Final Exam Cram
a producer who willfully violates the insurance code may, after a hearing, pat UP TO _______ per violation as a penalty.
$5,000
what percent of personal life insurance premiums is usually deductible for federal income tax purposes?
0%
According to Hawaii law, a Group Life insurance policy requires a minimum of how many insureds?
10
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20 pay life
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
20,000 death benefit
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
A producer must complete __ hours of ethics per continuing education reporting period. -1 -2 -3 -4
3
When an employee is terminated, how long does this employee have to convert group life coverage to an individual plan?
31 days
A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?
6
How long does an individual have to "rollover" funds from an IRA or qualified plan? 60 days 90 days 120 days No limit
60 days
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called...
Accidental Death & Dismemberment Rider
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy? -A straight life annuity -A variable annuity -An immediate annuity -A deferred annuity
An immediate annuity
An annuity promises that, if the annuitant dies before receiving equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called:
An installment Refund annuity
When a policy owner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):
Anti-Money Laundering violation
What action can a policy owner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
Who is NOT required to sign a life insurance application?
Beneficiary
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
What type of group insurance plan involves employees sharing the cost?
Contributory Plan
Additional coverage can be added to a whole life policy by adding
Decreasing Term Rider
What is the purpose of the U.S.A. Patriot Act?
Detect and deter terrorism
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
Exclusion
Term insurance has which of the following characteristics?
Expires at the end of the policy period
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed deferred
In Hawaii, an insurer licensed to conduct business in Hawaii but domiciled in Pennsylvania, is called a(n)
Foreigin Company
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds could be forfeited In this situation, 80% "vested" means that 20% of the funds could be forfeited if Tom's employment is terminated.
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)
Immediate Annuity
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
A policy adhesion can only be modified by whom?
Insurance company
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance company
What is being delivered during a policy delivery?
Insurance contract to the proposed insured.
Credit Life Insurance is
Insurance issued on a debtor to cover outstanding loan balance
In a Key Employee life insurance policy, the third-party owner can be all of the following EXCEPT
Insured
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
Which statement regarding the Change of Beneficiary provision is true? -The beneficiary can only be changed with the consent of the insurer -The policyowner can change the beneficiary -The insured can change the beneficiary -A beneficiary change is subject to underwriting procedures
The policyowner can change the beneficiary
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
This clause provides the payment of proceeds to the insured's estate
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
What type of annuity has a cash value that is based upon the performance of its underlying investment funds?
Variable
What policy combines investment choices with a form of Term coverage?
Variable Universal Life
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable Universal Life
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
A life insurance policy which insures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
How are Roth IRA distributions normally taxed?
distributions (withdrawals) are received tax-free
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums
The Life and Health Insurance Guaranty Association is
funded by admitted insurance companies through assessments
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy? increase face amount decrease face amount increase premium-paying period decrease premium payment
increase face amount
a domestic insurance company in Hawaii is considered a company that
is incorporated and formed in Hawaii
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies? beneficiary insured policyowner insurer
policyowner
What benefit does the Payor clause on a Juvenile Life policy provide?
premiums are waived if the payor becomes disabled.
The premiums paid by an employer for his employee's group life insurance are usually considered to be
tax-deductible to the employer
Life insurance replacement regulation protects the interest of
the policyowner
Which of these are NOT an example of a Nonforfeiture option?
Life Income
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70
An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?
Long Term Care
Which of these life insurance riders allows the applicant to have excess coverage?
Term Rider
what kind of life insurance product covers children their parent's policy?
Term Rider
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
An insurance applicant made a fraudulent statement on the application for the purpose of obtaining money benefits from an insurer. The applicant is guilty of...
Misrepresentation
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of plan assets are in key employee accounts
A producer who is a resident in another state but licensed to transact insurance in hawaii is called a(n) ___________ producer.
Nonresident
What must be signed by both the producer and the applicant when an existing life insurance policy is being reissued with a reduction in cash value?
Notice Regarding Replacement
An example of rebating would be
Offering a client something of value not stated in the contract in exchange for their business
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance Policy
what kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary Responsibility
life insurance replace regulations do the following:
- regulate the activities of insurers and producers- protect the interests of policyholders by establishing minimum standards- assure purchasers receive adequate information to make an informed decision- reduce the opportunity for misrepresentation- establish penalties for failure to comply with requirements
C is a key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?
ABC is the policyowner, C is the insured, and ABC is the beneficiary
B owns a whole life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
Additional whole life coverage at specified times
J is an agent who recently told a claimant that his rights might be impaired if he does not complete a release form within a specified time. What could this agent be found guilty of?
Coercion
The insurance company that jack represents has been placed into rehabilitation, but Jack continues to tell his clients the company is "financially strong" and he uses an outdated financial rating to back up his claim. What unfair trade practice has Jack committed?
False financial statements
if its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health? Modification Conversion Exchange Adjustable
Conversion
Which of the following is not a situation that involves life insurance policy replacement
Converting a term policy to a permanent policy with the same insurer
What type of policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing Term
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE? - Each partner owns a $1,000,000 policy on their own life - Each partner owns a $1,000,000 policy on their partner's life - Each partner owns a $500,000 policy on their own life - Each partner owns a $500,000 policy on their partner's life
Each partner owns a $500,000 policy on their partner's life
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? -Premiums are normally not tax deductible -Cash dividends are normally not taxed -Entire cash surrender value is taxable -Proceeds are received tax-free if there is a named beneficiary
Entire cash surrender value is taxable
How is the Life and Health Insurance Guaranty Associated funded?
From member companies
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
All of these statements about the Waiver of Premium provision are correct, EXCEPT
Insured must be eligible for Social Security disability for claim to be accepted.
Variable annuities may invest premiums in each of the following, EXCEPT : A- Money Market Securities B- Junk Bonds C- Inusurer's corporate business acct.
Insurer's Corporate Business Account
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive dividends
Whole life insurance policies are contractually guaranteed to provide each of the following except
Partial withdrawal features beyond a surrender charge period
All of the following statements are true regarding a policy's Grace period, except
Past due payments are waived
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which of these do NOT constitute policy delivery? Policy mailed to applicant Policy mailed to agent Policy delivered to the applicant by the agent Policy issued with a rating
Policy issued with a rating
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
Policy proceeds
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? Renewable Increasing Level Decreasing
Renewable
A producer has influenced an existing policyowner to convert an existing whole life policy to Reduced Paid-up insurance. The producer then sells the policyowner a new universal life policy. This transaction is called a(n):
Replacement
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
Split-dollar plan
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n) Cash Refund Installment Refund Straight Life annuity Life Annuity with Period Certain
Straight Life annuity
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
