Life Insurance Exam pt 3

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n) a)403(b) Plan (TSA). b)Keogh Plan. c)Roth IRA. d)SEP.

a)403(b) Plan (TSA).

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

a)50% tax on the amount not distributed as required

The term "illustration" in a life insurance policy refers to a)A presentation of nonguaranteed elements of a policy. b)A depiction of policy benefits and guarantees. c)Pictures accompanying a policy. d)Charts and graphs.

a)A presentation of nonguaranteed elements of a policy.

Which is TRUE about the cash surrender nonforfeiture option a)Funds exceeding the premium paid are taxable as ordinary income. b)After the cash surrender, the insured is covered for a grace period of one month. c)The policy remains active for some time after the policyholder opts for cash surrender. d)The policyholder receives the original cash value of the policy.

a)Funds exceeding the premium paid are taxable as ordinary income.

Which statement is NOT true regarding a Straight Life policy? a)Its premium steadily decreases over time, in response to its growing cash value. b)The face value of the policy is paid to the insured at age 100. c)It usually develops cash value by the end of the third policy year. d)It has the lowest annual premium of the three types of Whole Life policies.

a)Its premium steadily decreases over time, in response to its growing cash value.

If an agent wishes to sell variable life policies, what license must the agent obtain? a)Securities b)Adjuster c)Surplus Lines d)Personal Lines

a)Securities

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? a)The insured will need a written consent of the insurer. b)It is impossible to transfer a policy. c)The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it. d)The insured can transfer the policy to his friend and then notify the insurer of the change.

a)The insured will need a written consent of the insurer.

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT a)The loss may be intentional. b)The loss must not be catastrophic c)There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable. d)The loss produced by the risk must be definite.

a)The loss may be intentional.

An insurer has been found guilty of a Code violation regarding replacement. The insurer then repeats the violation. What will be the minimum penalty? a)$10,000 b)$25,000 c)$30,000 d)$100,000

c)$30,000

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a)Recession of the policy. b)Adjustment in the amount of death benefit. c)No change whatsoever. d)Automatic lapse.

b)Adjustment in the amount of death benefit.

Which of the following is a TRUE statement concerning an insurer's Earned Surplus? a)Earned Surplus finances a company's growth. b)Earned Surplus are unassigned funds that are required to be reported on the insurer's annual statement. c)It is from this money that death or medical claims are paid. d)Earned Surplus funds allow a company to pay higher bonuses to its agents.

b)Earned Surplus are unassigned funds that are required to be reported on the insurer's annual statement.

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) a)Aleatory contract. b)Executive bonus. c)Key person policy. d)Fraternal association.

b)Executive bonus.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a)Nonforfeiture option. b)Guaranteed insurability rider. c)Paid-up additions option. d)Cost of living provision.

b)Guaranteed insurability rider.

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy a)Decreased death benefit at each renewal. b)Required a premium increase each renewal. c)Built cash values. d)Required proof of insurability every year.

b)Required a premium increase each renewal.

Which of the following CANNOT be included along with illustrations used to sell life insurance? a)Original death benefit b)Vanishing premium information c)Name of the insurer d)Rating information

b)Vanishing premium information

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a)$0 b)$200 c)$9,800 d)$10,000

c)$9,800

The Department of Insurance contacts an agent about a claim that was settled two months ago. Within what timeframe must the agent issue a complete response? a)10 days b)15 days c)21 days d)31 days

c)21 days

For how long is an insurance company allowed to defer policy loan requests? a)30 days b)60 days c)6 months d)1 year

c)6 months

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be? a)Installment refund b)Cash refund c)Installments for a fixed period d)Installments for a fixed amount

c)Installments for a fixed period

Which of the following riders would NOT cause the Death Benefit to increase? a)Cost of Living Rider b)Accidental Death Rider c)Payor Benefit Rider d)Guaranteed Insurability Rider

c)Payor Benefit Rider

The risk of loss may be classified as a)Named risk and un-named risk. b)High risk and low risk. c)Pure risk and speculative risk. d)Certain risk and uncertain risk.

c)Pure risk and speculative risk.

Which of the following best describes taxation during the accumulation period of an annuity? a)The annuity is subject to both state and federal taxation. b)The growth is subject to immediate taxation. c)Taxes are deferred. d)The annuity is subject to state taxes only.

c)Taxes are deferred.

Which of the following is TRUE regarding the insurance amount in a credit life policy? a)Allowable amount of coverage is determined by the State Insurance Commissioner. b)The amount of coverage can be greater than the amount owed. c)The creditor can only insure the debtor for the amount owed. d)The creditor may insure the debtor for an unlimited amount of coverage.

c)The creditor can only insure the debtor for the amount owed.

To which of the following products does the Replacement Regulation apply? a)Credit life insurance b)Converting an existing policy with the same insurer c)Whole life insurance d)Group annuities

c)Whole life insurance

An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds a)$10,000. b)$15,000. c)$25,000. d)$50,000

d)$50,000

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? a)Legal purpose b)Contract of adhesion c)Acceptance d)Consideration

d)Consideration

Which of the following is true regarding taxation of dividends in participating policies? a)Dividends are taxable only after a certain amount is accumulated annually. b)Dividends are taxable in some life insurance policies and nontaxable in others. c)Dividends are considered income for tax purposes. d)Dividends are not taxable.

d)Dividends are not taxable.

Which of the following is true regarding a policy with a face value less than $10,000? a)An insured cannot return the policy. b)If it's returned during the free look period, the contract will be cancelled, but the insurer will retain the premium paid. c)The policy can be cancelled with full refund of premium at any time. d)If it's returned during the free look period, the agreement will be void.

d)If it's returned during the free look period, the agreement will be void.

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

d)It is a life contingency option.

Which of the following is true regarding a single life settlement option? a)Payments continue until the entire principal is exhausted. b)Proceeds are paid out in a lump sum. c)It provides income for a specified period of time. d)It provides income the beneficiary cannot outlive.

d)It provides income the beneficiary cannot outlive.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a)Purchase a term rider to attach to the policy. b)Pay back all premiums owed plus interest. c)Receive payments for a fixed amount. d)Purchase a single premium policy for a reduced face amount.

d)Purchase a single premium policy for a reduced face amount.

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a)The benefit is subject to the exclusionary rule. b)IRS has no jurisdiction. c)The benefit is received as taxable income. d)The benefit is received tax free.

d)The benefit is received tax free.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? a)The insurer will increase the interest rate on the loan and charge a penalty. b)The insurer will not permit the policyowner to take out any more loans. c)The policy will be reduced to an extended term option. d)The policy will terminate when the loan amount with interest equals or exceeds the cash value.

d)The policy will terminate when the loan amount with interest equals or exceeds the cash value.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? a)An irrevocable beneficiary b)A buy-sell agreement c)Family term rider d)Third-party ownership

d)Third-party ownership

Which of the following is a key distinction between variable whole life and variable universal life products? a)Variable universal life is regulated solely through FINRA. b)Variable whole life allows policy loans from the cash value. c)Variable universal life has a fixed premium. d)Variable whole life has a guaranteed death benefit.

d)Variable whole life has a guaranteed death benefit.