Chapter 6
All of the following are examples of third-party ownership, except: A An entity purchase plan B A key employee plan C An employee voluntary life insurance plan D A cross purchase plan
An employee voluntary life insurance plan
Group Life Insurance is usually written as:
Annual Renewable Term Group Insurance is usually written as annual renewable term so that, based on a number of factors, the insurer may change the rate or the employer may change the plan.
The Social Security System is funded through:
Federal Insurance Contribution Act (FICA) taxes The Social Security System Funding is provided by both employee and employer through the Federal Insurance Contributions Act (FICA) tax. The employer withholds the employee's tax and pays it along with the employer's portion. Self-employed individuals pay an amount equal to the total of an employer and employee payment.
When an underwriter evaluates the risks presented with a particular group life application, which of the following is considered the most important?
Group size, turnover, average age and purpose of the group
Barry has just been hired by OPQ Corporation and finds that he cannot enroll for coverage under OPQ's group health insurance plan for 30 days. This 30-day period is known as a:
Probationary Period
Social Security Benefits provided are:
Retirement, Death, and Survivor
The 31 days in which the employee may change his/her group policy to an individual policy upon termination and without evidence of insurability, is known as:
The Conversion Period
What is the most important thing a buy-sell agreement establishes in the agreement?
The price of the business The buy-sell agreement establishes a price for the business so a proper amount of life insurance can be acquired to fund the acquisition.
The Social Security Death Benefit is payable to the ____________.
The surviving spouse
With a Noncontributory Group Life Plan, what percentage of the employer's employees must participate?
100% A Noncontributory Group Life Plan is one in which the participant does not pay premiums. State law requires that 100% of eligible employees are covered. The insurer can be certain that all employees will enroll and it will not be subject to adverse selection.
All of the following are true about a buy/sell agreement, except: A It provides the funds necessary to carry out the terms of the agreement B It can only be funded with term life insurance C It contractually establishes a price for the business interest D It contractually establishes the intent to buy and sell a business interest
It can only be funded with term life insurance
Buy-sell agreement life insurance premiums are:
Not deductible and proceeds are income tax free
L is no longer eligible for the employer's $50,000 group life insurance plan. L dies 28 days later without sending in the required conversion paperwork. What will their beneficiaries receive?
$50,000, less any premiums due The conversion period is also a grace period. In the event a terminated or ineligible employee dies during the conversion period, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit.
Generally, children receive Social Security Survivor Benefits until age ________.
18
A grandparent purchases a life insurance policy on a granddaughter this is an example of _________.
Third-Party Ownership When someone other than the insured is the policyowner, then this is referred to as third-party ownership.