Exam Simulator One

XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?

Split-dollar

Any person who unknowingly violates Virginia insurance law may be punished for each violation by a penalty not to exceed

$1,000 with $10,000 cap

First-time homebuyers are able to withdraw up to how much from their qualified IRAs without incurring the 10% early withdrawal penalty?

$10,000

A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic deposits total $120,000 and the value of the contract is now worth $200,000. How much is taxed if the current value is surrendered today?

$200,000

John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?

100%

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

Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?

31 days

How many quarters must an employee have worked in a covered occupation to be considered fully insured for Social Security disability income?

40

One becomes eligible for Social Security disability benefits after having been disabled for

5 months

How long do most states allow an insurance company to delay the payment of a cash surrender under the delayed payment provision?

6 months

The time limit an individual has to "rollover" funds from an IRA or qualified plan is

60 days

Which of these is not an advantage of term life insurance?

A cash benefit will be provided if the insured is alive at the end of the policy period

Which of the following would not be appropriate for an immediate annuity?

A parent saving for a child's college

Which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy?

A portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy

Life insurance replacement can be best described as

A transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered

Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited?

Accelerated (living) benefit

Which statement regarding a single premium life insurance policy is not correct?

Additional premiums may be required under certain conditions

A __________ is a person appointed by an insurer that represents the company and present policies on its behalf

Agent

Tim is retired and has recently separated from his wife. He receives benefits from a qualified retirement plan through his former employer. The plan's trustee has decided to split these benefit payments between Tim and his estranged wife. This decision is likely in violation of which IRS rule?

Alienation of benefits

Which of the following is not a valid contract exchange?

An annuity exchanged for a life insurance policy

Which of the following situations would allow funds to be deposited into a rollover IRA?

An employee quits her job and receives $50,000 from her qualified plan

When a large sum of money is used to structure monthly payments, which product is typically used?

An immediate annuity

What qualifies as acceptance of an insurance contract offer?

An issued policy

Misrepresenting pertinent policy provisions relating to coverage after a loss is

An unfair claims settlement practice

Carlos the agent has sold an insurance policy and will be sharing the commission with another individual. Which of the following individuals may Carlos share the commission with?

Another licensed but unappointed agent

An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?

Applicant has a right to receive a copy of the report

If replacement was involved in the sale of a life insurance policy, an agent must provide a replacement notice no later than the

Application date

Kevin has an existing life insurance policy and assigns it to another insurer for a new contract. How would this transaction be treated for tax purposes?

As a Section 1035 exchange

Which statement regarding the cash value of a whole life insurance policy is correct?

Available to the policyowner when policy has been surrendered

What is the tax treatment of benefit payments for a non-qualified annuity?

Benefit payments are always fully taxable

Tom the agent negotiates an agreement that unreasonably restrains the business of insurance. He has likely committed a violation of insurance law that falls under

Boycott, coercion and intimidation

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?

Can be unequal

Which statement regarding the waiver of premium rider is accurate?

Cash payment is not directly provided to the policyowner

An employee welfare plan exempt from ERISA regulations would be

Church plans

What must be given to a life insurance applicant when the agent receives an application and the initial premium?

Conditional receipt

An annuity's accumulation period may

Continue after the purchase payments stop

The policy provision that permits an employee to change from group life coverage to an individual life policy is called the

Conversion provision

The premiums for a group life credit policy must be paid for by the

Creditor

Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective?

Date of issuance of the conditional receipt

What action may the Bureau of Insurance take it finds that a license applicant is not competent or untrustworthy?

Decline to issue the license

In what way is a life insurance policy affected by an accelerated benefit payment?

Decreases the death benefit

What kind of life policy typically offers mortgage protection?

Decreasing term

Which of the following is generally a form of group Credit Life Insurance?

Decreasing term insurance

An individual, age 45, would like to help pay for his daughters college expenses in 10 years. Which annuity would be appropriate for this individual?

Deferred annuity

And employee requested that the balance of a 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately And employee requested that the balance of a 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately had the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distribution is subject to federal income tax withholding

An employer has a group life coverage for his employees. How would an employee in poor health be treated in the situation?

Eligible for the same type of coverage as the other employees

Which of these is not considered a type of limited payment whole life insurance?

Endowment at age 70

The application is part of the annuity contract according to the

Entire contract clause

How often must the Commission examine each domestic insurance company?

Every five years

Which life insurance policy option allows the policy owner to have coverage equal to the net death benefit of the lapsed policy?

Extended term nonforfeiture option

When an applicant applies for a large amount of life insurance coverage, which of the following would likely not be an underwriting requirement?

Eye examination

A policyowner fell behind on the premium payments of a whole life policy and is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period and the policy also contains an outstanding policy loan?

Face amount minus the loan balance and past-due premium

Which of the following is considered an unfair claims settlement practice?

Failure to investigate or pay legitimate claims

Which benefit supplement added to a life insurance policy insures an entire family?

Family term rider

Which of these may not be deducted from premium payments or the cash value of a variable life insurance policy?

Federal premium taxes

Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?

Fluctuate with changes in the cash account

Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate

For federal income tax reasons

An annuity contract may be returned for a full refund during the

Free-look period

How long does one premium payment cover in a single premium whole life policy?

Full life of the policy

Insurable interest in one's own life is legally considered as

Generally unlimited

John has a criminal record in which he was convicted of a felony that involved dishonesty. Under Federal law, how would John be able to engage in insurance transactions?

Given written consent by the state insurance regulatory agency

What is the name of the rider that provides an additional purchase option in a life insurance policy?

Guaranteed insurability rider

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?

Income tax and penalty tax

Which life insurance clause prohibits an insurance company from questioning the validity of the contract after a stated period of time has passed?

Incontestable clause

What happens when an initial offer is answered with a counter offer?

Initial offer is void

All of these are considered features of whole life insurance except

Initial premium is lower than for an equivalent amount of term insurance

Which statement is incorrect about the interest only settlement option in a life insurance policy?

Interest on proceeds must be paid by the beneficiary

How much is normally paid to a policy owner in a life (viatical) Settlement?

Less than the death benefit

An agent must hold which of the following licenses to sell variable life insurance policies?

Life, variable, and securities license

Which of these do not indicate the presence of insurable interest in a life insurance contract?

Lifelong friendship

Which of these is not relevant when determining the amount of personal life insurance needed?

Local unemployment rate

According to the Federal Fraud and False Statements Act, which of these is considered to be an intentional violation?

Making false entries in a company's books

In Virginia, false advertising is an example of

Misrepresentation

Which of the following is true about a qualified retirement plan that is "top-heavy"?

More than 60% of plan assets are in key employee accounts

An agent advertising a life insurance policy must disclose the

Name of the actual insurer

Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?

Net payment cost index

Insurable interest involves what assumption?

One person benefits from another person's continued life

Who typically make the purchase payments in an individual annuity?

Owner

In Virginia, which of the following records are not required to be maintained by an agent?

Premium quotes for policies not accepted

When must a producer provide disclosure about information practices to an applicant?

Prior to or at the time of signing the application

Under federal law, which of the following actions may result in a producer becoming imprisoned?

Producer embezzling funds from an insurer

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a

Profit sharing plan

Which of the following would not be a reason for purchasing life insurance on a child's life?

Provide benefits for the child if the parents die

According to the State Corporation Commission, the purpose of licensing perspective agents in the state of Virginia is

Qualifying the agent to represent an authorized insurer for soliciting and negotiating their insurance products

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as

Reasonable expectations

Which of the following actions may result in an agent's license being suspended?

Rebating a portion of the commission to the insured

A life insurance policyowner sells her policy to a third-party in a viatical settlement. Under this transaction, the policyowner

Receives an amount less than the policy's death benefit

Which of the following is not a dividend option for a life insurance policy?

Receiving the entire policy cash value

Which of these is not an unfair claims settlement practice?

Refusing to pay persons bringing false or fraudulent claims

When a lapsed policy's premium has been paid current, it has the potential of being

Reinstated

A life insurance policy's waiver of premium rider has the ability to

Relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled

Which of the following would prevent a person from obtaining a Virginia resident agent license?

Residing in a state outside of Virginia

What kind of arrangement gives the policyowner the right to change the beneficiary?

Revocable designation

Security laws passed by Congress are enforced by which Federal agency?

Security and Exchange Commission (SEC)

Which of these situations would not potentially involve a prison sentence under federal law?

Selling insurance with a nonresident license

Which is a role of the replacing insurer during a life insurance replacement transaction?

Send notice of the proposed replacement transaction to the existing insurer

Chuck and Shaquille are both licensed agents in the same line of insurance. Chuck provides Shaquille with a referral that results in a sale. Commissions on the sale will likely be

Shared by both agents

Sylvia purchased an annuity for $100,000 from the proceeds of an inheritance. No further payments are permitted and the income stream begins in 15 years. This contract is a(n)

Single Premium Deferred Annuity

A life insurance agent has the authority to

Solicit, receive, and forward applications to the insurer

Licensed agents in Virginia are authorized to

Solicit, receive, and forward applications to the insurer

What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarantee period?

Subject to market value adjustment

Which of these is a true statement regarding survivor benefits under a qualified retirement plan?

Survivor benefits can only be waived with the written consent of a married employee's spouse

How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?

Taxed as ordinary income in the year received

An agent may be personally liable if he or she engages in acts

That are not part of the agency or agent contract

Which statement regarding the joint and survivor life insurance settlement option is not true?

The amount of each installment is larger than the single life income option

Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?

The gain is treated as taxable income and a penalty tax is imposed on the gain

What would be considered an advantage of purchasing term life insurance?

The initial premium is lower compared to an equivalent amount of whole life coverage

Which statement regarding a fixed period settlement option is correct?

The installment payment amount is determined by the total number of installments

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The transfer of Rick's IRA account balance to his surviving spouse qualifies for

The marital deduction

Which statement concerning a deferred annuity contract is correct?

The owner can be the beneficiary, annuitant, or neither

Who is normally considered to be the owner of a 403 (B) tax-sheltered annuity?

The participating employee

What happens when a policyowner borrows against the cash value of his life insurance policy?

The policy proceeds would be reduced by the outstanding loan balance

How does a continuous premium whole life policy differ from a limited payment whole life policy?

The time period in which premiums will be paid

How is a collateral assignment used in a life insurance contract?

Transfers specific ownership rights to a creditor

When does interest income for a flexible premium deferred annuity get reported for federal income taxes?

Upon receiving distributions from the contract

An agent's insurance records must be provided to the state corporation commission

Upon request of the state Corporation commission

An insurance policy that can also be classified as a securities product is called

Variable Life

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met

At what point are death proceeds paid in a joint life insurance policy?

When the first insured dies

A producer working for an insurance company may be personally liable for

acts performed which are prohibited in the agency contract

The surrender charge on many deferred annuity contracts are waived when the

annuitant dies or becomes disabled

To be eligible for Social Security disability benefits, an employee must be unable to perform

any occupation

When there is a named beneficiary on a life insurance policy, the death benefits

are paid directly to the beneficiary without interference from the insured's creditors

In a qualified retirement plan, the yearly contributions to an employee's account

are restricted to maximum levels set by the IRS

Who normally pays the premiums for a group Credit Life Insurance?

borrower

Voluntarily terminating an insurance policy is also known as

cancellation

Taking a sum of money and decreasing it in size is called

capital liquidation

What is payable to the policyowner if a whole life policy is surrendered prior to its maturity date?

cash value

The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of

consideration

Interest is credited to a fixed annuity no lower than the

contract guaranteed rate

Al surrenders his life insurance policy for its cash value. The total of the premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the

cost basis

What happens to the purchasing power of benefit payments from a fixed life annuity when the cost-of-living goes up?

decreases

An agreement is reached when an insurance contract is formed. Which of the following is not considered to be an element of an agreement?

equity

Death benefits from a life insurance policy are normally considered to be

exempt from federal income tax

When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid plus interest earned minus

expenses and withdrawals

A life insurance policy that contains an accelerated (living) benefit rider will provide funds if the

insured is expected to be confined to a nursing home for life

The _____ is required to notify the state corporation commission in the event of appointment termination

insurer

After an insurance application has been originated, the producer normally

is the major personal contact to the insured

The owner of a single premium deferred annuity is entitled to do all of these except

make additional payments into the annuity

An insurance contract may be voided if a misrepresentation found on the application is determined to be

material

Field underwriting by a producer

may result in the disclosure of hazardous activities of the applicant

The contractual rights which allow the owner of a deferred annuity to surrender the cash value several years before the annuity date are called

nonforfeiture options

When a deferred annuity is surrendered, who must sign the authorization to do so?

owner

A life annuity feature which provides benefit payments for a minimum number of years, no matter when the annuitant dies, is called

period certain

When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?

producer

The automatic premium loan provision can be accurately described as a

provision that provides a policy loan to pay any premiums by the end of the grace period

Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will

remain a constant dollar amount for the duration of the annuity period

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

social security

An insurer will typically assess a back-end load on a deferred annuity that is cancelled during the early contract years. What is this back-end load referred to as?

surrender charge

Under a deferred annuity, which contract feature initially charges a 5-10% fee that eventually reduces to $0 after a stated amount of time?

surrender charge

The interest credited to the cash values of personally-owned non-qualified annuities is considered

tax deferred

A material change in a modified endowment contract (MEC) results in

the seven pay test, adjusted for cash value, applies again

The reason for backdating a policy is

to obtain a premium rate based on an earlier age

All of these are considered to be a benefit under Social Security except for

unemployment

Giving up a known right on a voluntary basis is called

waiver

Which life insurance policy would be eligible to include an automatic premium loan provision?

whole life

An insured has a $25,000 whole life insurance policy with $6000 cash value available. Under the extended term nonforfeiture option, what is the amount of insurance available to the insured?

$25,000

The free look period provided in a life insurance policy is usually _____ days

10

An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?

Contract of utmost good faith

Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted?

Fixed amount installment option

An agent's license may only be suspended or revoked if the agent

Has been afforded a right to a hearing

Which of these statements is not true regarding a cash value loan against a life insurance policy?

Interest payments made by policyowner are deductible

Which of these would not be a valid reason to add the waiver of a premium rider to a life insurance policy?

It allows a policy loan to cover premium payments if the policyowner becomes totally disabled

Paul is an agent who is licensed in Virginia but a resident of Maryland. P is considered to be a _____ agent

Non-resident

Which of these would likely be considered an unfair claims settlement practice?

Offering settlements that are less than the fair value to offset insurer expenses

Which of these is not an unfair claims settlement practice?

Offering to settle a claim by arbitration

The State Corporation Commission is empowered to perform each of the following acts EXCEPT

Prosecute agents who violate state insurance laws

A life insurance producer's underwriting duties may include

Seeking additional information requested by the insurance company

Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?

Variable Universal Life

If an agent replaces a client's existing life insurance policy with a new one, which of these actions is advisable?

Wait until the new policy is issued and delivered before surrendering existing policy

An insurance company's failure to enforce a contract's provision is called

Waiver

The IRS has a "minimum coverage" rule regarding qualified retirement plans. This rule states that each qualified plan is required to

benefit a broad cross-section of employees

Any employee insured under a group life insurance plan is normally

covered with term life insurance

Viatical settlement proceeds may be subject to the claims of

creditors

Which of these life insurance policies does not contain a cash value provision?

decreasing term life

In a speech to a local association, an agent incorrectly stated that XYZ insurance company is in financial difficulty and not paying claims. The agent may be guilty of

defamation

Which annuity allows contributions to an IRA?

deferred

If a life insurance applicant is shown future premiums are to be paid out of non-guaranteed values, the illustration used in the sales presentation must

disclose that premium payments may need to be resumed depending on actual results

Group life plans sold in Virginia typically contain a conversion option. If the insured elects this option, the new policy

does NOT require evidence of insurability

When using the needs approach for life insurance planning, lump sums may be created for all of the following reasons EXCEPT

employee benefits

The powers directly given to a producer in an agency contract are called

express authority

Which settlement option makes minimum guaranteed dollar payments over a stated number of years?

fixed period

A Life Annuity with period certain is characterized as

guaranteeing benefit payments for a stated minimum number of years

A life insurance applicant is tested for Human immunodeficiency virus (HIV). The applicant must be informed that the testing

helps determine the insurability of the applicant

With life insurance, the needs approach is used primarily in determining

how much life insurance a client should apply for

During the early years of a whole life insurance policy, the cash value will normally be

less than the total premiums paid

When an agent is determining the suitability of an annuity for a client, which of these is not usually taken into consideration?

level of education

A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of

10%

Premature IRA distributions are subject to a penalty tax of

10%

Which of these statements about traditional individual retirement accounts is accurate?

10% penalty is applied to withdrawals prior to age 59 1/2

What is the maximum number of employees (earning at least $5000) that an employer can have in order to start a SIMPLE retirement plan?

100

A life insurance policy loan in Virginia cannot exceed an interest rate of

8%

A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen?

Reduction of premium payment

When an insurer discovers (during the claim process) that the insured's age was accidentally misstated on the life insurance application, the insurer will likely

Pay an amount the premiums would have purchased at the insured's actual age

What happens to a life insurance policy when the policy loan balance exceeds the cash value?

Policy will no longer be in force

Which of these is not used as selection criteria in the underwriting process of a life insurance application?

national origin

When funds are transferred directly from one IRA to another IRA, what percentage of the tax is withheld?

none

Which of the following is not a reason for a business to buy key person life insurance?

An increased pension liability if the key employee dies

A life insurance policy's contingent beneficiary is the

Person who receives the death benefits in the primary beneficiary dies before the insured

Which of the following is a true statement regarding universal life insurance?

Policy indicates how much of each premium is used toward company expenses