Life State Exam

A 45 year-old woman won $100,000 in a scratch-off lottery at age 60. Which of these annuities did this woman purchase?

Deferred Fixed annuity

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

$6,000

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?

Entire cash surrender value is taxable

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

Entire contract provision

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices, EXCEPT a (n):

Immediate annuity

When must insurable interest exist for a life insurance contract to be vaild?

Inception of the contract

All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT

Income derived from the TSA is received income tax-free

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?

Legal Purpose (Insurable Interest)

Which of these are NOT an example of a Nonforfeiture option?

Life income

An insured's inability to perform two or more activities of daily living may trigger which type of life policy rider?

Long term care

K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

Modified Whole Life

Which of these is NOT an element of Life insurance premiums?

Mortality rate

Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and the returns the policy February 13. How will the insurer handle this situation?

Policy was returned within the free-look period, premium will be fully refunded

A policyowner may generate taxable income from which of the following Dividend Options?

Accumulation at Interest

P is 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

What is the initial source of underwriting for an insurance policy?

Application containing statements from the insured

An incomplete life insurance application submitted to an insurer will result in which of these actions?

Application will be returned to the writing agent

What action can a policyowner take if an application for a bank loan requires collateral?

Assign policy ownership to the bank

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied under the Suicide clause of the policy

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to the doctor complaining of chest pains and some test were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What actions should the producer then take?

Collect initial premium along with a signed health statement

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Social Security

A(N)_______rider may be used to include coverage for children under their parents' life insurance policy.

Term

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Unilateral

When does a life insurance contract become effective if the initial premium is not collected during the application process?

When producer delivers policy and collects initial premium

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?

Whole Life

A Term Life rider offers the insured

additional life coverage

Group life insurance policies are generally written as:

annually renewable term

A life insurance application must be signed by all of these, EXCEPT:

beneficiary

A policy loan is made possible by which of these life insurance policy features?

Cash value provision

In a life insurance policy, which feature states that the policy will not cover certain risks?

Exclusion

The incontestable clause allows an insurer to:

contest a claim during the Contestable Period

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?

100

An individual participant received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

20% is withheld for income taxes

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing Term

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

Decreasing term

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?

Irrevocable

Which of the following statements is CORRECT about accelerated death benefits?

Must have a terminal illness to qualify

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?

Owner's Rights

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

What is the consideration given by an insurer in the Consideration clause of a life policy?

Promise to pay a death to a named beneficiary

Which of these types of life insurance allows the policyowner to have level premium and to also choose from a selection of investment options?

Variable Life

T cash surrenders a recently issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red-flagged for the violation of

anti-money laundering rules

Insurance contracts are known as ______ because certain future conditions or acts must occur before any claims can be paid.

conditional

A Universal Life policy is sometimes referred to as unbundled Life Policy because the owner can see the interest earned, expense charges, and the

cost of insurance

A variable insurance policy:

does not guarantee a return on investment accounts

Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?

increase face amount

Which of these actions should a producer when submitting an insurance application to an insurer?

inform insurer of relevant information not included on the application

Dividends paid from a life insurance policy are

issued by the insurer

A trustee-to-trustee of rollover funds in a qualified plan allows a participant to avoid:

mandatory income tax withholding on the transfer amount

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?

Life settlement contract

Who has the option to renew a Renewable Term policy?

insured

Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period

varies according to the contract