exam life insurance

H is employed by a company that provides group life insurance. The amount provided is $150,000. How much, if any, of the coverage is going to be reported as taxable income to H?

$100,000

An insured has contributed $12,000 in premiums toward a universal life policy. She decides to cancel the policy and take the cash value of $15,000. What are the tax consequences of this distribution?

$12,000 is a return of after tax dollars (i.e. cost basis), $3,000 is taxable as ordinary income

A partnership involving four equal partners is valued at $1,800,000. Under a Buy-Sell Agreement (Cross Purchase Plan), the amount of the policy on the life of each partner would be:

$150,000

L is no longer eligible for the employer's $50,000 group life insurance plan. L dies 28 days later without sending in the required conversion paperwork. What will their beneficiaries receive?

$50,000, less any premiums due

The mortality rate is based on mortality tables which show life expectancy and the death rate per _______ people living in the U.S.

1,000

A client purchases an individual disability income policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has ______days to review and return the policy to receive a full refund for any reason.

10

An ordinary straight whole life policy issued 30 years ago would endow at what age?

100

At what age does the cash value equal the face amount of a traditional whole life policy issued 25 years ago?

100

Which of the following term life insurance policies would have the highest 1st-year annual premium, all other factors being equal?

15-year

As part of Social Security benefits, a one-time payment of $_______ may be made paid to a surviving spouse after a taxpayer's death.

255

In a whole life policy, cash value must be made available to borrow against after _____ years.

3

To be considered fully insured under Social Security, a worker generally needs how many work credits?

40

Distributions from a Modified Endowment Contract (MEC) made on or after age _____ are not subject to any tax penalties.

59 1/2

A partnership has 3 partners who each have an equal ownership interest in their $3,000,000 business. How many policies would have to be purchased under a traditional cross purchase buy-sell agreement plan?

6

To be Currently Insured under Social Security, a worker must have at least _____ work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.

6

An annuity that is purchased with contributions made as often and in whatever amounts the owner wishes, subject only to the insurer's minimums and maximums, is called:

A flexible premium annuity

If a life insurance applicant's answers on the application indicate that he/she is in good health, when in fact the applicant has a disease that he/she is not aware of, the statement on the application is considered:

A representation

When the death of an insured occurs within a specified period, causing the policy to pay double or triple benefits, this policy must have which of the following riders?

Accidental Death Rider

The period of time from the first deposit into an annuity to the selection of a settlement option is considered the ___________ period.

Accumulation

Confidential information shared by the producer to the insurer and does not become part of the policy is the __________.

Agent's Report

With a Life Income Payment Option, what happens at the annuitant's death?

All payments cease

Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes?

An application

A systematic distribution of accumulated funds, either over one's life, or a specified period, is the definition of a(n):

Annuitization Option

The person who submits an application for insurance is always referred to as the _______.

Applicant

An insurable interest must exist between the _______ and the ________ at the time of application for life insurance to be valid.

Applicant/Insured

In order for a life insurance policy to be valid, insurable interest must exist at time of _________.

Application

How are employer paid premiums on a group life insurance plan treated for tax purposes?

As an ordinary and necessary business expense

The technical name of the person who makes a policy assignment is the:

Assignor

What is the fastest way to pay up an ordinary whole life policy?

Buy a single premium policy

The cash received by the policyowner when he/she terminates a policy is known as what?

Cash Surrender Value

What happens to the cash values in a whole life policy if an insured is on claim with a waiver of premium rider?

Cash value and dividends continue as if normal premium payments have been made

If a beneficiary is designated as irrevocable, then all of the following require the irrevocable beneficiary's approval, except:

Changing the mode of premium

All of the following are typically what key employee life insurance proceeds are used for, except to:

Close down the business

The ____________ has the power to issue rules and regulations to help enforce insurance statutes.

Commissioner

A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n):

Contract of Adhesion

The arrangement under a Buy-Sell Agreement in which each party purchases insurance on the life of his/her partner(s) is called a:

Cross Purchase Plan

Mr. Zamboni is the owner and the annuitant of an annuity. Mrs. Zamboni, the designated beneficiary, will be able to assume all ownership rights and tax-deferral if Mr. Zamboni should die ___________.

During the Accumulation Period

The exception to the rule concerning the non-deductibility of life insurance premiums is:

Employer paid group life insurance premium up to $50,000 of coverage

What provision describes the parts of the life insurance contract?

Entire Contract

For ____________ purposes, the client should know that if they are a third party owner, the value of the death benefit will be added to their estate upon death of the insured.

Estate planning

The State's __________ branch enforces the existing statutes that have been put in place.

Executive

Frank, the owner of a life insurance policy, chooses a Settlement Option whereby the proceeds of his policy will be paid out over 20 years. Frank has chosen:

Fixed Period

______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits.

Fraternal Benefit Societies

The _________ period keeps a policy in force for a short time after the premium due date, allowing policyowners a little extra time to pay an overdue premium without a lapse in coverage.

Grace

In which market are Certificates of Insurance issued to insured individuals?

Group

During the application process, a mistake is made by the applicant in answering one of the health questions and needs to be corrected. What is the best way to go about this?

Have the applicant initial the change or start over with a completely new application

Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk.

Home office underwriter

Under the Fair Credit Reporting Act, which of the following statements is correct?

If an individual is denied coverage, they can request a copy of the report

Which of the following correctly describes the effect of the Common Disaster Clause?

If an insured and primary beneficiary both are killed when the bus they are riding in goes over a cliff and if it cannot be determined who died first, the insured or primary beneficiary, the insured will be presumed to have survived the primary beneficiary so the contingent beneficiary will be able to receive the death proceeds

The Social Security Survivor Benefit is the amount of __________ that may be expected from the Primary Insurance Amount (PIA) of the insured.

Income

All of the following about Universal Life are true, except:

Increases in face amount do not require proof of insurability if under $100,000

Which principle states that an insured may be reimbursed up to the amount of the actual loss?

Indemnity

The Medical Information Bureau (MIB) is formed by:

Insurance companies

___________ manufacture and sell insurance coverage in the form of policies or contracts of insurance.

Insurers

Taxation applies to any ________ on the cash value paid out as a withdrawal of a Universal Life policy.

Interest

Which of the following scenarios will trigger an income tax due?

Interest earned on dividends left on deposit with the insurer

An applicant determined to have below average risk of loss would be:

Issued a preferred policy

The ___________ branch is responsible for interpreting and determining the constitutionality of the statutes.

Judicial

Cranston wants a Settlement Option for his beneficiary that will guarantee the beneficiary an income as long as the beneficiary lives. Cranston should choose:

Life Income Only

Which Payment Option pays an income for the life of the annuitant or for a specified period, whichever is longest?

Life Income with Period Certain

Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford, but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions?

Life Settlement

A false statement in the application that can render the contract void, if material to the acceptance of the risk, is known as a:

Misrepresentation

Members of the ___________ include state and territorial insurance commissioners or regulators.

National Association of Insurance Commissioners (NAIC)

Which of the following term policies cost the least all other factors being the same?

Nonrenewable and non-convertible

F has a $100,000 face amount term life policy for which F paid $10,000 in premium to date. F dies and the benefit is paid out to G, the beneficiary. What amount of the death benefit received is taxable as income to G?

Nothing

If a taxable event occurs with a permanent life insurance policy in just about every case, the taxability is considered:

Ordinary income

Which of the following is not a major source of underwriting information?

Past life insurance owned

What should a producer do if the policy applied for is issued at a higher rate than was expected?

Personally deliver the policy, explain the rating, and reinforce the value of the policy

When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a:

Preferred risk

All of the following are correct regarding Key Employee Life Insurance, except:

Premiums are deducted from the employee's salary

Which of the following is not a true characteristic of permanent protection Whole Life?

Premiums are flexible

A mandatory participation rate for noncontributory group plans is designed to:

Reduce adverse selection

The __________ provision specifies what an insured must do, if a policy has lapsed, in order to put it back in force.

Reinstatement

An individual owns a variable annuity. Upon annuitization, the number of Annuity Units on which the benefit amount is based will __________ from month to month.

Remain the same

____________ individuals pay a FICA tax amount equal to the total of an employer and employee payment.

Self-employed

Susan, age 65, inherits a substantial sum of money and wants to have the money distributed to her over the rest of her life starting next month. Which product offered by the life insurance industry will allow her to accomplish her objective?

Single Premium Immediate Annuity

An insurer considers all of the following when determining the fixed annuity payments, except:

Stock market value

_____________ are allowed as a way to access annuity values without having to elect a settlement option or surrender the contract.

Systematic withdrawals

K needs funds and needs to maintain the life insurance she has at the same time. Which of the following should K do with her traditional whole life policy

Take out a policy loan

From a tax standpoint, what is the benefit of receiving income benefit payments as opposed to cashing out an annuity after it has been held for several decades?

Taxes are only due on the amount of tax-deferred earnings in each payment

Deferred annuities are normally purchased to defer ___________.

Taxes on any policy earnings

Which of the following would have the lowest first-year annual premium for a 30-year-old, all other factors being equal?

Term to age 40

The cost of the group life insurance plan is determined by all of the following except one is the least important of them all. Which one is that?

The actual overall health of the group

In order to convert a term policy to a permanent policy as of the original issue age, all of the following must occur, except:

The cash values will have to be paid out first before the conversion can be effected

Angie is the insured under a $100,000 10 year term life insurance policy with her spouse named as her beneficiary. If she dies in year 9, what will her spouse receive?

The face amount of the policy

For the most part, the highest authority for insurance regulation is:

The individual states

Which of the following scenarios will cause the value of a life insurance policy death benefit to be included in the insured's estate?

The insured is also the policyowner and at death no beneficiaries are alive

A policyowner has chosen the Fixed Amount Settlement Option. Which of the following best describes this option?

The owner specifies the amount of each periodic payment and the insurer pays that amount until the funds plus interest are depleted

Who receives the endowment value of a whole life policy?

The policyowner

Who retains all of the rights in a life insurance policy?

The policyowner

The life insurance policy cost basis consists of:

The premiums paid in

If an applicant is a minor, who signs the application?

Their guardian

If an employee does not enroll during open enrollment and they still want coverage, what happens?

They must provide proof of insurability

How is it possible for an insurance company to payout more to an individual annuitant than what they had paid into the policy and any earnings credited?

Those who die early leave reserves behind to allow funding for those who live a very long time

The contract type in which only one party is legally bound to its contractual obligations after a premium is paid is a(n)_______ contract.

Unilateral

If an annuity uses units instead of dollars to determine the value of the policy, then it is a(n) _________ annuity.

Variable

A ___________ settlement is when a terminally ill insured sells his or her life insurance policy to a third party other than an insurance company, for an amount less than the policy's death benefit, but greater than its cash values.

Viatical

An applicant completes the application and submits it to the insurer along with a premium check. When is the applicant's offer considered accepted?

When the insurer issues a policy

When does the annuitization period begin?

When the policyowner elects to convert the annuity into an income benefit payment

XYZ Insurer has decided to issue a policy to a particular applicant. What is the next step in this insurance transaction?

XYZ will send the policy to the producer for delivery to the insured