MI Variable Life and Annuities Producer

What is the maximum fine for submitting a false or fraudulent claim to the insurer?

$1,000

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another, and what is the tax consequence of a direct transfer?

$10,000, no tax consequence *During IRA direct transfer (or rollover), the full amount gets reinvested from one plan to the other.

Maximum allowed value of articles of merchandise a producer may give to applicant or insured without violating unfair trade practice of rebating

$5 (life) $10 (property & Casualty)

An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declines and the cash value fell to $10,000. If the insured dies, how much will be paid out?

$50,000

Partial surrenders

- First in, first out (FIFO) - Applies to Life insurance Only

File certificate of completion of the prelicensing education

12 months

For insurer to file notice of producer appointment

15 days

Length of temporary license

180 days

Prelicensing education requirement for a single line license

20 hours

Continuing education required every 2 years

24 hours

Continuing education required in Ethics

3 hours

To notify Commissioner of termination of appointment

30 days

To report administrative action or criminal prosecution

30 days

to report change of name or address

30 days

prelicensing education for combined licenses

40 hours

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?

50% tax on the amount not distributed as required

For how long is an insurance company allowed to defer policy loan requests?

6 months

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

Accumulated cash value

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

Accumulated cash value.

How often must a registered person complete the firm element of their continuing education?

Annually

Employer contributions made to a qualified plan

Are subject to vesting requirements

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan

Producers are permitted to share or split commissions, providing that

Both are properly licensed for the line of insurance.

Code of Arbitration

Concerned with settling disputes between broker or dealers and the piblic.

A variable annuity has a payout that is

Contingent upon the profitability of the investment portfolio

When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of

Defamation

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 the benefit of?

Employees

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

The securities in the separate account of a variable annuity are substantially equity investments because

Equity investment values tend to reflect increases or decreases in the cost of living.

The two main categories of policy loan interest rates are

Fixed and variable

What type of premium do both Universal Life and Variable Universal Life policies have?

Flexible

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

From trustee to trustee

Lfe insurance death proceeds are

Generally not taxed as income.

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

Grace period

In insurance transactions, fiduciary responsibility means

Handling insurer funds in a trust capacity.

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

Implied

The Commissioner may waive prelicensing requirements or examinations for someone who has been a licensed insurance producer

In the last preceding 12 months.

In Michigan, variable life insurance contracts and variable annuities are considered what type of product?

Insurance

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

It determines if the insurance policy is an MEC.

Annuities follow a __ format.

Last in, first out (LIFO)

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

Not subject to income taxation by the Federal Government.

Cash value in a variable life policy must be calculated at least

Once a month.

Code of Procedure

Outlines the procedural process in the event of violations and complaints.

What is the primary purpose of a 401(k) plan?

Retirement

To qualify as an investment company, an insurer must be registered with the

Securities and Exchange Commission. (SEC)

A domestic insurer issuing variable contracts must establish one or more

Separate accounts

An IRA purchased by a small employer to cover employees is known as

Simplified Employee Pension plan (SEP).

During the accumulation period in a nonqualified 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

Traditional IRA distributions are __ ; Roth IRA distributions are NOT __

Taxable; Taxable

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit.

The Investment Company Act of 1940 defined 3 classifications of investment companies. They are

UTIs, Management Investment Companies, and Face Amount Certificate Companies.

The rules and regulations of FINRA are referred to as by-laws. These fall into 4 main categories:

Uniform Practice Code Conduct Rules Code of Procedure Code of Arbitration

FINRA bylaws are divided into four major categories. the category which relates to dealings between member firms is the

Uniform Practice Code.

A party wishing to buy an annuity that will advance with economic and market conditions should buy a

Variable annuity

An insurance company receives an application with some information missing and issues the policy anyway. what is this called?

Waiver

When would life insurance policy proceeds be included in the Insured's taxable estate?

When there are any incidents of ownership at the time of death.

An applicant for a counselor's license in Michigan must possess all of the following EXCEPT a) A license to practice law b) A good business reputation and good moral character. c) A reasonable understanding of the Michigan insurance code. d) A reasonable understanding of the provisions, terms, and conditions of the type of insurance he/she wishes to counsel.

a) A license to practice law

Which of the following is NOT an allowable 1035 exchange? a) A whole life insurance policy is exchanged for a term insurance policy. b) A whole life insurance policy is exchanged for a Universal life insurance policy. c) An annuity is exchanged for another annuity. d) A life insurance policy is exchanged for an annuity.

a) A whole life insurance policy is exchanged for a term insurance policy.

Which of the following is used to determine interest rates on variable products?

a) Cash value b) Interest rate index c) consumer price index d) annual average rate b) Interest rate index

To legally transact insurance in this state, an insurer must obtain which of the following? a) Certificate of Authority b) Power of Attorney c) Business entity licenses d) Certificate of Insurance

a) Certificate of Authority

State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT a) Inviting prospective clients to the grand opening of the company's new office. b) Issuing or delivering insurance company stock in return for purchasing insurance. c) Promising returns and profits from the purchase of insurance. d) Offering benefit certificates or securities in return for purchasing insurance.

a) Inviting prospective clients to the grand opening of the company's new office.

Which of the following is another term for the accumulation period of an annuity? a) Pay-in period b) Premium period c) Liquidation period d) Annuity period

a) Pay-in period

What type of annuity activity will cause immediate taxation of the interest earned? a) Surrendering the annuity for cash b) Using the contract as collateral for a loan c) Changing a settlement option d) Failing to make a planned contribution

a) Surrendering the annuity for cash

What characteristic must an annuity have if it is used to accumulate funds in an IRA? a) Tax-qualified b) Fixed income c) Fixed premium d) Tax-deductible

a) Tax-qualified

All of the following would be different between qualified and nonqualified retirement plans EXCEPT a) Taxation on accumulation b) Taxation of Withdrawals c) Taxation of contributions d) IRS approval requirements

a) Taxation on accumulation

All of the following entities regulate variable life policies EXCEPT a) The Guaranty Association b) Federal Government c) The SEC d) The Insurance Department

a) The Guaranty Association

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 be catastrophic. c) There must be a sufficient number of homogenous exposure units to make losses reasonably predictable. d) The loss produced by the risk must be definite.

a) The loss may be intentional.

All of the following are true of an annuity owner EXCEPT a) The owner must be the party to receive benefits. b) The owner pays the premiums on the annuity. c) The owner has the right to name the beneficiary. d) The owner is the party who may surrender the annuity.

a) The owner must be the party to receive benefits.

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

a) Variable whole life has a guaranteed death benefit.

Conduct Rules

address a member firms dealings with the public

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT a) Employee and employer contributions are not counted as income to the employee for income tax purposes. b) At distribution, all amounts received by the employee are tax free. c) Employer contributions are tax deductible as ordinary business expense. d) Funds accumulate on a tax-deferred basis.

b) At distribution, all amounts received by the employee are tax free.

SIMPLE Plans require all of the following EXCEPT a) Employees must receive a minimum of $5,000 in annual compensation. b) At least 1,000 employees. c) No other qualified plan can be used. d) No more than 100 employees/

b) At least 1,000 employees.

If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to a) Name another annuitant. b) Live at least to his life expectancy. c) Die before his life expectancy. d) Name a beneficiary.

b) Live at least to his life expectancy.

Traditional IRA contributions are tax deductible based on which of the following? a) IRA limit b) Owner's income c) How long the plan has been in force d) Owner's age

b) Owner's income

To sell variable life insurance policies, an agent must receive all of the following EXCEPT a) A life insurance license. b) SEC registration. c) FINRA registration. d) A securities license.

b) SEC registration.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend a) Joint and Survivor. b) Straight life. c) Life income with period certain. d) Installment refund.

b) Straight life.

When an annuity is written, whose life expectancy is taken into account? a) Life expectancy is not a factor when writing an annuity. b) Owner c) Annuitant d) Beneficiary

c) Annuitant

Which of the following features on a variable life insurance policy is guaranteed? a) Market value of investments b) Cash value accumulation from stocks c) Death benefit up to the policy face d) Issuance of the policy

c) Death benefit up to the policy face

Which of the following scenarios will incur a 10% tax penalty on distributions? a) Distributions are made to the beneficiary. b) Distributions are made as part of a qualified rollover. c) Distributions are made on a policy before age 59 1/2. d) Distributions are made prior to the age of 72.

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

Which of the following types of policies would allow a policyowner to choose a premium amount payment schedule? a) Fixed premium b) Indeterminate premium c) Flexible premium d) Initial premium

c) Flexible premium

Which of the following would be considered the largest cost incurred on the value of a variable annuity? a) the cost of insurance b) Mortality fee c) Investment management fee d) Administrative expenses

c) Investment management fee

Which of the following best describes a variable annuity subaccount? a) It escrows shares that are retained by the company if the customer fails to complete the LOI. b) It is disclosed in the statement of additional information. c) It is a separately managed account with its own investment objective. d) It is segregated from customer assets in the separate account.

c) It is a separately managed account with its own investment objective.

Which of the following can surrender a deferred annuity contract? a) The beneficiary after the owner's death. b) A deferred annuity cannot be surrendered. c) Only the annuity owner. d) Only the insurance company for nonpayment of premiums.

c) Only the annuity owner.

All of the following are true regarding insurance policy loans EXCEPT a) The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. b) Policyowners can borrow up to the full amount of their whole life policy's cash value. c) Policy loans can be made on policies that do not accumulate cash value. d) The amount of the outstand loan and interest will be deducted from the policy proceeds when the insured dies.

c) Policy loans can be made on policies that do not accumulate cash value.

What method do insurers use to protect themselves against catastrophic losses? a) Pro rata liability b) Risk management c) Reinsurance d) Indemnity

c) Reinsurance

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

c) Securities

Which of the following requires mandates a prospectus? a) Secured Investors Protection Act of 1970 b) Fair Credit Act of 1933 c) Securities Act of 1933 d) Securities Exchange Act of 1934

c) Securities Act of 1933

What causes a variable annuity benefit to vary? a) The professional manager's experience b) The flexible premium c) The annuity's underlying investment d) The market value adjustment

c) The annuity's underlying investment

Which of the following does NOT fall under the classification of an investment company according to the Investment Company Act of 1940? a) Unit investment trusts b) Management companies c) Variable annuities d) Face amount certificates

c) Variable annuities

A variable life insurance policy states all of the following current and maximum policy charges EXCEPT a) Administrative expenses b) Mortality costs c) Investment management fee d) Guaranteed cash value

d) Guaranteed cash value

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? a) It is a life contingency option. b) The beneficiary receives the remainder of the principal amount upon the annuitant's death. c) Payments can be made in installments and as a single cash refund. d) It does not guarantee that the entire principal amount will be paid out.

d) It does not guarantee that the entire principal amount will be paid out.

Which of the following is NOT true regarding policy loans? a) Policy loans can be repaid at death b) An insurer can charge interest on outstanding policy loans. c) A policy loan may be repaid after the policy is surrendered. d) Money borrowed from the cash value is taxable.

d) Money borrowed from the cash value is taxable.

What does a variable annuity guarantee to the annuitant at retirement? a) Tax-free income b) Total payments that equal at least the amount invested in the contract c) Higher returns than can be obtained from a fixed annuity d) None of the above

d) None of the above *None of these answers are true. If the performance in the separate account does well over time and lives long enough, he or she will come out much better than from a fixed annuity, but there are no guarantees this will occur.

Which of the following is designed to prevent fraud in the issue of securities? a) Securities Exchange Act of 1934 b) Rule 144 c) Section 1035 d) Securities Act of 1933

d) Securities Act of 1933

Which of the following securities act governs the variable annuity separate account? a) The PATRIOT Act b) The Securities Exchange Act of 1934 c) Dodd Frank d) The Investment Company Act of 1940

d) The Investment Company Act of 1940

Which of the following determines the cash value of a variable life policy? a) The company's general account b) The policy's guarantees. c) The premium mode d) The Performance of the policy portfolio

d) The Performance of the policy portfolio

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE? a) The premium value will be paid to the annuitant's estate. b) All benefits will be forfeited. c) The cash value will be paid to the state government. d) The cash value will be paid to the annuitant's estate.

d) The cash value will be paid to the annuitant's estate.

Which of the following annuities is funded through a separate account? a) Equity indexed annuity b) All of the above c) Fixed annuity d) Variable annuity

d) Variable annuity

Uniform Practice Code

relates to dealings between member firms (broker/dealers), covering all transactions in nonexempt securities and requiring orderly completion of dealer-to-dealer transactions