OH-Life-Agent-Series-11-44 Practice Exam Questions with Answers OHIO Life Insurance Agent Series 11-44 Certification

According to the Ohio Department of Insurance guidelines, each insurance licensee is required to complete24 credit hoursof continuing education during eachtwo-year license renewal period. This includesat least 3 hours in approved ethics training.

"Licensees must complete a total of 24 credit hours of continuing education every two years, including a minimum of 3 hours in ethics."

Under Section 1035 of the Internal Revenue Code, a policyholder can exchange a life insurance policy for another life insurance policy, an endowment policy, or an annuity contract without recognizing a gain or loss, provided the exchange is made directly between insurance companies and the policyholder does not receive any cash or other benefits in the process. This tax-free exchange allows the policyholder to replace outdated or underperforming policies without immediate tax consequences.

Ordinary life insurance, also known as whole life insurance, is a type of permanent life insurance that features level premiums and a guaranteed death benefit. Over time, the policy accumulates a cash value reserve through the payment of premiums and the crediting of interest. This reserve grows steadily and is designed to equal the face amount of the policy by the time the insured reaches the age of 100. This structure ensures that the policy remains in force for the insured's entire life, provided premiums are paid as scheduled.

The "Reduction of Premium" dividend option allows a policyowner to apply dividends toward paying all or part of the next premium due on their life insurance policy. This option effectively reduces the out-of-pocket premium payment required from the policyowner. If the dividend is equal to or exceeds the premium due, it can cover the entire premium, eliminating the need for the policyowner to make a payment.

Estate conservation refers to using life insurance proceeds to preserve an estate and prevent the forced liquidation of assets to pay taxes, debts, or other final expenses. By having life insurance in place, the policyholder ensures that the beneficiaries have sufficient liquidity to cover these obligations without selling off property or investments.

Life insurance premiums are calculated based on mortality (the likelihood of death), interest (investment earnings), and expenses (operational costs). Morbidity, which relates to illness rates, is primarily used in health insurance, not life insurance.

A "Life Annuity with Period Certain" guarantees income payments for the lifetime of the annuitant, with a minimum payment period specified (the "period certain"). If the annuitant dies before the end of this period, the remaining payments are made to a designated beneficiary for the rest of the period.

In this scenario, the annuity is set to pay income to the spouse for 20 years. If the spouse dies before the 20-year period concludes, the remaining payments continue to the children for the rest of the term. This structure aligns with the definition of a Life Annuity with a 20-Year Period Certain.

According to the Ohio Life Insurance Study Guide:

"A life annuity with period certain provides income for the life of the annuitant, but guarantees payments for a specified period. If the annuitant dies before the end of the period, payments continue to a beneficiary for the remainder of the period."

AClass designationis used when a group of individuals is identified as beneficiaries without naming each one individually, such as “all of my children.” This allows for inclusion of future children or changes in family composition.

"A class designation identifies a group of individuals as beneficiaries, like 'all of my children,' instead of naming each person individually. It ensures that any future members of the class are included."

Akey disadvantage of fixed annuitiesis that while they offer guaranteed payments, thefixed payment amount may not keep up with inflation, reducing purchasing power over time. This is a common concern for retirees relying on steady income.

"A disadvantage of fixed annuities is that they do not offer protection against inflation, meaning the real value of payments can diminish over time."

A payor benefit rider is an optional addition to a juvenile life insurance policy that waives the premium payments if the policyowner (typically a parent or guardian) becomes totally disabled or dies before the insured child reaches a specified age, usually 21. This rider ensures that the policy remains in force during the payor's period of disability or after their death, providing uninterrupted coverage for the insured child without the burden of premium payments.

An immediate annuity is designed to start providing income payments shortly after a lump-sum premium is paid. Typically, these payments commence within 30 days to one year from the date of purchase, depending on the terms of the contract

Risk avoidanceinvolveseliminating exposure to risk altogether. Choosingnot to go skydivingavoids the risk entirely, making it the correct method in this context.

"Risk avoidance means eliminating the risk entirely, such as choosing not to participate in a hazardous activity like skydiving."

A waiver of premium rider allows the policy to remain in force without premium payments if the insured becomes totally disabled and meets the terms of the rider. Once activated, the insurance company waives the premium payments, and the policy continues as if payments were being made. The cash value and death benefit remain unaffected, ensuring full policy performance.

Paid-up additions (PUAs) are a dividend option in whole life insurance policies that allow policyholders to use dividends to purchase additional amounts of paid-up life insurance. These additions increase both the policy's cash value and death benefit. Each paid-up addition is a miniature whole life policy that requires no further premiums and participates in future dividends. This compounding effect can significantly enhance the policy's value over time. Therefore, the correct answer is C.

Thereduced paid-upoption allows the policyholder to use the cash value to buy asmaller amount of the same type of insurance, fully paid-up for life, withno more premiums required.

"Under the reduced paid-up insurance option, the policy cash value is used to purchase a smaller amount of permanent insurance that requires no further premium payments."

AnAccelerated Death Benefit (ADB)is a provision in a life insurance policy that allows the policyholder to receive a portion of the death benefit while still alive, under certain qualifying conditions. According to the Ohio Administrative Code Rule 3901-6-06, accelerated death benefits are payable to the policyowner during the lifetime of the insured upon the occurrence of a qualifying event, which includes:

A medical condition that drastically reduces the potential life span of the insured to a period of time specified in the policy, often 24 months or less.

A medical condition that requires extraordinary medical intervention, such as a major organ transplant or continuous artificial life support, without which the insured would die.

A condition that normally results in continuous confinement in an eligible institution, if the insured is expected to remain there for the rest of their life.

The amount received through an ADB reduces the death benefit payable to beneficiaries upon the insured's death.

In Ohio, when a life insurance application is submitted without the initial premium payment (i.e., not prepaid), the coverage does not become effective immediately. Instead, the policy becomes effective on the date the policy is delivered to the applicant and the first premium is paid, provided the applicant's health status remains unchanged. This ensures that the insurer has received both the necessary payment and confirmation of the applicant's insurability before coverage begins.

According to the Ohio Life Insurance Study Guide:

"If the initial premium is not paid with the application, coverage becomes effective upon delivery of the policy and payment of the first premium, assuming the applicant's health has not changed."

TheWaiver of Premiumrider does not increase the death benefit amount. Instead, it waives the policyholder's obligation to pay premiums if they become totally disabled, ensuring the policy remains in force during the period of disability.

In contrast:

Cost of Livingrider adjusts the death benefit to keep pace with inflation, thereby increasing the benefit amount over time.

Accidental Death Riderprovides an additional benefit if the insured dies due to an accident, effectively increasing the total payout.

Guaranteed Insurabilityrider allows the policyholder to purchase additional coverage at specified times without undergoing a medical exam, thus potentially increasing the death benefit.

Aflexible premium deferred annuity (FPDA)allows the annuitant to makevarying premium paymentsover time. The annuity starts paying out at a future date, making it suitable for retirement savings.

"Flexible premium deferred annuities permit payments of varying amounts over time before annuitization, offering flexibility for savers."

The Fair Credit Reporting Act (FCRA) is a federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information. Insurance companies and their agents must comply with the FCRA when obtaining information from third parties about an applicant. This includes obtaining consumer reports for underwriting purposes. The FCRA ensures that consumers' personal information is handled with fairness, accuracy, and privacy. It mandates that consumers be notified when their information is used adversely and provides them the right to dispute inaccuracies.

A hazard is any condition or behavior that increases the likelihood of a loss occurring. Hazards are categorized as physical, moral, or morale. For example, driving under the influence is a hazard because it elevates the chance of a car accident. In contrast, a peril is the actual cause of loss, such as fire or theft.

Insurance rates must be fair and based on actuarial principles. Rates that are excessive, inadequate, or unfairly discriminatory are prohibited. This ensures that premiums are equitable and reflect the risk profile of the insured.

According to the Ohio Revised Code:

"Rates shall not be excessive, inadequate, or unfairly discriminatory."

The Ohio Life and Health Insurance Guaranty Association (OLHIGA) provides protection to policyholders in the event that a member insurer becomes insolvent. According to Ohio Revised Code Section 3956.08, the association may guarantee, assume, reissue, or reinsure the policies of an impaired or insolvent insurer to ensure the payment of contractual obligations. This protection is specifically activated when an insurer is declared insolvent and is unable to fulfill its obligations to policyholders.

If the primary beneficiary of a life insurance policy predeceases the insured and no contingent beneficiary is named, the death benefit becomes payable to the insured's estate. This means the proceeds will be distributed according to the terms of the insured's will or, if there is no will, in accordance with Ohio's intestate succession laws. It's important to regularly update beneficiary designations to ensure that the death benefit is distributed according to the policyowner's wishes.

AStraight Life Annuityprovides the highest monthly payout among annuity options because it offers income payments for the lifetime of the annuitant without any guarantees beyond the annuitant's life. This means that payments cease upon the annuitant's death, and no further benefits are paid to any beneficiaries. The absence of additional guarantees allows the insurer to offer higher periodic payments compared to other options that include survivor benefits or guaranteed payment periods.

A limited payment whole life policy provides permanent life insurance coverage for the insured's entire life, but the premiums are paid only for a specified period (e.g., 10, 20 years, or until age 65). After the premium period ends, the policy remains in force for life with no additional premium payments required.

According to Ohio Administrative Code Rule 3901-1-54, it is considered an unfair claims settlement practice for an insurer to fail to provide a reasonable explanation for the denial of a claim. Specifically, the rule states that no insurer shall deny a claim on the grounds of a specific policy provision, condition, or exclusion unless reference to such provision, condition, or exclusion is included in the denial. This ensures transparency and fairness in the claims process.

Immediate annuities are designed to start income payments shortly after a lump sum is paid and typically do not have a surrender option once the income phase has begun. In contrast, deferred annuities allow for surrender during the accumulation phase, often subject to surrender charges that decrease over time.

According to the Ohio Life Insurance Study Guide:

"Deferred annuities can be surrendered during the accumulation period, often with surrender charges that decrease over time. Immediate annuities, once annuitized, generally do not allow for surrender."

Mortality tablesare statistical charts used by insurers to predict life expectancy and the probability of death at various ages. These tables are based on a large pool ofpeople over time, allowing insurers to estimate risk and set appropriate premiums.

Annuities are financial products primarily used for the liquidation of an estate, providing a steady income stream, and allowing for tax-deferred growth of principal. They are not designed to create an estate; instead, they are tools for managing and distributing existing assets over time. Life insurance policies are typically used for estate creation, whereas annuities focus on the systematic distribution of accumulated funds.

In the event of a misstatement of age, Ohio law requires an equitable adjustment of the benefits or premiums. According to Ohio Revised Code Section 3917.06(E), if the age of the insured has been misstated, the amount payable under the policy shall be adjusted to the amount that the premium would have purchased at the correct age. This means the insurer's liability is limited to the amount of coverage that the paid premiums would have secured for the insured's actual age at the time of policy issuance.

In an executive bonus plan, the employer provides a bonus to the employee, which the employee uses to purchase a life insurance policy. The premiums paid by the employer are considered a form of compensation and are therefore taxable income to the employee. This means the employee must report the premium amounts as income on their tax return. The employer, on the other hand, can typically deduct the bonus as a business expense.

This structure allows the employee to own the policy, name the beneficiaries, and access the policy's cash value, while the employer benefits from a tax deduction.

An irrevocable beneficiary has a vested interest in the life insurance policy. This means that the policyowner cannot change the beneficiary designation, take loans, or surrender the policy without the written consent of the irrevocable beneficiary. This designation provides strong protection for the beneficiary’s interest.

Insurance is a risk management tool that allows individuals or businesses to transfer the financial burden of a potential loss to an insurance company. By paying premiums, the insured shifts the responsibility for financial protection to the insurer, which assumes the risk and provides compensation in the event of a covered loss.

According to Ohio insurance regulations, once an insurance agent submits an application or enters into an agency agreement with an insurer, the insurer must file the agent’s appointment with the Ohio Superintendent of Insurance within 30 days. This appointment legally authorizes the agent to act on behalf of the insurer in the state.

According to Ohio Administrative Code 3901-5-09, insurers are required to notify the superintendent within 30 days after the termination of an agent’s appointment. This ensures that the state maintains accurate records of active and terminated appointments

The "Life Only" annuity payout option, also known as a straight life annuity, provides periodic payments to the annuitant for as long as they live. Upon the annuitant's death, all payments cease, and no further benefits are paid to any beneficiaries, regardless of how soon after annuitization the death occurs. This option typically offers the highest periodic payment amount because it carries the greatest risk to the annuitant, with no provision for return of principal or continuation of payments after death.

Thecommon disaster clauseis used to address situations where the insured and beneficiary die in the same accident. It presumes that theinsured outlived the beneficiary, ensuring that the proceeds go to a contingent beneficiary or the estate of the insured.

"The common disaster clause assumes that the insured survived the beneficiary when both die in the same incident, ensuring proceeds are distributed accordingly."

Juvenile life insurancerefers to policies purchased on the life of a minor. Theparent or guardian is typically the policyowner, and the goal is to provide early financial protection or guarantee future insurability.

"Juvenile insurance is written on the life of a minor, typically with a parent as the policyowner. It can provide early insurance coverage and secure future insurability."

TheAutomatic Premium Loan (APL) provisionis a feature in many whole life insurance policies. If a policyholder fails to pay a premium by the end of the grace period, the insurer automatically takes a loan against the policy's cash value to cover the premium payment. This prevents the policy from lapsing due to non-payment. Interest accrues on the loan, and if not repaid, the loan amount plus interest is deducted from the death benefit.

ASpousal IRAallows a nonworking spouse to contribute to an individual retirement account based on the working spouse's income. This provision enables households with a single income earner to double their retirement savings potential by allowing both spouses to contribute to separate IRA accounts, subject to IRS contribution limits and eligibility requirements. The working spouse must have sufficient earned income to cover both contributions.

In a viatical settlement, a policyholder sells their life insurance policy to a third party for a lump sum that is less than the policy’s death benefit but more than its cash surrender value. The buyer then becomes the policy’s beneficiary and receives the full death benefit upon the insured’s death.

Individual underwritingis not typical in group life insurance. Instead,group policies use simplified underwritingorno individual underwriting, especially for basic coverage. Group plans feature amaster contractandcertificates of insurancefor participants.

"In group life insurance, individual underwriting is usually not required. The insurer issues a master policy to the employer, and employees receive certificates of insurance."

The accumulation phase is the period in an annuity contract during which the annuitant makes payments or contributions to the annuity. During this phase, the funds accumulate on a tax-deferred basis, meaning that taxes on earnings are deferred until distributions begin. This phase continues until the annuitant decides to begin receiving payments, at which point the annuity enters the payout or distribution phase

The premium mode refers to the frequency with which premium payments are made on an insurance policy. Common premium modes include annual, semi-annual, quarterly, and monthly payments. While the mode affects the payment schedule, it does not change the total annual premium amount; however, insurers may apply additional charges for more frequent payment modes due to increased administrative costs.

Under Ohio law, insurance agents are required to report certain events to the Superintendent of Insurance, including disciplinary actions such as suspensions or revocations of licenses and criminal convictions. However, sharing commissions with another properly licensed and appointed agent is a standard business practice and does not require reporting to the superintendent.

According to the Ohio Revised Code Section 3905.14:

"An agent must report to the superintendent any administrative action taken against the agent in another jurisdiction or by another governmental agency in this state within thirty days of the final disposition of the matter."

In agroup annuity, the employer holds the master contract, and individual employees typically do not receive separate contracts. Instead, they receive certificates outlining their benefits under the group plan.

Therefore, the statement that "each employee signs and receives an individual contract" is incorrect.

A children’s term rider provides term coverage for a policyholder’s child up to a specific age (commonly 25). When the child reaches that age, the coverage under the rider automatically terminates. The coverage does not convert or continue unless specifically stated in the policy under a conversion option.

A Market Value Adjustment (MVA) is a feature found in some fixed annuities that affects the surrender value of the contract based on changes in interest rates. If the annuity is surrendered before the end of the guaranteed period, the MVA can either increase or decrease the surrender value, depending on whether interest rates have fallen or risen since the contract was issued. This adjustment aligns the annuity's value with current market conditions, protecting both the insurer and the annuity holder from interest rate fluctuations.

Fixed annuities are insurance contracts that provide a guaranteed interest rate and fixed periodic payments to the annuitant. The funds in a fixed annuity are invested in the insurance company's general account, not in a separate account. Separate accounts are associated with variable annuities, where the investment risk is borne by the policyholder.

According to the Ohio Life Insurance Study Guide:

"In a fixed annuity, the insurance company guarantees both the rate of return and the payout amount. The funds are invested in the insurer's general account."

Thenonforfeiture valueof an annuity prior to annuitization is the amount available to the policyholder if the contract is surrendered. It includes all premiums paid, accumulated interest, minus any withdrawals and applicable surrender charges. This ensures that the policyholder retains some value from the contract, even if they choose to terminate it before receiving annuity payments.