Chapter 4: Taxes, Retirement, and Other Insurance concepts

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Profit sharing plan

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilitze?

Viatical settlement

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is correct

100% participation of members is required in noncontributory plans

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age

Life insurance death preceeds are

Generally not taxed as income

Which of the following is not true regarding policy loans?

Money borrowed from the cash value is taxable

Which of the following is correct concerning the taxation of premium in a key person life insurance policy?

Premiums are not tax deductible as a business expense

The premiums paid by the employer in a business life insurance policy are

Tax deductible by the employer

What is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee

A key person insurance policy can pay for which of the following

costs of training a replacement

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

the benefit is received tax free

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

the policy is owned by the company

A producer is helping a married couple determine the financial needs of the children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)

Executive bonus

In a life settlement contract, whom does the life settlement broker represent?

The owner

All of the following are general requirements of a qualified plan EXCEPT

The plan must provide an offset for social security benefits

Which of the following best defines the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy

Which of the following in NOT true of life settlements?

The seller must be terminally ill

Which of the following is the best reason to purchase life insurance rather than annuities

To create an estate

Which of the following is NOT an example of a business use of life insurance

Workers compensation

When an employee terminates coverage under a group insurance policy, coverage continues in force

for 31 days

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a

Buy-sell agreement

Which of the following is an eligibility requirement for all social security Disability income benefits?

Have attained fully insured status

Which of the following is an example of liquidity in a life insurance contract

The cash value available to the policyowner

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors

life expactancy