Chapter test questions
The social security survivor benefit covers children to age _____ and may continue coverage to age ______ if still enrolled in high school.
18/19
A typical life insurance application contains how many parts?
2
The value within a permanent life insurance policy that the policyowner can access through a policy loan or policy surrender is known as the ___________.
Cash value
The _______ branch is responsible for interpreting and determining the constitutionality of the statutes.
Judicial
The social security blackout period for surviving spouses begins when the youngest child reaches age ________, and ends when the surviving spouse reaches age ________.
16/60
Generally, children receive Social Security Survivor Benefits until age ________.
18
C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. What is the insurer's net amount at risk?
$30,000
A retiree elected the Life Income with 10 Year Period Certain. He/she dies the day after receiving 119 monthly payments. The beneficiary will receive _______ more payment(s):
1
The social security blackout period lasts until a surviving spouse reaches age _____.
60
Ordinarily, who would not be the owner of a juvenile policy from the outset?
A brother or sister
Which statement regarding social security benefits is FALSE?
A surviving spouse cannot receive survivor's benefits before age 62.
What is the primary reason why states have "outlawed" stranger/investor originated life insurance (STOLI) transactions?
At policy inception there is a lack of insurance interest
When a life insurance policy's ownership is changed from the original owner to a new owner without payment, this is known as:
Absolute assignment
A child rider that is added to an insured's permanent policy includes which of the following features?
All children (beyond 14 or 15 days of age) are covered, and the rider may be converted to permanent coverage at a specified age without evidence of insurability, when the child reaches the maximum age.
The nonforfeiture option that, if exercised, terminates all coverage is:
Cash surrender
Which of the following is truly a key person (key employee)?
An executive sales manager
If a non-qualified variable annuity owned for 15 years is surrendered, what is the income tax consequence?
Any amount received in excess of its cost basis is taxable as ordinary income
Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Alice dies, so who receives the policy proceeds?
Bill
Annuities and life insurance are similar in all of the following ways, except:
Both use the same term to identify the person whose life is the subject of the contract
A beneficiary receives ample income each month from the interest earned while the insurance company retains the principal. This is referred to as which of the following?
Capital Conservation
Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds?
Claire
A person who wants to work in the insurance industry, but who has a prior felony conviction must apply for ______.
Consent to work (1033 waiver)
Upon receipt of all of the necessary information, the home office underwriters, can issue the coverage applied for in all of the following way, except:
Declined
Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect and is most often used to pay an outstanding loan or mortgage balance upon the death of the insured?
Decreasing term
All of the following types of qualified plans provide an employee with a retirement benefit based on the value of the employees account at retirement, except:
Defined benefits
A producer should do all of the following when meeting with the client after the policy has been issued, except:
Disclose the amount of commission earned on the sale
________ refers to the jurisdiction where an insurer was formed or incorporated.
Domicile
Mr. Zamboni is the owner and the annuitant of an annuity. Mrs. Zamboni, the designated beneficiary, will be able to assume all ownership rights and tax-deferral if Mr. Zamboni should die ___________.
During the accumulation period.
One of the benefits of an annuity in regards to taxes is:
Earnings are tax deferred during the accumulation phase
All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases, except:
Education level completed
Which of the following types of buy-sell agreements provides for a business to purchase a life insurance policy on each business partner?
Entity plan
When a producer personally delivers a life insurance policy, they are responsible for doing which of the following?
Explain the policy benefits
The ______ allows an insurer to pay death benefits to anyone it deems to be entitled in the absence of a designated beneficiary.
Facility of Payment Clause
A client wants coverage for himself as well as coverage for his wife and children all under one policy at an affordable price. Which of the following would best meet the need?
Family Rider
All of the following activities could cause an insurance purchase to be treated as a STOLI, except:
Fill out the application for life insurance on behalf of the insured
The beneficiary is concerned about a payout for a particular period of time, the ______ settlement option should be selected.
Fixed period
Annuities may be funded with either a lump sum or a ______ premium basis.
Flexible
X is 57 years old, and planning for their retirement. They do not know what their cash flow will look like over the next 10 years, but wants to fund an annuity to provide retirement income. Which of the following premium funding methods would be best for X to consider?
Flexible
Each of the following pertaining to group life insurance is true, except:
Group members are required to prove insurability
Which of the following gives the owner of a variable annuity the right to withdraw funds without having to annuitize?
Guaranteed minimum withdrawal benefit
Failure to repay a loan or loan interest will void a life insurance policy:
If the total amount due equals or exceeds the policy's cash values
If interest rates have fallen since a market value adjustment annuity (MVA) was purchased, what impact will this have on the annuity?
In effect, the account values would have increased
The provision that limits the amount of time an insurer has to challenge a claim and void the contract upon proof of a material misstatement is called the ________ clause.
Incontestability
Cash values with an ordinary straight whole life insurance policy _____ over time.
Increase
All of the following about Universal Life are true, except:
Increases in face amount do not require proof of insurability if under $100,000
The ability of an individual to meet an insurance company's underwriting requirements is known as:
Insurability
The _____ clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force.
Insuring
Taxation applies to any ______ on the cash value paid out as a withdrawal of a Universal policy.
Interest
Which of the following scenarios will trigger an income tax due?
Interest earned on dividends left on deposit with the insurer
If a court is presented with a contract of adhesion that contains unclear or ambiguous language, the court will:
Interpret the contract in favor of the party that did not write it
All of the following are true about a buy/sell agreement, except:
It can only be funded with term life insurance
Which of the following is TRUE of a term rider when attached to a permanent life policy?
It can provide additional temporary coverage on the insured or on other members of the family
The proceeds from a ______ plan provide the necessary funds to recruit, hire, and train a replacement employee.
Key employee
In those instances in which the death of a valued employee could cause financial hardship for a company, the company might acquire additional funds through which type of coverage?
Key person
Buy-Sell agreements are used for all of the following entities, except:
Large Public Corporations
Which of the following death benefits is paid out to the beneficiary income tax-free?
Life insurance when the insured dies while the policy is in force
Z is the beneficiary of a life insurance policy. Rather than take a lump sum, Z wanted a lifetime payout. However, Z would feel bad if after he died, residual values were retained by the insurer rather than being paid out. Z should consider which of the following settlement options?
Life refund
Instead of electing to annuitize the annuity, what is another common option chosen?
Lump sum distribution
Which of the following is most likely to pay the highest premium for a disability income policy, all other factors being equal?
Male, age 40, firefighter
Which of the following statements is correct regarding a waiver of premium rider on a participating whole life policy?
The premiums are waived until either the insured recovers from the disability, the policy achieves paid-up status, or the insured dies
The difference between a misrepresentation and a material misrepresentation is:
Material misrepresentations are issues that affect policy issuance
Which of the following types of coverage is best used to protect the beneficiary, and to provide a living benefit for the policy owner?
Permanent
For an individually purchased life insurance policy, the premiums are considered a ______.
Nondeductible personal expense
If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point?
Nothing, the insurer has waived its right to that information
How often may a person perform a rollover from one IRA to another?
Once every 12 months
Generally speaking, straight whole life is classified as which of the following?
Ordinary
When the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit must pay income tax on any gain from the policy at ______ tax rates.
Ordinary income
The cost basis of a life insurance policy is _____.
Premiums paid less dividends or withdrawals
To make insurance more affordable and protect the insurance company from paying out too much in claims, insurers will:
Reinsure the risk
An insured dies within the time limit of an Increasing Term Rider and the beneficiary receives the face amount plus the value of all paid premiums. Which rider is attached to the policy?
Return of premium
If incorrect or unverifiable information is found on an applicants credit report, the fair credit reporting act requires the reporting agency to:
Send the correct information to all parties who received a report within the prior 24 hours
At the time of her retirement at age 62, Jolene chose a Life Income Payment Option to have her annuity distributed. Five years later, when her health declines, she needs the distribution to be increased. How is this accomplished?
She cannot change the distribution once commenced
Chad and Sue have successfully owned and operated their bakery for 10 years and have decided to plan for their retirement. They are not incorporated and have no full-time employees, and want a qualified plan to maximize the tax advantages while at the same time not bog them down with paperwork. Which of the following plans would be their best option?
Simplified Employee Pension (SEP)
Warren and Wilma have a joint life policy. Warren dies, and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a:
Survivorship or second to die policy
Which of the following two documents always constitutes part of the entire contract?
The application and policy
Which of the following provides the basis for the benefit amount paid to an insured under a disability rider?
The face amount of the policy
Once a policy is classified as an MEC, it will maintain that classification for ________.
The life of the policy
When reviewing an application, the underwriter decides to reclassify the risk. What does that mean for the client?
The premium could increase or decrease
Which of the following is NOT part of the definition of "insurable risk"?
The risk must be preventable
Which of the following is a major risk to an employee covered under an employers group life insurance plan?
The sponsor can elect to discontinue the plan
What is the intent of the suicide clause?
To discourage individuals from purchasing an insurance policy while contemplating suicide
Determining acceptable risk is the primary responsibility of the:
Underwriter
A policy owner has the right to cancel the policy at any time, and for any reason, because insurance contracts are _______.
Unilateral
Which of the following policies allow for a partial withdrawal or partial surrender?
Universal Life
Al of the following annuities can be sold without a securities registration/license, except:
Variable
During the accumulation phase of an _____ annuity, premium dollars buy more accumulation units.
Variable
A ______ is a contractual agreement that allows a company or person to buy one or more of the rights of ownership in a life policy on the life of another person, should the owner/insured become terminally ill.
Viatical Settlement
And insurer issues a policy as "other than applied for" requiring an additional premium of $100. When would an agreement come into being?
When the applicant accepts delivery of the policy and pays the additional premium
You can purchase a life insurance policy on all of the following persons, except:
Your neighbor
For the insurance company to pay the accidental death benefit, most companies require that the insured:
die within 90 days of the accident
The _______ date is the date on which the insurance coverage ends.
expiration
The date on which insurance coverage is no longer in effect is referred to as the ______ date.
expiration
If the insured dies while the _______ period is in effect, the death benefit paid is the face amount, minus the premiums due.
grace
When an insured decides to change her mode of premium payment from annually to monthly, the total premium due would:
increase
Which of the following types of term life insurance can be written as a rider to provide cost of living or return of premium benefits?
increasing term
Individuals who do not enroll during the initial enrollment period are considered _______ enrollees.
late
An insurer NOT authorized to do business within this state is considered what type of insurer?
non-admitted
It is the ______ Who issues a certificate of authority enabling an insurer to conduct insurance business within a particular state.
state insurance commissioner
An insurer considers all of the following when determining the fixed annuity payments, except:
stock market value
Which of the following annuities typically offers no guarantees?
variable
