Life Insurance Wrong Answers
Which of the following is NOT a problem when existing life insurance is replaced with new coverage?
Comprehensive coverage may increase under the new policy
The combination of Whole Life and ______ Term insurance is referred to as a Family Income Policy
Decreasing
The combination of Whole Life and _________ Term insurance is referred to as a Family Income Policy
Decreasing
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life annuity
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance
Which of the following statements is true regarding the replacement of a life insurance policy in Colorado?
The replacing insurer must maintain copies of all records regarding replacement for at least 5 years
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
USA Patriot Act
The cash value in a(n)__________ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
Universal
The free-look provision begins
Upon receipt of the policy by the policyowner
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this?
Modified Premium Life
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
Which of these is NOT an element of Life insurance premiums?
Morbidity rate
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy
Owners Rights
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
On June 1, 2004 G takes out a $20,000 Whole Life insurance policy with an Accidental Death and Dismemberment rider. On July 15, 2005 G intentionally overdoses on sleeping pills and takes her own life. What will G's beneficiary receive as a death benefit
$20,000
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
$50,000
Premature IRA distributions are assessed a penalty tax of
10%
All of the following statements about traditional individual retirement accounts are false EXCEPT:
10% penalty is applied to withdrawls before age 59 1/2
What is the maximum number of employees (earning atleast $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
When replacing an existing life insurance policy, the replacing insurer must notify the existing insurer within
5 business days
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
Which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum of employees is required to participate
Which of the following potential insurance sales would be subject to replacement regulations?
A new policy that causes an existing life insurance policy to be surrendered
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):
Accidental Death and Dismemberment (AD&D)
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
A policy loan is made possible by which of these life insurance policy features?
Cash value provision
Which of these states is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender is taxable
Which of these is NOT a source of funding for Social Security benefits?
Federal Government
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)
Installment Refund annuity
Which of these needs is satisfied by Adjustable Life insurance?
Insured's need for flexible premiums
How are policyowners dividends treated in regards to income tax?
Interest on accumulations is taxed
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest only
K is an insured under a life insurance policy owned by a third party. Which of these statements is true?
K has no ownership rights
K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT
K will forfeit the right to use the automatic loan provision upon reinstatement
A sole proprietor may use this plan ONLY if the employees of this business are included
Keogh Pension Plan
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
Life Annuity with Period Certain
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disability
Payor clause
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the:
Policy Loan provision
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period
Which of the following actions is NOT possible with a Universal Life policy
Premiums may be applied as a credit against income tax
Which of the following is required for a life insurance Lapse Notice?
Reason stated why the policy will lapse
Which of these factors does NOT influence an applicant's needs for life insurance?
Self-maintenance expenses
Which of the following types of permanent life insurance policies offers the highest initial cash value?
Single premium
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit
Variable Life
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
Variable Universal Life policy
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
At what point does an informal agreement become a binding contract
When consideration is provided by one of the contract
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
A Return of Premium life insurance policy is:
Whole life and Increasing term
Under a Graded Premium policy, the premiums
are lower during the policy's early years
In a qualified retirement plan, the yearly contributions to an employee's account:
are restricted to maximum levels set by the IRS
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
beneficiary's age
Under an interest sensitive whole life policy
cash values are determined by interest rates
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the
expense charges
Which of these is an element of Variable Life policy?
fixed, level premium
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT
free-look period has expired
In life insurance, the needs approach is used mostly to establish:
how much life insurance a client should apply for
The type of annuity that can be purchased with one monetary deposit is called a(n):
immediate annuity
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the
marital deduction
If an applicant for an annuity refuses to provide suitability information, the producer should
obtain the consumer's signed statement documenting his or her refusal to provide suitability information
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
policy proceeds
Which of these terms accurately defines an underwriters assessment of information on a life insurance application?
risk classification
Typically a life insurance death benefit is paid by a limp-sum payment. A(n) _________ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.
settlement
A contract owner terminates an annuity before the income payment period begins. The owner will then receive
the current contract surrender value
The advantage of reinstating an original life policy is
the premiums are based on a younger age
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has
waived one of it legal rights
If an annuity application was not taken in person, an insurer must provide the applicant a Buyer's Guide
within 5 business days of the insurer receiving the application
