Exam 2
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
whole life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 Pay Life
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n)
Anti-Money Laundering violation
Which statement regarding the misstatement of age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
Flexible Installment Deferred
An immediate annuity consists of a
Single Premium
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?
The gross premium is higher on a monthly payment mode as compared to being paid annually
How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 days
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
A Whole Life Policy with an Other Insured Rider
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire Contract
Which of these statements is incorrect regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for
Modified Whole Life
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:
Profit sharing plan
All of these are considered sources of underwriting information about an applicant EXCEPT
Rating Services
If a product offers to refund part of a prospect's premium in exchange for the purchase of a life insurance policy, the producer committing the illegal act of
Rebating
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
Taking receipt of premiums and holding them for the insurance company is an example of
fiduciary responsibility
Under the USA patriot act, insurers are required to report receipt of cash payments in excess of:
$10,000
Premature IRA distributions are assessed a penalty tax of
10%
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing agent
What action should a producer take if the initial premium is not submitted with the application?
Forward the application to the insurer without the initial premium
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest only
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
The underwriting process involves all of these, EXCEPT for:
Policy loan
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
The premiums paid by an employer for his employee's group life insurance are usually considered to be:
tax-deductible to the employer
All of the following statements about traditional individual retirement accounts are false except
10% penalty is applied to withdrawals before age 59 1/2
Which of the following statements regarding the notice regarding replacement of life insurance is correct?
A copy of the notice must be signed by the applicant and submitted with the application
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
A family Income policy is a combination of whole life and
Decreasing term insurance
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
How are Roth IRA distributions normally taxed?
Distributions are received tax-free
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
How does a indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
All of these statements about the Waiver of Premium provision are correct EXCEPT
Insured must be eligible for Social Security disability for claim to be accepted
An engineering firm that would suffer financially from the death of a project manager should purchase a:
Key Person Life Policy
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
If an applicant for an annuity refuses to provide suitability information, the producer should
Obtained the consumers signed statement documenting his or her refusal to provide suitability information
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
Ordinary income tax and a 10% tax penalty for early withdrawal
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
Which statement is true in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
What would the medical information bureau (MIB) identify?
Testing positive for marijuana use from a previous screening
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
Which of the following annuities pays benefits based on units rather than specific dollar amounts?
Variable annuity
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
Whole life policy with other insured rider
Who is NOT required to sign a life insurance application?
beneficiary
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
When replacing an existing life insurance policy, the replacing insurer must notify the existing insurer within
5 days
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
The investment gains from a universal life policy usually go toward:
cash value
In life insurance, the needs approach is used mostly to establish
how much life insurance a client should apply for
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
A renewable term policy is renewable at the option of the:
insured
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased
Credit life insurance is:
issued in an amount not to exceed the amount of the loan
Which life insurance rider typically appears on a Juvenile life insurance policy?
payor benefit rider
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called
representations
The consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and
the initial premium
A verbal or written statement which misleads a policy's features, benefits, or coverage is considered
Misrepresentation
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
What determines the full amount of social security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
to cost
To be valid, a group life insurance policy
May not be issued to a group formed solely for the purpose of obtaining insurance.
Which of these is considered a statement that is assured to be true in every respect?
warranty
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
Which of the following statements is correct about accelerated death benefits?
Must have a terminal illness to qualify
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
The full face amount
P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
Which of the following is not included in an annuity contract?
AD&D rider
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment rider (AD&D)
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
The automatic premium loan is provision is designed to:
Avoid a policy lapse
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
Which of the following features of a group term life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
All of the following penalties apply to anyone giving intentional false testimony during an insurance examination except
Guilty of a felony
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
Which is true concerning a variable universal life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of the following is true if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required