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Virginia Insurance Virginia-Life-Annuities-and-Health-Insurance Exam
Virginia Life, Annuities, and Health Insuranceination Series 1101 (Page 12 )

Updated On: 4-Feb-2026
Page 12 of 89
PDF with 440 Questions

All of the following statements about the interest ONLY settlement option in life insurance policies are true EXCEPT:

  1. The proceeds of the policy are left with the insurance company
  2. The option can be selected only by the beneficiary
  3. The interest on the principal amount is paid periodically to the beneficiary
  4. At some later date, the principal may be paid under one of the other options

Answer(s): B

Explanation:

Virginia Code § 38.2-3115 governs life insurance settlement options. The interest-only option keeps proceeds with the insurer (option A, true), paying interest periodically to the beneficiary (option C, true, e.g., quarterly), and allows the principal to be withdrawn or redirected later (option D, true, e.g., switching to fixed period). Option B is false; the policyowner can select this option during the policy term, not just the beneficiary post-death--though beneficiaries may elect it if not pre- specified. The study guide likely explains this flexibility with examples--e.g., a $100,000 policy earning 3% interest paid monthly--noting both parties' roles, making B the exception since it restricts choice to the beneficiary alone.



In a deferred annuity, which contract feature begins at a high level, often 5%-10%, and then diminishes until it disappears after a specified number of years?

  1. The surrender charge
  2. The front end sales load
  3. The guaranteed interest rate
  4. The expense charge

Answer(s): A

Explanation:

Virginia Code § 38.2-3100 et seq. governs deferred annuities, where a surrender charge (option A) is a penalty for early withdrawal, starting high (e.g., 7-10%) and declining over a surrender period (e.g., 7-10 years) until it reaches zero. Option B (front-end sales load) is a one-time fee deducted upfront, not diminishing over time. Option C (guaranteed interest rate) is a fixed return (e.g., 2%), stable or adjustable, not disappearing. Option D (expense charge) covers ongoing costs (e.g., mortality and expense fees), typically level, not phased out. The study guide likely illustrates this with a table--e.g.,

10% year 1, 9% year 2, 0% year 10--emphasizing surrender charges as a liquidity deterrent, making A the matching feature.



The injury or damage sustained by the insured is called:

  1. A claim
  2. A peril
  3. A loss
  4. An accident

Answer(s): C

Explanation:

Virginia Code § 38.2-100 et seq. defines insurance terms. A loss (option C) is the actual injury or damage sustained (e.g., a broken leg or burned house), the event insurance covers. Option A (claim) is the request for payment post-loss, not the loss itself. Option B (peril) is the cause (e.g., fire, collision), not the result. Option D (accident) is a type of peril or event, not the damage. The study guide likely clarifies this chain--e.g., a car crash (peril/accident) causes $5,000 damage (loss), prompting a claim--using examples to distinguish loss as the outcome, making C the precise term.



Which is true about disability buy-sell insurance policies?

  1. The policyowner may not be the beneficiary
  2. The insurer pays the benefits to the disabled individual
  3. The policy proceeds are normally received income tax-free
  4. The premiums are tax-deductible

Answer(s): C

Explanation:

Disability buy-sell insurance funds a business partner's buyout if one becomes disabled, per Virginia Code § 38.2-3100 et seq. Option C is true; proceeds are typically tax-free under IRC § 104(a)(3) as insurance benefits, not income, if premiums aren't deducted. Option A is false; the policyowner (e.g., a partner or business) is often the beneficiary to fund the buyout. Option B is false; benefits go to the business or partner, not the disabled individual, who may receive separate disability income coverage. Option D is false; premiums aren't tax-deductible (IRC § 265), preserving tax-free proceeds. The study guide likely explains this with scenarios--e.g., $500,000 paid tax-free to buy out a disabled partner--highlighting tax treatment, making C the true statement.



A function performed by both the life insurance agent and the home office underwriter is:

  1. Finding new clients
  2. Evaluating risks
  3. Collecting premiums
  4. Reviewing a client's coverage periodically

Answer(s): B

Explanation:

Virginia Code § 38.2-1800 et seq. outlines roles in life insurance. Agents and underwriters both evaluate risks (option B): agents assess initial client risk (e.g., health questions) for application accuracy, while underwriters analyze it for approval (e.g., medical records). Option A (finding clients) is agent-only; underwriters don't prospect. Option C (collecting premiums) is primarily the agent's task, not underwriting's. Option D (reviewing coverage) is a post-sale service, not a core underwriting function. The study guide likely contrasts roles but notes this shared risk focus--e.g., an agent flags smoking, underwriter rates it--making B the common duty.



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