Life insurance

Class H felonies

-Embezzling money belonging to policy holders -Obtaining money from any person under false pretenses -Knowingly presenting false claims statements

What is the maximum face amount on an industrial life policy?

1,000

To sell variable life insurance policies, an agent must receive

A life insurance license, A FINRA registration, and a Securities license

Who is considered a field underwriter?

An agent

A restricted license, which allows an individual to represent a life insurance company domiciled in North Carolina to transact insurance business in a foreign country must be renewed

Annually

Non-qualified Retirement plan

Contributions are not tax deductible Earnings grow tax deferred

Qualified retirement plan

Contributions are tax deductible Earnings grow tax deferred

Your employer does not offer a company wide annuity contract. What type of annuity contract could your client obtain?

Individual

Preferred Risks

Individuals who meet certain requirements and qualify for lower premiums than the standard risk Have superior physical condition, lifestyle, and habits

referred to taxing premiums are

Not tax deductible

401 (k) Plans

Profit sharing plans Employer contributions must be systematic and substantial Take reduction in current salaries by deferring amounts to a retirement plan

One of the main sources of underwriting info for the company

The application

Consideration

The binding force in any contract. Something of value that each party gives to the other. Consideration on the part of the insured- payment of premium and the representations made in the application. Consideration on the part of the insurer- the promise to pay in the even of loss

With adjustable life the owner can't change

The insured

Regarding the cash value is a universal life policy...

The insurer credits the cash value in the policy with a current interest rate

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

What type of policy is considered interest sensitive?

Universal Life

Premium receipt

Whenever the agent collects the premium This type of receipt missed will determine when coverage will be effective

Traditional IRA

tax deductible contributions until the age of 70 1/2 Withdrawals may begin at age 59 1/2 but no later than age 70 1/2

Cash values grow

tax deferred

IRA's

tax deferred earnings not taxed until withdrawn

Accelerated befits are received

tax free up to a certain limit

If the Commissioner denies an initial application for an agent, how long does the applicant have to request a review after receiving notification of the denial?

30 days

The reinstatment provision in life insurance policies lasts

5 years

Approval conditional recepit

Coverage begins only when the pre-paid application is approved by the insurer (but before the policy is delivered). Therefore no coverage during the initial underwriting process

Which provision of a life insurance policy states the insurers duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Insuring Clause

SIMPLE Plan

Small businesses that employ no more than 100 employees who received at least 5,000 in compensation from the employed during the previous year Employer must not have a qualified plan already in place Tax is deferred on both contributions and earnings until funds are withdrawn

referred to taxing the death benefit

Tax free if taken as a lump-sum distribution to a named beneficiary Principal is tax free Interest is taxable if paid in installments

IF the full premium was submitted with the application and the policy was issued as requested

the policy coverage would generally coincide with the date of the application

What can't be changed in adjustable life?

The type of investment

Credit life

written as decreasing term insurance

How long must a compliant record be maintained?

5 years

What should an insurer obtain in order to transact insurance within a given state?

Certificate of authority

What is not a duty or responsibility of producers at the time of application?

Change any incorrect statement on the application by personally initialing next to the correct statement

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

What would not cause the death benefit to increase?

Payor benefit rider

Contributory plan

Premiums for group insurance are shared between the employer and employees Insurer will require that 75% of eligible employees be included in the plan

Aleatory

There is an exchange of unequal amounts or values.

HR-10 or Keogh plan

self-employed persons to be covered under an IRS qualified retirement plan. must be self employed or a partner working part time or full time who owns at least 10% of the business Contributions are tax deductible Has to be at least 21 years old and have worked for a self-employed person for one year or more and worked at least 1000 hours

The policy owner of an adjustable life policy wants to increase the death benefit. Whats a true statement?

The death benefit can be increased by providing evidence of insurability

An MEC must always pass the 7-pay test ( T or F)

False

If the license is terminated due to misconduct the bond is forfeited (T or F)

False

Key person insurance

Key employee is the insured The Business is: Applicant Policyowner Premium payer Beneficiary IF key employee dies, the business would use the money for the additional costs of running the business and replacing the employee Business can't take tax deductions for the expense of the premium IF key employee dies the benefits paid to the business are usually received tax free

Dividends received on participating life insurance policies are

Not taxable because they are a return of unused premiums

What is the official name for the Social Security Program?

Old Age Survivors Disability Insurance

Under a pure life annuity, an income is payable by the company

Only for the life of the annuitant

If an employee terminates membership in the insured group

The employee has the right to convert to an individual policy without proving insurability at a standard rate, based on the individuals attained age. group life policy can convert to any form of insurance issued by the insurer except term insurance Face amount will be equal to the group term face amount but the premium will be higher Employee has a period of 31 days after terminating from the group to use the conversion option During that time the employee is still covered under the original group policy

What happens to the face amount of a whole life policy if the insured reaches the age of 100?

The face amount is paid to the insured

How long does an insurer have to file with the Commissioner the form detailing the agents name, address, and other needed information?

30 days

Types of Nonforfeiture Options

Cash surrender value Reduced Paid-up insurance Extended Term

If a policy is issued with questions left unanswered,

The contract will be interpreted as if the insurer waived its right tot have an answer to the question The insurer will not have the right to deny coverage based on any info that the unanswered question might contain.

Defamation

When an oral or written statement is made that is intended to inure a person engaged in the insurance business

Rebating

any inducement offered to the insured in the sale of a life insurance product that is not specified in the policy.

An adjustable life policy can assume the form of

Either term insurance or permanent insurance

The provision which states that both the policy and a copy of the application form the contract between the policy owner and the insurer is called the

Entire contract

A policy will pay the death benefit if the insured dies during 20-year premium-paying period, and nothing if death occurs after the 20 year period. What type of policy is this?

Level Term

Which two terms are associated directly with the premium?

Level or flexible

What type of insurance is annually renewable term insurance?

Level term

Which of the following can surrender a deferred annuity contract?

Only the annuity owner

Conditional Contract

Requires that certain, conditions must be met by the policy owner and the company in order for the contract to be executed, and before each party fulfills its obligations.

S set up an individual retirement account that her employer is now contributing to . Her employers contributions are not included in her gross income. What kind of retirement plan does S have?

Simplified Employee Pension (SEP)

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?

The amount of the distribution is reduced by the amount of a 20% withholding tax

What is the name for the owner of a life insurance policy who enters into a vatical settlement contract?

Viator

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called?

Waiver of Premium

Noncontributory plan

When an employer pays all of the premiums An insurer will require that 100% of the eligible employees be included in the plan

Money borrowed against the cash value is

not income taxable However insurance company charges interest on outstanding policy loans

If the initial premium is not paid with the application,

the agent will be required to collect the premium at the time of policy delivery. In this case, the policy doesn't go in effect until the premium has been collected The agent may also be required to get a statement of good health from the insured.

If the full premium was submitted with the application and the policy was issued as a request, the policy coverage effective date would be?

the date of the application

Adjustable life

the death benefit can be increased by providing evidence of insurability

In a variable life insurance policy which assets are held in insurance companies general account?

-Incidental benefit amounts -Mortality Reserves -Face Amount Reserves

Agent appointments must be reported to the commissioner within?

30 days

An insurer that terminates the appointment of an agent must notify the commissioner within

30 days

Twisting

A misrepresentation of insurance policies that persuades an insured/owner to his or her detriment to cancel, lapse, switch policies, or take out a policy with another insurer

MIB

A non profit organization that maintains underwriting info on applicants for life and health insurance

All other factors being equal the least expensive first-year premium payment is found in?

Annually Renewable Term

When a policy owner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called?

Class designation

Which of the following terms is used to name the contacted return of unused premiums?

Dividends

If a change needs to be made the application for insurance, the agent may not ?

Erase the incorrect answer and record the correct answer

When would life insurance proceeds be taxable by the federal government?

If there is a transfer for value

A return of premium term life policy is written as what type of term coverage?

Increasing

Term insurance that provides increasing death benefits as the insured ages

Increasing Term

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a

Inspection report

If an insurer accepts premium payments by credit card, who is responsible for paying the fees charged by a credit card company?

Insurer accepting payment

What ultimately determines the interest rates paid to the owner of a fixed annuity?

Insurer's guaranteed minimum rate of interest

Who makes up the Medical Information Bureau?

Insurers

SEP's are not suitable for

Large Companies

Discrimination on

Marital status Race Color National Origin Creed Ancestry

A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend?

Payor Benefit

When changing a beneficiary through an endorsement method, what is the policy owner required to do?

Submit a request for change to the home office of the insurer

Adhesion

Take it or Leave it basis

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued what would be the policy's effective date?

The date of medical exam

Disclosure authorization forms must include

The date of the authorization, the name of the insurer or agent, the nature of the information authorized to be disclosed

Indeterminate premium whole life policy

The premium can be raised up to a guaranteed maximum rate

An agent tells an insured that if he replaces his current insurance policy with a newer one, his dividends will be higher and his premiums will be slightly lower. The policy, however, would not offer either one of these things. What type of misrepresentations is being committed?

Twisting

If a retirement plan or annuity is qualified, this means

It satisfies IRS requirements for favorable tax treatment

Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policy owner select?

Join and Survivor

Contract of Adhesion

Prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insurance contracts are offered on a take it or leave it basis.

All statement of the insured in any application for a policy of insurance are deemed

Representations

Coercion

Require as a condition to a loan that the applicant purchase insurance from a specific insurer

Unconditional receipt

coverage begins immediately for a specific length of time, until the policy is issued

Conditional receipt

is used only when the applicant submits a prepaid application. Says the coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last.

Education is

not an underwriting factor nor is it information included on the application

Indexed whole life insurance

-The cash value depends on the performance of the equity index -The premium is fixed -There is a guaranteed minimum interest rate

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with accelerated benefits rider. What is taxed regarding the accelerated benefits?

A portion of the benefit up to a limit is tax free; the rest is taxable income

What is not used to determine annuity suitability?

Beneficiaries age

Regarding insurable interest in viatical settlements....

It must exist at the time of the issue of the original life policy

A policy will pay the death benefit if the insured dies during the 20-year premium paying period, and nothing if death occurs after the 20 year period. What type of policy is this?

Level Term

Variable Life

Level fixed

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

Military Service or war

Unilateral Contract

Only one of the parties to the contract is legally bound to do anything. Insurer makes no legally binding promises.

Group life insurance

Usually annually renewable term Evidence of insurability is usually not required Participants under the plan do not receive a policy because they do not own or control the policy instead issued a certificate of insurance

403(b) Tax-sheltered Annuities

avaliable to employees of certain nonprofit organization under section 501(c)(3)

Endowment policy

has to build up faster since the funds are intended to be used while the insurer is alive, the premium for an endowment is considerably more expensive than an ordinary straight life plan.

If a policy is surrendered the cash value

may be taxable as income if the cash surrender value exceeds the amount of the premiums paid for the policy

Simplified Employee Pension Plans (SEP)

suited for small employer or self employed Employer contributes to plan Employer contributions are not included in the employees gross income

Any cash value in excess of cost basis (premium payments) is

taxable as ordinary income

Death benefits are usually are paid to

the beneficiary income tax free

Standard Risks

According to a company underwriters standards, are entitled to insurance protection without extra rating or special restrictions. Representatives of the majority of people at their age with similar lifestyles. Average Risk

Elements of a Legal Contract

Agreement- offer and acceptance Consideration Competent Parties Legal Purpose

What would not trigger the payment of Accelerated Death Benefits?

Being permanently disabled

When does the 10 day free look period end?

At the time of the policy delivery

If a life insurance policy contains a minimum 10-day unconditional refund provision, when is the latest that the buyers guide and policy summary must be delivered?

At the time of policy delivery

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer sponsored plan who has earned income

Substandard (High Exposure) Risk

Applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. Policies are also referred to as "rated" because they could be issues with the premium rated-up, resulting in higher premium

Any person who willfully misstates financial or other information under oath may be charged with a?

Class 1 Felony

A debtor has an insurable interest in the life of a lender (T or F)

False

Any time a business is the named beneficiary of a life insurance policy or has a beneficial interest in the policy

any premiums that the business pays for such insurance are not tax deductible Ex. Key employee (key person) Stock redemption or entity purchase agreement Split- dollar insurance

Premiums that an employer pays for life insurance on and employee

are tax deductible to the employer as a business expense

Roth IRA's

contributions can continue beyond age 70 1/2 and distributions do not have to begin at age 70 1/2 Grow tax free as long as the account is open for at least 5 years

Life Income with period certain

gurantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If reciepent should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.

If the insurer receives a incomplete application

insurer must return it to the applicant for completion

In life insurance, when must the policy summary be presented?

Before accepting the initial premium deposit

Annuity Certain

Begins on a specific date and ends on a specific date (chosen by annuitant)

A legally acceptable attempt by an existing insurer to dissuade a current policy owner from the replacement of existing life insurance

Conservation

A whole life policy s surrendered for a reduced-paid up policy. The cash value in the new policy will

Continue to increase

Contracts that are prepared by one party and submitted to the other party on a take-it- or leave-it basis are classified as?

Contracts of Adhesion

Both Universal Life and Variable Life have a

Flexible Premium

What is the legal limit coverage based on marital status?

It is never legal to limit coverage based on marital status

Annually renewable term insurance is

Level term insurance

If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to?

Live at least to his life expectancy

What is pure life annuity settlement option?

Pure life provides payments for as long as the annuitant is alive

Joint life annuity payments

The payments stop at the first death

The regulation of the insurance industry primarily rests with?

The state

Stating that an insurers policies are guaranteed by the existence of the Life and Health Guaranty Association is?

Unfair trade practice

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Children upon reaching the age of majority are permitted to convert to an individual policy......

without proof of inusrability