NC Life Insurance
indeterminate premium
A _____ whole life policy features a lower premium rate initially (2-3 years) and adjusted (up or down) according to the insurer's mortality,
straight
A _____ whole life policy features permanent level protection and level premiums until insured's death or age 100.
Keogh
A __________ plan is a qualified plan that allows unincorporated business owners to participate in a retirement plan as an employee.
unilateral
A ____________ contract obligates only one party (the insurer) in the contract.
physical
A bodily disease of endangerment, such as cancer, presents a ______ hazard.
noncontributory
A group life insurance plan in which the employer pays the entire premium is known as a ________________ plan.
Domestic
An insurance company has their home office in Winston-Salem, North Carolina, and is doing business in Greensboro, North Carolina. In Greensboro, the company would be considered a(n) ____________ insurer.
encourage uniformity in state insurance laws and regulations
An objective of the NAIC is to:
moral
An unhealthy habit, such as smoking, presents a _____ hazard.
Starting principal, interest, and income period
Annuity payment amounts are based upon which of the following factors?
hazard
Any factor that gives rise to peril
Private Insurers
Assessment Mutual Insurers, Reinsurers, and Home Service Insurers are all examples of what type of insurer?
False
If a disabled worker covered under Social Security disability benefits recovers and then is disabled again within five years, a new waiting period is required before benefits begin again.
the beneficiary's permission
If a policy is transferred under an absolute assignment, the assignee cannot change the irrevocable beneficiary without:
Conditional Receipt
If an applicant were to die before a policy is issued, the company will pay the death benefit, but only if the policy would have been issued. This is called a(n):
false
If an insurance policy contains an incontestable clause, it means that the insurer CANNOT contest any claim under any circumstances.
the deceased's estate becomes beneficiary
If an insured person does not stipulate a beneficiary on their life insurance policy, what happens to the policy's benefits if the insured dies?
the deceased's estate becomes the beneficiary
If an insured person does not stipulate a beneficiary on their life insurance policy, what happens to the policy's benefits if the insured dies?
59 1/2
If pre-tax dollars are withdrawn before age _____ on a tax-deferred annuity, a 10% excise tax penalty is imposed by the federal government.
binding receipt
If the applicant were to die before the policy is issued, the company will pay the death benefit whether or not the policy would have been issued, subject to any limitations. This is called a(n):
6
In a Close Corporation Cross-Purchase plan involving three owners, how many life insurance policies in total are purchased?
the other policy holders
In a reciprocal insurer structure, each policyholder insures the risks of:
decreasing
In a(n) ________________ term policy, the face value slowly declines in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level.
level
In a(n) _________________ term policy, the face value remains unchanged from the date the policy comes into force to the date the policy expires.
policyowner
In an endowment policy, if the insured is still living at the end of the endowment period, the ___________ is entitled to receive the policy benefits.
two years
In general, the standard life insurance Incontestable Clause means that a policy is incontestable after:
10 Days
The Free Look Period for life insurance contracts is _______ days.
beneficiary
The Insuring Clause includes all of the following EXCEPT the: 1) face value of the policy. 2) insured's name. 3) insurance company. 4) beneficiary.
$2,000
The Social Security payroll tax is known as ____________ tax.
FICA
The Social Security payroll tax is known as ____________ tax.
Federal Insurance Contributions Act (FICA)
The Social Security payroll tax is known as ____________ tax.
option to convert
The _____ allows the policyowner the choice of changing a term policy into a whole life policy at renewal time without providing evidence of insurability.
option to renew
The _____ allows the policyowner to regenerate the policy without the insured having to provide proof of insurability.
last survivor
The _____ policy covers two lives; benefit is paid upon the death of the last surviving insured.
agent
The __________ bears the burden of proving a policy replacement is in the client's best interest.
per capita
The ___________ method disperses proceeds equally among the life policy's living named beneficiaries.
Revocable
The ____________ designation means that the beneficiary can be changed without the named beneficiary's permission.
Internal Revenue Service (IRS)
Participation, coverage, vesting, funding, and contributions are basic requirement categories retirement plans must fulfill in order to be approved by the:
Accidental Death Benefit Rider
Pays a multiple of the death proceeds if the cause of death is a covered accidental event.
Accelerated benefit rider
Pays a portion of the death benefit if the insured is diagnosed with a terminal illness.
Irrevocable
The ____________ designation means that the beneficiary cannot be changed without the named beneficiary's permission.
Domestic
The ____________ insurer is licensed and practicing in the same state in which they are incorporated.
insurer
Policy reserves are the intangible amounts set aside by the _____________ out of the insurer's assets at the beginning of the policy period.
specific funeral services
Prearrangement means any contract created for __________.
cash surrender value
Privileges allowed under terms of a life insurance contract after cash values have been created are referred to as nonforfeiture options. A _____ nonforfeiture option is when the policyowner relinquishes the value of the policy for cash.
automatic premium loans
Protection against the unintentional lapse of a life insurance policy is afforded through what means?
incontestable
The ____________ provision provides that for certain reasons the company may void a policy after it has been in force, typically limited to one or two years after issue.
policy owners, policy holders
Purchasers of life insurance policies are _____________, but are not necessarily _______________.
policy owners; policyholders
Purchasers of life insurance policies are _____________, but are not necessarily _______________.
true
T/F: ERISA was created to protect employees from possible loopholes in retirement plans and to allow them to receive their own contributions along with company contributions for retirement.
True
T/F: Endowment policies are payable at the death of the insured or on a specific maturity date, whichever comes first.
true
T/F: Endowment policies are payable at the death of the insured or on a specific maturity date, whichever comes first.
True
T/F: Except as otherwise provided by law, offering a rebate on life insurance premiums other than what is plainly expressed in the contract is prohibited.
reinstatement
The ____________ provision puts a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.
true
T/F: If a beneficiary opts to receive interest only payments while the insurance company holds the policy proceeds, the insurer is restricted from paying a lower interest rate than the pre-established minimum rate.
true
T/F: If a policy is transferred under an absolute assignment, the assignee cannot change the beneficiary if the beneficiary had been originally designated as irrevocable without the beneficiary's permission.
entire contract
The ____________ provision states that the application and policy contain all provisions and constitute the whole agreement.
true
T/F: If an agent's company rejects an applicant based on the company's specific underwriting guidelines, the agent can pursue writing the business with another company for which he/she is not appointed.
spendthrift
The _____________ clause protects the proceeds held under a settlement option from attachment by creditors of the beneficiary.
Cash Refund
The ______________ annuity option provides a guaranteed income to the annuitant for life and if the insured dies prematurely, the balance of the principal is paid out in a lump sum to the annuitant's beneficiary.
cash refund
The ______________ annuity option provides a guaranteed income to the annuitant for life and if the insured dies prematurely, the balance of the principal is paid out in a lump sum to the annuitant's beneficiary.
parol evidence rule
The ______________ refers to the fact that a written contract cannot be changed by oral evidence.
annuitant
The _______________ bears the investment risk in a variable annuity.
waiver of premium
The _______________ provision exempts the insured from paying premiums after becoming disabled for a specified period of time.
insuring
The ________________ clause states the very purpose of the life policy; it outlines the conditions under which the policy will pay. If the insured dies, the insurer promises to pay the beneficiary the death benefit as laid out in the policy.
Keogh plan
The _________________ is a qualified plan that allows unincorporated business owners to participate in the retirement plan as an employee.
consideration
The __________________ clause spells out exactly how much premium payments are and when they are due
True
T/F: If an employee pays a percentage of their paycheck every month to a retirement plan and the employer contributes or matches the percentage, the amount the company pays is tax deductible.
False
T/F: If an insurance policy contains an incontestable clause, it means that the insurer CANNOT contest any claim under any circumstances.
false
T/F: If the policyowner has an insurable interest in the insured, legal purpose is validated in the contract.
true
T/F: If the policyowner has an insurable interest in the insured, legal purpose is validated in the contract.
true
T/F: In a reciprocal insurer structure, each policyholder insures the risks of the other policyholders.
the other policyholders
T/F: In a reciprocal insurer structure, each policyholder insures the risks of:
False
T/F: In order for a 1035 Exchange to take place, the exchange must be with the same company that issued the original policy.
True
T/F: In the process of selling life insurance and when evaluating the needs of your client, the Human Life Value approach has been largely replaced by the more practical Needs Approach.
true
T/F: Indemnity contracts are also known as reimbursement contracts.
false
T/F: It is usually in the best interest of a policyholder to replace a life insurance policy with a new one.
true
T/F: Level term policies do not fluctuate in face value.
True
T/F: Licensees must maintain records of all ICECs for five years.
True
T/F: Most adjustable life policies are more expensive than conventional term policies or whole life policies.
true
T/F: Most term insurance policies contain the option to renew and/or the option to convert.
False
T/F: Mutual Insurers are owned by stockholders and stock insurers are owned by policyholders.
true
T/F: No life or health insurance may be issued for delivery in North Carolina unless the application is taken by, and the policy delivered through, a licensed agent who will receive the usual and customary commission.
True
T/F: On the whole, federal employees hired before 1984 who are covered by Civil Service Retirement or another similar pension plan are not eligible for Social Security benefits.
true
T/F: Only participating policies pay dividends.
true
T/F: Ordinary insurance in the permanent life insurance category accumulates cash value.
True
T/F: Proceeds of a life insurance policy paid as a lump sum death benefit are exempt from federal income tax.
True
T/F: SIMPLE plans can be structured as an IRA or a 401(k).
False
T/F: Since a mutual insurance company has no stockholders, it cannot be considered a corporation.
True
T/F: Term insurance specifies coverage for a limited amount of time.
true
T/F: Term insurance specifies coverage for a limited amount of time.
true
T/F: The Rating-Up In Age method is no longer used predominantly.
true
T/F: The basic concept for plan regulation is to attempt to make all employees equally eligible for retirement benefits and to eliminate favoring highly compensated employees.
true
T/F: The death benefit under an increasing term policy increases with time.
true
T/F: The delayed payment provision allows an insurer to postpone payment of a policy's cash surrender value for a period of six months.
true
T/F: The effective date of a policy is the date the insurer accepts an offer by the applicant "as written."
true
T/F: The formula used to compute the net single premium is Mortality Cost minus Interest. (Mortality Cost - Interest = Net Single Premium)
True
T/F: The key factor behind ERISA's development was to encourage employers to establish employee health plans allowing them to self-insure.
true
T/F: The option to renew is most popular on policies that are renewable on an annual basis.
true
T/F: The policyholder assumes the investment risk in variable insurance products.
false
T/F: The purpose of Social Security is to provide a meaningful standard of living as a person ages.
true
T/F: The systematic selection of loss exposures is prohibited due to the rules of adverse selection.
false
T/F: There are no cash values in endowment insurance.
true
T/F: Twisting is referred to as "external replacement" and is the practice of inducing a person to drop existing insurance to buy similar coverage with another producer or company.
True
T/F: Under the Joint and One-Half Survivor option, annuity payments to the survivor are reduced to one-half of the original joint income.
true
T/F: Under the Joint and One-Half Survivor option, annuity payments to the survivor are reduced to one-half of the original joint income.
false
T/F: Under the fixed period option, if the insurer's earnings from the premium payments throughout the years are large enough to permit paying excess interest, the interest will be used to extend the payment period, not increase the scheduled payments.
false
T/F: Using riders to decrease coverage will typically increase premium payments.
True
T/F: Variable insurance products are considered securities contracts as well as life contracts and contain no contract value guarantees.
true
T/F: Variable insurance products are considered securities contracts as well as life contracts and contain no contract value guarantees.
False
T/F: When a life insurance policy is reinstated after lapse, a new suicide clause automatically goes into effect.
True
T/F: When a life insurance policy is reinstated after lapse, any back premiums MUST be paid before reinstatement becomes effective.
true
T/F: When a life insurance policy is reinstated after lapse, any back premiums MUST be paid before reinstatement becomes effective.
False
T/F: When a life insurance policy is reinstated after lapse, any outstanding loans must ALWAYS be repaid before reinstatement is effective.
true
T/F: When a policyowner surrenders his whole life policy for its cash value, he can receive an amount equal to the premiums paid into the policy tax-free.
true
T/F: With the joint life income option, the proceeds may be paid to two beneficiaries in equal monthly installments.
Needs Approach
Taking all of the funds available to a family and planning for their future financial obligations is an example of the ______________ in life insurance.
needs approach
Taking all of the funds available to a family and planning for their future financial obligations is an example of the ______________ in life insurance.
mortality and loading
Term insurance premiums are based on:
mortality and loading
Term life policy premiums are based on:
dependency period
The __________________ is the time period when the children are growing in age and expenses for them rise, which typically lasts until the youngest child of the family reaches age 18.
blackout period
The __________________ is the timeframe when the youngest eligible child reaches the age of 16 and the surviving spouse has not yet reached the age of 60, Social Security benefits for the surviving spouse are temporarily suspended.
social security act
The __________________ was originally enacted to enable individual states to make more adequate provisions to furnish financial assistance to the aged, blind, dependent and crippled children, and other qualified individuals.
incontestable
The ___________________ clause places a time limit (usually two years) in which the insurer can dispute a policy based on the validity of statements made on the original application.
McCarran-Ferguson
The ____________________ Act mandated once and for all that insurance would be regulated by the states.
accelerated death benefit
The _________________________ provision allows the policyowner to withdraw funds from his/her life insurance policy early, before death.
misstatement of age or sex
The _________________________________ provision allows the insurer to adjust the benefit payable if the age or sex of the insured was incorrectly stated when the application for the policy was made.
twisting
The act of inducing or attempt to induce a policy owner to drop an existing life insurance policy and to take another policy that is substantially the same kind by using misrepresentations or incomplete comparisons of the advantages and disadvantages of the two policies.
the current value of one unit relative to the amount of premiums paid.
The actual number of annuity units is determined by:
Apparant
The appearance of power on behalf of the insurer through the actions or use of identifying materials by the agent, such as company advertising material, is called _____________ authority.
the risk of dying too soon; the risk of living too long
The basic risk insured against by purchasing a life insurance contract is ___________________ whereas the basic risk insured against by an annuity contract is __________________.
Consumer Price Index (CPI)
The cost of living adjustment (COLA) rider is based on:
7
The designated time period for an equity indexed annuity is ______ years.
estate
The disadvantage of naming an estate as beneficiary is that proceeds will be included in the insured's:
contributory
The employees of XYZ Company must each pay a part of the premium for their group health/life insurance plan. They are, therefore, members of a ______________ group plan.
Variable
The exclusion ratio is always considered 100% in _________ annuities.
variable
The exclusion ratio is always considered 100% in _________ annuities.
smaller
The face value on industrial insurance policies is usually ___________ than most.
10
The free look provision for life insurance policies is ____ days from policy delivery.
educate the client so the client can make his or her own decisions about what's right for him or her.
The goal of a sales presentation is to:
ERISA
The goals of _________ were to encourage individual employers to establish employee health plans.
six credits during the 13th quarter
The "currently insured" classification under Social Security limits survivorship benefits. In order to be eligible for Social Security survivor benefits, a person must have earned _________________ period ending with the quarter in which the worker died.
period certain option
Which annuity payout option provides guaranteed payments for a certain period of time and if the annuitant dies before the period has expired, the policy pays the beneficiary through the remainder of the period?
Uncertainty regarding financial loss
Which answer best completes the following sentence? "In the insurance business, risk can best be defined as ___________________________."
Face amount
Which aspect of a decreasing term policy actually decreases each year?
Mutual Insurance Company
Which is the proper term for a company owned by its policyowners?
ALL
Which of the following are typically excluded in life insurance policies? 1) Suicide 2) War or military service 3) Hazardous occupation or hobby 4) All - Suicide, war or military service, and hazardous occupation or hobby
It spreads financial risk over a large group to minimize the loss to any one individual.
Which of the following best describes the function of insurance? 1) It is a form of legalized gambling. 2) It spreads financial risk over a large group to minimize the loss to any one individual. 3) It protects against living too long. 4) It creates and protects risks.
Human Life Values
Which of the following best describes the true value of insurance? "The true value of insurance lies in its ability to protect __________."
Joint and first survivor method
Which of the following does NOT belong in the category of available life insurance settlement options? 1) Lump sum method 2) Installment payments 3) Joint life income 4) Joint and first survivor method
joint and first survivor method
Which of the following does NOT belong in the category of available life insurance settlement options? 1) Lump sum method 2) Installment payments 3) Joint life income 4) Joint and first survivor method
wage control
Which of the following is NOT a benefit to key person insurance? 1) Business credit 2) Flexibility 3) Reserve fund 4) Wage control
suicide, most suicide exclusions are enforced until two years after the policy's effective date.
Which of the following is NOT a typical permanent exclusion in life insurance policies? 1) Aviation 2) Suicide 3) Acts of war 4) Self-inflicted injuries
security report
Which of the following is NOT considered one of the three basic parts of a life insurance contract? 1) General Report 2) Medical Report 3) Agent's Report 4) Security Report
morbidity
Which of the following is NOT one of the primary factors used in determining life insurance premium costs?
Provides level premiums limited to certain time period, less than life
Which of the following is TRUE about a Limited Pay Whole Life policy? 1) Provides permanent level protection and level premiums until insured's death or age 100 2) Provides level premiums limited to certain time period, less than life 3) Funds are invested in general accounts 4) Mutual insurers issue these policies with lower premiums and face amounts that diminish after a few years
monthly
Which of the following premium payment modes will result in the highest total out-of-pocket costs?
The policy's death proceeds received by the business are taxable.
Which of the following statements regarding key person insurance is INCORRECT? 1) Key person life insurance indemnifies a business for financial loss caused by the death of a key employee or key executive. 2) The business may borrow from the cash value of a permanent key person life insurance policy. 3) The policy's death proceeds received by the business are not taxable. 4) The policy's death proceeds received by the business are taxable.
The SEC
Which organization regulates the separate account in variable annuities?
only an attorney
Who can draft Buy-Sell agreements?
the replacing agent
Who is responsible for notifying the original insurer that a replacement policy may be issued?
100
Whole life insurance policies typically mature at age:
Before
With a Roth IRA, the contributory funds are taxed as income ______ the contributions are made.
Implied
______________ authority is established through verbalization and occurs when appropriate actions are taken to carry out the authority granted to fulfill the principal's goals.
Credit life
________________ insurance applies to the relationship between debtor groups (those who owe) and creditor groups (those who loan).
Key person
________________ insurance is designed to help protect a business against financial loss that may be caused by the death of a key, or economically valuable, person. It gives complete control of the policy to the company as an owned asset.
Premium payments
________________________ can be set up for monthly, quarterly, semi-annual or annual payment plans.
Primary Care Physician
a PCP is a:
insureds
agents represent
What type of insurance is most frequently used in group life plans?
annual renewable term
furnish with income
to "endow" means to:
true
T/F: Anyone under the age of 70 1/2 with earned income can open an IRA.
False
T/F: An agent may accept a gratuity from a provider of services for recommending that provider to claimants.
false
T/F: Building cash value does not apply if a term policy is converted to a whole life policy.
true
T/F: Churning is also called "internal replacement" and is the practice of inducing a person to drop their existing policy to buy another policy with the same company.
true
T/F: Decreasing term policies fluctuate in face value.
true
T/F: Deferred Compensation plans are nonqualified plans that are comprised of a contractual agreement to pay benefits in the future.
To make a profit for its owners, the stockholders
What is the operating objective of a stock insurance company?
2 years
What is the typical period of time specific to the suicide clause in life insurance policies?
cross-purchase plan
What type of buy-sell plan enables each partner to purchase policies on the other partners?
annual renewable term insurance (ART) as it provides the lowest cost life insurance coverage.
What type of insurance is most frequently used in group life plans?
Blanket Insurance Policies
What type of life insurance refers to temporary coverage of a specific hazard for a specific group?
blanket insurance policies
What type of life insurance refers to temporary coverage of a specific hazard for a specific group?
mixed plan
When a stock life insurance company issues both participating and nonparticipating policies, it is referred to as a company doing business as a:
mixed plan
When a stock life insurance company issues both participating and nonparticipating policies, the company is doing business on a:
when there in no premium
When might a Statement of Continued Good Health be required regarding a life insurance policy?
increasing
When the death benefit escalates periodically over the policy's term, it is a(n) ____________ term contract.
revocable
When the policyowner can change the policy's beneficiary at will, the beneficiary designation is:
common stocks and other securities
A Variable annuity separate account will be invested in:
common stocks and other securities.
A Variable annuity separate account will be invested in:
defined benefit plan
A _____ is a pension plan under which benefits are determined by a specific benefit formula.
defined contribution plan
A _____ is a tax qualified retirement plan in which annual contributions are determined by a formula set forth in the plan. Benefits paid vary with the amount of contributions made and length of service.
continuance of wages
A Salary Continuation Plan can be used for the _______________ of a disabled employee.
The Employer
A Salary Continuation Plan is set up between the employer and employees and is funded by
The Employer
A Salary Continuation Plan is set up between the employer and employees and is funded by:
employer
A Salary Continuation plan is set up between the employer and employees and is funded by the:
it pays a predertmined amount with out any way to assess loss
A life insurance contract is considered a valued contract because:
it pays a predetermined amount with no way to assess loss
A life insurance contract is considered a valued contract because:
two years
A life insurance policy becomes incontestable even in case of fraud after the incontestable clause time limit has passed, which is typically:
A Modified Endowment (MEC) contract.
A life insurance policy under which the amount a policy owner pays in during the first years exceeds the sum of net level premiums that would have been payable to provide paid-up future benefits in seven years is called:
cover funeral expenses
A main reason for purchasing industrial life insurance is to:
the face amount of the policy
A man commits suicide 30 months after purchasing a life insurance policy and his wife is the named beneficiary. What amount will his wife receive?
morale
A mental trait, such as road rage, presents a ______ hazard.
two years
A viatical settlement can be used when the insured is diagnosed with an illness or condition that is expected to end his/her life, usually within:
independent
A(n) _______________ agent represents several insurers and their different insurance products.
automatic premium loan
A(n)_____ rider allows cash value to pay premiums.
31 days
According to N.C. law, all group life policies must contain a conversion provision which allows the covered individual _______ to convert the group coverage to an individual plan without evidence of insurability if their employment is terminated.
Disability
According to the Social Security Department, the inability to engage in any substantial gainful work is known as:
disability
According to the Social Security Department, the inability to engage in any substantial gainful work is known as:
at the tie of annuity payout
Accumulation units are converted into annuity units:
at the time of annuity payout
Accumulation units are converted into annuity units:
The propensity for insuring less favorable insurance risks.
Adverse Selection is based on what premise?
the agent and the company with whom the agent is affiliated.
Agency Law refers to the relationship between:
true
Agents of fraternal societies must be licensed in accordance with general insurance laws.
15
All minors in North Carolina, age ____ and older have full power and authority to make contracts of insurance.
the parties to a group health contract are the employer and the employees.
All of the following are characteristics of group health insurance plans EXCEPT: 1) the parties to a group health contract are the employer and the employees. 2) their benefits are more extensive than those under individual plans. 3) the cost of insuring an individual is less than what would be charged for comparable benefits under an individual plan. 4) employers may require employees to contribute to the premium payments.
Edna, age 72, nurse.
All of the following employed persons who have no employer-sponsored retirement plan would be eligible to set up and contribute to a traditional IRA EXCEPT: 1) Joan, age 26, customer service representative. 2) Brett, age 41, medical technician. 3) Edna, age 72, nurse. 4) John, age 60, electrician.
representations
All statements made on an application are considered ________________ because there can be no guarantee that they are true.
immediatly
An immediate annuity is designed to provide income:
$500
Audrey, a 34-year old attendant, has a $10,000 IRA with her former employer and wants to roll the funds over into an IRA with her new employer but wants to keep out $5,000 to pay some bills. How much early distribution penalty will she have to pay?
$2,000
Bob's life insurance policy cash value is $10,000 and he has paid $8,000 in premiums. He now wants to surrender the policy for its cash value. How much is considered taxable?
$5,500
Both SARSEP and SIMPLE plans allow employees 50+ years of age to make catch-up contributions with a $_______ limit on a SARSEP and a $2,500 limit on a SIMPLE (2011).
An Attourney
Buy-sell agreements can only be drafted by:
Risk reduction
Changing one's lifestyle to minimize a known risk is an example of what type of risk?
joint and full survivor option
Charles wants an annuity that provides income for he and his wife, Emma. If he should predecease Emma, he wants her to receive the same income payments for the rest of her life. Which type of annuity payout option should he select?
higher the premium
Complete this sentence: "Typically, the shorter the premium-paying period, the _________________."
No-lapse guarantee rider
Guarantees a death benefit for life so the insured is covered even if premium payments lapse.
payments for the remaining five years
Henry has a Life with Period Certain annuity (life or ten years) in which is wife, Harriet, is beneficiary. If Henry dies after 5 years, what will Harriet receive?
a contractual agreement to pay benefits in the future.
Deferred compensation plans can be simply and best defined as:
misuse of premium
Diverting insurance funds for personal use is an example of:
$1,120
Each Social Security credit equals _______ annual FICA taxed earnings in 2011.
$5,000
Ed is 24 years old and works as a clerk in his father's hardware store. He earned $30,000 in 2011 and wants to invest in an IRA as much as he can to lower his taxable income. How much is he eligible to contribute and deduct from his taxes?
level
Endowment policies can be compared to _______________ insurance.
Fixed Rate Annuity
Equity indexed annuities are a form of:
Children's insurance rider
Extends a death benefit to the insured's child (up to age 25).
taxable wage base
FICA taxes are applied to employees' incomes up to certain limits, called the:
whole life policy, term insurance
Family Income and Family Maintenance contracts both utilize a ____________ as the base, with a __________ rider.
whole life policy, term insurance rider
Family Income and Family Maintenance contracts both utilize a ____________ as the base, with a __________ rider.
whole life and decreasing term
Family Income policies are a combination of which two types of policies?
no less than 30 days
For life insurance policies for which the premiums are paid monthly, the grace period is:
no more than 30
For life insurance policies for which the premiums are paid monthly, the grace period is:
wholesale insurance
Franchise life insurance is also called:
flexibility
Group Universal Life plans offer a greater degree of _____________ than is usually found in other group life plans.
premium payments
In insurance terms, "consideration" refers to:
Tertiary
In life insurance, a beneficiary designated as third in line to receive the proceeds or benefits if the other named beneficiaries do not survive the insured is the _____________ beneficiary.
funded
In order for a retirement plan to be qualified, it must be:
uncertainty regarding financial loss
In the insurance business, risk can best be defined as ___________________________.
evaluate the financial needs of those left behind who depend on the insured.
In the process of selling life insurance, the first step in determining the needs of your client is to:
Because of the way it credits interest to the annuity's value.
In what way is an equity-indexed annuity different from other fixed annuities?
policy owner
Insurance would be unenforceable and considered a wager if the __________ does not have an insurable interest in the insured party.
company
Key Person insurance gives complete control of the policy to the _______________ as an owned asset.
survivorship factor
Life insurance companies are uniquely qualified to guarantee annuity payments due to what is referred to as the ______________, which is akin to the mortality factor in a life insurance premium calculation.
liquidating an estate
Life insurance is concerned with creating an estate, whereas annuities are concerned with:
there is no tax
Mabel named her church as the beneficiary of her life insurance policy. When Mabel dies, who is responsible for the taxes on the lump sum payment of proceeds?
Risk Reduction
Mac decides to install a burglar alarm in his residence. What type of risk classification would this be?
Matt, because Ashley has not contributed the minimum 10 years in FICA taxes to be fully insured.
Matt has been a full-time firefighter in New York City for the past 20 years. His wife, Ashley, went to work after the children grew up and has been working for the past 9 years. Who would earn more through the Social Security program?
individuals
Most new life insurance policies are purchased by ______________ from life insurance agents.
permanent capital stock
Mutual insurers are incorporated insurers without:
Ordinary, Industrial, Group
Name the three basic categories of coverage upon which the life insurance world revolves.
10%
No cash withdrawals from a traditional IRA are permitted prior to the policyowner reaching the age of 59 1/2 without having to pay a ______ excise tax, with few exceptions.
brokers
North Carolina does not issue separate licenses for:
8%
North Carolina law restricts an insurance company from charging a fixed rate higher than _____ annually on policy loans.
a proposed new life insurance policy
North Carolina's Replacement Rule sets forth the requirements and procedures to be followed by insurance companies and insurance producers when a proposal is being made to a client who plans to replace an existing life insurance contract with:
a preferred risk client
Of the following, who would most likely pay a lower premium amount?
Immediately
On a reinstated health policy when no new application is requested, how long after the policy's reinstatement will coverage for accidents become effective?
premium rates
Once insurable interest has been established, and the process of evaluating all of the information and applying it against the insurer's standards and guidelines has been accomplished, ______________ can be established.
misrepresentation
Overstating promises and guarantees is a form of:
point of service
PPOs are considered ___________ companies.
Additional insured rider
Provides a death benefit on the lives of family members.
limited pay whole life
Provides level premiums limited to certain time period, less than life
qualified
Retirement plans that meet federal government approval and receive tax benefits are known as ___________ plans.
mutual
Risk Retention Groups (RRGs) are a form of __________ insurer.
Morale
Road rage is an example of what type of hazard?
joint and two thirds survivor
Rob died in a car accident and his wife, Jean, survived. Their annuity was purchased to provide income for two people. Jean's annuity income will now provide her with two-thirds of the original payments. Which annuity payout method did they choose?
joint and two-thirds survivor
Rob died in a car accident and his wife, Jean, survived. Their annuity was purchased to provide income for two people. Jean's annuity income will now provide her with two-thirds of the original payments. Which annuity payout method did they choose?
5 months
Robert had an accident and qualified for Social Security disability. Given the waiting period, when will Robert begin to receive benefits?
after 5 years
Robert had an accident and qualified for Social Security disability. Given the waiting period, when will Robert begin to receive benefits?
The $15,000 withdrawal is taxable as ordinary income plus a 10% premature distribution penalty applies.
Roland invested $30,000 in a deferred annuity when he was 30 years old, which grew to $60,000 in 20 years. At age 50, he decides to take a partial withdrawal in the amount of $15,000. What are the tax implications?
Ron no longer has to pay premium payments
Ron has paid on his 20-year pay whole life policy for 20 years. Which of the following scenarios apply?
Ron no longer must make premium payments.
Ron has paid on his 20-year pay whole life policy for 20 years. Which of the following scenarios apply?
parol evidence rule
Rule of contract law that brings all verbal statements into the written contract and disallows any changes or modifications to the contract by oral evidence.
seniors
STOLI contracts typically target:
income tax free
Section 1035 Exchanges are a way to move annuity funds:
Adverse Selection
Selection "against the company." Tendency of less favorable insurance risk to seek or continue insurance to a greater extent than others. Also, tendency of policy owners to take advantage of favorable options in insurance contracts.
Risk Retention
Self-insuring is an example of what type of risk?
nonforfeiture
Should a policyowner get into a situation in which he/she cannot continue to make the required premium payments, _____________ options can be utilized.
pay as you go
Social Security is based on a __________ system.
$255
Social Security provides for a maximum death benefit of:
a death benefit, old age benefits, and disability benefits.
Social Security provides:
False
T/F: An agent who negotiates an application for insurance, in any controversy between the insured and the insurer, is regarded as representing the insured and not the insurer.
true
T/F: An agent who negotiates an application for insurance, in any controversy between the insured and the insurer, is regarded as representing the insured and not the insurer.
true
T/F: An agent's records are subject to scrutiny by the Insurance Commissioner at any time deemed appropriate by the Commissioner.
representations
Statements made on an application are not considered warrantees, but are called ________________ as true to the best of the applicant's knowledge and belief.
ALL
Stock and mutual companies can write ______________ insurance. 1) life 2) health 3) property and casualty 4) All - life, health, and property and casualty
government insurers
Supplemental Medical Insurance, Medicaid, and U.S. Armed Services and Veterans Insurance are all examples of what type of insurer?
false
T/F Only non-participating policies pay dividends.
true
T/F: "Combination contract" is a term used to describe life insurance programs which combine different forms of life insurance into a single package to produce a desired pattern of benefits.
True
T/F: "Partnerships" usually are made up of two or more owners who contribute and share profits.
true
T/F: "Partnerships" usually are made up of two or more owners who contribute and share profits.
False
T/F: "Replacement" means a transaction in which a new policy is purchased by a person who has never had insurance before.
false
T/F: "Replacement" means a transaction in which a new policy is purchased by a person who has never had insurance before.
True
T/F: "Small businesses" usually operate as sole proprietorship.
True
T/F: "Small businesses" usually operate as sole proprietorships.
true
T/F: "Small businesses" usually operate as sole proprietorships.
True
T/F: A Waiver of Premium rider is usually included with guaranteed renewable and noncancelable individual disability income policies.
true
T/F: A Waiver of Premium rider is usually included with guaranteed renewable and noncancelable individual disability income policies.
True
T/F: A licensee may request in writing an extension of time before the last month of the licensee's compliance year.
false
T/F: A new suicide exclusion goes into effect when a policy is reinstated.
false
T/F: A term life insurance policy's cash value builds during a specifically limited period of time.
true
T/F: Accelerated benefit provisions are standard in most individual and group life insurance policies.
true
T/F: Adjustable life policies combine term and permanent insurance with whole life insurance as the base policy.
true
T/F: Agents are prohibited from negotiating insurance contract provisions.
True
T/F: Agents are sometimes referred to as "field underwriters."
True
T/F: Agents of fraternal societies must be licensed in accordance with general insurance laws.
true
T/F: Agents of fraternal societies must be licensed in accordance with general insurance laws.
false
T/F: An "alien company" is a company incorporated under the laws of any jurisdiction inside of the United States.
2
The incontestable clause is typically ______ years.
5
The insurer has informed applicant Joan that adverse information has been discovered through her credit report investigation. Joan requests a summary of the information. The insurer has ______ days in which to provide Joan with the information.
annual renewable term insurance (ART)
The most common group life insurance plans use __________________________________ as it provides the lowest cost life insurance coverage.
provide insurance to its owners (the policyholders) at the lowest possible net cost.
The operating objective of a mutual life insurance company is to:
Grace Period
The period between the time a life insurance premium is due and the time the policy lapses is called the:
grace period
The period of time after the due date of a premium has passed during which the policy remains in force without penalty is the ____________ provision.
mortality, interest and expenses
The primary factors used as the basis for determining premium costs in life insurance are:
higher
The shorter increments between payments, the _______________ the out-of-pocket costs.
larger
The shorter the payout period, the _______________ each payment amount
When the primary and secondary beneficiaries predecease the insured
When does a tertiary beneficiary collect?
When there is no premium accompanying the application
When might a Statement of Continued Good Health be required regarding a life insurance policy?
generally the same
The surrender values are __________ for a participating life insurance policy and a nonparticipating life insurance policy.
human life values
The true value of insurance lies in its ability to protect __________.
Defined Benefit
The two categories of retirement contribution plans are _________________ Plans and Defined Contribution Plans.
defined benefit
The two categories of retirement contribution plans are _________________ Plans and Defined Contribution Plans.
Fixed
The type of annuity that provides a guaranteed rate of return is called a ______________ annuity.
experience
The type of rating that relies on a group's track record of past claims to determine premiums is called _________ rating.
term
The word "___________" is defined as "the length of time that something lasts, with a fixed beginning and end" or, more simply, "time."
endow
To "furnish with an income" is to:
5
To address the special needs of senior consumers with regard to annuity investments, an agent should maintain records relating to such transactions for ________ years.
5 years
To address the special needs of senior consumers with regard to annuity investments, an agent should maintain records relating to such transactions for ________ years.
five
To address the special needs of senior consumers with regard to annuity investments, an agent should maintain records relating to such transactions for ________ years.
contested
Typically, a life insurance policy cannot be:
40 quarters
Under Social Security benefits, in order for an individual to be classified as "fully insured," the worker must have completed _________________ of participating employment.
policy loan
Under the __________________ provision, a permanent life insurance policy may be borrowed against, using the policy's cash value as collateral.
75%
Under the accelerated death benefits provision, usually up to ______ of the policy's face value can be withdrawn.
aleatory contract
Unequal contingencies on the potential for profit or loss upon both parties in an insurance contract is a(n):
no-lapse guarantee rider
Universal life policies include additional death benefit guarantees offered by many insurers. A _____ guarantees a death benefit for life so the insured is covered even if premium payments lapse.
such material generally has been reviewed for compliance.
Using preprinted material in a sales presentation is recommended because:
The Indexing Method and the Participation Rate
What are the two features that have the greatest effect on the amount of additional interest that may be credited to an equity-indexed annuity?
Old Age, Survivors, Disability & Hospital Insurance
What does OASDI stand for?
65 or older
With regard to annuity investments by seniors, "senior consumers" are typically defined as those individuals who are age:
the same income payments continue to the survivor for life
With the Joint and Full Survivor annuity option, if one dies:
the same income payments continue to the survivor for life.
With the Joint and Full Survivor annuity option, if one dies:
family plan
With the _____ policy, all family members are covered under one plan. Newborns are covered automatically at no extra premium. Children's coverage is usually convertible without evidence of insurability.
traditional IRA
With the _____, contributions are nontaxable as income until the funds are withdrawn.
Roth IRA
With the _____, the funds are taxed as income before the contribution is made.
dividends against premium payments
_____ are used to pay policy premiums and lessen the policyowner's out-of-pocket expenses.
policy reserves
_____ belong to the insurer
group
_____ life insurance affords coverage for specific groups
ordinary
_____ life insurance is the most common
industrial
_____ life insurance provides smaller face values
brokers; agents
_________ represent insureds; _______ represent insurers.
churning
__________ is when policy values of an insurance policy are used to purchase another policy with the same insurer for the sole purpose of earning additional premiums or commissions.
express
___________ authority is the authority that an agent has in writing in the contract with the insurer the agent represents.
implied
___________ authority is the authority that is given not in writing but that is necessary for the agent to transact insurance.
cash value
___________ belongs to the policyowner
apparent
____________ authority is authority a third party is led to believe and that the agent is given due to the agent's actions.
Express
____________ authority spells out in contract form the activities that the agent has the power to perform on behalf of the insurer?
Level
____________ term insurance provides a level amount of protection for a specified period, after which the policy expires.
credit accident
_____________ health plans are designed to help the insured pay off a loan in the event he or she is disabled due to an accident or sickness.
Franchise
_____________ health plans are sometimes called "wholesale plans" and provide health insurance coverage to members of an association or professional society.
insurers
brokers represent
utmost good faith
insurance is a contract of:
Federal Insurance Contributions Act
what does FICA stand for?
a preferred risk client
who would most likely pay a lower premium amount?