Markets & Social Security

________ Insured under Social Security means that a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age. A. Currently B. Partially C. Fully D. Not

A. Currently Insured under Social Security means a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.

An employee who becomes entitled under the terms of the group policy to have an individual policy issued without evidence of insurability must: A. Submit an application along with the initial premium B. File for unemployment C. Request the coverage within 90 days D. Document the need for coverage

A. If an employee under a group policy becomes entitled under the terms of the policy to have an individual policy issued without evidence of insurability, he/she must submit an application with the initial premium.

In California, a life insurer may issue blanket life insurance policies for a term not exceeding how much time with premium rates less than the usual rates for such insurance as approved by the Commissioner? A. 1 year B. 18 months C. 2 years D. 3 years

A. In California, a life insurer may issue blanket life insurance policies for a term not exceeding 1 year.

The premium for optional dependent group insurance can be payable by: A. The employer, the employee, or both B. The employer only C. The employee only D. Both the employee and employer must contribute

A. Optional dependent coverage may be paid for by the employer, the employee, or both.

A Credit Life Policy will be cancelled if: A. The loan is paid off or refinanced B. The premiums increase by more than 10% C. The insurer's credit rating falls below A+ D. The coverage is less than the total debt outstanding

A. The credit life policy can be cancelled when the debt is paid off or is refinanced.

Who are the parties in a third-party life insurance ownership situation? A. The policyowner, the insured, and the beneficiary B. The policyowner, the insured, and the insurer C. The insured, the insurer, and the beneficiary D. The policyowner, the insurer, and the beneficiary

B. The three parties involved in third-party ownership are the policyowner, the insured, and the insurer. The beneficiary is not a party to the contract.

All of the following are typically what key employee life insurance proceeds are used for, except to: A. Recruit a replacement B. Hire a replacement C. Close down the business D. Train a replacement

C. A key person life insurance policy provides the necessary funds to recruit, hire, and train a replacement employee, restore lost profits, and reassure customers that business operations will continue.

All of the following are true regarding credit life, except: A. The debtor is entitled to cancel the coverage upon paying off the debt B. The proceeds must be used to satisfy the outstanding debt C. The amount of coverage can exceed the debt D. The coverage begins when the debt is incurred

C. The amount of insurance benefit must not exceed the total amount of indebtedness.

All of the following are parties to a life insurance contract, except: A. The insurer B. The policyowner C. The beneficiary D. The insured

C. While beneficiaries are named, they are not a party to a life insurance policy.

A key person is typically all of the following, except: A. Part of the management team B. Not directly involved in sales, production, or service C. More highly paid D. Respected by customers, creditors, suppliers, or vendors

B. Key persons are employees whose contributions have a significant impact on the revenue and profitability of the company, especially in small businesses. They are typically: part of the management team, more highly paid, respected by customers, creditors, suppliers, and vendors, and have direct responsibilities for sales, production, or service.

Which one of the following statements about nonqualified deferred compensation plans is false? A. It is an incentive plan in which an employer promises to pay highly compensated employees the full value of their voluntary salary deferral at a defined future point in time B. The employee is the policyowner and the beneficiary is the employee's spouse C. If the employee dies before retirement, the life insurance benefit is paid to the employer tax free, who in turn pays the employee's heirs, who will pay income tax but if the employee lives to retirement, the policy may be surrendered to pay the deferred compensation D. Income taxes are deferred until the employee takes possession of the incentive funds

B. The employer is both the policyowner and the beneficiary.

Social Security pays an eligible surviving spouse (or minor child) a one-time benefit upon the death of a covered worker. Which of the following is the amount of that benefit? A. $250 B. $255 C. $350 D. $355

B. A one-time benefit of $255 is paid to a surviving spouse or child if he/she is eligible for Social Security benefits.

All of the following are characteristics of Group Life Insurance, except: A. Claims are not contestable after an employee has been covered for 2 years B. Group is typically written utilizing Permanent Insurance C. Most states require a minimum number of enrollees at date of issue D. Evidence of insurability is usually not required

B. Group Insurance is typically written on a Renewable Term basis. However, some insurers do make Permanent Insurance available.

A buy-sell agreement can be used in all of the following businesses, except: A. Closed corporation stockholders B. A partnership C. A sole proprietorship D. Large publicly held corporations

D. A buy-sell agreement may be used with a sole proprietorship, a partnership, or with stockholders of a closed corporation.

The type of life insurance used to provide funds for a Buy-Sell Agreement is: A. Term Life B. Whole Life C. Variable Life D. Any type of life insurance

D. Any type of life insurance may be used to provide funds for a Buy-Sell Agreement.

Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is all of the following, except: A. Policyholder B. Premium payor C. Beneficiary D. Insured

D. Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is the owner, premium payor, and beneficiary of a policy written upon each of the partners or shareholders who are the insureds.

Who is generally named as the beneficiary when a credit life insurance policy is issued? A. Creditor B. Spouse of insured C. Debtor D. Estate of the insured

A. When a credit life insurance policy is issued, the creditor is normally named as the beneficiary in order to be able to recover the outstanding debt when the insured dies.

Which of the following best describes Third-Party Ownership? A. A policy owned by one person insuring the life of another person B. A policy owned by the insured C. A business partner buying a life insurance policy on him/herself D. A key employee buying a life insurance policy on him/herself

A. When a policy is owned by someone other than the insured, it is a third-party ownership situation.

Which of the following meets the criterion for being a natural group for group life insurance purposes? A. The group has at least 500 members B. All members of the group live within the same zip code C. The group was formed for a purpose other than for procuring or reducing the cost of insurance D. Members of the group all have a college degree

C. To be eligible for a group plan, the group must be a natural group, meaning it was formed for a purpose other than for procuring or reducing the cost of insurance.

Regarding Social Security survivor benefits, when the youngest child reaches age 16, the widow's/widower's _________ period begins and continues until the surviving (non-remarried) spouse reaches age 60. A. Probationary B. Elimination C. Blackout D. Waiting

C. When the youngest child reaches age 16, the widow's/widower's blackout period begins.

The Social Security blackout period for surviving spouses begins when the youngest child reaches age ______, and ends when the surviving spouse reaches age ______. A. 18/60 B. 18/65 C. 16/60 D. 16/62

C. When the youngest child reaches age 16, the widow's/widower's blackout period begins. It continues until a surviving (non-remarried) spouse reaches age 60.

A partnership involving four equal partners is valued at $1,800,000. Under a Buy-Sell Agreement (Cross Purchase Plan), the amount of the policy on the life of each partner would be: A. $1,800,000 B. $900,000 C. $450,000 D. $150,000

D. Each partner's ownership share equals $450,000, thus each partner would own a $150,000 policy on the life of each of the other three partners under a Cross Purchase Plan (3 x $150,000 = $450,000). There would be a total of 12 (4 x 3) policies (12 x $150,000 each = $1,800,000).

Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except: A. The premium will be higher than the group premium B. She has 31 days of eligibility to convert to the private plan without having to prove insurability C. If she waits until the eligibility period has closed, the insurer may require evidence of insurability to reduce adverse selection D. She will be converting her group term benefit to an individual term benefit

D. She will be converting her group term life to an individual permanent policy.

With credit life, who is normally the policyowner and beneficiary? A. The debtor B. The insurer C. The debtor's heirs D. The creditor

D. The creditor is normally both the policyowner and the beneficiary

If an employer offers dependent coverage it must be offered to what percentage of eligible employees? A. 70 B. 80 C. 90 D. 100

D. The decision of whether to offer dependent coverage rests with the employer, and must be offered to 100% of eligible employees.