Chapter 6 Practice Questions

To be included in an ER-sponsored group plan, an EE must be employed FT by any of the following, except: A. A silent partner B. The immediate group C. A subsidiary of the firm D. An active partner

*A. A silent partner* B. The immediate group C. A subsidiary of the firm D. An active partner

A Buy-Sell Agreement... A. Assures the continuation of the business by providing benefits tot he surviving business partners to buyout a business partner's interest in the event one of them dies unexpectedly B. Describes which relatives of a business owner have the right to purchase that person's interest in the business C. Provides the business with funds in the event of the death of a key person who is not an owner D. Specifies the conditions and requirements that are necessary to sell the business to a third party if a business owner dies unexpectedly

*A. Assures the continuation of the business by providing benefits tot he surviving business partners to buyout a business partner's interest in the event one of them dies unexpectedly* B. Describes which relatives of a business owner have the right to purchase that person's interest in the business C. Provides the business with funds in the event of the death of a key person who is not an owner D. Specifies the conditions and requirements that are necessary to sell the business to a third party if a business owner dies unexpectedly

In order for a worker to be qualified for all of the benefits available from Social Security how many credits must be earned? A. 1 credit for each year of work between age 20 and age 40 B. 6 credits in the last 13 quarters C. 30 credits D. 40 credits

A. 1 credit for each year of work between age 20 and age 40 B. 6 credits in the last 13 quarters C. 30 credits *D. 40 credits*

Which of the following is NOT an example of Third-Party Ownership? A. A parent purchasing a policy on the life of his or her child B. A business owner buying a life policy on his own life C. A Key EE Policy D. A policy used to fund a Buy-Sell Agreement

A. A parent purchasing a policy on the life of his or her child *B. A business owner buying a life policy on his own life* C. A Key EE Policy D. A policy used to fund a Buy-Sell Agreement

A buy-sell agreement can be used in all of the following businesses, except: A. A partnership B. A sole proprietorship C. Large publicly held corporations D. Closed corporation stockholders

A. A partnership B. A sole proprietorship *C. Large publicly held corporations* D. Closed corporation stockholders

The Master Policy for a group life plan goes to the employer. What does a participating employee receive? A. Claim form package B. Change of beneficiary form C. Copy of the Master Policy D. Certificate of Insurance

A. Claim form package B. Change of beneficiary form C. Copy of the Master Policy *D. Certificate of Insurance*

All of the following are characteristics of Group Life Insurance, except: A. Evidence if insurability is usually not required B. Group is typically written utilizing Permanent Insurance C. Claims are not contestable after an EE has been covered for 2 years D. Most states require a minimum number of enrollees at date of issue

A. Evidence if insurability is usually not required *B. Group is typically written utilizing Permanent Insurance* C. Claims are not contestable after an EE has been covered for 2 years D. Most states require a minimum number of enrollees at date of issue

All of the following are advantages of having a Buy-Sell Agreement in place, except: A. It is an immediate and automatic method of transferring the deceased's interest B. The business value is pre-agreed upton C. The agreement is legally enforceable D. Premiums are tax-deductible

A. It is an immediate and automatic method of transferring the deceased's interest B. The business value is pre-agreed upton C. The agreement is legally enforceable *D. Premiums are tax-deductible*

All are correct statements concerning noncontributory group life, except: A. Only the plan sponsor is responsible for paying premiums B. If ER-sponsored, an EE must work a minimum number of hours per week to be eligible C. The Conversion Period is 31 days D. Premiums are calculated by underwriting each individual in the group

A. Only the plan sponsor is responsible for paying premiums B. If ER-sponsored, an EE must work a minimum number of hours per week to be eligible C. The Conversion Period is 31 days *D. Premiums are calculated by underwriting each individual in the group*

The proceeds from a ___ plan provide the necessary funds to recruit, hire, and train a replacement EE. A. Key Employee B. Entity C. Cross Purchase D. Group

*A. Key Employee* B. Entity C. Cross Purchase D. Group

The lowest monthly Social Security retirement benefit would occur if started at age ___. A. 67 B. 65 C. 60 D. 62

A. 67 B. 65 C. 60 *D. 62*

With a Contributory Group Life Plan, what percentage of the EEs must participate? A. At least 50% B. At least 60% C. At least 75% D. A full 100%

A. At least 50% B. At least 60% *C. At least 75%* D. A full 100%

An individual can make changes to their group life insurance plan at any time for any one of the following reasons, except: A. Change in employment status such as going to or from part-time to full-time B. Changing health insurance carriers and deductibles C. Adding an eligible dependent D. Getting married

A. Change in employment status such as going to or from part-time to full-time *B. Changing health insurance carriers and deductibles* C. Adding an eligible dependent D. Getting married

Ultimately, who determines if a life insurance policy with an owner other than the insured will be issued? A. The benficiary B. The policyowner C. The insured D. The insurer

A. The benficiary B. The policyowner C. The insured *D. The insurer*

The Social Security Death Benefit is payable to the ____. A. The estate of the insured B. The named beneficiary C. The surviving spouse D. The next of kin

A. The estate of the insured B. The named beneficiary *C. The surviving spouse* D. The next of kin

Which of the following is truly a Key Person (EE)? A. the company's truck driver B. the company bookkeeper C. a rank-and-file EE an executive sales manager

A. the company's truck driver B. the company bookkeeper C. a rank-and-file EE *D. an executive sales manager*

Generally, children receive Social Security Survivor Benefits until age ___. A. 15 B. 17 C. 18 D. 16

A. 15 B. 17 *C. 18* D. 16

The widow or widower's Social Security blackout period lasts until a surviving, non-remarried spouse reaches age ___. A. 65 B. 60 C. 50 D. 62

A. 65 *B. 60* C. 50 D. 62

Franchise plans are also known as: A. Small group plans B. McGroup plans C. Wholesale plans D. Mini-group plans

A. Small group plans B. McGroup plans *C. Wholesale plans* D. Mini-group plans

After the blackout period has ended, the widow or widower may receive a Social Security income benefit based on the ____. A. Social Security Death Benefit B. FICA taxes that are paid by ERs C. FICA taxes that are paid by the EEs D. PIA of the decreased spouse

A. Social Security Death Benefit B. FICA taxes that are paid by ERs C. FICA taxes that are paid by the EEs *D. PIA of the decreased spouse*

Social Security pays an eligible surviving spouse (or minor child) a one-time benefit upon the death of a covered worker. Which of the following is the amount of that benefit? A. $350 B. $255 C. $250 D. $355

A. $350 *B. $255* C. $250 D. $355

Industrial life insurance is typically sold in face amounts of: A. Up to $50,000 B. $1,000 or less C. $10,000 to $20,000 D. $5,000 multiples

A. Up to $50,000 *B. $1,000 or less* C. $10,000 to $20,000 D. $5,000 multiples

___ Insured under Social Security means that a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age. A. Currently B. Under C. Partially D. Fully

*A. Currently* B. Under C. Partially D. Fully

Why were industrial policies written? A. The replace lost income due to the insured's death B. To offset funeral expenses C. To supplement retirement income D. To provide an additional source of college funds

A. The replace lost income due to the insured's death *B. To offset funeral expenses* C. To supplement retirement income D. To provide an additional source of college funds

All of the following are characteristics of Franchise Insurance, except: A. Certificates of Insurance are issued B. The group must be together for a reason other than purchasing cheaper insurance C. Premiums are paid by the ER or shared with the EE D. The ER handles most of the administrative responsibilities, which makes franchise less expensive than individual insurance

*A. Certificates of Insurance are issued* B. The group must be together for a reason other than purchasing cheaper insurance C. Premiums are paid by the ER or shared with the EE D. The ER handles most of the administrative responsibilities, which makes franchise less expensive than individual insurance

Which of the following is a characteristic of a contributory plan? A. Eligible employees pay a portion of the premium B. Dependents of eligible employees must pay 75% of the premium C. Employers must enroll 100% of eligible employees D. Part-time employees must be eligible to participate

*A. Eligible employees pay a portion of the premium* B. Dependents of eligible employees must pay 75% of the premium C. Employers must enroll 100% of eligible employees D. Part-time employees must be eligible to participate

All of the following are true regarding industrial life insurance, except: A. The policies are marketed house to house by debit agents B. The grace period is 1 week C. The method of settlement upon death is lump sum D. Debit agents are also known as home service agents

A. The policies are marketed house to house by debit agents *B. The grace period is 1 week* C. The method of settlement upon death is lump sum D. Debit agents are also known as home service agents

ABC Enterprises with work $300,000. There are 3 shareholders and each shareholder is an equal owner of the company. If they establish an entity buy-sell agreement, the entity would have to buy policies in the amount of $__ on each of the owners. A. $150,000 B. $100,000 C. $75,000 D. $50,000

A. $150,000 *B. $100,000* C. $75,000 D. $50,000

Which of the following is a likely outcome if a buy-sell agreement in a two-person partnership is not in place when one of the partners dies? A. The value of the business will increase B. Partners transfer taxes are due within 9 months C. The agreement will need to go through the probate process D. The surviving spouse of the deceased becomes the other partner

A. The value of the business will increase B. Partners transfer taxes are due within 9 months C. The agreement will need to go through the probate process *D. The surviving spouse of the deceased becomes the other partner*

In a group life insurance plan, the employee has control over which of the following? A. Type of policy B. Choice of insurance company C. Mode of premium payments D. Choice of beneficiary

A. Type of policy B. Choice of insurance company C. Mode of premium payments *D. Choice of beneficiary*

Which of the following is true in regard to an Entity Purchase Plan? A. The business enters into an agreement to purchase the deceased's interest in the business B. The entity buys life insurance on non-owner key EEs C. The owners are named as beneficiaries in the policy acquired D. It is an incentive plan for key EEs

*A. The business enters into an agreement to purchase the deceased's interest in the business* B. The entity buys life insurance on non-owner key EEs C. The owners are named as beneficiaries in the policy acquired D. It is an incentive plan for key EEs

When is an entity buy-sell agreement plan used? A. When the entity buys life insurance on each of the owners B. When the owners are not in the financial position to buy the policies on their own C. When the entity needs an additional tax deduction D. When insurability is an issue

*A. When the entity buys life insurance on each of the owners* B. When the owners are not in the financial position to buy the policies on their own C. When the entity needs an additional tax deduction D. When insurability is an issue

Individuals who do not enroll during the initial enrollment period are considered ___ enrollees. A. Prohibited B. Terminated C. Late D. Restricted

A. Prohibited B. Terminated *C. Late* D. Restricted

A primary purpose of key person life insurance is to: A. Protect the business against the death of any employee earning at least $50,000 per year B. Provide the family of the deceased EE with up to ten years of the EE's lost future income C. Provide the business with money to recruit and train a replacement EE D. Provide the business with money to pay vested retirement benefits to the heirs of the EE as a lump sum

A. Protect the business against the death of any employee earning at least $50,000 per year B. Provide the family of the deceased EE with up to ten years of the EE's lost future income *C. Provide the business with money to recruit and train a replacement EE* D. Provide the business with money to pay vested retirement benefits to the heirs of the EE as a lump sum

A consumer should know the following aspects of a group insurance policy, except: A. The plan sponsor has a say in the form and amount of coverage available to plan participants B. If covered under an ER group plan, the ER can discontinue the plan at any time C. Upon separating from the group, the group life coverage is not convertible D. At renewal, the premium can increased, in which case it may become unaffordable

A. The plan sponsor has a say in the form and amount of coverage available to plan participants B. If covered under an ER group plan, the ER can discontinue the plan at any time *C. Upon separating from the group, the group life coverage is not convertible* D. At renewal, the premium can increased, in which case it may become unaffordable

All of the following are characteristics of Credit life Insurance, except: A. the insurance is either a form of individual coverage on the life of a debtor, or a form of group insurance issued to a creditor providing coverage for debtors B. this insurance is normally Decreasing Term and the amount of insurance reduces as the obligation reduces C. the amount of the insurance benefit must not exceed the total amount of indebtedness D. The debtor generally is both policyowner and beneficiary

A. the insurance is either a form of individual coverage on the life of a debtor, or a form of group insurance issued to a creditor providing coverage for debtors B. this insurance is normally Decreasing Term and the amount of insurance reduces as the obligation reduces C. the amount of the insurance benefit must not exceed the total amount of indebtedness *D. The debtor generally is both policyowner and beneficiary*

In a credit life plan, who is the beneficiary? A. the wife of the insured B. the creditor C. the husband of the insured D. the children of the insured

A. the wife of the insured *B. the creditor* C. the husband of the insured D. the children of the insured