Virginia-Life-Annuities-and-Health-Insurance Exam Dumps - Insurance Licensing Virginia Insurance License Questions and Answers

Whole life contracts guarantee cash values, nonforfeiture options, loan values, and settlement values. Dividends are not guaranteed because they depend on company performance.

Exact Extract (Virginia Life Insurance Study Guide): “Whole life policies provide guaranteed cash values, policy loans, and settlement options. Dividends, if declared, are not guaranteed.”

References (Virginia Documents / Study Guide):

— Virginia Life Insurance Examination Outline, Policy Provisions and Guarantees

A class designation of beneficiary is used when the policyowner wishes to name beneficiaries as a group rather than listing each individual by name. This method is especially useful when the number or identity of beneficiaries may change over time. Naming “the insured’s children” allows all individuals who meet that description at the time of the insured’s death to share in the proceeds, including children born after the policy is issued. This avoids the need to update beneficiary designations whenever family circumstances change. Donating proceeds to a charity requires naming a specific organization, not a class. Establishing a trust requires a trust to be named as beneficiary, which is not a class designation. Naming a specific person to act on behalf of others is also not a class designation because the beneficiary must be clearly defined. Therefore, naming children as a group without listing them individually is the proper use of a class designation.

An immediate annuity is commonly used to structure the payment of liability insurance settlements, lottery winnings, and other large sums. This type of annuity allows the beneficiary to receive a series of periodic payments starting immediately after the lump sum is invested. Immediate annuities are often used to provide a steady stream of income for individuals who receive large sums of money but want to ensure that the funds last over time.

Term life insurance provides coverage for a specified period of time and is designed to offer pure death benefit protection without a savings or investment component. One of its defining characteristics is that it does not accumulate cash value. Term policies offer temporary protection and may have level or decreasing face amounts, depending on the policy design. They are also known for having a low initial cost compared to permanent life insurance, making them attractive for short-term needs such as income replacement or debt coverage. Because term life insurance does not build cash value, there is no opportunity for increasing cash values over time. Therefore, increasing cash values is not a characteristic of term life insurance and is the correct exception.

Universal life insurance is a flexible type of permanent life insurance. The policyowner may be able to increase the death benefit, but this is typically subject to proof of insurability (such as a medical exam). Universal life allows adjustments to premiums and death benefits within policy limits. The interest credited is guaranteed at a minimum rate set by the insurer, not tied to the CPI. Coverage does not automatically terminate at retirement.

Detailed Answer in Step-by-Step Solution:

A group health insurance contract is a legal agreement between the employer (policyholder) and the insurance company (C), with employees as covered participants, not direct parties to the contract.

Option A (employer and employees) is the employment relationship, not the insurance contract. Option B (employee and insurer) applies to individual policies. Option D (all three) overcomplicates the contractual relationship.

The Virginia study guide states that group insurance contracts are issued to the employer or group sponsor, who contracts with the insurer, while employees receive certificates of coverage. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Group Insurance."

A profit-sharing plan is an employer-sponsored qualified retirement plan in which the employer makes discretionary contributions based on company profits. Under Virginia exam standards and federal retirement plan rules covered in licensing materials, only the employer contributes to a traditional profit-sharing plan. Employees do not make direct salary deferral contributions as they would in a 401(k) plan. This makes option A correct.

The employer is not required to make a contribution every year, nor is the employer required to contribute a fixed amount. Contributions can vary year to year depending on business performance, which makes option D incorrect. Employers are allowed to offer other retirement plans alongside a profit-sharing plan, so option B is incorrect. Participation rules are typically defined by plan eligibility requirements rather than employee opt-out provisions, making option C inaccurate. Profit-sharing plans are attractive to employers because of flexibility in contributions and favorable tax treatment, while employees benefit from employer-funded retirement savings.

Under Virginia group life insurance provisions, when an employer is the policyholder, the term “employee” includes individuals who work for the employer and may also include individual proprietors if they actively work in the business. This allows sole proprietors and working owners to be covered under group insurance arrangements. Credit unions, labor unions, and trade associations are not employees; they are organizational entities that may serve as policyholders under separate types of group insurance contracts. The question specifically asks which option is included within the definition of employee when the employer is the policyholder. An individual proprietor who performs services for the business qualifies, making that option correct.

Whole life insurance provides permanent coverage, builds guaranteed cash value, and allows for policy loans. However, it has a higher initial premium cost compared to term life insurance. Therefore, the statement that whole life has lower initial costs is incorrect.

Exact Extract (Virginia Life Insurance Study Guide): “Whole life insurance provides long-term protection, guaranteed cash values, and policy loans. Premiums are higher than term insurance for equivalent coverage.”

References (Virginia Documents / Study Guide):

— Virginia Life & Annuities Insurance Examination Outline, Whole Life Characteristics

A captive agent represents only one insurance company under a contractual agreement. The agent sells only that insurer’s products and acts as its exclusive representative.

Independent agents represent multiple insurers, brokers represent clients rather than insurers, and “free agent” is not a recognized licensing category. Virginia licensing materials clearly distinguish captive agents from other distribution roles, making option A correct.