Taxes,Retirement,and Other Insurance Concepts

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What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2?

10% penatly

What is the penalty for excessive contributions to a traditional IRA?

6%

Who would be considered a third -party owner

An individual or an entity who is not the insured

Why are dividends in life insurance policies not taxable

Dividends are not considered income for tax purpose; they are a return of unused premium

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

Earned income

What type of policy issues certificated of insurance to the insured?

Group policy

What qualified plan is suitable for the self-employed

HR-10 or Keogh

What are some examples of qualified plans?

IRA,401(k), HR10(Keogh), SEP, SIMPLe

Is the death benefit of a life insurance policy taxed to the beneficiary if it is received as a lump sum?

No, lump-sum benefits are received tax free

Who owns a group life insurance contract?

Th employer (also known as the sponsor of the group)

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

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

What is the name for an overfunded life insurance policy?

a modified Endowment Contract (MEC)

who may contribute to an HR-10 plan?

a self-employed individual

Group life insurance policies are written as what type of insurance

annually renewable term

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

cash value growth is tax deferred.

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy

death benefits are generally not subject to income taxes

Who qualifies for tax-shelter annuities or 403(b) plans?

employees of nonprofit organization under Section 501(c)(3) and employess of public school systems

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

estate conservation

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

evidence of insurability is not required

What type of policy is typically issued without proof of insurability from the insured>

group policy

What are the characteristics of the group that underwriters will consider before issuing a group life policy

group's purpose,size, financial strength and turnover

What are the characteristics of the group that underwriters will consider before issuing a group life policy

group's purpose,size, financial strength, and turnover

In what form of payment mut be the contributions to a traditional IRA be made>

in cash(or cash equivalents)

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

interest only

if the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest,which portion, if any, will be taxed?

interest only

SIMPLE plans are available to groups of how many employess?

no mare than 100

In qualified plan, are employer contribution taxed income to the employees>

no, employer contributions are not taxed as income to the employees

Upon surrender of a life insurance policy, what portion of the cash value will be taxed

only the portion in excess of the premium paid

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

only the portion in excess of the premium paid

What is the primary purpose of 401(K) plan

provide retirement income

What are the three types of Social Security benefits

retirement, disability and survivors

what are the personal uses of life insurance

survivor protection,estate creation and conservation,cash accumulation and liquidity

When planning for survivor protection in life insurance, what needs to be considered>

the insured's current assets, liabilities and survivor's needs

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

the plan has favorable tax treatment

What is the main purpose of the 7-pay Test?

to determine if a life insurance policy is a modified endowment contact

If an insured terminate membership in group life insurance, to what type of insurance can the insured convert the coverage

whole life


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