Test Questions
b)Certain groups of employees only.
A tax-sheltered annuity is a special tax-favored retirement plan available to a)Certain groups depending on factors such as race, gender, and age. b)Certain groups of employees only. c)Anyone. d)Certain age groups only.
a)Guaranteed cash value.
A variable life insurance policy states all of the following current and maximum policy charges EXCEPT a)Guaranteed cash value. b)Administrative expenses. c)Mortality costs. d)Investment management fee.
c)Guaranteed cash value.
A variable life insurance policy states all of the following current and maximum policy charges EXCEPT a)Mortality costs. b)Investment management fee. c)Guaranteed cash value. d)Administrative expenses.
Every 3 years after the second anniversary of their initial resignation
According to the FINRA Membership and Registration rules for continuing education, the Regulatory Element must be completed by each registered person Annually Every 2 years Every 3 years after the second anniversary of their initial resignation Every 4 years after the initial training
Life Insurance Producer
Agents who sell only variable life insurance and annuities in this state are required to pass all of the following exams EXCEPT Variable Life and Annuities Producer Life Insurance Producer Securities Industry Essentials (SIE) Series 6 or Series 7
c)Premiums.
All of the following are examples of risk retention EXCEPT a)Copayments. b)Self-insurance. c)Premiums. d)Deductibles.
a)The plan must provide an offset for social security benefits.
All of the following are general requirements of a qualified plan EXCEPT a)The plan must provide an offset for social security benefits. b)The plan must be communicated to all employees. c)The plan must be for the exclusive benefits of the employees and their beneficiaries. d)The plan must be permanent, written and legally binding.
Contributions are tax deductible
All of the following are true of nonqualified deferred compensation plan EXCEPT It can be discretionary Contributions are tax deductible It is a contractural agreement whereby the employee agrees to defer receipt of a portion of his compensation until retirement, disability, or death It does not require IRS approval
Policy dividends issued by mutual companies are guaranteed and not taxable
All of the following statements about mutual insurance companies are correct EXCEPT Mutual companies issue policies referred to as participating Policy dividends issued by mutual companies are guaranteed and not taxable Dividends allow policyholders to share in a mutual company's divisible surplus Dividends are a return of unused premium
c)Participant's debt.
All of the following types of distributions are considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax EXCEPT a)Death of participant. b)A loan from the plan. c)Participant's debt. d)Participant's disability.
$70,000
An annuity has accumulated the cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive $30,000 $70,000 $100,000 A survivor benefit determined by the insurance company
Fixed
An annuity owner receives the same guaranteed payment every month, what type of annuity is it? Fixed Immediate Guaranteed Single
c)Profit sharing plan
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a)Tax-sheltered account plan b)HR 10 plan c)Profit sharing plan d)401(k) plan
b)The policy will not be affected.
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? a)Because the insured is currently not a drug user, his policy will not be affected. b)The policy will not be affected. c)The policy will be voided. d)The insurer will sue the insured for committing fraud.
b)He will have to pay a penalty if he is younger than 59½.
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true? a)He cannot withdraw money from his MEC before age 59½. b)He will have to pay a penalty if he is younger than 59½. c)He will have to pay a penalty regardless of his age. d)He will not have to pay a penalty, regardless of his age.
3. Once a month.
Cash value in a variable life policy must be calculated at least 1. Once a day. 2. Once a week. 3. Once a month. 4. Once every 90 days.
1. False advertising
Circulating deceptive sales material to the public is what type of Unfair Trade Practice? 1. False advertising 2. Defamation 3. Coercion 4. Misrepresentation
10 years
Form U4 must contain an applicant's employment history for a minimum of how many previous years? 3 years 5 years 7 years 10 years
d)They are not included as income for the employee, but are taxable upon distribution.
How are contributions to a tax-sheltered annuity treated with regards to taxation? a)They are never taxed. b)They are taxed as income for the employee. c)They are taxed as income for the employee, but are tax free upon withdrawal. d)They are not included as income for the employee, but are taxable upon distribution.
It will decrease
If a cash value in a variable life policy decreases, what will happen to the death benefit? It will decrease It will be reduced to be equal to the cash value It will remain the same It will increase
d)The beneficiary
If the annuitant dies during the accumulation period, who will receive the annuity benefits? a)The annuity owner b)The insurance company c)The annuitant's estate d)The beneficiary
c)At least 1,000 employees.
SIMPLE Plans require all of the following EXCEPT a)No more than 100 employees. b)Employees must receive a minimum of $5,000 in annual compensation. c)At least 1,000 employees. d)No other qualified plan can be used.
4. Equity investment values tend to reflect increases or decreases in the cost of living.
The securities in the separate account of a variable annuity are substantially equity investments because 1. The yield on equity is usually higher than the yield on bonds. 2. Equity provides limited liability to shareholders. 3. The value of equity investments is easy to calculate. 4. Equity investment values tend to reflect increases or decreases in the cost of living.
Securities Act of 1933
Variable life insurance separate accounts must be registered under the SECURE Act of 2019 Investment Company Act of 1940 Maloney Act of 1938 Securities Act of 1933
c)The current interest rate at the time of surrender
What determines the penalty for surrendering a market value adjusted annuity prematurely? a)There are no penalties imposed for surrendering annuities prematurely. b)The guaranteed minimum interest rate provided in the contract c)The current interest rate at the time of surrender d)The flat fee determined by an index of interest gains and the amount of time the annuity would take to mature
4. The owner will receive the surrender value of the annuity.
What happens if a deferred annuity is surrendered before the annuitization period? 1. The owner will only receive a refund of premium. 2. The insurer can only apply the surrender value toward another annuity. 3. Deferred annuities cannot be surrendered prior to the annuitization period. 4. The owner will receive the surrender value of the annuity.
a)An insurance organization that most often addresses a commercial casualty concern
What is a risk retention group? a)An insurance organization that most often addresses a commercial casualty concern b)A group of people classified as having substandard risk c)A risk retention group addresses adverse selection by selecting insurable risks, and is always regulated by state authorities. d)A purchasing group for employers who are unable to purchase insurance due to the size of the company
b)$1,000
What is the minimum civil fine per violation of the Insurance Code of this state? a)$500 b)$1,000 c)$2,000 d)$5,000
To compensate the company for loss of investment value
What is the purpose of the surrender charge in a deferred annuity? To punish the annuitant for breach of contract To prevent the over funding of the annuity To provide additional revenue for the insurance company To compensate the company for loss of investment value
b)Income tax on distributions and no penalty.
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary? a)Capital gains tax on distributions plus 10% penalty. b)Income tax on distributions and no penalty. c)Income tax on distributions plus 10% penalty. d)Capital gains tax on distributions and no penalty.
a)Federal estate tax
What type of tax is associated with death proceeds from a life insurance policy? a)Federal estate tax b)Personal tax c)State tax d)Income tax
d)Transfer
When an individual purchases insurance, what risk management technique is he or she practicing? a)Avoidance b)Sharing c)Retention d)Transfer
1. Variable annuities
Which of the following does NOT fall under the classification of an investment company according to the Investment Company Act of 1940? 1. Variable annuities 2. Face amount certificates 3. Unit investment trusts 4. Management companies
1. Death benefit up to the policy face value
Which of the following features on a variable life insurance policy is guaranteed? 1. Death benefit up to the policy face value 2. Issuance of the policy 3. Market value of investments 4. Cash value accumulation from stocks
Annuitant
Which of the following indicates the person upon whose life the annuity income amount is determined? Owner Insured Annuitant Beneficiary
a)To minimize the insured's level of liability in the event of loss
Which of the following is NOT a goal of risk retention? a)To minimize the insured's level of liability in the event of loss b)To reduce expenses and improve cash flow c)To increase control of claim reserving and claims settlements d)To fund losses that cannot be insured
a)They earn lower interest rates than fixed annuities.
Which of the following is NOT true regarding Equity Indexed Annuities? a)They earn lower interest rates than fixed annuities. b)The insurance company keeps a percentage of the returns. c)They have guaranteed minimum interest rates. d)They are less risky than variable annuities.
b)Benefits stop at the annuitant's death.
Which of the following is NOT true regarding an annuity certain? a)It is a short-term annuity. b)Benefits stop at the annuitant's death. c)It will pay until a fixed amount is liquidated. d)There are no life contingencies.
2. Benefits stop at the annuitant's death.
Which of the following is NOT true regarding an annuity certain? 1. It is a short-term annuity. 2. Benefits stop at the annuitant's death. 3. It will pay until a fixed amount is liquidated. 4. There are no life contingencies.
4. It does not guarantee that the entire principal amount will be paid out.
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? 1. It is a life contingency option. 2. The beneficiary receives the remainder of the principal amount upon the annuitant's death. 3. Payments can be made in installments and as a single cash refund. 4. It does not guarantee that the entire principal amount will be paid out.
d)Interest rate index
Which of the following is used to determine interest rates on variable products? a)Consumer price index b)Annual average rate c)Cash value d)Interest rate index
c)Variable universal life
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? a)Credit term life b)Decreasing term life c)Variable universal life d)Increasing term life
4. Variable universal life
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? 1. Increasing term life 2. Credit term life 3. Decreasing term life 4. Variable universal life
a)Certificate of authority
Which of the following must an insurer obtain in order to transact insurance within a given state? a)Certificate of authority b)Producer's certificate c)Business entity license d)Insurer's license
Premium
Which of the following pays for the policy's administrative costs and fees, and the cost of mortality? Dividend Cash value Face amount Premium
Both FINRA and the state insurance departments
Which of the following regulatory bodies has authority over variable life policies? Both FINRA and the state insurance departments The Securities and Exchange Commission (SEC) State insurance departments only FINRA only
b)The Investment Company Act of 1940
Which of the following securities acts governs the variable annuity separate account? a)Dodd Frank b)The Investment Company Act of 1940 c)The PATRIOT Act d)The Securities Exchange Act of 1934
2. Private insurers may be authorized to transact insurance by state insurance departments.
Which of the following statements is an accurate comparison between private and government insurers? 1. Private insurers provide insurance in areas where the government will not. 2. Private insurers may be authorized to transact insurance by state insurance departments. 3. Insurance provided by the government is called federal insurance. 4. Private insurers offer fewer lines of insurance than government insurers.
c)Flexible premium
Which of the following types of policies would allow a policyowner to choose a premium amount and payment schedule? a)Fixed premium b)Indeterminate premium c)Flexible premium d)Initial premium
Investment Depository Institutions
Which of the following would NOT be classified as an investment company under the Investment Company Act of 1940? Investment Depository Institutions Face Amount Certificate Companies Unit Investment Trusts (UITs) Management Investment Comapnies
d)Single payment or periodic payments
Which two terms are associated directly with the way an annuity is funded? a)Increasing or decreasing b)Immediate or deferred c)Renewable or convertible d)Single payment or periodic payments
d)An individual not covered by an employer-sponsored plan who has earned income
Who can make a fully deductible contribution to a traditional IRA? a)Anybody; all IRA contributions are fully deductible regardless of income level b)Someone making contributions to an educational IRA c)A person whose contributions are funded by a return on investment d)An individual not covered by an employer-sponsored plan who has earned income
The person who purchases the annuity
Who is the annuity owner? The person who receives the benefits The person on whose life the annuity is written The insurer The person who purchases the annuity
1. Annually
.How often must registered person complete the firm element of their continuing education? 1. Annually 2. Every 2 years 3. Every 3 years 4. Every 5 years
a)The amount of the distribution is reduced by the amount of a 20% withholding tax.
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a)The amount of the distribution is reduced by the amount of a 20% withholding tax. b)No taxes are due since the plan participant is over age 59 1/2. c)There is a 10% early withdrawal penalty. d)The amount distributed is subject to ordinary income tax.
1 year
A licensee fails to earn the required CE credits by the expiration of the 90-day grace period, and the license has been terminated for education. How much time does the licensee have to meet the CE requirement to be considered for license reinstatement? 1 year 3 years Once terminated, a license cannot be reinstated 6 months
The policy's cash value minus unpaid loans and accrued interest
How are policy loans calculated? The policy's cash value minus unpaid loans and accrued interest The face amount of the policy minus unpaid loans Premium contributions over the previous year minus unpaid loans The face amount of the policy minus investment fees
None
How many hours of Continuing Education are required to maintain a Counselor's license? 30 None 12 24
a)It is only taxable if the cash value exceeds the amount paid for premiums.
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy? a)It is only taxable if the cash value exceeds the amount paid for premiums. b)It is not considered to be taxable. c)It is taxable only if it exceeds the amounts paid for premiums by 50%. d)It is automatically taxable.
The interest is taxable
If the annuitant dies before the annuity start date, which of the following is true? The interest is taxable The interest will not be tax deferred The interest is tax free if the beneficiary is a spouse The interest is nontaxable
b)The beneficiary will receive the greater of the money paid into the annuity or the cash value.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a)The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. b)The beneficiary will receive the greater of the money paid into the annuity or the cash value. c)The owner's estate will receive the money paid into the annuity. d)The insurance company will retain the cash value and pay back the premiums to the owner's estate.
b)It does not guarantee that the entire principal amount will be paid out.
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? a)Payments can be made in installments and as a single cash refund. b)It does not guarantee that the entire principal amount will be paid out. c)It is a life contingency option. d)The beneficiary receives the remainder of the principal amount upon the annuitant's death.
Securities Act of 1933
Which of the following is known as the paper act? The Securities Exchange Act of 1934 The Fair Credit Reporting Act The Trust Indenture Act The Securities Act of 1933
a)The payments will stop when the annuitant dies.
All of the following statements are true regarding installments for a fixed amount EXCEPT a)The payments will stop when the annuitant dies. b)Value of the account and future earnings will determine the time period for the benefits. c)This option pays a specific amount until the funds are exhausted. d)The annuitant may select how big the payments will be.
Cash
An IRA contribution can be made from which of the following? Life insurance Collectibles Stocks and bonds Cash
2. Fixed or variable.
The two main categories of policy loan interest rates are 1. Compound and variable. 2. Fixed or variable. 3. Simple or compound. 4. Fixed and simple.
c)Variable whole life has a guaranteed death benefit.
Which of the following is a key distinction between variable whole life and variable universal life products? a)Variable whole life allows policy loans from the cash value. b)Variable universal life has a fixed premium. c)Variable whole life has a guaranteed death benefit. d)Variable universal life is regulated solely through FINRA.
b)The owner is guaranteed a fixed interest rate for a specific period of time.
Which of the following is true regarding a market value adjusted annuity? a)It provides a level benefit payment. b)The owner is guaranteed a fixed interest rate for a specific period of time. c)The insurer bears all the market risk of changing interest rates. d)There are no penalties for a premature surrender of the annuity.
d)The owner is guaranteed a fixed interest rate for a specific period of time.
Which of the following is true regarding a market value adjusted annuity? a)The insurer bears all the market risk of changing interest rates. b)There are no penalties for a premature surrender of the annuity. c)It provides a level benefit payment. d)The owner is guaranteed a fixed interest rate for a specific period of time.
d)Retirement plans
Annuities can be used to fund which of the following? a)Variable life insurance b)Group life insurance c)Estate creation d)Retirement plans
a)An applicant submits an application to the insurer.
In insurance, an offer is usually made when a)An applicant submits an application to the insurer. b)The insurer approves the application and receives the initial premium. c)The agent hands the policy to the policyholder. d)An agent explains a policy to a potential applicant.
b)Generally not taxed as income.
Life insurance death proceeds are a)Taxed as ordinary income. b)Generally not taxed as income. c)Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. d)Taxed as a capital gain.
d)SEC registration.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT a)FINRA registration. b)A securities license. c)A life insurance license. d)SEC registration.
b)$1,000
What is the maximum fine for submitting a false or fraudulent claim to the insurer? a)$500 b)$1,000 c)$1,500 d)$2,000
