Life Exam Missed Questions

Annually Renewable Term

-Renews each year without proof of insurability -Premiums increase due to attained age Most insurance at lowest cost

In a life settlement transaction, how many days does the owner have to terminate the contract the date after it is executed

15 days

The owner of a life insurance policy has just completed a life settlement transaction. How many days does he have to rescind the contract?

15 days

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

if the insurer does not pay the death benefit to the beneficiary within the required time period, what interest rate will be assessed on the proceeds

6%

A distribution from an employer-sponsored retirement plan from an IRA is eligible for tax-free rollover if it is reinvested in an IRA within...

60 days

An annuity has accumulated the cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive

70,000 (ALWAYS THE GREATER AMOUNT BETWEEN PREMIUMS PAID AND CASH VALUE)

Waiver of Cost of Insurance

A disability rider added to a Universal Life policy that pays the cost of insurance and other expense charges during the insured's disability.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Option B b)Corridor option c)Variable option d)Option A

A) Option B

All of the following are general requirements of a qualified plan EXCEPT... a. The plan must be temporary b. the plan must be approved by the IRS c. The plan must have a vesting requirement d. The plan's benefit cannot discriminate in favor of the "prohibited group"

Answer: A. The plan must be temporary Qualified plans must be permanent. All other characteristics above are also true.

According to the life insurance replacement regulations, which of the following would be an example of policy replacement ? a. Term insurance is changed to a Whole Life policy b. A lapsed policy is reinstated within a specific timeframe c. A policy is reissued with a reduction in cash value d. A term only expires, and the insured buys another term life policy

Answer: C. A policy is reissued with a reduction in cash value Replacement refers to any transaction in which new life insurance or an annuity is purchased , resulting in reduced paid-up insurance, continuation of extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values

J is receiving fixed amount benefit payments from his late wife's insurance policy. he was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? a. Interest only b. Joint and survivor c. Fixed amount d. Fixed Period

Answer: C. Fixed Amount The fixed-amount option pays a fixed, specified amount in installments until the proceeds (principal and interest) are exhausted. The recipient selects a specified fixed dollar amount to be paid until it is gone. If the beneficiary dies before the proceeds are exhausted, installments will continue to be paid to a contingent beneficiary until all proceeds have been paid out.

Which of the following is true regarding pure life annuity settlement option? a. The beneficiary will receive a refund of the principal b. It guarantees income for a specified period of time c. It provides the highest monthly benefit d. It guarantees that all the proceeds will be paid out

Answer: C. It provides the highest monthly benefit The pure life annuity pays the most since it only guarantees to pay for the rest of one's life without a minimum guarantee

Contributions to Roth IRAs are.. a. Always subject to a 6% tax penalty b. Paid with pre-tax dollars c. Not taxable deductible d. Tax deductible

Answer: C. Not Tax Deductible Contributions to Roth IRAs are not tax deductible , and excess contributions are subject to a 6% tax penalty

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is a. Taxed as income on 50% of the excess b. Assessed a fine of 10% of the excess c. Taxed as ordinary income d. Not taxed

Answer: C. Taxed as ordinary Income Upon surrender or endowment, any cash value in excess of cost basis (premium payments) is taxable as ordinary income

A graded premium life insurance policy is a modified form of a. Deferred Annuity b. Universal Life c. Whole Life d. Level Term

Answer: C. Whole Life Graded premium is a whole life policy with premiums that increase annually over the first 5 to 10 years

Which of the following would NOT trigger the payment of Accelerated Death Benefits? a. Terminal Illness? b. Requiring an organ transplant for the insured to survive c. Being permanently institutionalized d. Being permanently disabled

Answer: D. Being permanently disabled Accelerated death benefits or living riders allow the early payment of some portion of the death benefit if the insured has conditions such as terminal illness, permanent institutionalization, or a life-threatening medical condition that required a dramatic medical intervention. Accelerated death benefit, however, does not cover disability.

Which of the following would be TRUE of both the fixed-period and fixed-amount settlement options? a. The amount of payments is based on the recipient's life expectancy b. The size of installments decreases after certain period of time c. Both guarantee payments for the life of the beneficiary d. Both guarantee that the principal and interest will be fully paid out

Answer: D. Both guarantee that the principal and interest will be fully paid out Neither the fixed-period nor fixed-amount settlement options guarantee income for the life of the beneficiary; however, they both guarantee that the entire principal and interest will be distributed

In a group life policy with a death benefit of more than $50,000. a. Premium cost below $50,000 is taxable as income to the insured b. Premium cost is tax-deferred c. Premium cost is taxable to the employer d. Premium cost above $50,000 is taxable as income to the employee

Answer: D. Premium cost above $50,000 is taxable as income to the employee Any premiums paid by the employer for an employee's coverage of more than $50,000 are taxable as income to the employee. Premiums for coverage of $50,000 or less are not taxable to the employee.

Employer contributions made to a qualified plan

Are subject to vesting requirements. Qualified plans must have a vesting requirement. (vesting= partial ownership gained ea ch year by the employee)

the guaranteed insurability rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following except: a. Marriage b. Purchase of a new home c. Approximately every 3 years between the ages of 25 and 40. d. Birth of a child

B

what type of licensee represents the INSURED

Broker (An agent represents the insurer (principal); a broker represents the insured.)

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?

Extended Term

Which of the following would be considered a peril?

Fire

what is the name for an overfunded policy?

MEC (modified endowment contract)

can a person be denied coverage for HIV?

No because of the ACA

Which Universal Life option has a gradually increasing cash value and a level death benefit? A. Juvenile life b. term insurance c. option b d. option a

Option A

what is the exclusion ratio used to determine

The annuity benefit to be EXCLUDED from TAXES

Paid-Up Additions

The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

Guaranteed Insurability

The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.

Accumulation at Interest Dividend Option

The insurance company keeps the dividend in an account where it accumulates interest. The policy owner is allowed to withdraw the funds at any time. The amount of interest is specified in the policy and compounds annually. Although dividends themselves are NOT taxable, the interest on the dividends is taxable to the policy owner when credited to the policy, whether or not the policy owner receives the interest.

which of the following policies would have an IRS required corridor or gap between the cash value and death benefit Universal life-- Option A Universal life-- Option B Equity Indexed Universal Life Variable Universal Life

Universal Life-- Option A (level death benefit option)

Guaranteed Renewable

a policy that is written on a noncancellable basis with the right to renew guaranteed as long as the policies are paid

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a)Guaranteed insurability option b)Dividend options c)Guaranteed renewable option d)Nonforfeiture options

a) guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called a)Paid-up additions. b)One-year term purchase. c)Accumulation at interest. d)Reduction of premiums.

a)Paid-up additions.

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a)Settlement option. b)Nontaxable exchange. c)Nonforfeiture option. d)Rollover.

a)Settlement option. A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.

All of the following are true of key person insurance EXCEPT a)The plan is funded by permanent insurance only. b)There is no limitation on the number of key employee plans in force at any one time. c)The employer is the owner, payor and beneficiary of the policy. d)The key employee is the insured. Key Person coverage may be funded by any type of life insurance.

a)The plan is funded by permanent insurance only

Are insurance company underwriters allowed to discriminate? a)Yes, but not unfairly b)No, higher risks pay higher premium c)No, discrimination is an unfair practice d)Yes, but only for gender

a)Yes, but not unfairly

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

an individual NOT covered by an employer-sponsored plan who has earned income may deduct regardless of their income level

Which of the following indicates the person upon whose life the annuity income amount is determined?

annuitant

an insurance advisers license may be issued to a corporation if the majority of the officers of the corporation

are found by the Commissioner to be in all respects qualified for licenses as advisors

Traditional IRA contributions are tax deductible based on which of the following? a)IRA limit b)Owner's income c)How long the plan has been in force d)Owner's age

b)Owner's income Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.

Which of the following is true regarding a market value adjusted annuity? a)It provides a level benefit payment. b)The owner is guaranteed a fixed interest rate for a specific period of time. c)The insurer bears all the market risk of changing interest rates. d)There are no penalties for a premature surrender of the annuity.

b)The owner is guaranteed a fixed interest rate for a specific period of time. Under a market value adjusted (modified guaranteed) annuity, the insurer guarantees a competitive interest rate for a specific period (the longer the period, the better the guaranteed rate). At the end of the period, the owner has the option of taking the accumulated value or reinvesting the values at a new interest rate.

The Waiver of Cost of Insurance rider is found in what type of insurance a)Juvenile Life b)Universal Life c)Whole Life d)Joint and Survivor

b)Universal Life The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

Which of the following best describes the aleatory nature of an insurance contract? a. policies are submitted to the insurer on a take it or leave it basis b. exchange of unequal values c. only one of the parties are legally bounded to the contract d. ambiguities are in favor of the insured

b. exchange of unequal values

The Waiver of Cost of Insurance rider is found in what type of insurance? a. whole b. universal life

b. universal life

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a)Universal life b)Whole life c)Decreasing term d)Variable life

c) DECREASING TERM A decreasing term policy's face amount decreases as the amount of debt is reduced.

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a)The payments are not guaranteed for life. b)The insurer determines the amount for each payment. c)It is a life contingency option. d)It will pay the benefit only for a designated period of time.

c)It is a life contingency option.

During replacement of life insurance, a replacing insurer must do which of the following? a)Designate a new producer for a replaced policy b)Send a copy of the Notice Regarding Replacement to the Department of Insurance c)Obtain a list of all life insurance policies that will be replaced d)Guarantee a replacement for each existing polic

c)Obtain a list of all life insurance policies that will be replaced

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? a)The beneficiary will receive the lump sum, plus interest. b)The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. c)The beneficiary will only receive payments of the interest earned on the death benefit. d)The beneficiary must pay interest to the insurer

c)The beneficiary will only receive payments of the interest earned on the death benefit. With the Interest Only settlement option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, or annually).

What is the advantage of reinstating a policy instead of applying for a new one? a)The face amount can be increased. b)The cash values have gained interest while the policy was lapsed. c)The original age is used for premium determination. d)Proof of insurability is not required.

c)The original age is used for premium determination. The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

Which of the following best defines the "owner" as it pertains to life settlement contracts? a)A fiduciary for the contract b)The insurance provider c)The policyowner of the life insurance policy d)A financial entity that sponsors the transaction

c)The policyowner of the life insurance policy

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a. universal life b. whole life c. decreasing term d. variable life

c. decreasing term

Which of the following is the distinguishing characteristic of the interest-adjusted net cost method?

considers the time value of money in comparing life insurance costs

what type of interest rate is guaranteed in universal life policies

contract interest rate

A producer who fails to separate premium monies from his own personal funds is guilty of a)Larceny. b)Embezzlement. c)Theft. d)Commingling.

d) commingling It is illegal for insurance producers to COMMINGLE premiums collected from the applicants with their own personal funds.

A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called a)Qualified distribution. b)Premature distribution. c)Rollover. d)1035 exchange.

d)1035 exchange.

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? a)No penalties, since the owner is older than 59 ½ b)10% for early withdrawal c)15% for early withdrawal d)50% tax on the amount not distributed as required

d)50% tax on the amount not distributed as required When immediate annuities are used to pay IRA benefits, distributions must begin no later than age 70½ in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required annual amount.

Under the 401(k) bonus or thrift plan, the employer will contribute a)All of the money to the plan. b)30% of what the employee contributes. c)75% of what the employee contributes. d)An undetermined percentage for each dollar contributed by the employee.

d)An undetermined percentage for each dollar contributed by the employee. Under the bonus or thrift plan, the employer will contribute certain amount or percentage for each dollar contributed by the employee. There is no specific rule as to how much the employer must contribute.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a)Until the policyowner reaches age 65. b)For at least 20 years. c)Until the policyowner's age 100, when the policy matures. d)For 20 years or until death, whichever occurs first.

d)For 20 years or until death, whichever occurs first. if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.

Willie, a private investigator, was hired by an insurer to obtain a character report on Joan, an applicant. Willie pretends to be a reporter working on a story about working women in Joan's town. During the conversation, Joan is asked a variety of questions for which the answers will be used to determine the final underwriting decision. This is an example of a)Adverse underwriting. b)Insurance fraud. c)Investigative reporting. d)Pretext interview.

d)Pretext interview.

A married couple wants to include the entire family in their whole life policy under one rider. Which of the following riders will help them achieve that goal?

family term (NOT OTHER-INSURED)

in a direct rollover, how is the money transferred from one retirement plan to another?

from trustee to trustee

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

implied express is written in the contract apparent is when agent acts on principal authority. not really implied

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

it is a percentage of the cash value that decreases over time

which of the following best describes annually renewable term insurance

it is level term insurance (offers the most insurance at the lowest cost)

annually renewable policies increase premiums each year... if there was a guaranteed renewable rider, does the premium still increase?

no

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

only the portion in excess of the premium paid will be taxed

in order to reinstate a life policy, the insured must do all of the following EXCEPT

pay next years premium in advance

a married couple purchase a life insurance policy on their newborn baby. they are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. which policy rider should their agent recommend?

payor benefit - protection to insured minors.

in a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure

prior to performing of the test, must obtain verbal consent

Who may be authorized to transact insurance by state departments private insurers government insurers

private insurers

all of the following are true of annually renewable term insurance EXCEPT

proof of insurability must be provided at each renewal (false)

the paid-up addition option uses the dividend to

purchase a single-premium policy in addition to the face amount of the permanent policy. (its the same type of insurance, just a smaller amount)

which of the following options would be considered a risk-sharing arrangement recipricol stock mutual surplus lines

recipricol (shared risks with other clients)

the policyowner pays for her life insurance annually, until now, she has collected a dividend check tax-free every year. Now she has decided that she wants to apply dividend checks to reduce the next premium amount. What option will allow her to do this?

reduction of premium option

the family term rider incorporates

spouse term and childrens term

life insurance can provide which of the following a. outliving ones assets b. creation of a future liability c. liquidation of ones estate d. survivorship protection

survivorship protection

how are lump sum life insurance payouts taxed?

tax free

an adjustable life policy can assume the form of

term OR permanent insurance (key word adjustable)

all of the following entities regulate variable life policies EXCEPT

the guarantee association (they help cover insurers asses if they cant pay claims, etc.)

all of the following are true of a survivorship policy EXCEPT

the premium is based on the age of each insured

all of the following are true about the guaranteed insurability rider EXCEPT

this rider is available to ALL insured with no additional premium (usually the rider expires at 40 years old)

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

universal life

when an insured terminates membership in the insured group, the insured can convert to a. whole life without proof of insurability b. whole life with proof of insurability c. term with proof of insurability d. term without proof of insurability

whole life without proof of insurability