Chapter 4: Taxes, Retirement, and Other Insurance concepts
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?
Profit sharing plan
An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilitze?
Viatical settlement
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
100% participation of members is required in noncontributory plans
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
Attained age
Life insurance death preceeds are
Generally not taxed as income
Which of the following is not true regarding policy loans?
Money borrowed from the cash value is taxable
Which of the following is correct concerning the taxation of premium in a key person life insurance policy?
Premiums are not tax deductible as a business expense
The premiums paid by the employer in a business life insurance policy are
Tax deductible by the employer
What is the purpose of key person insurance?
To lessen the risk of financial loss because of the death of a key employee
A key person insurance policy can pay for which of the following
costs of training a replacement
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then
the benefit is received tax free
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
the policy is owned by the company
A producer is helping a married couple determine the financial needs of the children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection
All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
Executive bonus
In a life settlement contract, whom does the life settlement broker represent?
The owner
All of the following are general requirements of a qualified plan EXCEPT
The plan must provide an offset for social security benefits
Which of the following best defines the "owner" as it pertains to life settlement contracts?
The policyowner of the life insurance policy
Which of the following in NOT true of life settlements?
The seller must be terminally ill
Which of the following is the best reason to purchase life insurance rather than annuities
To create an estate
Which of the following is NOT an example of a business use of life insurance
Workers compensation
When an employee terminates coverage under a group insurance policy, coverage continues in force
for 31 days
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
Buy-sell agreement
Which of the following is an eligibility requirement for all social security Disability income benefits?
Have attained fully insured status
Which of the following is an example of liquidity in a life insurance contract
The cash value available to the policyowner
All of the following are business uses of life insurance EXCEPT
Funding against company's general financial loss
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors
life expactancy