ExamFX Ch6-8

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

Being age 65.

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

Who may contribute to a Keogh (HR-10) plan?

Self-employed plumber

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

Settlement option.

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

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

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

SEPs are suitable for large companies.

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

Simplified Employee Pension plan.

A 403(b) plan, commonly referred to as a TSA, is available to be used by

Teachers and not-for-profit organizations.

A policy-owner neglects to pay his life insurance premium on time. He dies ten days later. Which of the following is true?

The death benefit will be paid, minus the premium.

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

The plan must provide an offset for social security benefits.

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

Someone who works 400 hours per year

All of the following would be different between qualified and non-qualified retirement plans EXCEPT

Taxation on accumulation

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?

$3,000

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

6 credits

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

They are tax free to terminally ill insured.

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

Employer

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

HR-10 (Keogh Plan).

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

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

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

Policy-owner

No one may perform, offer to perform, or advertise any service in life insurance and securities, unless

The person is licensed and authorized in both areas.

For what reason may a life insurance producer backdate a life insurance policy?

To avoid an increase in premium rate for the insured

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

Owner's income

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

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

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

Employer contributions are not tax deductible.

An insured's monthly life insurance premiums are due on the first of each month. She misses her July 1 premium. When will her policy terminate, if she does not pay her premiums?

August 1

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

Not subject to income taxation by the Federal Government.

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

Notice Regarding Replacement

What is the official name for the Social Security program?

Old Age Survivors Disability Insurance

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?

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

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

Taxes are deferred.

If a retirement plan or annuity is "qualified," this means

It is approved by the IRS.

What type of annuity activity will cause immediate taxation of the interest earned?

Surrendering the annuity for cash

For a retirement plan to be qualified, it must be designed for the benefit of

Employees.

Who does the Interstate Insurance Product Regulation Compact serve?

Insurers

All of the following are required in a life insurance illustration EXCEPT

Name and home address of agent.

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

The earnings in the plan accumulate tax deferred.

Which of the following is TRUE of a qualified plan?

It has a tax benefit for both employer and employee.

What happens to policy coverage during the grace period?

The insured is covered as he/she was before the grace period.

An applicant accidentally writes on her application that she is 10 years older than she actually is. The policy is issued, and the insurer discovers the error several months later. Which of the following is most likely to happen to the premiums?

They will be charged according to her actual age.

The insurer must maintain copies of all signed illustrations for a minimum of how many years after the policy is no longer in force?

3

During a life insurance policy replacement, the insurer is required to provide the policy-owner a free-look period of at least

30 days

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

50%

SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees.

Which of the following is NOT true regarding a non-qualified retirement plan?

It needs IRS approval.

Using a class designation for beneficiaries means

Naming beneficiaries as a group

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?

PIA

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

Lump-sum death benefits are not taxable.

The Interstate Insurance Product Regulation Compact is a contract between

Member states.

Which type of retirement account does not require the owner to start taking distributions at age 72?

Roth IRA

All of the following are true regarding the Policy Summary EXCEPT

The policy summary may show dividends.

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

$10,000

What describes a ledger or proposal used to show both guaranteed and non-guaranteed elements of the policy?

Basic illustration

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

Certain groups of employees only.

When a policy-owner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called

Class designation.

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

It determines if the insurance policy is a MEC

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

A qualified plan for a small business

An insured innocently omitted a health problem in her life insurance application that would have influenced her premium amounts. The policy is issued, and the insurer discovers the error 3 years later. Which of the following will most likely happen?

The premium amounts will remain unchanged.

Which of the following is NOT an allowable 1035 exchange?

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