Wisconsin Life Insurance Exam

Certain groups of employees only

A tax-sheltered annuity is a special tax-favored retirement plan available to

Twisting

Agent who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of

The interest is not taxable since it remains inside the insurance policy

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

Group

All of the following are considered Social Security benefits EXCEPT

The plan must provide an offset for security benefits

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

The plan must provide an offset for social security benefits

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

3.5

Any person who violates an insurance statute or rule of Wisconsin can be imprisoned for up to how many years?

Not subject to income taxation by the Federal Government

Death benefits payable to a beneficiary under a life insurance policy are generally

Taxable Interest will be withdrawn first and the 10% penalty will be imposed if under age 59.5

During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal?

Are subject to vesting requirements

Employer contributions made to a qualified plan

Without receiving written consent from an insurance regulatory authority

Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce

Taxes imposed on a worker's earned income

How is Social Security funded?

Every 5 years

How often are domestic insurers examined by the Commissioner?

$3,000

If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?

A qualified plan for a small business

If a company has a Simplified Employee Pension plan, what type of plan is it?

Modified Endowment Contract

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an

The contribution is known and the benefit is unknown

In a defined contribution plan

Adhesion

Insurance policies are not drawn up through negotiations and an insured has little to say about its provisions. What contract characteristic is this?

Adhesion

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

The entire face value of the policy will be included in J's taxable estate

J transferred his life insurance policy to his son two years before his death. Which of the following is true?

Apparent

Perceived authority

Readability

Policies issued in this state must be presented in a meaningful sequence, be appropriately captioned, must provide definitions where appropriate, and must be printed in specified type. All these requirements refer to the rule of

Unemployment income

Social Security was created to provide all of the following benefits EXCEPT

30

The Commissioner issues an order without having conducted a hearing. Within how many days of receiving the order can the person aggrieved by the order request a trial?

Member States

The Interstate Insurance Product Regulation Compact (IIPRC) is a contract between

Universal Life

The Waiver of Cost of Insurance rider is found in what type of insurance?

Life income with period certain

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called

Utmost Good Faith

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as what?

Risk

The uncertainty or chance of loss

6 credits

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?

Certificate of Authority

To legally transact insurance in this state, an insurer must obtain which of the following?

Owner's income

Traditional IRA contributions are tax deductible based on which of the following?

The application given to a prospective insured

Which of the following is NOT the consideration in a policy?

Lump-sum death benefits are not taxable

Which of the following statements is TRUE concerning whole life insurance?

Withdrawals are not taxable

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Insureds cannot be randomly selected

Which statement regarding insurable risks is NOT correct?

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

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

Reciprocal

an unincorporated aggregation of individuals, called subscribers, who exchange insurance risks

Illegal inducement

ex: confirming future dividends in a life insurance proposal

Authorized Insurer

insurer who has received a Certificate of Authority from the department of insurance to transact insurance in this state

Apparent Authority (Perceived Authority)

is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of the circumstances the principal created.

Risk Retention Group

it is a liability insurance company owned by its members

Annuitant

receives payments from an annuity and is the person whose life expectancy is considered when writing the contract

Churning

replacing insurance policies for the sole purpose of making commissions

Hazard

something that increases the risk of loss

Express authority

the authority granted to an agent through the agent's contract

Risk

the uncertainty or chance of loss

Premiums

this is not a risk retention strategy

No penalties

A 35-year-old spouse of the insured collects early distributions from her husband's retirement plan as a result of a divorce settlement. What penalties, if any, will she have to pay?

The amount of the distribution is reduced by the amount of 20% withholding tax

A 60-year-old participant in 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?

When the application is taken

A Buyer's Guide must be presented

5 months

A claimant, who is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of

Proof of insurability is not required

A couple owns a life insurance policy with a Children's Term rider. their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

The insured's premiums will be waived until she is 21

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

If the father is disabled for more than 6 months

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

Pay dividends to the policyowner

A participating insurance policy may do which of the following?

Revocable beneficiary

A policyowner who is also insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

Reinsurance System

All of the following are marketing arrangements used by insurers EXCEPT

Being age 65

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT

The owner must be the party to receive benefits

All of the following are true of an annuity owner EXCEPT

Rebates are allowed if it is in the best interest of the client

All of the following are true regarding rebates EXCEPT

Welfare benefits

All of the following benefits are available under Social Security EXCEPT

Dividends from a mutual insurer

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT

Employer contributions are not tax deductible

All of the following statements are true regarding tax-qualified annuities EXCEPT

The president and employee of a family corporation

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

An applicant

An "insurance broker" is an intermediary who acts in the procuring of insurance on behalf of

Simplified Employee Pension plan

An IRA purchased by a small employer to cover employees is known as a

50% tax on the amount not distributed as required

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?

403(b) Plan (TSA)

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a

The interest will continue to accumulate tax deferred

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur?

Spouse

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?

$10,000, no tax consequence

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

An employee quits her job where she has a balance of 10 grand 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?

A portion of the benefit up to a limit is tax free; the rest is taxable income

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

If the primary beneficiary predeceases the insured

An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

Fraud

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?

Waiver

An insurance company receives an application with some information missing and issues the policy anyway. What is this called?

Aleatory

An insurance contract is this when it requires a relatively small amount of premium for a large risk

He will have to pay a penalty if he is younger than 59 1/2

An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which is true?

Mutual

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Cash Option

An insured receives and annual life insurance dividend check. What term best describes this arrangement?

The policy will terminate when the loan amount with interest equals or exceeds the cash value

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The insured will need a written consent of the insurer

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

Moral character, physical condition or developmental disability, sexual preference

An insurer cannot refuse, cancel, or deny insurance coverage based on these characteristics

60

An insurer decides to renew a life policy but at a higher premium rate, starting on the renewal date. How many days in advance must the insured be notified?

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

3 years

An intermediary must maintain records for how long?

30

An intermediary must notify the Commissioner of a change of residence address within how many days of the change?

an applicant submits an application to the insurer

An offer is usually made when

Apparent Authority

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority is this?

Contracts of adhesion

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59.5

During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal?

$5,000

If a person does not comply with an order issued within 2 weeks after the Commissioner has given notice, for each day that the violation continues, the Commissioner may issue a fine of up to

The balance of the loan will be taken out of the death benefit

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

Accumulated cash value

If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate?

Settlement Option

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

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

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

12 months

If reasonably possible, a notice of proof of loss claim must be provided to the insurer within what period of time after the time required by the policy?

Free of federal income taxation

If taken as a lump sum, life insurance proceeds to beneficiaries are passed

60 days

If the Commissioner issues an order and the person who is the object of the order demands a hearing within 30 days, within how many days must the hearing be held?

Twice the amount of any profit gained from the violation

In addition to any other forfeiture imposed, any person who violates an effective order may be required to pay

Grow tax deferred

In life insurance policies, cash value increases

Life and Series 6 or Series 7

In order for an intermediary to sell or offer to sell a variable contract, the intermediary must have which of the following types of licenses?

Blackout Period

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called?

30 days

In this state, insurers must pay a claim within how many days of receiving proof of loss?

6 credits

Minimum number of credits required for partially insured status for Social Security disability benefits is

Tax-deductible contributions

The advantage of qualified plans to employers is

10 days after the notice was delivered to the policyholder

The insurer decided to cancel an insurance policy prior to its expiration due to nonpayment of premium. When can cancellation take place?

HR-10 (Keogh Plan)

Two attorneys operate their practice as a partnership. The want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose

They are tax deferred until withdrawn

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

Employer

Under a defined benefit retirement plan, who determines what benefits a retired employee will receive?

Nothing; the payments will cease

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

Must be informed of the source of the report

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Cash Surrender

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Agent's contract with the principal

What documentation grants express authority to an agent?

Coverage ends and the policy cannot be reinstated

What happens when a policy is surrendered for its cash value?

Guides describing company financial integrity

What insurance concept is associated with the names Weiss and Fitch?

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

What is material misrepresentation?

It determines if the insurance policy is a MEC

What is the main purpose of the Seven-pay Test?

1% of net premiums earned

What is the maximum annual billing for an insurer?

$10,000

What is the maximum life insurance coverage available to the state residents through the Wisconsin State Life Insurance Fund?

50%

What is the penalty for IRA distributions that are below the required minimum for the year?

To provide the policyholder with a clear and accurate description of the policy coverage

What is the purpose of a proposal for a life insurance policy sold in connection with a security?

Both a life insurance license and a securities license

What license or licenses are required to sell variable annuities?

Reinsurance

What method do INSURERS use to protect themselves against catastrophic losses?

The Exclusion Ratio

What method is used to determine the taxable portion of each annuity payment?

Section 1035 Policy Exchange

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?

Insureds cannot be randomly selected

What statement regarding insurable risks is NOT correct?

Immediate

What type of annuity can be purchased with a single premium and provides benefit payments immediately?

Federal Estate Tax

What type of tax is associated with death proceeds from a life insurance policy?

It is reduced to the amount of what the cash value would buy a single premium

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

Purchase a single premium policy for a reduced face amount

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Annuitant

When an annuity is written, whose life expectancy is taken into account?

Return of Premium

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all the premiums paid. Which rider is attached to the policy?

The Wisconsin Insurance Security Fund

When an insurer is given an order of liquidation, which of the following will protect the insureds' unpaid claims?

Outstanding loans and interest

When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value?

When the worker reaches age 65 and has earned the required amount of work credits

When do full Social Security retirement benefits begin?

30

When the appointment of an individual agent is terminated, the insurer must notify the Office of the Commissioner with appropriate forms within how many days after the termination date?

When there are any incidents of ownership at the time of death

When would life insurance policy proceeds be included in the insured's taxable estate?

Implied

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

Implied

Which authority is NOT stated required for the agent to conduct business?

Annuity payments

Which concept is associated with "exclusion ratio"?

The loss must be catastrophic

Which is NOT a characteristic of an insurable risk?

To minimize the insured's level of liability in the event of a loss

Which is NOT a goal of risk retention?

Private insurers may be authorized to transact insurance by state insurance departments

Which is an accurate comparison between private and government insurers?

Extended Term

Which nonforfeiture option has the highest amount of insurance protection?

Payor Benefit

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Someone who works 400 hours per year

Which of the following applicants would NOT qualify for a Keogh Plan?

Retirement, disability, and survivors

Which of the following are Social Security benefits?

Taxes are deferred

Which of the following best describes taxation during the accumulation period of an annuity?

The earnings in a qualified plan accumulate tax deferred

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

The amount of contributions made by the employer is determined by an actuarial formula

Which of the following characteristics applies to defined benefit plans but not defined contribution plans?

Withdrawn amounts are taxed on last in, first out basis

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

Size of each installment

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?

Notice Regarding Replacement

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Policyowner

Which of the following has the right to transfer ownership of a life insurance policy to another person?

To minimize the insured's level of liability in the event of loss

Which of the following is NOT a goal of risk retention?

A whole life insurance policy is exchanged for a term insurance policy

Which of the following is NOT an allowable 1035 exchange?

Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.

Which of the following is NOT true of Section 1035 Policy Exchanges?

It needs IRS approval

Which of the following is NOT true regarding a nonqualified retirement plan?

Money borrowed from the cash value is taxable

Which of the following is NOT true regarding policy loans?

It would not occur in a deferred annuity

Which of the following is NOT true regarding the accumulation period of an annuity?

They are required by state law to be included in the policy

Which of the following is TRUE about non forfeiture values?

It has a tax benefit for both employer and employee

Which of the following is TRUE of a qualified plan?

The annuitant assumes the risks on investment

Which of the following is TRUE regarding variable annuities?

The chief administrator of the insurer is called an "attorney-in-fact"

Which of the following is a characteristic of a Reciprocal Insurance Exchange?

Surplus lines agent

Which of the following is a licensee able to place insurance with unauthorized insurers?

Have attained fully insured status

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

Loss

Which of the following is the basis for a claim against an insurance policy?

Misrepresentation

Which of the following is the use of false, misleading, or deceptive statements to describe the terms or benefits of any policy?

They are tax free to terminally ill insured

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?

Dividends are not taxable

Which of the following is true regarding taxation of dividends in particular policies?

Variable Annuity

Which of the following products requires a securities license?

PIA

Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the worker's earnings and retirement age?

Payor Benefit Rider

Which of the following riders would NOT cause the Death Benefit to increase?

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated

Which of the following statements about the reinstatement provision is true?

SEPs are suitable for large companies = false

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

Dividend

Which of the following terms is used to name the nontaxed return of unused premiums?

Insurer's guaranteed minimum rate of interest

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?

Agent C uses her license to write only business other than controlled

Which of the following would NOT be a violation of state insurance regulations?

Rating the financial strength of insurance companies

Which services are associated with Standard & Poor's and AM Best?

Policyholders

Who might receive dividends from a mutual insurer?

20 days

Within how many days of the original hearing and final issuance of an order (regarding an order issued by the Commissioner) may an aggrieved person request a re-hearing?

Material Misrepresentation

a statement that, if discovered, would alter the underwriting decision of the insurance company

Keogh plan (HR-10)

a type of retirement plan for self-employed people and small businesses in the US (independent contractors cannot us this plan)

Unilateral Contract

one-sided, only one party makes an enforceable promise

Rebating

when the prospective insurance buyer receives a refund of all or part of the commission for the insurance sale, example: cash, gifts, services, payment of premiums, employment, etc.