Life Insurance Review Test

a qualified retirement plan for self-employed individuals and their eligible employees

A Keogh plan (or an HR-10) is

a transfer of funds from one IRA to another

A rollover refers to:

the insurers operating costs

An expense load is also known as

equal value is not given by both parties to the contract

An insurance contract is an aleatory contract. This means

multiplying earnings by the number of working years

Human life value can be estimated by:

- mortality - interest - and expenses

3 basic factors must be considered when computing the premium rate for a life insurance policy. These factors are:

has a death benefit that varies to reflect the investment results of the underlying separate account but will not drop below a guaranteed minimum

A variable life policy

1.5 million

Alma, age 35, earns $50,000 a year and expects to retire when she is 65. What is Alma's human life value?

only the insurance company is bound to live up to its side of the agreement

An insurance policy is a unilateral contract because

will automatically institute the extended term option

An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company

an inspection report

An investigative consumer report is also called

a stock redemption plan

Another name for an entity plan is

- protects against living too long - used to accumulate money for income payments while living - used to liquidate an estate

Characteristics of an annuity include:

$8,000

Ed had a $50,000 policy with cash values of $10,000. Including the interest owed, there is a $2,000 policy loan outstanding. Ed finds that he can no longer make premium payments on this policy. Ed chooses the cash surrender value option, he will receive

90 days

For a beneficiary to receive accidental death benefits, the death of the insured generally must occur within how many days following the accident?

at least 75%

If an employer pays an entire premium for a group life insurance policy, the policy must insure ____ percentage of eligible employees?

the cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy

In a whole life policy

contract

In group insurance, the evidence of an agreement between the insurer and the employer or association is the

only partly subject to federal taxation

Income payments made from an annuity are

25%

Licensed insurance producers can write no more than what percentage of their commission business in any 12-month period on controlled businesses?

continue to increase

Lynn elects to surrender her whole life policy for a reduced paid-up policy. The cash value of her new policy will

6 months

Most state laws allow life insurance polices to be backdated to ____ months

joint life and survivor annuity settlement option

Mr. and Mrs. Burden receive a monthly annuity payment. Mr. Burden dies, but Mrs. Burden continues to receive a monthly annuity payment. The Burdens have a

plus interest have been repaid and fewer than 3 years have elapsed

Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if all back premiums due

the insured is not required to show proof of insurability in order to renew or convert

One of the greatest advantages of convertible and renewable term policies is that

life with refund annuity

Paul dies before his annuity has paid out an amount at least equal to the purchase price of the annuity, so Paul's beneficiary continues to receive annuity payments until that amount has been reached. This type of annuity is

must have a valid life license and must be registered with FINRA

Producers selling variable life insurance

has average health and a normal life expectancy

Susan has been classified as a standard risk by her insurance company. This means that Susan

True

TRUE or FALSE: Except in the case of a MEC, life insurance policy loans are income tax-free

FALSE

TRUE or FALSE: Premiums paid for individual life insurance are tax-deductible

a overqualified plan

The Lucrative Lozenge Company provides a $5,000 monthly bonus plan to retirees who served as senior executives. This benefit is not available to other retirees of the company. This is an example of:

a non-profit insurance trade association

The Medical Information Bureau is

The insured

The annuitant of an annuity can be compared to ______ in a life insurance policy?

The time during which payments are made to the annuitant

The annuity period refers to:

may go up or down but will fall below the guaranteed minimum amount specified in the policy

The death benefit of a variable life policy

mortality minus interest

The net premium is defined as

term

The option to renew is a feature of ______ insurance

fines, imprisonment, or both

The punishment for fraud or making false statements may include

mortality

The relative frequency of deaths in a specific population is known as:

During the first 2 years after the policy is in effect, the insurance company will only pay the premium paid by the insured, not the face amount of the policy

The suicide clause states that if an insured commits suicide:

variable annuity

The type of annuity in which the values grow according to the performance of the investment medium, and in which benefits may fluctuate according to market performance, is called

life with refund annuity

The type of annuity that guarantees to pay total income at least equal to the purchase price of the contract is a

an absolute agreement

Tina's grandparents purchased a $250,000 universal life insurance with the intent to permanently transfer ownership to her when she turned 21. What is that transfer of rights known as?

taxable income for the employee

Under an executive bonus plan, the amount of premiums paid is:

survivorship, or second-to-die, policy

Warren and Wilma have a joint life policy. Warren dies, and the policy pays nothing. Later on, and the policy pays nothing. Later on, Wilma dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a

preferred risks

What classification of risks would typically have the lowest premium payment?

family dependency

What is considered an income need when determining the amount a person needs for personal life insurance

Extended term

What is the default non-forfeiture option?

a mutual insurance company

What is the proper term for a company owned by its policyowners?

Retention

What method of handling risk means that the individual will pay for the loss if it occurs?

Option B (Option 2)

What option provides for an enhanced death benefit on a universal life policy?

Term insurance, particularly convertible term insurance

What type of insurance is useful for people with limited income and a significant need for life insurance?

Universal life

What type of life insurance policies was designed for individuals who want flexible premiums and flexible coverage over the course of their lifetime.

will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age

When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company

75%

When a group plan is contributory, what percentage of employees must want and be willing to pay for coverage?

annuity units

When the annuity period begins in a variable annuity contract, the accumulation units are converted to

not taxable as income

When the entire death benefit is paid in a lump sum to a beneficiary, it is

at the time of application

With life insurance, insurable interest must exist