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| Section | Objectives |
|---|---|
| Topic 1: Life Insurance Applications and Underwriting | - Application Process
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| Topic 2: Life Insurance Taxation and Retirement Planning | - Retirement and Estate Planning Concepts
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| Topic 3: General Insurance Concepts | - Insurance Regulation
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| Topic 4: Arizona Insurance Laws and Ethics | - Producer Duties and Ethical Practices
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| Topic 5: Life Insurance Products and Policies | - Types of Life Insurance
|
>> Certification Insurance Licensing AZ-Insurance-Producer-Life Book Torrent <<
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NEW QUESTION # 37
An insured owns a whole life insurance policy on himself. He would also like coverage for his minor son and
/or daughter. One way the insured can accomplish this goal is to purchase a
Answer: D
Explanation:
A child term rider adds term life insurance coverage for eligible dependent children to the primary insured ' s life insurance policy. It is an efficient mechanism for obtaining coverage on one or more minor children without purchasing a separate individual policy for each child.
The rider normally provides a stated amount of term protection on each eligible child and may automatically include children born or adopted after the rider is issued, subject to the contract ' s definition of an eligible child. Coverage generally terminates at a specified age, although the child may often have a conversion privilege allowing the term insurance to be converted to individual permanent coverage without proving insurability.
A guaranteed insurability rider applies primarily to the insured and permits additional coverage to be purchased at specified future dates without new medical evidence. A family maintenance rider is designed to provide continuing income after the insured ' s death, while a family income rider similarly provides an income benefit for a stated period following death.
Because the stated objective is specifically to insure the policyowner ' s minor son or daughter, the child term rider directly satisfies the requirement.
Study Guide Reference: Life Insurance Policy Provisions, Options, and Riders - children ' s term rider; family riders; conversion privileges; dependent coverage.
NEW QUESTION # 38
Reinsurance allows an insurer to
Answer: C
Explanation:
Reinsurance is an arrangement through which one insurance company transfers part of the risk it has assumed to another insurance company. The original insurer is commonly called the ceding insurer, while the company accepting the transferred exposure is the reinsurer.
Reinsurance enables an insurer to control the amount of risk retained on individual policies or across a portfolio. It can increase underwriting capacity, stabilize financial results, protect against catastrophic or unusually large losses, and assist with capital and solvency management. Depending on the arrangement, reinsurance may be structured on a facultative or treaty basis and may use proportional or nonproportional methods.
Importantly, reinsurance does not ordinarily change the policyholder ' s contractual relationship with the original insurer. The policyholder continues to look to the issuing insurer for payment of covered claims.
Thus, the risk is not transferred back to the policyholder.
Risk avoidance is also incorrect. Reinsurance does not eliminate the existence of the underlying risk; instead, it reallocates some of its financial consequences between insurers.
Therefore, the defining function of reinsurance is to transfer risk from one insurer to another insurer, making D correct.
Study Guide Reference: General Insurance Concepts - reinsurance; risk transfer; ceding insurer; reinsurer; insurer risk management.
NEW QUESTION # 39
An employee is covered by a group life insurance policy offered by their employer at no cost to the employee.
Which life insurance option is available to this employee from the group policy insurer if their employment is terminated?
Answer: A
Explanation:
Group life insurance provides a statutory conversion privilege when coverage terminates because an employee ' s employment or eligibility ends. The former employee may obtain an individual life policy from the insurer without furnishing new evidence of insurability, provided the conversion requirements and time limits are satisfied.
Arizona law specifically provides that an eligible individual may apply for an individual policy and pay the first premium within 31 days after termination. The individual policy may be issued without evidence of insurability, and the premium is based on the insurer ' s customary rate for the selected policy form, amount, class of risk, and the insured ' s attained age on the effective date. Arizona law also provides that the converted policy may generally be one of the insurer ' s customary individual forms other than term insurance.
Therefore, C is the intended examination answer because it captures the essential principles of conversion to individual coverage at an individual premium based on attained age. A new medical examination is not required merely to exercise the statutory conversion right. The insured also does not simply continue employer group coverage indefinitely.
Study Guide Reference: Life Insurance Policy Provisions, Options, and Riders - group life conversion; termination of eligibility; evidence of insurability; individual premium based on attained age.
NEW QUESTION # 40
An annuitant dies during the accumulation period. What happens to the cash value in the annuity?
Answer: B
Explanation:
During an annuity ' s accumulation period, premiums or purchase payments are being accumulated and credited according to the contract ' s terms; annuitization and the systematic payout phase have not yet begun.
If the annuity owner or annuitant dies during this period, the contract generally provides a death benefit payable to the designated beneficiary.
The amount payable depends on the particular annuity contract. It may consist of the accumulated contract value, premiums paid less withdrawals, or another amount determined by the contract ' s death-benefit provisions. The fundamental exam principle is that the insurer does not simply retain the accumulated value because the annuitant died before annuitization.
Payment to an estate may occur when the estate is itself the designated beneficiary or when no effective beneficiary designation exists, but that is not the normal result when a beneficiary has been properly named.
The IRS does not receive the cash value as the death-benefit recipient, although the beneficiary may have income-tax consequences associated with the gain contained within an inherited nonqualified annuity.
Therefore, among the stated choices, payment to the beneficiary is correct.
Study Guide Reference: Annuities - accumulation and annuity periods; death before annuitization; beneficiary provisions; annuity death benefits.
NEW QUESTION # 41
When a policyowner chooses to apply their dividend to their next premium payment, which of the following accurately describes this option?
Answer: C
Explanation:
The reduced premium dividend option applies a participating policy ' s declared dividend toward the next premium due. Instead of receiving the dividend in cash, leaving it with the insurer at interest, or purchasing additional paid-up insurance, the policyowner uses the dividend to reduce the amount that must be paid out of pocket for the next scheduled premium.
For example, if the annual premium is $1,000 and the insurer declares a $150 dividend, application of the reduced-premium option would ordinarily leave the policyowner responsible for the remaining $850 premium.
Under the accumulation at interest option, the insurer retains the dividend and credits interest to it. Under the cash option, the dividend is paid directly to the policyowner. With paid-up additions, the dividend purchases small increments of fully paid permanent life insurance, increasing both the total death benefit and cash-value potential.
Dividends on participating life policies are not guaranteed because they depend on the insurer ' s divisible surplus and experience. The question, however, concerns the use of an already declared dividend.
Applying that dividend directly against the next premium is precisely the reduced premium option.
Study Guide Reference: Life Insurance Policy Provisions, Options, and Riders - participating-policy dividends; reduced premium; cash; accumulation at interest; paid-up additions.
NEW QUESTION # 42
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