a beneficiary and applies after receipt, so the beneficiary's creditor cannot seize them.

Any payments due or to become due under Servicemembers' Group Life Insurance or Veterans' Group Life Insurance made to, or on account of, an insured or a beneficiary shall be exempt from taxation, shall be exempt from the claims of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.

Correct answer: A. 10 days

• A. Correct. Section 4D(1)(e) calls for a captioned provision allowing return of the policy within ten days of receipt, with a refund.
• B. Incorrect. Model 270 states a ten-day return period, not twenty days.
• C. Incorrect. Thirty-one days is the scheduled premium grace period, not the return period.
• D. Incorrect. Section 4D(1)(e) uses ten days from receipt of the policy.

To the extent permitted by state law, a captioned provision that the policyholder may return the variable life insurance policy within ten (10) days of receipt of the policy by the policyholder and receive a refund

Correct answer: D. It leaves that provision unaffected

• A. Incorrect. Section 5C keeps the accidental death benefit provision in place when a death benefit remains.
• B. Incorrect. Section 5C says the provision is not affected by the accelerated payment.
• C. Incorrect. Section 5C does not call for a proportional reduction.
• D. Correct. If any death benefit remains after an accelerated benefit is paid, the accidental death benefit provision in the policy or rider shall not be affected by that payment.

Accidental Death Benefit Provision. If any death benefit remains after payment of an accelerated benefit, the accidental death benefit provision, if any, in the policy or rider shall not be affected by the payment of the accelerated benefit.

Correct answer: A. A description of the adjustments that will be made to policy values

• A. Correct. Section 4D(11) requires a description of any adjustments in policy values to be made if the insured's age or sex is misstated.
• B. Incorrect. The required provision describes adjustments to policy values, not voiding the policy.
• C. Incorrect. Section 4D(11) calls for a description of value adjustments, not a premium refund.
• D. Incorrect. Section 4D(11) says nothing about waiving the error after one year.

Mandatory Policy Provisions. Every variable life insurance policy filed for approval in this state shall contain at least the following: [...] A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

Correct answer: D. Age, annual income, liquid net worth, and tax status

• A. Incorrect. Credit score and driving record are not among the 14 items in the Section 5C minimum list.
• B. Incorrect. Medical history and hobbies are not among the 14 items in the Section 5C minimum list.
• C. Incorrect. Employer name, hobbies, and credit score are not among the 14 items in the Section 5C minimum list.
• D. Correct. Age, annual income, liquid net worth, and tax status are items (1), (2), (11), and (14) of the Section 5C minimum list.

"Consumer profile information" means information that is reasonably appropriate to determine whether a recommendation addresses the consumer's financial situation, insurance needs and financial objectives, including, at a minimum, the following: [...] (1) Age; (2) Annual income; (3) Financial situation and needs, including debts and other obligations; (4) Financial experience; (5) Insurance needs; (6) Financial objectives; (7) Intended use of the annuity; (8) Financial time horizon; (9) Existing assets or financial products, including investment, annuity and insurance holdings; (10) Liquidity needs; (11) Liquid net worth; (12) Risk tolerance, including but not limited to, willingness to accept non-guaranteed elements in the annuity; (13) Financial resources used to fund the annuity; and (14) Tax status.

Correct answer: A. Fees and expenses of the mutual funds used as the investment options

• A. Correct. The SEC says the owner also indirectly pays the fees and expenses imposed by the mutual funds that are the underlying investment options.
• B. Incorrect. Record-keeping charges are administrative fees the insurer deducts directly, not the fees paid indirectly.
• C. Incorrect. The mortality and expense risk charge is deducted by the insurer, not paid indirectly through the funds.
• D. Incorrect. The guide's indirect fees are those imposed by the underlying mutual funds, not guaranty association assessments.

You will also indirectly pay the fees and expenses imposed by the mutual funds that are the underlying investment options for your variable annuity.

Correct answer: D. Participation rates, rate caps, or a spread taken from index gains

• A. Incorrect. Surrender charges, market value adjustments and free withdrawals are not what Section 5B(3)(a) names as the elements that determine index-based interest.
• B. Incorrect. Mortality and expense charges and subaccount fees are not the elements that determine index-based interest.
• C. Incorrect. Ratings, reserves and guaranty limits are not listed in 5B(3)(a) as elements used to determine index-based interest.
• D. Correct. Section 5B(3)(a) requires, for fixed indexed annuities, the elements used to determine the index-based interest, such as the participation rates, caps or spread, and an explanation of how they operate.

At a minimum, the following information shall be included in the disclosure document required to be provided under this regulation: [...] A description of the contract and its benefits, emphasizing its long-term nature, including examples where appropriate: [...] The guaranteed and non-guaranteed elements of the contract, and their limitations, if any, including for fixed indexed annuities, the elements used to determine the index-based interest, such as the participation rates, caps or spread, and an explanation of how they operate;

Correct answer: C. It is excluded from income to the extent used as premium

• A. Incorrect. Keeping the dividend as premium does not make it taxable; it is excluded to the extent retained as premium.
• B. Incorrect. 72(e)(4)(B) excludes the retained amount; it is not treated as interest income.
• C. Correct. Under the rule for policyholder dividends, such an amount is not included in gross income to the extent the insurer retains it as a premium or other consideration for the contract.
• D. Incorrect. The statute excludes the retained dividend from gross income; it does not create a deduction.

Treatment of policyholder dividends [...] Any amount described in paragraph (1)(B) shall not be included in gross income under paragraph (2)(B)(i) to the extent such amount is retained by the insurer as a premium or other consideration paid for the contract.