Quiz Answers
After he sold his business, David didn't need his $100,000 universal policy, but he wanted to keep $25,000 of it as a last expense fund. His agent said he could:
Reduce the current face amount
Your neighbor has to leave his job because of a serious illness that has also left him uninsurable. If he acts within 30 days, he may be able to take advantage of the __________ in his former group coverage.
30-day conversion privilege
Agent Henry uses the seven-pay test to determine if his client's life insurance policy is:
A Modified Endowment Contract (MEC)
Group survivor income benefit insurance provides ____________ to qualified survivors at the death of a covered employee.
A continuing income stream
What type of offense is money laundering?
A federal crime
Claire has had her adjustable life policy for a few years and wants to withdraw a small amount from her cash value. Which of the following would most likely apply?
A partial or full surrender of the policy may be required
"I hate payment plans. I pay cash for my cars and even paid cash for my house. No ongoing insurance premium for me.'' This fellow is a prospect for:
A single premium whole life policy
A married couple is sold on the idea of a first-to-die policy to replace income at the first death, but one earns a considerably higher income more than the other. You solve this problem by recommending:
A single-life rider
Your policyholder wants to make sure that after his death, his beneficiary's creditors won't seize the death benefit.' You suggest he add ______________ to his policy.
A spendthrift clause
A drug cartel would engage in money laundering to conceal the origin of the money made through the sale of drugs. How would a drug cartel differ from a terrorist organization with respect to money laundering?
A terrorist organization would want to also conceal the destinations and purposes of the money
"If I outlive a term policy," your client says, "I've wasted my money. And I'm not interested in any new-fangled risky investments, either." You put him at ease by suggesting:
A whole life policy
For establishing premium rates, life insurers make use of:
Actuarial and mortality tables
________________ was the insurance industry's first flexible policy.
Adjustable life
The requirement that at least 75% of employees must enroll in a 'contributory' plan is in place to protect the insurance company from ___________.
Adverse selection
Sharon permanently assigned her policy to a trust for estate tax purposes. This is known as a (an):
Absolute assignment
Albert is 80 years old and has advanced Alzheimer's. He submitted an application for life insurance to an insurer. Which of the following is correct regarding this situation?
Albert lacks the capacity to contract
The Needs Approach to determining life insurance face amount considers ______________ the survivors may be faced with.
All potential cash needs
Single premium policy loans come from assets other than the policy itself, while the policy values:
Are held as collateral against the loan
Your client habitually forgets to pay the premium on her 15-year old whole life policy by the end of the grace period. You suggest adding _____________to her policy:
Automatic premium loan
Long time employee Simon had paid for optional life coverage over and above his employer-paid amount.' Now nearing retirement, he considered the guaranteed conversion option because his coverage would ______________ at age 65.
Begin to diminish to zero
The first-to-die policy might not be the insurance salesperson's hottest product, but it can be a valuable option when it:
Best fits the situation
"Sure," says 30-year old Martin. "This 20-year policy covers me until my kids are grown, but what if I die after age 50?" The agent suggests:
Buying a permanent-life policy
Denise wanted to get started on a permanent life policy, but she couldn't afford the full premium until she finished medical school in 4 years. Her agent suggested:
Buying a policy with a five-year modified premium
The procedure to determine if the death benefit is sufficient to prevent the account values from exceeding the required net premium to fund future benefits is known as:
Cash Value Accumulation Test
The proceeds of Seth's life insurance will be paid to his primary beneficiary for life. However, if the primary beneficiary dies before all of the proceeds are paid, then the remaining amount will be paid to a named beneficiary. This option is known as:
Cash refund
Jim didn't have the $1,000 available when his annual premium came due.' The company representative told him he could:
Change to a semi-annual, quarterly or monthly basis
In addition to car washes, which of the following types of business is best suited for laundering money?
Coin operated laundromat
Which of the following correctly describes money laundering?
Concealing source of money obtained by illegal activity
Rebecca didn't even know she was her grandfather's beneficiary.' Even so, after his death, she has a ______________ with the insurance company.
Contractual arrangement
Life insurance that cancels a debt at an insured's death is called:
Credit-life
The value of survivorship life insurance proceeds can become estate taxable themselves if:
Death occurs within 3 years of policy ownership transfers
Your client has a $250,000 mortgage. With the exception of the mortgage, your client has adequate life insurance in place to protect his family. Your client does not need the extra $250,000 in life insurance if he is able to pay-off the mortgage before he dies. In this case, you could point your client toward:
Decreasing term insurance
ABC Bank had some negotiable instruments purchased with cash on a given day. Pursuant to the BSA, ABC Bank must do which of the following?
Document these transactions
When did the act of money laundering originate?
During Prohibition
The ____________________________ includes regulations and requirements for group life insurance plans.
Employee Retirement Income Security Act (ERISA)
Single-premium and universal (optional amount) premium clients must be made aware of the consequences of over-feeding their policies. Their most significant penalty will be a switch from __________on loans and withdrawals, which results in less favorable taxation.
FIFO to LIFO
Blake chooses the Fixed Amount option to receive the proceeds of his father's life insurance. Which option would be the opposite?
Fixed Period option
Under Miranda's policy, the interest rate is based on the performance of a stock index rather than determined by the insurance company. The type of policy that Miranda has is:
Fixed indexed universal life
When asked to define his product, life insurance agent Henderson pointed out all the following except:
Funding a buy-sell agreement with life insurance
All of the following factors come into play when calculating someone's human life value, EXCEPT:
Golf handicap
Your client's priority is to provide low cost life insurance protection for her employees. Which of the following would you suggest?
Group term life
Harvey is properly licensed as a life insurance agent in his state. Harvey believes he is qualified to sell variable life insurance in his state since is a licensed agent. Which of the following applies?
Harvey must also have a Series 6 or 7 registration
Doctor Falen would apply for a $1 million life policy, but she's concerned about adding the eventual death-benefit proceeds to her estate value. She can avoid that situation by:
Having her adult children own the policy
Judy likes the fact that she may have considerable cash accumulation with variable universal life, but also needs the life insurance and is concerned about the potential of the death benefit fluctuating negatively with poor investment performance. To alleviate Judy's concern about the death benefit staying in force, she may want to consider:
Having the policy issued with a no-lapse guarantee
Bert and Michelle want to make sure their second-to-die insurance proceeds don't add to their estate tax. They can avoid this pitfall by ______________:
Having their daughter own the policy
Paul's variable universal life policy has been in effect for 6 months and Paul has decided that he does not want the risk involved with variable insurance. Does Paul have any options?
He can have the policy exchanged for a non-variable policy
All of the following are considered advantages of adjustable life EXCEPT:
Interest paid on policy loans is tax-deductible
Lindsey wants a permanent life insurance policy with fixed premiums for life, but wants the potential for a better return on the cash value as compared to traditional whole life. Which of the following may be best suited for this purpose?
Interest sensitive whole life
All of the following are direct costs of underwriting and issuing a policy EXCEPT:
Janitorial services
The life insurance policy covering Susan provides $150,000 of life insurance with no cash value for 10 years and the premiums do not increase. What kind of policy is Susan covered by?
Level term
All of the following are advantages of first-to-die policies EXCEPT:
Liberal underwriting
Death benefits provide for an insured person's survivors.' The potential returns through permanent insurance can provide for an insured's own _____________.
Living objectives
A major advantage of one first-to-die policy over multiple single-life policies is:
Lower premium cost
Joseph has purchased a universal life policy and wants to be able to discontinue paying premiums after the first 15 years and have the death benefit remain in-tact. It is important that Joseph:
Maintain the premium payment or overfund in the early years
Current assumption policies have a gross cash value and a lower net value, which is the amount accessible for loans. Over time, the amounts ___________ to reward policy longevity.
Merge into the higher amount
Joe is a former drug trafficker who engaged in money laundering during the late 1960s and 1970s. Since the end of the 1970s, Joe turned his life around and has been a productive law abiding citizen. If law enforcement learned of Joe's prior money laundering activities, could action be taken against Joe for such money laundering activities?
No, money laundering had not been declared a crime until 1986
Step one: Through his agent, Walter submits his personal information and his check for the initial premium. Step two: The company decides whether or not to complete the transaction. This two-step process is described as:
Offer and acceptance
Fred's universal life policy had $15,000 cash value; he had paid $10,000 total premiums. George paid $10,000 into an annuity that grew to a value of $15,000. Each withdraws $5,000. Which one owes income tax on the withdrawal?
Only George
Aaron would like to pay his life insurance premiums as soon as possible. When he learned that universal life may provide the opportunity to discontinue premium payments at some point in the future, he purchased a policy. In order to have the best chance of discontinuing premiums, which death benefit option should be chosen?
Option A
Your client's $100,000 universal policy has accumulated $18,000 cash value. His brother told him the death benefit would be only $100k, but you explain that it would be $118k because his policy includes ________________.
Option B death benefit
Jana withdrew $5,000 of the $15,000 cash value accumulated in her universal life policy. This action is known as a:
Partial withdrawal
Susan's client wants to have cash value over time from which she can withdraw or borrow. Susan should suggest:
Permanent life insurance
A drug ring is beginning to launder money by depositing the illegal money into a financial institution and financial products. Which phase of the money laundering process is taking place?
Placement
Your client is concerned that if they take out a loan from their whole life policy that they will increase their taxable income. You confirm for them that:
Policy loans are received income tax-free
Some clients are concerned about where the company invests its money in order to guarantee the cash value returns. You tell them that the company's 'general account' is invested in all of the following, EXCEPT:
Precious metal stocks
After Mr. North's wife died, he no longer needed his $100,000 universal policy, which had $35,000 cash value.' He decided to use the $35k to provide an insurance benefit for his grandchildren that required no further payment from any source.' What he chose was the:
Reduced paid-up non-forfeiture option
Which of the following statements is true?
Some money laundering schemes involve various financial transactions and forms of money
Most relevant to life insurance analysis, Social Security also provides survivor benefits for _________ of deceased workers.
Spouses and children
All the following are beneficiary payout options except:
Stock option
Your business client pays the entire premium on a group life plan that provides $10,000 insurance for each of his 80 employees. He wants to make additional coverage available to employees at their own expense. You suggest adding ___________ to the group contract.
Supplemental group term
Before someone decides to surrender a three-year old single premium policy, he or she should be made aware of the:
Surrender charge or 'back end load'
After a conversation with her agent, Rebecca realized that by purchasing variable life insurance, she is:
Taking on an investment risk
All of the following are tax advantages of variable universal policies EXCEPT:
Tax deductible premiums
In the context of ant-money laundering and financing terrorism, the term "jurisdiction" means:
Territory within which a court or government may exercise its power
Based on his review of Brenda's life insurance application, an underwriter has decided to make an adverse underwriting decision. The details of this decision should not be shared with:
The agent of record
Darrin's universal life policy has a planned monthly premium of $200 and has a cash value of $10,000. If Darrin misses the next premium payment that is due, what will happen?
The cash value will cover the deduction for mortality charges and expenses
Most insurance companies will accept premiums up to 31 days after the due date. This is known as:
The grace period
Linda has a universal life policy under which she has paid excess premiums. These excess premiums are being returned to Linda in order to limit the amount of premium in relation to the death benefit so that the policy can retain favorable tax status. This action is being taken pursuant to:
The guideline premium test
After Stanley died, his widow applied for social security benefits based on his income and also on her own income. She received:
The higher amount
Brendon is worried that the death benefit under his variable life policy may reduce or be eliminated if the investment portion of his policy performs poorly. Brendon's agent assures him that:
The initial death benefit is guaranteed if fixed premiums are paid on time
Melinda's universal life policy has been overfunded to the point that it has become a Modified Endowment Contract (MEC). Who among the following is responsible for notifying Melinda to correct this situation?
The insurance company
In the early policy years, the cash value that is available is less than the actual cash value accumulation. This difference in these amounts is due to:
The surrender charge
When a term life insurance policy is convertible, this means that:
The term policy can be converted to a permanent policy
Which of the following statements is FALSE regarding a legal contract?
There at least must be an offer, regardless of an acceptance
An alternative to borrowing from a universal policy's cash value is to withdraw a portion of the cash value. All of the following aspects of such a withdrawal are true, EXCEPT:
There is a low interest charge
An employer is providing group term life coverage for 200 employees. The enrollment period is 90 days from the date of hire. Which of the following correctly applies to employees who enroll for coverage within the enrollment period?
They are covered without proof of insurability
Jennifer's employer holds a key employee policy on her life. Jennifer doesn't even see the premium billing notices. This is an example of:
Third-party ownership
Wealthy homeowners who could leave enough cash to pay off their mortgages after death might still choose to __________________ an insurance company.
Transfer the risk to
First and foremost, the question a producer should be asking a prospect for life insurance would be:
What is the need?
The re-negotiated union contract mandated a voluntary permanent cash-value life insurance option. The company's financial team installed a group:
Universal life insurance plan
Some say that the best features of universal life and variable whole life are contained in:
Variable universal life
The ABC Insurance Company typically relives its applicants from the requirement for a medical exam if the amount of insurance applied for does not exceed $250,000. This is an example of:
Waiver
Which of the following carries more weight than a representation?
Warranty
All of the following are points to consider before committing to a long-term relationship with life insurance EXCEPT:
Where to keep the policy
With Kevin's life insurance policy, the insurance company invests the policy cash value holdings into a general account. Kevin's policy is:
Whole life
Which of the following could include an automatic premium loan provision?
Whole life insurance
Your client doesn't understand why he has to pay interest on a loan from his own policy's cash value. You explain that the company _____________________:
Won't have those funds to invest
In an effort to limit employee turnover, the CFO installed a group life plan that based the coverage amount on the employee's ____________.
Years of service
Marcy wants to provide collateral to the bank where she will be obtaining a loan. Can her life insurance policy be used for this purpose?
Yes by collaterally assigning the policy to the bank
Ted and Alice know that their children will have to face estate tax issues after they have both died. Can life insurance help with estate taxes?
Yes, it can be received income tax free to pay the full amount of the estate tax
