MO L&H - Chapter 4: Retirement and Other Insurance Concepts

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? Coverage cannot be converted when an individual leaves the group. Premiums are determined by age, occupation, and individual underwriting. 100% participation of members is required in noncontributory plans. Each member covered receives a policy.

100% participation of members is required in noncontributory plans.

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? 1 3 5 10

5

The minimum number of credits required for partially insured status for Social Security disability benefits is 4 credits. 6 credits. 10 credits. 40 credits.

6 credits.

Who can make a fully deductible contribution to a traditional IRA? Someone making contributions to an educational IRA A person whose contributions are funded by a return on investment An individual not covered by an employer-sponsored plan who has earned income Anybody; all IRA contributions are fully deductible regardless of income level

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

All of the following are examples of third-party ownership of a life insurance policy EXCEPT An insured couple purchases a life insurance policy insuring the life of their grandson. A company purchases a life insurance policy on their manager, who is an important part of the operation. When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a Key person policy. Split-dollar plan. Stock redemption plan. Buy-sell agreement.

Buy-sell agreement.

All of the following are personal uses of life insurance EXCEPT Buy-sell agreement. Survivor protection. Estate creation. Cash accumulation.

Buy-sell agreement.

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a Split-dollar plan. Stock redemption plan. Cross-purchase plan. Key person plan.

Cross-purchase plan.

Which of the following terms is used to name the nontaxed return of unused premiums? Surrender Dividend Premium return Interest

Dividend

All of the following statements are true regarding tax-qualified annuities EXCEPT Withdrawals are taxed. Employer contributions are not tax deductible. Annuity earnings are tax deferred. They must be approved by the IRS.

Employer contributions are not tax deductible.

When an employee terminates coverage under a group insurance policy, coverage continues in force Until the employee can obtain coverage under a new group plan. Until the employee notifies the group insurance provider that coverage conversion policy is issued. For 31 days. For 60 days.

For 31 days.

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is Fully insured. Partially insured. Correctly insured. Permanently insured.

Fully insured.

All of the following are business uses of life insurance EXCEPT Compensating executives. Funding against financial loss caused by the death of a key employee. Funding business continuation agreements. Funding against company's general financial loss.

Funding against company's general financial loss.

Life insurance death proceeds are Generally not taxed as income. Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. Taxed as a capital gain. Taxed as ordinary income.

Generally not taxed as income.

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 Section 457 Deferred Compensation Plan. 403(b) plan. 401(k) plan. HR-10 (Keogh Plan).

HR-10 (Keogh Plan).

Which of the following is an eligibility requirement for all Social Security Disability Income benefits? Have permanent kidney failure Be at least age 50 Have attained fully insured status Be disabled for at least 1 year

Have attained fully insured status

In which of the following instances would the premium be tax deductible? Premiums paid by a mother on her son's policy Premiums paid by an employer on the life of a key person Premiums paid by an employer on a $30,000 group term life insurance plan for employees Premiums paid by an individual on his/her own life insurance

Premiums paid by an employer on a $30,000 group term life insurance plan for employees

Which type of retirement account does not require the owner to start taking distributions at age 73? Roth IRA Nonqualified IRA Standard IRA Traditional IRA

Roth IRA

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income. SEPs have a higher tax deductible contribution limit than an IRA. Employer contributions are not included in the employee's gross income. SEPs are suitable for large companies.

SEPs are suitable for large companies.

Who may contribute to a Keogh (HR-10) plan? Partner with at least 5% ownership Self-employed plumber Manager of a store Corporate executive

Self-employed plumber

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. Life planning. Survivorship insurance. Juvenile protection provision.

Survivor protection.

Which of the following is an example of liquidity in a life insurance contract? The flexible premium The money in a savings account The cash value available to the policyowner The death benefit paid to the beneficiary

The cash value available to the policyowner

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? The insured would not need to prove insurability for a conversion policy. The insured may convert coverage to an individual policy within 31 days. The premium for individual coverage will be based upon the insured's attained age. The insured may choose to convert to term or permanent individual coverage.

The insured may choose to convert to term or permanent individual coverage.

In a life settlement contract, whom does the life settlement broker represent?The owner The insurer The beneficiary The life settlement intermediary

The owner

All of the following are general requirements of a qualified plan EXCEPT The plan must be permanent, written and legally binding. The plan must provide an offset for social security benefits. The plan must be communicated to all employees. The plan must be for the exclusive benefits of the employees and their beneficiaries.

The plan must provide an offset for social security benefits.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT The employer pays a bonus to a selected employee to fund the policy. It is considered a nonqualified employee benefit. The policy is owned by the company. Any type of insurance policy may be used.

The policy is owned by the company.

Which of the following best defines the "owner" as it pertains to life settlement contracts? A financial entity that sponsors the transaction A fiduciary for the contract The insurance provider The policyowner of the life insurance policy

The policyowner of the life insurance policy

All of the following would be eligible to establish a Keogh retirement plan EXCEPT A sole proprietor of film development store with no employees. A hair dresser who operates her business at her house. The president and employee of a family corporation. A sole proprietor of a service station who employs four employees.

The president and employee of a family corporation.

Which of the following is NOT true of life settlements? The seller must be terminally ill. They could be used for a key person coverage. They could be sold for an amount greater than the current cash value. They involve insurance policies with large face amounts.

The seller must be terminally ill.