CH.3

The Social Security blackout period begins when the youngest child reaches the age of:

16

A life insurance policy is considered replaced if:

All of the above

Which of the following are the actuarial tables used by insurers for underwriting?

C.S.O. tables

What type of group plan requires 75% participation?

Contributory

Another term for insurers' expense is:

Loading

What are the two terms used to describe whether or not special federal tax benefits apply to retirement plans?

Qualified; nonqualified

All of the following are true regarding the insurable interest creditors have in the lives of their debtors, EXCEPT:

The face amount of life insurance on debtors stays constant throughout the policy term.

Angela took out a $2,000 policy loan from her whole life insurance policy. The policy face amount is $200,000. If Angela does not repay the loan, how will the death benefit be affected?

the death benefit will be decreased by $2,000 plus interest.

Viatical brokers represent _______; viatical producers represent _________.

viators; viatical settlement providers

Mildred is age 58. She withdraws a sum of money from her qualified plan. What is the penalty?

10% penalty tax

Maggie incurred a10% penalty to distributions from her qualified plan because they were made before she turned:

59 1/2

If Becky wants to take a distribution from her qualified retirement plan, she should know that distributions can be made:

At any time.

All of the following are characteristics of qualified retirement plans, EXCEPT:

Contributions are not tax-deductible for the employee.

Premiums are invested to earn interest. __________ interest rates allow insurers to charge ________ premiums.

Higher; lower

In which of the following does an applicant for a life insurance policy not have an insurable interest?

His cousin

The ___________ approach calculates the amount of money a person is expected to earn over their lifetime to determine the face amount of life insurance needed, thereby placing a dollar value on the life of an individual.

Human life value

The nonguaranteed elements of an insurance policy are:

Illustrations

What is the term used to describe an insurer that cannot pay its claim obligations?

Insolvent

All of the following are considered minimum information that must be on a life insurance illustration, EXCEPT:

Insured's marital status

Judas and John are identical twins. Judas and John go to the same insurance agent and end up buying the exact same policy. The only difference between their policies is: John pays his premiums monthly and Judas pays his premiums annually. Whose policy has higher premiums?

John

Saul wants to sell variable life insurance products. Which license(s) must he hold?

Life and variable products and securities licenses

Which of the following is not used to calculate the premium for life insurance contracts?

Morbidity

Which of the following is true regarding level premiums?

Policyholders are paying more premium than is needed in the early years of policy

Select one:

Surrender cost index

When must insurable interest be shown for a life insurance policy?

Upon policy application

Tim's Toy Shop has gone bankrupt and needs to terminate all employees. Tim informs all employees of their right of conversion under the employer-sponsored group life plan. How many days are Tim's employees allotted to convert their group life coverage to individual coverage?

31 days

A surviving spouse's blackout period ends when she reaches the age of:

60

Special tax advantages of qualified plans include all of the following, EXCEPT:

Distributions are tax-deferred.

Which of the following is not a characteristic of qualified plans?

Employee contributions are not tax-deductible.

The time period during which children are young and financially dependent upon their parents is termed the:

Family dependency period

Level premium life insurance policies usually have ______ premiums in order to account for the greater risk of death with advancing age.

Higher

Which document contains information about the nonguaranteed elements of a life insurance policy?

Illustrations

Which of the following is not included in a policy summary for life insurance?

Illustrations

Bob's Motorcycle Company purchases a life insurance policy on Jacob, the nation's leading sales representative. Jacob sells more motorcycles than all of the other sales representatives combined. Which of the following plans was purchased?

Key person insurance

Which of the following does not constitute policy replacement?

Life insurance coverage in which a loan is not repaid to the insurer

Which of the following would not be used to determine the premium rate for a life insurance policy?

Morbidity

All of the following statements are true regarding the premium payment mode, EXCEPT:

More frequent premium payments means lower premiums.

Noncontributory plans:

Must have 100% participation

Contributory plans:

Must have 75% participation

The ____________ approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities.

Needs

Select one:

Net single premium includes mortality and interest.

What type of group plan requires 100% participation?

Noncontributory

Martin pays his policy premiums on a monthly basis. Which of the following terms best describes the frequency that Martin pays his premiums

Premium payment mode

Insurers' expenses include all of the following costs, EXCEPT:

Premiums

Which factor is the most crucial for underwriting life insurance?

Proposed insured's age

Serena dies 15 days after her group life insurance coverage is terminated. She did not apply for individual coverage. Which of the following is true?

Serena's beneficiary will receive the full death benefit.

All of the following are drawbacks of buying a viatical settlement, EXCEPT:

The insured's life insurance protection ends.

All of the following are true regarding purchase of personal life insurance for charity, EXCEPT:

The person purchasing life insurance for charity must have insurable interest in the lives of the charity's members.

All of the following are characteristics of qualified retirement plans, EXCEPT:

There are two types of qualified plans.

The third party that purchases a life insurance policy death benefit from a terminally ill insured is termed:

Viatical settlement provider

What is the term attributed to the third party that buys the death benefit from a life insurance policy?

Viatical settlement provider

All of the following are true regarding viatical settlements, EXCEPT:

Viatical settlements are a type of life insurance contract.

Conversion from a group policy to an individual policy must be made within a maximum of how many days of termination from the group coverage?

60

What happens if Becky takes her distributions from her qualified plan prior to age 59 1/2?

A 10% penalty tax is assessed.

Insurance agent Maria is assisting Joshua with his life insurance needs. To determine the proper amount of life insurance for Joshua, Maria uses Joshua's age, net annual salary, his expenses, the rate of depreciation, and the remaining number of working years before Joshua retires. What method did Maria use?

Human life value approach

Mary's Cosmetics purchases a life insurance policy on Samantha, the leading makeup salesperson in the nation. Which business continuation plan did Mary's Cosmetics buy?

Key person insurance

Net single premium is:

Mortality - Interest

Which of the following best describes the tool underwriters use to determine the rate at which a group of people die?

Mortality table

Life insurance policy illustrations must contain all of the following, EXCEPT:

Only the guaranteed policy elements

A nonqualified plan:

Permits discrimination in favor of certain employees.

All of the following statements regarding key person insurance are true, EXCEPT:

The key employee is the policyowner and pays the premiums; the company is the beneficiary.

In life insurance the risk of death increases with age, so premiums must be ______ in ______ years to account for this risk.

higher; later

Insurance agent Jessica evaluates Ben's life insurance needs. In calculating the amount of life insurance needed, Jessica uses the cost for funeral and burial, mortgage payments, cost of education for Ben's children, and the amount of income Ben's dependents would need to maintain their standard of living. Which method did Jessica use?

Needs approach

For replacement transactions, an insurance producer's duties include all of the following, EXCEPT:

Notify existing insurers of policies to be replaced

All of the following are the insurance producer's duties with respect to life insurance policy replacement, EXCEPT:

Notify insurers of policies to be replaced, and if requested, provide insurers with the policy comparison statement

A life insurance policy summary includes all of the following, EXCEPT:

Policy illustrations

What is business life insurance used for?

All of the above

Select one:

Converted coverage may be term or whole life, depending on the needs of the insured.

Which of the following is false regarding life insurance policy illustrations?

Illustrations are part of the insurance contract.

All of the following are true regarding claims for life insurance policies, EXCEPT:

In order for death benefits to be paid, the insurer must receive notice of the insured's death, but does not need the death certificate.

Jacob has been insured under his employer-sponsored group life insurance plan for seven years. He becomes totally disabled upon termination of his group coverage. Which of the following is true?

Jacob must be permitted to continue group coverage for six months.

Insurance companies need to set aside a certain amount of funds called reserves. Reserves are treated as a(n):

Liability

Insurance agent David analyzed Carmen's life insurance needs. He calculated the amount of coverage she will need based on the expenses and basic needs of her family in the event of her untimely death. These include the cost of funeral and burial, mortgage payments, education for the children, and income to support the family's standard of living. Which of the following methods is David using?

Needs approach

Generally, premiums paid on business life insurance policies are:

Not tax-deductible

Generally, premiums paid on individual life insurance policies are:

Not tax-deductible

Employer-paid premiums used to fund group life insurance for the benefit of employees are:

Tax-deductible as a business expense

Ben applies for a life insurance policy on himself. How much insurable interest does Ben have in his own life?

Unlimited