Life insurance
Class H felonies
-Embezzling money belonging to policy holders -Obtaining money from any person under false pretenses -Knowingly presenting false claims statements
What is the maximum face amount on an industrial life policy?
1,000
To sell variable life insurance policies, an agent must receive
A life insurance license, A FINRA registration, and a Securities license
Who is considered a field underwriter?
An agent
A restricted license, which allows an individual to represent a life insurance company domiciled in North Carolina to transact insurance business in a foreign country must be renewed
Annually
Non-qualified Retirement plan
Contributions are not tax deductible Earnings grow tax deferred
Qualified retirement plan
Contributions are tax deductible Earnings grow tax deferred
Your employer does not offer a company wide annuity contract. What type of annuity contract could your client obtain?
Individual
Preferred Risks
Individuals who meet certain requirements and qualify for lower premiums than the standard risk Have superior physical condition, lifestyle, and habits
referred to taxing premiums are
Not tax deductible
401 (k) Plans
Profit sharing plans Employer contributions must be systematic and substantial Take reduction in current salaries by deferring amounts to a retirement plan
One of the main sources of underwriting info for the company
The application
Consideration
The binding force in any contract. Something of value that each party gives to the other. Consideration on the part of the insured- payment of premium and the representations made in the application. Consideration on the part of the insurer- the promise to pay in the even of loss
With adjustable life the owner can't change
The insured
Regarding the cash value is a universal life policy...
The insurer credits the cash value in the policy with a current interest rate
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
Unilateral
What type of policy is considered interest sensitive?
Universal Life
Premium receipt
Whenever the agent collects the premium This type of receipt missed will determine when coverage will be effective
Traditional IRA
tax deductible contributions until the age of 70 1/2 Withdrawals may begin at age 59 1/2 but no later than age 70 1/2
Cash values grow
tax deferred
IRA's
tax deferred earnings not taxed until withdrawn
Accelerated befits are received
tax free up to a certain limit
If the Commissioner denies an initial application for an agent, how long does the applicant have to request a review after receiving notification of the denial?
30 days
The reinstatment provision in life insurance policies lasts
5 years
Approval conditional recepit
Coverage begins only when the pre-paid application is approved by the insurer (but before the policy is delivered). Therefore no coverage during the initial underwriting process
Which provision of a life insurance policy states the insurers duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Insuring Clause
SIMPLE Plan
Small businesses that employ no more than 100 employees who received at least 5,000 in compensation from the employed during the previous year Employer must not have a qualified plan already in place Tax is deferred on both contributions and earnings until funds are withdrawn
referred to taxing the death benefit
Tax free if taken as a lump-sum distribution to a named beneficiary Principal is tax free Interest is taxable if paid in installments
IF the full premium was submitted with the application and the policy was issued as requested
the policy coverage would generally coincide with the date of the application
What can't be changed in adjustable life?
The type of investment
Credit life
written as decreasing term insurance
How long must a compliant record be maintained?
5 years
What should an insurer obtain in order to transact insurance within a given state?
Certificate of authority
What is not a duty or responsibility of producers at the time of application?
Change any incorrect statement on the application by personally initialing next to the correct statement
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest
What would not cause the death benefit to increase?
Payor benefit rider
Contributory plan
Premiums for group insurance are shared between the employer and employees Insurer will require that 75% of eligible employees be included in the plan
Aleatory
There is an exchange of unequal amounts or values.
HR-10 or Keogh plan
self-employed persons to be covered under an IRS qualified retirement plan. must be self employed or a partner working part time or full time who owns at least 10% of the business Contributions are tax deductible Has to be at least 21 years old and have worked for a self-employed person for one year or more and worked at least 1000 hours
The policy owner of an adjustable life policy wants to increase the death benefit. Whats a true statement?
The death benefit can be increased by providing evidence of insurability
An MEC must always pass the 7-pay test ( T or F)
False
If the license is terminated due to misconduct the bond is forfeited (T or F)
False
Key person insurance
Key employee is the insured The Business is: Applicant Policyowner Premium payer Beneficiary IF key employee dies, the business would use the money for the additional costs of running the business and replacing the employee Business can't take tax deductions for the expense of the premium IF key employee dies the benefits paid to the business are usually received tax free
Dividends received on participating life insurance policies are
Not taxable because they are a return of unused premiums
What is the official name for the Social Security Program?
Old Age Survivors Disability Insurance
Under a pure life annuity, an income is payable by the company
Only for the life of the annuitant
If an employee terminates membership in the insured group
The employee has the right to convert to an individual policy without proving insurability at a standard rate, based on the individuals attained age. group life policy can convert to any form of insurance issued by the insurer except term insurance Face amount will be equal to the group term face amount but the premium will be higher Employee has a period of 31 days after terminating from the group to use the conversion option During that time the employee is still covered under the original group policy
What happens to the face amount of a whole life policy if the insured reaches the age of 100?
The face amount is paid to the insured
How long does an insurer have to file with the Commissioner the form detailing the agents name, address, and other needed information?
30 days
Types of Nonforfeiture Options
Cash surrender value Reduced Paid-up insurance Extended Term
If a policy is issued with questions left unanswered,
The contract will be interpreted as if the insurer waived its right tot have an answer to the question The insurer will not have the right to deny coverage based on any info that the unanswered question might contain.
Defamation
When an oral or written statement is made that is intended to inure a person engaged in the insurance business
Rebating
any inducement offered to the insured in the sale of a life insurance product that is not specified in the policy.
An adjustable life policy can assume the form of
Either term insurance or permanent insurance
The provision which states that both the policy and a copy of the application form the contract between the policy owner and the insurer is called the
Entire contract
A policy will pay the death benefit if the insured dies during 20-year premium-paying period, and nothing if death occurs after the 20 year period. What type of policy is this?
Level Term
Which two terms are associated directly with the premium?
Level or flexible
What type of insurance is annually renewable term insurance?
Level term
Which of the following can surrender a deferred annuity contract?
Only the annuity owner
Conditional Contract
Requires that certain, conditions must be met by the policy owner and the company in order for the contract to be executed, and before each party fulfills its obligations.
S set up an individual retirement account that her employer is now contributing to . Her employers contributions are not included in her gross income. What kind of retirement plan does S have?
Simplified Employee Pension (SEP)
A 60 year old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The amount of the distribution is reduced by the amount of a 20% withholding tax
What is the name for the owner of a life insurance policy who enters into a vatical settlement contract?
Viator
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called?
Waiver of Premium
Noncontributory plan
When an employer pays all of the premiums An insurer will require that 100% of the eligible employees be included in the plan
Money borrowed against the cash value is
not income taxable However insurance company charges interest on outstanding policy loans
If the initial premium is not paid with the application,
the agent will be required to collect the premium at the time of policy delivery. In this case, the policy doesn't go in effect until the premium has been collected The agent may also be required to get a statement of good health from the insured.
If the full premium was submitted with the application and the policy was issued as a request, the policy coverage effective date would be?
the date of the application
Adjustable life
the death benefit can be increased by providing evidence of insurability
In a variable life insurance policy which assets are held in insurance companies general account?
-Incidental benefit amounts -Mortality Reserves -Face Amount Reserves
Agent appointments must be reported to the commissioner within?
30 days
An insurer that terminates the appointment of an agent must notify the commissioner within
30 days
Twisting
A misrepresentation of insurance policies that persuades an insured/owner to his or her detriment to cancel, lapse, switch policies, or take out a policy with another insurer
MIB
A non profit organization that maintains underwriting info on applicants for life and health insurance
All other factors being equal the least expensive first-year premium payment is found in?
Annually Renewable Term
When a policy owner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called?
Class designation
Which of the following terms is used to name the contacted return of unused premiums?
Dividends
If a change needs to be made the application for insurance, the agent may not ?
Erase the incorrect answer and record the correct answer
When would life insurance proceeds be taxable by the federal government?
If there is a transfer for value
A return of premium term life policy is written as what type of term coverage?
Increasing
Term insurance that provides increasing death benefits as the insured ages
Increasing Term
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a
Inspection report
If an insurer accepts premium payments by credit card, who is responsible for paying the fees charged by a credit card company?
Insurer accepting payment
What ultimately determines the interest rates paid to the owner of a fixed annuity?
Insurer's guaranteed minimum rate of interest
Who makes up the Medical Information Bureau?
Insurers
SEP's are not suitable for
Large Companies
Discrimination on
Marital status Race Color National Origin Creed Ancestry
A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend?
Payor Benefit
When changing a beneficiary through an endorsement method, what is the policy owner required to do?
Submit a request for change to the home office of the insurer
Adhesion
Take it or Leave it basis
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued what would be the policy's effective date?
The date of medical exam
Disclosure authorization forms must include
The date of the authorization, the name of the insurer or agent, the nature of the information authorized to be disclosed
Indeterminate premium whole life policy
The premium can be raised up to a guaranteed maximum rate
An agent tells an insured that if he replaces his current insurance policy with a newer one, his dividends will be higher and his premiums will be slightly lower. The policy, however, would not offer either one of these things. What type of misrepresentations is being committed?
Twisting
If a retirement plan or annuity is qualified, this means
It satisfies IRS requirements for favorable tax treatment
Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policy owner select?
Join and Survivor
Contract of Adhesion
Prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insurance contracts are offered on a take it or leave it basis.
All statement of the insured in any application for a policy of insurance are deemed
Representations
Coercion
Require as a condition to a loan that the applicant purchase insurance from a specific insurer
Unconditional receipt
coverage begins immediately for a specific length of time, until the policy is issued
Conditional receipt
is used only when the applicant submits a prepaid application. Says the coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last.
Education is
not an underwriting factor nor is it information included on the application
Indexed whole life insurance
-The cash value depends on the performance of the equity index -The premium is fixed -There is a guaranteed minimum interest rate
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with accelerated benefits rider. What is taxed regarding the accelerated benefits?
A portion of the benefit up to a limit is tax free; the rest is taxable income
What is not used to determine annuity suitability?
Beneficiaries age
Regarding insurable interest in viatical settlements....
It must exist at the time of the issue of the original life policy
A policy will pay the death benefit if the insured dies during the 20-year premium paying period, and nothing if death occurs after the 20 year period. What type of policy is this?
Level Term
Variable Life
Level fixed
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?
Military Service or war
Unilateral Contract
Only one of the parties to the contract is legally bound to do anything. Insurer makes no legally binding promises.
Group life insurance
Usually annually renewable term Evidence of insurability is usually not required Participants under the plan do not receive a policy because they do not own or control the policy instead issued a certificate of insurance
403(b) Tax-sheltered Annuities
avaliable to employees of certain nonprofit organization under section 501(c)(3)
Endowment policy
has to build up faster since the funds are intended to be used while the insurer is alive, the premium for an endowment is considerably more expensive than an ordinary straight life plan.
If a policy is surrendered the cash value
may be taxable as income if the cash surrender value exceeds the amount of the premiums paid for the policy
Simplified Employee Pension Plans (SEP)
suited for small employer or self employed Employer contributes to plan Employer contributions are not included in the employees gross income
Any cash value in excess of cost basis (premium payments) is
taxable as ordinary income
Death benefits are usually are paid to
the beneficiary income tax free
Standard Risks
According to a company underwriters standards, are entitled to insurance protection without extra rating or special restrictions. Representatives of the majority of people at their age with similar lifestyles. Average Risk
Elements of a Legal Contract
Agreement- offer and acceptance Consideration Competent Parties Legal Purpose
What would not trigger the payment of Accelerated Death Benefits?
Being permanently disabled
When does the 10 day free look period end?
At the time of the policy delivery
If a life insurance policy contains a minimum 10-day unconditional refund provision, when is the latest that the buyers guide and policy summary must be delivered?
At the time of policy delivery
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer sponsored plan who has earned income
Substandard (High Exposure) Risk
Applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. Policies are also referred to as "rated" because they could be issues with the premium rated-up, resulting in higher premium
Any person who willfully misstates financial or other information under oath may be charged with a?
Class 1 Felony
A debtor has an insurable interest in the life of a lender (T or F)
False
Any time a business is the named beneficiary of a life insurance policy or has a beneficial interest in the policy
any premiums that the business pays for such insurance are not tax deductible Ex. Key employee (key person) Stock redemption or entity purchase agreement Split- dollar insurance
Premiums that an employer pays for life insurance on and employee
are tax deductible to the employer as a business expense
Roth IRA's
contributions can continue beyond age 70 1/2 and distributions do not have to begin at age 70 1/2 Grow tax free as long as the account is open for at least 5 years
Life Income with period certain
gurantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If reciepent should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.
If the insurer receives a incomplete application
insurer must return it to the applicant for completion
In life insurance, when must the policy summary be presented?
Before accepting the initial premium deposit
Annuity Certain
Begins on a specific date and ends on a specific date (chosen by annuitant)
A legally acceptable attempt by an existing insurer to dissuade a current policy owner from the replacement of existing life insurance
Conservation
A whole life policy s surrendered for a reduced-paid up policy. The cash value in the new policy will
Continue to increase
Contracts that are prepared by one party and submitted to the other party on a take-it- or leave-it basis are classified as?
Contracts of Adhesion
Both Universal Life and Variable Life have a
Flexible Premium
What is the legal limit coverage based on marital status?
It is never legal to limit coverage based on marital status
Annually renewable term insurance is
Level term insurance
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to?
Live at least to his life expectancy
What is pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive
Joint life annuity payments
The payments stop at the first death
The regulation of the insurance industry primarily rests with?
The state
Stating that an insurers policies are guaranteed by the existence of the Life and Health Guaranty Association is?
Unfair trade practice
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Children upon reaching the age of majority are permitted to convert to an individual policy......
without proof of inusrability