Mo Life Insurance PRACTICE!!

The policy is owned by the employee.

Concerning the use of life insurance as an executive bonus ___________.

Term life

Credit life insurance is usually issued as what type of policy?

The policy will terminate when the cash value is reduced to nothing

If an insured continually uses the automatic premium loan option to pau the policy premium, the policy will ___________________.

Provide the applicant a disclosure authorization notice

If the insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Premiums are not tax-deductible as a business expense

In a key-person life insurance policy, are premiums taxable/tax deductible?

$100000

The insured under a $100000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

Insurance on the producers own life or property, or the lives or property of the producers family or business associates

What is controlled business?

Earned Income

What is required to qualify an individual to contribute to a traditional IRA?

The period of time during which accumulated money is converted into income payments

What is the annuity period?

Evidence of insurability is not required

What is the main advantage of converting from group life insurance to individual coverage?

$2500

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

To explain features and benefits of a proposed policy to the consumer

What is the purpose of a disclosure statement in life insurance policies?

Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans.

What is true regarding policy loans?

Fair Credit Reporting Act

What law protects consumers from the circulation of inaccurate or obsolete information?

The policy's application

What must contain a notice of the graded death benefit in a life insurance policy with graded death benefits?

Extended Term

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

Reduced Paid-Up

What nonforfeiture option provides coverage for the longest period of time?

100%

What percentage of a company's employees must take part in a noncontributory group life plan?

Face amount

What policy component must decrease in decreasing term insurance?

Insurable Interest and consent

What two elements are required for an insurance contract to have legal purpose?

Equity Indexed Annuity

What type of annuity credits its interest based upon an index such as S&P 500?

Straight life

What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?

Increasing term

What type of insurance would be used for a Return of Premium rider?

Whole life insurance

What type of insurance would perform the function of cash accumulation?

Decreasing Term

What type of life insurance is best suited to cover a mortgage?

Limited Pay Whole Life

What type of life insurance policy is Life Paid-up at Age 65?

Single Premium Whole Life

What type of whole life policy generates immediate cash value?

It is reduced to the amount of what the cash value would buy as a single premium.

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy?

Consideration

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as ___________.

When the commissions from controlled business do not exceed the aggregate commissions on all the other business (specific limits may vary from state to state)

When is controlled business legal?

When it may alter the underwriting decision

When would a misrepresentation be considered material?

When there is an incident of ownership at the time of death.

When would life insurance policy proceeds be included in the insureds taxable estate?

The insurer

Who bears the investment risk in a fixed annuity?

The insurer who is being examined

Who is responsible for the cost associated with the examination of insurers?

An individual or an entity who is not the insured.

Who would be considered a third-party owner?

It has a guaranteed minimum interest rate

Why is an equity Indexed annuity considered to be a fixed annuity?

Cross Purchase Plan

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a __________.

20-year level term

A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this?

2010, Insurance transaction records must be maintained for 3 years and be available to the Director for inspection.

A producer completed an insurance transaction in 2007. When can the producer dispose of the records for this transaction?

Cost of living rider.

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called _______.

The rider is usually level term insurance

A spouse term rider (just like any other insured rider) is usually _______.

Limited Pay Whole Life

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?

Cash value growth is tax deferred

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Fair Credit Reporting Act

An applicant is denied insurance because of information found on a consumer report. What act requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

A portion of the benefit up to a limit is tax free; the rest is taxable income.

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. What is true regarding taxation of the accelerated benefits?

Common disaster

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy? Which insurance principle has the insurer violated?

A STOLI policy (stranger-oriented life insurance policies are usually purchased by people who have no relationships with the insured, with the intention of selling them for life settlements.)

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of ___________.

Tax qualified annuities must be approved by the IRS and allow for tax deductible employer contributions.

Are tax-qualified annuities tax deductible?

Guaranteed Insurability Rider

At the tome the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called _________.

Either on the date of the application or the date of the medical exam (whichever occurs last)

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

No, Insurable interest exist as followed: policy owner insuring their own life, life of a family member, life of a business partner/key employee

Does a debtor have insurable interests in the life of the creditor?

Interest earned on the withdrawn cash value

During partial withdrawal from a universal life policy, what portion, if any, will be taxed?

Qualified Plan

Funds accumulate on a tax deferred basis: however, at distribution any amount received by the employee will be treated as ordinary income for tac purposes.

Annually Renewable Term

Group life insurance policies are written as what type of insurance?

Contract of Adhesion

Health contracts are prepared by insurers and must be accepted by the insured on an as is basis. This describes what aspect of a health insurance contract?

$3000 ($10000 would be income tax free- as principal, and $3000 per year would be income taxable- as interest)

If $100000 of life insurance proceeds were used in a settlement option, which paid $13000 per year for ten years, how much would be taxable annually?

Fixed Period

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

5 days

If a consumer requests ADDITIONAL information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

The plan has favorable tax treatment.

If a retirement plan is qualified, what does that mean?

lump-sum payment

If a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insurer?

When the insurer approves a prepaid application

In forming an insurance contract, when does acceptance normally occur?

Unilateral

In health insurance contracts, the insured is not legally bound to any particular action, however the insurer is obligated to pay for losses covered by the policy. What contract element does this describe?

When the insurance application is submitted

In insurance, when is an offer usually made on a contract?

Executive is the owner, and the executive pays the premium

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

The longer the period selected, the smaller each installment will be

In the fixed-period settlement option, how will the number of installments for the death benefit proceeds determine the amount of the installments?

cash value and death benefit

In variable universal life insurance, to what policy component does the term "variable" refer?

Universal life

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Adhesion

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

Regulates consumer reports

The Federal Fair Credit Reporting Act

Annually Renewable Term

The death protection component of a universal life policy is expressed as what type of coverage?

Purchase a smaller amount of the same type of insurance as the original policy

The paid-up addition u=option uses the dividend to _________.

Interest only option

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. What settlement option should the policyowner choose?

Conditional

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what type of contract?

Joint and survivor.

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called ___________.

The cash value is converted to the same face amount as in the whole life policy.

What happens to a policy's cash value under an extended term nonforfeiture option?

Information about the amount and frequency of premium payments.

What information will be stated in the consideration clause of a life insurance policy?

Money borrowed from the cash value is taxable

What is NOT true regarding policy loans?

Something of value exchanged between two parties to form a legal contract

What is consideration in a policy?

Nothing; The payments will cease.

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

The same face amount as in the whole life policy

Under an extended term nonforfeiture option, the policy cash value is converted to ______.

Respond to the consumers complaint (and if necessary, reinvestigate the report. )

Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must ______________.

Be informed of the source of the report (must be advised and provided w/ the name and address of the reporting agency.)

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report must ____________.

Level Fixed

Variable Whole Life insurance is based on what type of premium?

Life income with period certain

What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?

Return of unused premiums

What are policy dividends?

Welfare benefits, Social Security is an entitlement program, not a welfare program.

What benefits is not available under social security?

Paid-Up Additions

What dividend option can increase the death benefit of the existing life policy?

Paid-Up Additions

What dividend option is automatically selected by the company if not chosen by the policyowner?

Qualified plans

plans must be permanent, written and legal binding, must be communicated to all employees, must be for the exclusive benefits of the employees and their beneficiaries, WILL NOT provide an offset for SS benefits.