South Carolina Life Insurance Producer

1. If the initial premium does not accompany an application for insurance, the producer MUST take which of the following actions when delivering the policy? South Carolina Life Insurance Producer

• A. Collect the initial premium and complete the inspection report
• B. Collect the initial premium and verify the applicant’s continued good health
• C. Collect the initial premium in compliance with the provisions of federal Fair Credit Reporting Act
• D. Obtain the beneficiary’s approval of the policy

2. An insured is covered under a life policy in which their spouse is the designated beneficiary. Both are involved in a car accident that results in death. If the spouse survives ten days and then dies, under a typical Common Disaster provision in the policy, the benefits will be paid to the:

• A. insured’s estate
• B. next of kin
• C. spouse’s estate
• D. primary beneficiary

3. P is both the policyowner and the insured under a 100,000$ Whole Life policy. The beneficiary is P’s mother. When P marries, ownership of the policy is transferred to P’s spouse. If P dies without making any other changes, the policy proceeds will be payable to: South Carolina Life Insurance Producer

• A. P’s spouse only
• B. P’s mother only
• C. mother and spouse
• D. P’s mother

4. Which of the following is TRUE of life settlements?

• A. They are the same as Accelerated Death Benefits.
• B. Any insured is eligible to enter into one. South Carolina Life Insurance Producer
• C. They involve a change of owner and beneficiary.
• D. Only terminally ill insureds can consider one.

5. The Director of Insurance may suspend, revoke, or refuse to renew a license if the licensee:

• A. has failed to write any business for a period of six months
• B. is convicted of a misdemeanor involving moral turpitude
• C. has committed misrepresentation or fraud South Carolina Life Insurance Producer
• D. files for personal bankruptcy

6. A life insurer that accepts an incomplete application and issues a policy is obligated to:

• A. honor the contract
• B. complete the application within the Contestable Period
• C. return only the premiums paid, with interest, on the insured’s death
• D. charge a lower premium for the initial period of coverage

7. A Convertible Term policy offers which of the following advantages?

• A. The insured may convert on the basis of the insured’s original age only. South Carolina Life Insurance Producer
• B. The insured does not have to provide evidence of insurability when requesting a conversion.
• C. Its face amount can be increased at the insured’s request.
• D. Its premium costs are lower than those for Nonconvertible Term.

8. What is the REQUIRED number of continuing education hours for a resident producer’s license renewal in South Carolina?

• A. 12
• B. 18
• C. 24
• D. 32

9. Which of the following actions is considered to be an act of insurance fraud?

• A. Requiring a debtor to obtain a specific insurance policy from the lender in connection with a loan
• B. Knowingly presenting a document containing incorrect information
• C. Failing to report a change of address to the Department of Insurance
• D. Maligning the financial condition of another insurance company

10. Which of the following features of a life policy is used to restrict coverage?

• A. An endorsement
• B. An exclusion
• C. An Other Insured rider
• D. A Consideration clause

11. Which of the following annuities provides the highest monthly payout?

• A. Straight Life Annuity
• B. Joint and Survivor Life Annuity
• C. Joint and 2/3 Survivor Annuity
• D. Installment Refund Annuity

12. An Immediate annuity can be recognized by which of the following features?

• A. Payout begins one payment period after purchase.
• B. Payout begins several years later.
• C. Only an annual payout period will apply.
• D. The annuitant must be in good health.

13. The purpose of the USA PATRIOT Act is to:

• A. detect criminal activity
• B. encourage patriotism among producers
• C. require a licensed producer to swear to uphold the Constitution
• D. authorize insurance companies to order credit checks on their producers

14. An example of a Limited-Pay Life policy is:

• A. Whole Life
• B. Life Paid-Up at Age 65
• C. Renewable Term to Age 70
• D. Endowment maturing at age 65

15. Two equal partners in a business worth $\$100,000$ enter into a Buy and Sell Agreement to assure continuation of the business in the event of the death of the other partner. Which of the following funding arrangements BEST meets their needs?

• A. The partnership purchases a100,000$policy on each partner. South Carolina Life Insurance Producer
• B. Both partners purchase 50,000 policies on themselves
• C. Each partner purchases a 50,000$ policy on the other
• D. Each partner purchases a100,000$ policy on the other

16. An insured is entitled by statute to a loan on a life policy that has a cash loan value after the insured has paid premiums for a MINIMUM of:

• A. six months
• B. one year
• C. three years
• D. five years

17. Which of the following beneficiary designations may limit a policyowner’s rights?

• A. Primary
• B. Contingent
• C. Revocable
• D. Irrevocable

18. A Company takes out a key employee policy on its director of operations. Several years later, the employee leaves $Z$ Company, joins $A$ Company and is killed in an automobile accident while the key employee policy is still in force. In this situation, the insurance company will pay the proceeds to which of the following entities? South Carolina Life Insurance Producer

• A. The insured’s estate
• B. $A$ Company
• C. $Z$ Company
• D. The insured’s spouse

19. A prospect, with limited financial resources, wants to purchase a policy with the highest amount of protection for a temporary period. The producer should advise the prospect to purchase which of the following?

• A. Limited-Pay Life
• B. Term Life
• C. Whole Life
• D. Endowment

20. In general, what amount of personal life insurance premiums is deductible for federal income tax purposes?

• A. $100\%$
• B. $50\%$
• C. $33\ 1/3\%$
• D. None

21. An insurance company may charge a higher total premium to an insured who pays a policy quarterly rather than annually because the quarterly payment results in:

• A. greater adverse selection
• B. an increase in the number of dividend payments
• C. a reduction in the company’s interest earnings and an increase in administrative expenses
• D. a shorter grace period

22. A producer who discovers that answers to a series of questions on a life insurance application were omitted should take which of the following actions:

• A. Send the application to the insurance company as is.
• B. Complete the application to the best of producer’s knowledge based on the producer’s interview of the applicant.
• C. Send the application to the applicant with instructions to answer the questions and mail it to the insurance company directly.
• D. Schedule another appointment with the applicant to complete the unanswered questions.

23. Which of the following statements is CORRECT about the Death benefit of a life insurance policy?

• A. It cannot be assigned.
• B. It can only be assigned by the beneficiary.
• C. It can be assigned by the policyowner.
• D. It can be assigned by verbal agreement.

24. Which of the following policy provisions is designed to protect the insurance company from adverse selection by certain high-risk applicants?

• A. Nonforfeiture options
• B. Suicide clause
• C. Grace period
• D. Settlement options

25. A retirement plan that may be established by an employee, regardless of any other retirement plan is called a(n):

• A. Individual Retirement Account (IRA)
• B. Keogh (Unincorporated) Pension plan
• C. $401(k)$ plan
• D. Corporate pension plan

26. In South Carolina, a foreign insurance company is a company that is:

• A. formed under the laws of South Carolina
• B. formed under the laws of a state other than South Carolina
• C. formed under the laws of a country other than the United States
• D. not authorized to do business in South Carolina

27. If an initial premium is not collected when a life insurance application is written, the insurance becomes effective:

• A. after medical examination is completed
• B. after it is approved by the insurer’s underwriters
• C. on delivery of the policy to the insured and payment of the initial premium to the producer
• D. on delivery of the policy to the insured and receipt of the initial premium in the home office

28. Under South Carolina Standard Nonforfeiture Law, a cash surrender value payment may be deferred by the insurance company for NO LONGER than how many months?

• A. 1
• B. 6
• C. 12
• D. 24

29. The Waiver of Premium provision in a life policy guarantees that the:

• A. insurance company will waive premiums whenever the policy’s cash value is sufficient to cover its cost
• B. insurance company will pay premiums for the duration of a disability after a predetermined waiting period
• C. insured will receive a predetermined amount of money for each week the insured is hospitalized.
• D. insured may increase the face amount of the policy without providing evidence of insurability

30. A player returned a newly issued policy one week after the policy was delivered by the producer and received a refund of all premiums paid. Which of the following policy sections covered this situation?

• A. Consideration clause
• B. Grace Period provision
• C. Incontestable period provision
• D. Free Look provision

31. After giving notice and providing the opportunity for a hearing, the Director of Insurance may suspend or revoke the license of a producer who:

• A. fails to maintain Errors and Omissions coverage
• B. fails to sell any new business for a period of six months
• C. shares commissions with a producer who placed a portion of a risk with another insurer
• D. shares commissions with an insured who placed a large volume of business with the producer

32. Because life insurance policies are offered on a “take it or leave it” basis, they are referred to as which of the following types of contracts?

• A. Aleatory Contracts
• B. Executory Contracts
• C. Unilateral Contracts
• D. Contracts of Adhesion

33. T wants to purchase a policy that allows T to increase or decrease the premium payments, the premium payment period, and the death benefit of the policy. Which of the following policies has this flexibility?

• A. Limited-Pay Life
• B. Variable Universal Life
• C. Variable Whole Life
• D. Modified Whole Life

34. In a life policy, insurable interest MUST exist at which of the following times?

• A. Throughout the life of the policy
• B. During the first two years the policy is in effect
• C. At the time the application is signed
• D. At the time of the insured’s death

35. Which of the following Term policies guarantees the insured the right to continue term coverage after expiration of the initial policy period?

• A. Renewable
• B. Convertible
• C. Decreasing South Carolina Life Insurance Producer
• D. Increasing

36. The Director of Insurance is empowered to:

• A. enforce state laws relating to insurance
• B. pass state laws relating to insurance
• C. write policy forms for mandatory insurance coverages
• D. set rates for mandatory insurance coverages

37. Unfair discrimination can best be described as:

• A. failing to choose a specific policy type
• B. charging different rates for persons in the same class
• C. writing different policies for different individuals
• D. writing policies for only one company

38. Which of the following annuities ensures level income for the lifetime of two annuitants?

• A. A Double Life annuity
• B. An Immediate annuity
• C. A Joint and Survivor Life annuity
• D. A Joint and 2/3 Life annuity

39. Which of the following statements is CORRECT about conversion of group Term Life insurance on termination of employment?

• A. Evidence of insurability is required.
• B. Premiums on a new policy must be paid within a maximum of ten days.
• C. If death occurs during the conversion period, the death benefit must be paid.
• D. A terminated employee may convert an amount of coverage up to five times the group coverage.

40. If an insurance producer has been accused of misrepresenting pertinent facts on an insurance application, the Director of Insurance will FIRST:

• A. fine the producer
• B. order a hearing or issue a cease and desist order
• C. suspend the producer’s license
• D. revoke the producer’s license. South Carolina Life Insurance Producer

41. Which of the following sources of information MUST a licensed producer make available to the Department of Insurance?

• A. A record of all commissions received for a one-year period
• B. All insurance accounts, records, and documents related to insurance practice for a three-year period
• C. All insurance accounts, records, and documents related to insurance practice for a five-year period
• D. A record of all expenses paid to employees for a two-year period

42. The Director of Insurance is authorized to take which of the following actions upon receiving a notice of a fraudulent claim?

• A. Require the insurer to disclose additional information
• B. Consider the evidence a matter of public record
• C. Refer violators to the prosecutor for investigation
• D. Determine whether civil or criminal liability exists

43. A student airplane pilot may buy life insurance at a regular price if the policy that is purchased contains:

• A. an Aviation Exclusion
• B. a Guaranteed Insurability rider
• C. a Hazardous Occupation Exclusion
• D. an Accidental Death Benefit rider

44. A nonresident producer’s license will be terminated automatically when the:

• A. producer becomes affiliated with a different insurance company
• B. producer’s resident license for that class of insurance is terminated
• C. producer fails to transact business for a three-year period
• D. producer is suspected of engaging in unfair trade practices

45. Under the Conversion provision of a group life insurance policy, a terminating employee can:

• A. continue the life insurance coverage by paying the group premium rate
• B. change to a Term policy
• C. change to an individual life insurance policy without evidence of insurability
• D. change the amount of group coverage

46. An insurance company MUST deliver which of the following documents to the purchaser of life insurance no later than at the time of policy delivery?

• A. Buyer’s Guide and copy of the application
• B. Buyer’s Guide and Policy Summary
• C. Policy Summary and copy of the application
• D. Policy Summary and the company’s A.M. Best rating

47. Changing a beneficiary is a right reserved for the:

• A. contract owner
• B. insured who is other than the owner
• C. owner’s spouse
• D. estate

48. The primary purpose of a Limited-Pay Life policy is to allow an:

• A. insurance company to reduce its risk exposure
• B. insurance company to sell policies to selected groups of risks only
• C. insured to pay premiums for a predetermined period of time
• D. insured to purchase coverage that will pay Death benefits under specified circumstances only

49. A producer who lives in an adjacent state and wants to write insurance in South Carolina MUST obtain which of the following types of licenses?

• A. Limited
• B. Temporary
• C. Nonresident
• D. Surplus lines

50. Which of the following types of policies provides permanent protection at the lowest annual premium?

• A. Term
• B. Endowment
• C. Whole Life
• D. Limited-Pay Life

51. Under a group life policy, assignment of the policy proceeds is a right of the:

• A. policyowner
• B. insured South Carolina Life Insurance Producer
• C. beneficiary
• D. insured’s creditors

52. All licensees in South Carolina are required to notify the Director of Insurance of a change in address within how many days?

• A. 35
• B. 60
• C. 30
• D. 90

53. If a producer knowingly claims a policy covers risks which are NOT covered, the producer may have committed an act of:

• A. coercion
• B. unfair discrimination
• C. restraint of competition
• D. fraud

54. Which of the following types of group Term Life insurance plans does a corporation offer, if the employees share the premium cost?

• A. Nonparticipating
• B. Participating
• C. Noncontributory
• D. Contributory

55. The signed document that starts the Free Look period is the:

• A. Buyer’s Guide
• B. delivery receipt
• C. Policy Summary
• D. conditional receipt

56. What minimum percentage of eligible employees must participate for a company to offer a Contributory group life insurance plan?

• A. 25
• B. 50
• C. 75
• D. 100

57. A person who issues written or oral statements that are maliciously critical of the financial condition of an insurance company may have committed an act of:

• A. defamation
• B. fraud
• C. misrepresentation
• D. coercion

58. Which of the following annuities pays benefits based on units rather than specific dollar amounts?

• A. A Flexible annuity
• B. A Variable annuity
• C. A Deferred annuity
• D. A Single Premium annuity

59. Which of the following statements is CORRECT about a Renewable Term policy?

• A. The insured must provide evidence of insurability only on the first renewal.
• B. The insured may increase the face amount on subsequent renewals without providing proof of insurability.
• C. The renewal premium is calculated on the basis of the insured’s attained age.
• D. The policy is renewable only until the insured retires.

60. Which of the following is a contract in which the performance of one or both parties is contingent upon the occurrence of a particular event?

• A. Unilateral
• B. Aleatory
• C. Adhesion
• D. Conditional

61. An underwriter’s evaluation of information on a life insurance application is also known as:

• A. risk classification
• B. warranty review
• C. consideration
• D. applicant investigation

62. A life insurance policyholder dies of heart failure shortly after the tenth policy anniversary. The insured failed to disclose the condition and resulting medical consultations on the application. In this situation, the insurance company will most likely:

• A. refund all premiums with interest and not pay the face amount
• B. refund all premiums without interest and not pay the face amount
• C. pay the face amount
• D. pay a reduced face amount

63. Which of the following policies allows the policyowner to select where the cash values are invested?

• A. Whole Life
• B. Variable Life
• C. Limited-Pay Life
• D. Adjustable Life

64. A Payor Benefit clause is generally added to a life policy that insures the life of a:

• A. spouse
• B. parent
• C. child
• D. business associate

65. A Policy Summary:

• A. tells the insured about the insurer issuing the policy
• B. educates the client at the time of application about the types of insurance available
• C. contains the Conditional Receipt
• D. highlights the critical parts of the policy issued and describes the coverages, riders, and exclusions

66. In a life insurance policy, the promise by the insurer to pay certain benefits is the:

• A. Insuring clause
• B. Entire Contract provision
• C. Settlement Option provision
• D. Nonforfeiture Option provision

67. W applies for life insurance on W’s five-year-old child and submits the initial annual premium. The producer gives W a receipt and says that coverage will be effective immediately if the application is approved and no medical examination is required. Which of the following types of receipts did the producer give W?

• A. Conditional
• B. Premium
• C. Binding
• D. Interim

68. Which of the following statements about a five-year-old Whole Life policy is CORRECT?

• A. If a policyowner stops paying premiums, the policyowner may elect a Nonforfeiture option.
• B. If the insurance company discovers a misrepresentation on the application, they may rescind the policy.
• C. The Contestable period cannot begin again even if the policy is reinstated.
• D. If extra premiums were charged for special risks, cash and Nonforfeiture option values increased accordingly.

69. A domestic insurance company in South Carolina MUST:

• A. be organized under South Carolina insurance laws
• B. own real estate in South Carolina
• C. write insurance on risks located only in South Carolina
• D. honor the National Association of Insurance Commissioner’s charter

70. Which of the following individuals may transact business for an admitted insurance company?

• A. A producer
• B. An attorney
• C. A surplus lines broker
• D. An insurance consultant

71. Which of the following statements is CORRECT about a Limited-Pay Whole Life policy?

• A. The policyowner has the right to adjust the premium.
• B. Premium payments must be made for a specified number of years, after which the policy lapses.
• C. The premium payment period is shorter than for a Straight Life policy, and more of each premium payment is credited to the policy’s cash value.
• D. The policy provides insurance protection for a shorter period of time than a Straight Life policy.

72. Which of the following items requires that an insurance application state that an investigative consumer report may be obtained on a prospective insured?

• A. Fair Credit Reporting Act
• B. Entire Contract provision
• C. Individual Standard Provision law
• D. Medical Information Bureau (MIB) authorization

73. Which of the following statements is CORRECT about the federal income tax levy in relation to $\$100,000$ worth of group Term Life insurance coverage through an employer-sponsored plan?

• A. Employees must not pay tax on premiums paid by an employer.
• B. Employees must pay tax on the premiums for the first $\$50,000$ of group Term Life coverage.
• C. An employer can deduct a premium for tax purposes only if the employer is also the beneficiary of the plan.
• D. Death benefits are income tax free to named beneficiaries.

74. A producer’s fiduciary responsibilities include:

• A. collecting premiums and paying them to the insurance company
• B. maintaining a separate bank account for each insurance company the producer represents
• C. acting as a referee in the event of a disagreement between an insured and the insurance company
• D. advising prospective insureds of the lowest rates available

75. A producer MUST complete a Replacement Notice form when replacing which of the following types of insurance?

• A. Group Life
• B. Group Annuities South Carolina Life Insurance Producer
• C. Credit Life
• D. Universal Life

76. An insurance company formed under the laws of Canada would be known in South Carolina as:

• A. a domestic company
• B. an alien company
• C. a foreign company
• D. a mutual company

77. An Immediate Annuity will have:

• A. an increasing premium
• B. a decreasing premium
• C. a single premium
• D. a level premium

78. In a life insurance policy, the Consideration clause states that the policyowner’s consideration consists of completing the application and:

• A. paying the initial premium
• B. signing the medical authorization form
• C. accepting the policy
• D. surrendering existing insurance policies

79. Under South Carolina insurance law, deceptive advertising is considered a form of:

• A. malfeasance
• B. coercion
• C. discrimination
• D. misrepresentation

80. When replacing life insurance, a producer MUST take which of the following actions?

• A. Cash surrender the existing policy
• B. Obtain a form signed by the applicant which states that an existing policy is being replaced
• C. Notify the existing policy’s producer about the replacement
• D. Notify the Director of Insurance that an existing policy is being replaced

81. A policy becomes a Modified Endowment Contract (MEC) when:

• A. too much premium is paid in the initial policy’s years
• B. premium payments are skipped and the policy lapses
• C. more than one life is covered by the policy
• D. a Settlement option is selected to provide lifetime income

82. The purpose of the Life Insurance Replacement Rule is to:

• A. determine which companies are replacing the most insurance
• B. determine the types of insurance being replaced
• C. establish minimum standards of conduct to be observed in replacement transactions
• D. establish the amount of premium tax to be assessed by the Department of Insurance

83. An insured surrenders a recently issued whole life policy and requests proceeds be made payable to an unrelated third party. This would be a red flag for potential of:

• A. Fair Credit Reporting Act
• B. Money laundering
• C. Modified endowment contract rules
• D. Point of sale disclosure requirements