Life and Health Insurance: Chapter 4

Traditional IRAs and Roth IRAs are for..

Individuals with earned income.

In Group Insurance

The master contract is for the employer, and certificates of insurance are for individual insureds.

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

Premiums are not tax deductible as a business expense.

Which of the following statements about Grouplife is correct?

The cost of coverage is based on the ratio of men and women in the group.

All of the following are true of key person insurance EXCEPT

The plan is funded by permanent insurance only.

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

The plan must provide and offset of social security benefits.

Which of the following is the best reason to purchase life insurance rather than an annuity?

To create an estate.

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

The policyowner of the life insurance policy.

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement.

Lump-sum cash payments of life policy proceeds are...

tax free for the beneficiary.

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

Life Insurance death proceeds are

Generally not taxed as income.

In a life settlement...

the owner sells an existing life policy to a third party

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

Costs of training a replacement.

Qualified plans have...

Tax Advantages.

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.

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.

Group Insurance is written as..

annually renewable term insurance

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.

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

Tax deductible by the employer.

Contributions with traditional IRAs are with

Pre tax-dollars(tax deductible)

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

$10,000 no tax consequence.

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

Buy-sell agreement

For a retirement plan to be qualified, it must be designed for whose benefit?

Employee

Once a policy becomes an MEC

It will remain an MEC

Which of the following best describes the tax advantage of a qualified retirement plan?

The earnings in a qualified plan accumulate tax deferred.

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

From trustee to trustee

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss.

What is the purpose of key person insurance?

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

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

They are tax deferred until withdrawn.

Which of the following is INCORRECT concerning a noncontributory group plan?

The employees receive individual policies.

In which of the following instances would the premium be tax deductible?

Premiums paid by and employer on a $30,000 group term life insurance plan for employees.

Taxes must be paid...

Either upon contribution or upon distribution, NOT both * if taxed on one end, will not be taxed on the other.

How are contributions to a tax-sheltered annuity treated with regards to taxation?

They are not included as income for the employee, but are taxable upon distribution.

Which of the following is NOT true of life settlements?

The seller must be terminally ill.

Which of the following is an IRS qualified retirement program for the self-employed? Keogh plan

HR-10 (Keogh plan)

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income.

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?

It is only taxable if the cash value exceeds the amount paid for premiums.

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

The owner

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain individual policy?

She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.

All of the following would be different between qualified and nonqualified retirement plans EXCEPT

Taxation on accumulation

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?

The employer is the owner and beneficiary.

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years.

Contributions to a Roth IRA are with

after-tax dollars, not tax deductible

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium.

What is an MEC?

An overfunded life insurance policy=failed the 7 pay test.

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

Survivor protection.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third-party ownership

When converting from group life to individual life insurance

evidence of insurability is not required.

Which of the following is an eligibility requirement for all Social Security Disability Income benefits?

have attained fully insured status.