Exam Simulator Two
First-time homebuyers are able to withdraw up to how much for their qualified IRAs without incurring the 10% early withdrawal penalty?
$10,000
An agent who willfully violates the insurance code may, after a hearing, pay UP TO _________ per violation as a penalty
$5,000
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will
remain a constant dollar amount for the duration of the annuity period
A transaction in which a new annuity is purchased and an old one is terminated is called
replacement
The conversion option for group term insurance may be exercised by an employee
within 31 days of terminated employment
Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate
For federal income tax reasons
What is considered a valid reason for small corporations to insure the lives of its major stockholders?
Fund a buy-sell agreement
In Virginia, which of the following records are not required to be maintained by an agent?
Premium quotes for policies not accepted
What is considered interstate travel under the Federal Fraud and False Statements Act?
Puerto Rico
A life insurance policyowner sells her policy to a third-party in a viatical settlement. Under this transaction, the policyowner
Received an amount less than the policy's death benefit
According to the IRS, a company may NOT do which of the following in regards to funds in a qualified retirement plan?
Repossess the funds for business purposes
Which of the following would prevent a person from obtaining a Virginia resident agent license?
Residing in a state outside of Virginia
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarantee period?
Subject to market value adjustment
How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?
Taxed as ordinary income in the year received
Which of the following statements is true if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
How is a collateral assignment used in a life insurance contract?
Transfers specific ownership rights to a creditor
A policy owner is permitted to take out a policy loan on a whole life policy at what point?
When the policy has a cash value
Voluntarily terminating an insurance policy is also known as
cancellation
Interest is credited to a fixed annuity no lower than the
contract guaranteed rate
The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)
contract of adhesion
According to the needs approach, an emergency reserve fund's primary purpose is to
cover the cost of unexpected expenses
The main purpose of an annuity is to
create a stream of income
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up?
decreases
If a life insurance applicant is shown future premiums are to be paid out of non-guaranteed values, the illustration used in the sales presentation must
disclose that premium payments may need to be resumed depending on actual results
When using the needs approach for life insurance planning, lump sums may be created for all of the following reasons EXCEPT
employee benefits
When there is a named beneficiary on a life insurance policy, the death benefits
are paid directly to the beneficiary without interference from the insured's creditors
The Virginia Life, Accident, and Sickness Insurance Guaranty Association protects an insured in the event of
insurer's insolvency
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
Carlos' agent license has been suspended due to non-renewal. He may apply for reinstatement within the _____ month period following the day when the license should have been renewed
12
The maximum prison sentence given under federal law for unfair and deceptive insurance practices is
15 years
A _____ is a person appointed by and ensure that represents the company and present policies on its behalf
Agent
When a large sum of money is used to structure monthly payments, which product is typically used?
An immediate annuity
Which of the following is not an intended use of an annuity?
Create new funds upon the death of a wage-earner
Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners?
Cross-purchase agreement
What kind of life policy typically offers mortgage protection?
Decreasing term
Which of these is not an unfair claims settlement practice?
Denying unsubstantiated claims on a timely basis
Which of the following is considered an unfair claims settlement practice?
Failure to investigate or pay legitimate claims
Which tax cost is normally associated with death?
Federal estate tax
An employer that offers a qualified retirement plan to its employees is eligible to
make tax-deductible contributions to the plan
An agent whose actions exceed the authority granted by contract is
not backed by the insurer
Where is the difference between a standard risk and a substandard risk reflected?
premium charges
Which of these factors does not affect life insurance premium rates?
producer certification
In Virginia, any person acting as an agent for an unlicensed insurer is
Permissible only if acting as a licensed surplus lines broker
What is the primary reason for the state corporation commission examination of an agency insurance records?
To determine compliance with state insurance laws and regulations
Which statement regarding the waiver of premium rider is accurate?
Cash payment is not directly provided to the policyowner
An agent does not need to notify the bureau of insurance of
Change in financial status
An agent must maintain customer records for ___ year(s) following the completion date of the insurance transaction
5
How long do most states allow an insurance company to delay the payment of a cash surrender under the delayed payment provision?
6 months
An insurance company or agent must respond within ___ days to an insured's request to access personal information collected on him/her by the insurer
30
In Virginia, a grace period of ___ days is required for a life insurance policy paid on an annual basis
31
Which statement is incorrect concerning a tax-sheltered annuity (TSA)?
Annual investment gains are included in participant's gross income
How may an insurance company classify an accidental death benefit on a life policy?
As an optional policy rider
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
Investment risk is assumed by the purchaser
Which of these pays an income to two or more annuitants until the death of the last annuitant?
Joint and survivor annuity
Which of these is not a common life insurance nonforfeiture option?
Life income annuity
James the agent has sold a life insurance contract to a client without using an illustration, even though his insurer offers one. For this particular transaction, the applicant
Must sign a statement that no illustration was provided
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
What would be considered an advantage of purchasing term life insurance?
The initial premium is lower compared to an equivalent amount of whole life coverage
Which statement regarding a fixed period settlement option is correct?
The installment payment amount is determined by the total number of installments
Which of the following statements about the installments for a fixed period settlement option in life insurance policies is not true?
The periodic payment amount is determined by the beneficiary's age
Upon meeting company requirements, a lapsed life insurance policy may be reinstated for up to ___ years
Three
According to federal fraud and false statements regulation, what is required for a prohibited person to transact insurance business in the state?
Written consent from the state insurance regulatory agency
The absolute assignment of a life insurance policy results in
all incidents of ownership transferred to the assignee
The surrender charge on many deferred annuity contracts are waived when the
annuitant dies or becomes disabled
