Comprehensive Pre-exam (Part II)

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E has a $10,000 traditional whole life policy with a $4,000 cash value. Premiums paid to date are $3,500. If the policy lapses with a $4,000 loan outstanding, what amount will be taxable as income to E?

$500

Premiums are base on what 3 values?

1) Expected Mortality 2) Interest 3) Expenses

Nonforfeiture Options

1) Reduced Paid-Up 2) Extended Term 3) Cash Surrender

Which of the following life insurance policies does not develop a cash value?

5 year term ==> (Term insurance is temporary, therefore it does not develop a cash value)

Which of the following is NOT correct concerning licensing and authority for viatical settlement licensees?

A business entity may not be licensed as a viatical settlement provider

Option that will keep a loan from lapsing?

Automatic Premium Loan

All of the following are Nonforfeiture Options, EXCEPT:

Automatic Premium Loan Option

The Nonforfeiture Option that , IF exercised, terminates all coverage is:

Cash Surrender

Any withdrawal in excess of the Cost-Basis will be taxed as ordinary income:

Cost Recovery Rule

All of the following are Dividend Option, EXCEPT:

Extended Term ==> (Extended Term is a Nonforfeiture Option, not a dividend option)

Statement that DO NOT affect the acceptance or rating of the risk.

Immaterial

An __________ report is a general report of the applicant's finances, character, morals, work, hobbies and other habits.

Inspection

Interest earned on premiums paid to an insurer helps to _________ the premiums charged.

Lower

Primarily used to collect adverse medical information about an applicant's health and act as an information exchange.

MIB (Medical Information Bureau) Report

Statements that impact the acceptance of an insurable risk are:

Material

A FALSE statement contained in the application is considered a:

Misrepresentation (A Material Misrepresentation may void the policy)

All of the following are classes of insurance requiring a producer's license, EXCEPT:

Mutual Farm

This Option may go into effect AFTER a policy lapses:

Nonforfeiture Option

__________ in a policy allow the owner to name the beneficiary, choose a dividend option or settlement option, or borrow against the contract.

Ownership Provision

All of the following are Settlement Options, Except:

Reduced Paid-Up ==> (Reduced Paid-Up is a Nonforfeiture Option, not a Settlement Option)

Which is TRUE regarding the taxation of the cash value in a Universal Life Policy prior to withdrawal?

Tax Deferred

Which of the following statements about policy roles is true?

The insured and the policy owner are usually the same, but not necessarily.

All of the following are TRUE regarding a Waiver of Premium Rider, EXCEPT:

The insured must repay the unpaid premiums

If the cash value of a Permanent Life policy equals the face amount, what is that referred to?

The policy's endowment

Which statement regarding Social Security benefits is FALSE?

Widows and Widowers CANNOT receive survivor's benefits before age 62

An applicant claims they have no hazardous hobbies, but the agent sees a plaque proclaiming the applicant as president of a local skydiving club. The agent would need to include this information on the:

Agent's Report

Cash withdrawals from a life insurance policy are taxed based on_______?

FIFO (First In First Out)

If the policy owner specified the time over which all settlement option installments are to be paid, he/she has chosen which Settlement Option?

Fixed Period

Which Settlement Option pays for a specific period, regardless of who may receive the payments?

Fixed Period Option

A Single Premium Immediate Annuity (SPIA) begins paying out its benefit:

No later than within 1 year

For an individually purchased life insurance policy, the premiums are considered a ___________________?

Nondeductible Personal Expense

K needs funds and needs to maintain the life insurance she has at the same time. Which of the following should K do with her traditional whole life policy?

Take out a loan

A Universal Life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal?

The death benefit or cash accumulation will be reduced by the partial withdrawal.

Statements made by the applicant, on the application, that are GUARANTEED to be TRUE:

Warranties

Paul is the insured and policy owner. Paul named Danny and Kayla as co-primary beneficiaries of Paul's $100,000 policy. Danny is to receive 70% and Kayla 30%, therefore Danny gets _______ and Kayla gets ______ when Paul dies.

$70,000/$30,000

Dividend Options

1) Cash 2) Premium Reduction 3) Accumulate at Interest 4) Paid-Up Additions 5) 1 Year Term 6) Paid-Up Option

The widow or widower's Social Security Blackout period lasts until a surviving, non-remarried spouse reaches age ______?

60

All of the following are true in general about riders, EXCEPT:

All riders are provided for as long as the policy is in effect

Which of the following is a TRUE characteristic of a Variable Universal Life Policy?

As long as there is sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned premium.

An insurer must provide a Policy Summary:

Before or at the time of policy delivery

The Primary benefit of Universal Life is the potential of a ____________ than the fixed rate in Whole Life policies?

Higher interest crediting rating

Statement made on the application by the applicant that are believed to be true to the best of the applicant's knowledge are called:

Representation

Which of the following is not a factor in premium determination?

Reserves

How is a Variable Universal Life (VUL)insurance policy different from a Universal Life (UL) insurance policy?

The ability to invest the cash values in various separate accounts.

Social Security Retirement Benefits are available as early as age ____ but are less than if paid at the full retirement age.

62

Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?

Automatic Premium Loan (Can be Cancelled at any time)


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