Life Insurance Exam Questions

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Who may contribute to an HR-10 plan?

A self-employed individual

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

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

Employer contributions made to a qualified plan

Are subject to vesting requirements

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?

Inspection Report

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will only receive payments of the interest earned on the death benefit

how many hours of Ethics must a producer complete as part of continuing education every 2 years?

3

This state provides for a temporary license for all of the following EXCEPT

A producer's retirement

Which of the following is TRUE of a qualified plan?

It has a tax benefit for both employer and employee

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

not subject to income taxation by the federal government

if a nonresident producer for this state changes his or her home address, what must the producer do to comply with the Oregon rules

nothing

All of the following statements are true regarding installments for a fixed amount EXCEPT

The payments will will stop when the annuitant dies

All of the following are true regarding a decreaseing term policy EXCEPT

The payable premium amount steadily declines throughout the duration of the contract

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

decreases

which of the following ultimately determines the interest rates paid to the owner of a fixed annuity

insurer's guaranteed minimum rate of interest

Why is an equity indexed annuity considered to be a fixed annuity?

it has a guaranteed minimum interest rate

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the

revocable beneficiary

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

what is the waiting period on a waiver of premium rider in life insurance policies

6 months

Which statement is NOT true regarding a Straight Life policy?

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

which of the following statements concerning a simplified employee pension plan (SEP) is incorrect

SEPs are suitable for large companies

What limits the amount that a policyowner may borrow from a whole life insurance policy?

cash value

which of the following would be an example of an insurer participating in an unfair competition practice of discrimination?

chargint the insured higher premiums based on their race

Which of the following is true regarding payment of claims by an insurer

claims must be either paid or acknowledge within 30 days of notification

annually renewable term policies provided a level death benefit for a premium that

increases annually

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 and decreases over time

Which of the following is TRUE regarding the accumulation period of an annuity

it is a period during which the payments into the annuity grow tax deferred

Which of the following is another term for the accumulation period of an annuity?

pay-in period

an applicant wants to buy a policy that has a cash value element. what type should she buy

permanent

Annuities can be used to fund which of the following?

Retirement plans

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

cash option

Which of the following is a characteristic of a reciprocal insurance exchange

the chief administrator of the insurer is called an "attorney-in-fact"

Which of the following is NOT true regarding a non-qualified retirement plan? A)It needs IRS approval B)Contributions are not currently tax deductible C)it can discriminate in benefits and selecting participants D)Earnings grow tax deferred

A

Which of following is called a "second-to-die" policy? A)Family income B)Juvenile life C)Joint life D)Survivorship life

D

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)

Equity Indexed Annuity

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)

Executive bonus

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

Joint and survivor

Concerning Juvenile Life insurance, which of the following statements is INCORRECT?

Juvenile Life is classified as any life insurance purchased by a minor

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited-pay life

Which of the following policies would be classified as a traditional level premium contract?

Straight life

after three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

J transferred his life insurance policy to his son two years before his death. Which of the following is true?

The entire face value of the policy will be included in J's taxable estate

Which of the following best describes annually renewable term insurance?

it is level term insurance

When must an IRA be completely distributed when a beneficiary is not named?

December 31 of the year that contains the fifth anniversary of the owner's death

Which of the following is NOT an allowable 1035 exchange? A)A life insurance policy is exchanged for an annuity B)A whole life insurance policy is exchanged for a term insurance policy C)A while life insurance policy is exchanged for a Universal life insurance policy D)An annuity is exchanged for another annuity

B

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

It determines if the insurance policy is an MEC.

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

surrendering the annuity for cash

Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that the annuity owner will have to pay?

Current interest rate at the time of surrender

During the accumulation period in a non-qualified annuity, what are the tax consequences of a withdrawal ?

Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 1/2

Which of the following protects consumer against the circulation of inaccurate or obsolete personal or financial information?

The Fair Credit Reporting Act

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

The plan must provide an offset for social security benefits

The two types of assignments are

absolute and collateral

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

guaranteed insurability rider

which of the following is true of a children's rider added to an insured's permanent life insurance policy?

it is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

joint life

An adjustable life policyowner can change what?

the coverage period

An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?

$8000, 60 days

If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitants estate?

Accumulated cash value

Which of the following terms is used to name the nontaxed return of unused premiums? A)Interest B)surrender C)Dividend D)Premium return

C

The automatic premium loan provision is activated at the end of the

Grace period

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

Guaranteed surrender value

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)

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate

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

Universal Life

which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal Life - Option A

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

application

which of the following best defines target premium in a universal life policy

the recommended amount to keep the policy in force throughout its lifetime

Which of the following is NOT true regarding equity indexed annuities

they earn lower interest rates than fixed annuities

In a survivorship life policy, when does the insurer pay the death benefit

upon the last death

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

consideration

which of the following will NOT be an appropriate use of a deferred anuity

creating an estate

How often may a life settlement provider contact an insured regarding the insured's health status if the insured's life expectancy is more than one year?

once every 3 months

Traditional IRA contributions are

tax deductible

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

the annuitant must be a natural person

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

withdrawn amounts are taxed on a last in, first out basis

All other factors being equal, the least expensive first-year premium payment is found in

Annually Renewable Term

Which of the following is NOT true regarding the annuitant? A)The annuitant must be a natural person B)The annuitant cannot be the same person as the annuity owner. C)The annuitants life expectancy is taken into consideration for the annuity D)The annuitant receives the annuity benefits

B

Which of the following is TRUE regarding the accumulation period of an annuity? A)It is limited to 10 years B)It is a period during which the payments into the annuity grow tax deferred C)it is also referred to as the annuity period D)It is a period of time during which the beneficiary receives income

B

A long stretch of national economic hardship causes a 7% rate of inflation. Devonne notices that the face value of her life insurance policy has been raised 7% as a result. What is the name of the provision that caused this change?

Cost of Living Rider

When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?

Distributions are taxable

For a retirement plan to be qualified, it must be designed for whose benefit?

Employees

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insure, it is a(n)

Joint life annuity

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Withdrawals are not taxable

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

any form of life insurance

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Profit sharing plan

an insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristics does this describe?

conditional

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

joint and survivor

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

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

Taxation on accumulation

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?

The employer is the owner and beneficiary

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation

human life value approach

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?

installments for a fixed period

an insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insure, and matures at the insured's age 100 is called

single premium whole life

What must happen when an individual policy or annuity has been personally delivered to the policy owner?

the policy owner must sign a delivery receipt

which of the following best describes gross annual premium? A)expense premium B)net premium plus expenses C)annual loading D) basic insurance rate plus commissions

B

Which of the following scenarios will incur a 10% tax penalty on distributions?

Distributions are made on a policy before age 59 1/2

Which of the following is NOT a characteristic of an insurable risk?

The loss must be catastrophic

Which of the following is true regarding a modified guaranteed annuity?

The owner is guaranteed a fixed interest rate for a specific period of time

Which of the following information about the applicant is NOT included on Part 1 of the application for insurance

medical background

which of the following is not true about a joint and survivor annuity benefit option

payments stop after the first death among the annuitants

what does "liquidity" refer to in a life insurance policy?

cash values can be borrowed at any time

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of

Rebating

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy?

Return of Premium

Which nonforfeiture option has the highest amount of insurance protection?

Extended Term

If a cease and desist order is issued, what must the violator do

quit the actions stipulated in the order

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

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

the earnings in the plan accumulate tax deferred

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

50%

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A)Payment of premium B)Delivery receipt C)signed waiver of premium D)statement of good health

C

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

survivor protection

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Common Disaster Clause


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