These twenty questions come from eighteen sections of the official Washington outline. Answer each one in your head first, then reveal the correct choice and the reason behind it.
Question 1 of 20
18 USC Sections 1033 and 1034
Diane was convicted of a felony DUI with no element of dishonesty or breach of trust; how does 18 USC Section 1033 treat her ability to work in insurance?
- A. She is permanently barred like any convicted felon
- B. The written consent prohibition does not automatically apply to that conviction
- C. She must still get federal consent for any felony
- D. She may never obtain a waiver of any kind
+Reveal answer
Answer: B. The written consent prohibition does not automatically apply to that conviction
Section 1033's prohibition targets felonies involving dishonesty or breach of trust. A DUI, while a felony, generally does not involve dishonesty or breach of trust, so the automatic 1033 bar does not apply to it. That is why the choices saying she is barred like any felon or must always get federal consent are wrong. State licensing rules could still evaluate the conviction, but the federal 1033 written consent requirement is triggered by dishonesty or breach of trust crimes.
18 USC Section 1033
Question 2 of 20
National Do Not Call List
How long does a phone number generally remain on the National Do Not Call Registry once a consumer registers it?
- A. Until the consumer removes it or the number is disconnected
- B. Exactly 90 days
- C. One calendar year, then it must be renewed
- D. Five years, then it expires
+Reveal answer
Answer: A. Until the consumer removes it or the number is disconnected
Registrations on the National Do Not Call Registry are permanent; the number stays listed until the consumer cancels the registration or the number is disconnected and reassigned. It does not expire after 90 days, one year, or five years. Earlier proposals for expiration were dropped, so no renewal is required.
Federal Laws and Regulations > National Do Not Call List
Question 3 of 20
Commissioner
Before an insurer may use a new life insurance policy form in Washington, what must generally happen?
- A. The form must be filed with and generally approved by the Commissioner
- B. The form must be published in a local newspaper
- C. The form must be approved by the state legislature
- D. The form only needs the insurer's board approval
+Reveal answer
Answer: A. The form must be filed with and generally approved by the Commissioner
Policy forms must be filed with the Commissioner and are subject to the Commissioner's review and approval before use. Newspaper publication is not required. The legislature does not approve individual forms. Internal board approval alone does not meet the state filing requirement.
RCW 48.18 (policy form filing and approval)
Question 4 of 20
Terms and Concepts
According to Washington law, what is an "insurance transaction"?
- A. Only the moment money changes hands for a premium
- B. Any act involving solicitation, negotiation, execution, or servicing of an insurance contract
- C. The internal accounting an insurer performs each year
- D. The renewal of an agent's license
+Reveal answer
Answer: B. Any act involving solicitation, negotiation, execution, or servicing of an insurance contract
An insurance transaction includes solicitation, negotiation, procurement, effectuation, and servicing of insurance contracts. It is broader than just paying a premium, so choice one is wrong. Internal accounting is a company operation, not a transaction defined by statute, so choice three is wrong. License renewal is a licensing matter, not an insurance transaction, so choice four is wrong.
RCW 48.01.060 (definition of transacting insurance)
Question 5 of 20
Guaranty Association
What is the main purpose of the Washington Life and Disability Insurance Guaranty Association?
- A. To protect policyholders when an insurer becomes insolvent and cannot pay claims
- B. To regulate the rates insurers charge for life insurance
- C. To license insurance producers in the state
- D. To invest premium dollars on behalf of insurers
+Reveal answer
Answer: A. To protect policyholders when an insurer becomes insolvent and cannot pay claims
The guaranty association exists to protect residents who hold covered policies if their insurer becomes insolvent, by stepping in to cover claims up to statutory limits. Rate regulation is handled by the Insurance Commissioner, not the association. Licensing producers is also a Commissioner function. The association does not invest premiums for insurers; it is a safety net funded by assessments on member insurers.
Washington Life and Disability Insurance Guaranty Association Act (RCW 48.32A)
Question 6 of 20
Licensing
How does an appointment differ from a license under Washington insurance law?
- A. A license authorizes selling insurance generally, while an appointment authorizes representing a specific insurer
- B. A license is issued by an insurer, while an appointment is issued by the state
- C. A license lasts one month, while an appointment lasts one year
- D. A license covers only life insurance, while an appointment covers all lines
+Reveal answer
Answer: A. A license authorizes selling insurance generally, while an appointment authorizes representing a specific insurer
A license from the commissioner gives a person the general authority to sell insurance, while an appointment from an insurer authorizes that producer to represent that particular company. The state, not an insurer, issues the license, and insurers issue appointments, so the second choice reverses them. License terms are not one month. A license is not limited to life insurance only; the lines are shown on the license itself.
RCW 48.17 (licensing) and RCW 48.17.160 (appointments)
Question 7 of 20
Marketing Practices
What is the practice called when a producer makes false or misleading statements to convince a policyholder to drop an existing policy and buy a new one?
- A. Rebating
- B. Twisting
- C. Coercion
- D. Commingling
+Reveal answer
Answer: B. Twisting
Twisting is using misrepresentation to induce a policyholder to lapse or surrender one policy and take out another. Rebating is giving something of value not stated in the policy to persuade a purchase. Coercion is using force or threats, often in the sale of insurance tied to other transactions. Commingling is mixing client funds with your own, which is a trust issue, not a replacement issue.
RCW 48.30.180 (twisting); concept-based
Question 8 of 20
Producer responsibilities
When a producer collects an initial premium at the time of an application, what is that producer required to do with the money?
- A. Deposit it into the producer's personal checking account
- B. Hold it in a fiduciary capacity and account for it to the insurer
- C. Keep it as an advance on future commissions
- D. Return it to the applicant until the policy is issued
+Reveal answer
Answer: B. Hold it in a fiduciary capacity and account for it to the insurer
Premiums a producer collects belong to the insurer or the client, not the producer. Washington law requires the producer to hold these funds in a fiduciary (trust) capacity and account for them properly. Depositing into a personal account is commingling, which is prohibited. Treating premiums as a commission advance is misappropriation. Returning the money defeats the purpose of collecting the initial premium to begin coverage.
RCW 48.17.480 (fiduciary duty for funds received)
Question 9 of 20
Compensation of licensees
Which of the following is a lawful form of producer compensation under Washington law?
- A. A commission paid by the insurer to a licensed appointed producer
- B. A cash gift to a client to close a sale
- C. A share of premium returned to the applicant
- D. A payment to an unlicensed neighbor who negotiated the policy terms
+Reveal answer
Answer: A. A commission paid by the insurer to a licensed appointed producer
A commission from the insurer to a licensed and appointed producer is the standard lawful form of compensation. A cash gift to a client to close a sale is an illegal rebate. Returning part of the premium to the applicant is also rebating. Paying an unlicensed person who negotiated policy terms violates licensing law.
RCW 48.17.480 and RCW 48.30.140 (lawful compensation)
Question 10 of 20
Marketing methods and practices
A policy illustration used in a life insurance sale in Washington must do which of the following?
- A. Guarantee that nonguaranteed values will actually be paid
- B. Clearly distinguish between guaranteed and nonguaranteed elements
- C. Omit any values that are not guaranteed
- D. Be prepared only by the applicant
+Reveal answer
Answer: B. Clearly distinguish between guaranteed and nonguaranteed elements
Illustrations must clearly separate guaranteed elements from nonguaranteed elements so the consumer is not misled. An illustration cannot guarantee nonguaranteed values, since those depend on future performance. Nonguaranteed values may be shown, they just must be labeled, not omitted. The insurer or producer prepares the illustration, not the applicant.
WAC 284-23 (life insurance illustrations)
A homeowner reviews her policy and notices it only pays if a covered event like windstorm or fire causes damage. These covered events are called what?
- A. Hazards
- B. Perils
- C. Exposures
- D. Losses
+Reveal answer
Answer: B. Perils
Perils are the actual causes of a loss, such as wind, fire, or theft, and policies list the perils they cover. Hazards are conditions that increase the likelihood of a peril occurring. Exposures are the units at risk of loss. A loss is the actual reduction in value that results when a peril strikes, not the cause itself.
General Insurance Concepts > Definitions, perils
Question 12 of 20
Classifications of insurers
Maria buys a life insurance policy from a company that is organized in Canada and sells policies in Washington. How is this insurer classified relative to Washington?
- A. Domestic insurer
- B. Foreign insurer
- C. Alien insurer
- D. Fraternal insurer
+Reveal answer
Answer: C. Alien insurer
An alien insurer is one formed under the laws of a country other than the United States, and Canada is a foreign country, so the company is alien. Domestic means formed in Washington. Foreign means formed in another US state. Fraternal refers to a membership-based benefit society, which does not describe this company.
RCW 48.05.030 (foreign, domestic, and alien insurers)
Question 13 of 20
Elements of a contract
An insurance contract that a 16 year old attempts to purchase on his own may be unenforceable because he fails which element of a valid contract?
- A. Legal purpose
- B. Consideration
- C. Competent parties
- D. Acceptance
+Reveal answer
Answer: C. Competent parties
A minor generally lacks the legal capacity to contract, so he fails the competent parties element. Legal purpose relates to whether the contract's aim is lawful, which buying insurance is. Consideration would still exist if he paid a premium. Acceptance is the insurer's action, not the reason the minor's capacity is questioned.
General Insurance Concepts > Elements of a contract
Question 14 of 20
Authority and powers of producers; the law of agency
When agent Dwayne collects a premium from an applicant, in whose hands is that money considered to be in the eyes of the law?
- A. The applicant's, until the policy is delivered
- B. The agent's personal funds
- C. The insurer's, because the agent represents the company
- D. The guaranty association's
+Reveal answer
Answer: C. The insurer's, because the agent represents the company
Because the producer is the agent of the insurer, money the agent collects on the insurer's behalf is legally treated as received by the insurer. It is not the applicant's once paid, it is never the agent's personal money, and the guaranty association has no role in premium collection.
General Insurance Concepts > Authority and powers of producers; the law of agency
Question 15 of 20
Legal interpretations affecting contracts
Under the legal doctrine of indemnity, what is the purpose of an insurance contract?
- A. To allow the insured to profit from a loss
- B. To restore the insured to the same financial position held before the loss
- C. To pay the insured double the value of the loss
- D. To provide coverage regardless of whether a loss occurred
+Reveal answer
Answer: B. To restore the insured to the same financial position held before the loss
Indemnity means restoring the insured to the same position they were in before the loss, no better and no worse. Profiting from a loss is exactly what indemnity prevents. Paying double is not indemnity and would create a profit motive. Paying without any loss is not how indemnity works because a covered loss must occur.
General Insurance Concepts > Legal interpretations affecting contracts (indemnity)
Question 16 of 20
Insurable interest
Which relationship most clearly gives one person insurable interest in another's life?
- A. A wife insuring her husband
- B. A neighbor insuring the family next door
- C. A fan insuring a celebrity
- D. A stranger insuring a person seen on the news
+Reveal answer
Answer: A. A wife insuring her husband
Close family relationships such as spouses are recognized as having insurable interest because of the emotional and financial ties between them. A neighbor generally has no such stake in the family next door. A fan has no financial or family tie to a celebrity. A stranger has no interest at all, and letting strangers insure others would amount to gambling on lives.
Life Insurance Basics > Insurable interest (concept)
Question 17 of 20
Personal uses of life insurance
Darnell wants to make sure his two young children will have money for living costs and college if he dies early; which personal use of life insurance meets this goal?
- A. Survivor protection
- B. Business continuation
- C. Key person coverage
- D. Buy sell funding
+Reveal answer
Answer: A. Survivor protection
Providing for a family's future needs after the breadwinner dies is survivor protection. Business continuation, key person coverage, and buy sell funding are all business uses of insurance, not personal family protection.
Life Insurance Basics > Personal uses of life insurance (survivor protection, liquidity)
Question 18 of 20
Determining amount of personal life insurance
Using the needs approach, the Johnson family estimates $400,000 in total needs and already has $150,000 in savings and existing life coverage; how much additional life insurance is indicated?
- A. $150,000
- B. $250,000
- C. $400,000
- D. $550,000
+Reveal answer
Answer: B. $250,000
The needs approach subtracts existing resources from total needs: $400,000 minus $150,000 equals $250,000 of additional coverage. $150,000 is the existing resources, not the gap. $400,000 ignores the resources already available. $550,000 wrongly adds the two figures instead of subtracting.
Life Insurance Basics > Determining amount of personal life insurance (needs approach)
Question 19 of 20
18 USC Sections 1033 and 1034
Which type of business does 18 USC Section 1033 apply to?
- A. Only property and casualty insurance
- B. Only life and health insurance
- C. The business of insurance whose activities affect interstate commerce
- D. Only insurance sold across state lines
+Reveal answer
Answer: C. The business of insurance whose activities affect interstate commerce
Section 1033 is a federal law that applies broadly to the business of insurance that affects interstate commerce, which covers essentially all insurance business. It is not limited to one line of insurance, so the first two choices are too narrow. The last choice is wrong because it is not limited to policies actually sold across state lines; it applies to the business generally when it affects interstate commerce.
18 USC Section 1033
Question 20 of 20
National Do Not Call List
Diane bought a life policy from agent Tom six months ago; under the Do Not Call rules, may Tom call her even though her number is on the registry?
- A. Yes, because an established business relationship allows calls for a limited period
- B. No, an existing customer relationship never allows a call to a registered number
- C. Yes, but only if she gives written permission each time
- D. No, unless she calls him first every time
+Reveal answer
Answer: A. Yes, because an established business relationship allows calls for a limited period
An established business relationship (EBR) is an exception that lets a seller call an existing customer for a period of time even if the number is registered. So Diane's recent purchase permits Tom to call. It is not true that a customer relationship never allows calls. Written permission each time is not required under an EBR. Requiring her to call first misstates how the EBR exception works.
Federal Laws and Regulations > National Do Not Call List