Life Insurance

An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company a. will automatically institute the extended term option b. may use the cash value to purchase a reduced amount of permanent insurance c. will automatically send the cash values of the policy to the policy owner d. is entitled to keep any accumulated cash values

A

The type of annuity that guarantees to pay total income at least equal to the purchase price of the contract is a a. life with refund annuity b. life annuity with period certain c. straight life annuity d. temporary annuity certain

A

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 a. survivorship, or second-to-die, policy b. convertible term policy c. limited pay life policy d. variable life policy

A

a policy owner allows a policy to lapse, and the insurance company converts the policy to the extended term option. which of the following from the original policy will automatically carry over into the new policy? a. face value b. accidental death benefit c. disability income d. waiver of premium

A

a rollover refers to which of the following? a. a transfer of funds from on IRA to another b. change from a standard to a substandard risk c. taxation of withdrawals from a modified endowment contract d. contributions made by employees to a group life policy

A

a variable life policy a. has a death benefit that varies to reflect the investment results of the underlying separate account but will not drop below a guaranteed minimum b. has fixed cash values; what varies is the death benefit c. has a fixed death benefit; what varies are the cash values d. always offers a variable premium

A

all of the following are characteristics of annuity EXCEPT? a. protects against dying too soon b. used to accumulate money for income payments while living c. used to liquidate an estate d. protects against living too long

A

all of the following statements about individual life insurance tax treatment are correct EXCEPT a. premiums paid are tax deductible b. interest earnings credited to tax values are not taxable as long as they remain inside the policy c. premiums paid are not tax deductible d. when surrender, any gain in the cash value is taxable

A

susan has been classified as a standard risk by her insurance company. this means that Susan a. has average health and a normal life expectancy b.

A

which of the following is considered an income need when determining the amount a person needs for personal life insurance? a. family dependency b. emergency fund c. final expenses d. debt payoff

A

which of the following life insurance policies was designed for individuals who want flexible premiums and flexible coverage over the course of their lifetime? a. universal life b. variable life c. term insurance d. whole life

A

which of the following statements about modified endowment contract (MEC) is INCORRECT? a. MEC's are not life insurance but do offer tax-free death benefits b. MEC's offer tax-free death benefits c. MEC's are life insurance and have tax deferred cash value accumulation d. MEC's are a special type of life insurance under federal income tax law

A

with life insurance, insurable interest must exist a. at the time of application b. at the time of application and at the time of loss or claim c. at the time of loss d. at the time the claim is paid out

A

Income payments made from an annuity are a. always received entirely tax free b. only partly subject to federal taxation c. taxed only by states d. always taxed for their entire amount

B

Nathan and Sarah want to fund their IRA. which of the following vehicles for funding is NOT allowed? a. mutual funds b. life insurance c. flexible premium annuities d. bank accounts

B

Paul dies before his annuity has paid out an amount at least equal to the purchase price of the annuity, so Paul's beneficiary continues to receive annuity payments until that amount has been reached. This type of annuity is a a. joint and survivorship annuity b. life with refund annuity c. straight life annuity d. life annuity with no refund

B

an expense load is also known as a. the insureds premium payment b. the insurers operating costs c. the face amount of a policy d. the predicted payout of a policy

B

part 1 of the insurance application includes all of the following EXCEPT: a. the applicant's gender b. the applicant's current medical treatments c. the applicant's social security number d. the applicant's date of birth

B

the relative frequency of deaths in a specific population is known as a. morbidity b. mortality c. risk d. expenses

B

the type of annuity in which the values grow according to the performance of the investment medium, and in which benefits may fluctuate according to market performance, is called a a. deferred annuity b. variable annuity c. flexible premium annuity d. TSA

B

which of the following methods of handling risk means that the individual will pay for the loss if it occurs? a. sharing b. retention c. avoidance d. reduction

B

which of the following would NOT be permitted as a Section 1035 policy exchange? a. an annuity contract exchanged for another annuity contract b. an annuity contract exchanged for a life contract c. a life exchanged for another life contract d. a life contract exchanged for an annuity contract

B

When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company a. must pay all the proceeds regardless of Jonas haven given an incorrect age b. will pay the proceeds less the amount of extra premium that Jonas should have paid for the insurance c. will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age d. will not pay the policy proceeds

C

When a group plan is contributory, what percentage of employees must want and be willing to pay for coverage? a. 50% b. 100% c. 75% d. the percentage depends on the size of the group

C

an insurance policy is a unilateral contract because a) either party may default on the agreement b) neither party may default on the agreement c) only the insurance company is bound to live up to its side of agreement d) only the insured is bound to live up to his side of the agreement

C

in group insurance, the evidence of an agreement between the insurer and the employer of association is the a. policy of certification b. certificate of policy c. contract d. certificate of insurance

C

the death benefit of a variable life policy a. may go down but never up b. remains the same c. may go up or down but will never fall below the guaranteed minimum amount specified in the policy d. may go up but never down

C

the lucrative lozenge company provides a $5,000 monthly bonus plan to retirees who served as senior executives. this benefit is not available to other retirees of the company. this is an example of a a. qualified retirement plan b. profit-sharing plan c. non qualified plan d. defined contribution plan

C

the medical information bureau is a. a for profit insurance trade association b. not a source for underwriting information c. a non-profit insurance trade association d. a consumer report

C

the suicide clause states that if an insured commits suicide: a. during the first two years after the policy is in effect, the insurance company will only pay the premium paid by the insured and the face amount of the policy b. during the first two years after the policy is in effect, the insurance company will only pay the face amount of the policy and subtract any premiums paid by the insured c. during the first two years after the policy is in effect, the insurance company will only pay the premium paid by the insured, not the face amount of the policy d. during the first year after the policy is in effect, the insurance company will only pay the premium paid by the insured, not the face amount of the policy

C

the term annuity period refers to which of the following? a. the process of determining the amount of the annuity payment b. the principal factor is determine the annuity premium c. the time during which payments are made to the annuitant d. the time during which premiums are paid to fund the annuity

C

when the entire death benefit is paid in a lump sum to a beneficiary, it is a. taxed as income if an individual b. taxed as income if a business c. not taxable as income d. taxed only on interest

C

which is the proper term for a company owned by its policyowners a. a stock insurance company b. a legal insurance company c. a mutual insurance company d. a fraternal insurance company

C

which of the following is NOT necessary for the formation of a valid contract a. agreement b. legal purpose c. written documents d. consideration

C

which of the following situations most Kiely calls for the purchase of term insurance? a. Tayna palas to retire at age 59 with enough income to travel abroad b. Leonard is 42 years old and owns a thriving business. he is married, with 2 teenaged children c. George has no income and 2 years of medical school to complete. he and his wife have 1 child d. Marge, widowed, has 1 married son, age 30

C

which of the following statements about whole life insurance is INCORRECT? a. premiums cannot be decreased and are not flexible b. the initial premium is higher than term insurance c. the initial premium is lower than term insurance d. cash values accumulate tax deferred

C

Alma, age 35, earns $50,000 a year and expects to retire when she is 65. What is Alma's human life value? a. $5 million b. $50,000 c. $1.5 million d. $150,000

C (50,000 * 30) the 30 is from (65-35)

Mr. and Mrs. Burden receive a monthly annuity payment. Mr. Burden dies, but Mrs. Burden continues to receive a monthly annuity payment. The Burdens have a a. joint life annuity settlement option b. straight life annuity settlement option c. life annuity with period certain settlement option d. joint life and survivor annuity settlement option

D

Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if all back premiums due a. have been repaid regardless of how much time has elapsed b. have been repaid and fewer than 5 years have elapsed c. plus interest have been repaid and less than 1 year has elapsed d. plus interest have been repaid and fewer than 3 years have elapsed

D

One of the greatest advantages of convertible and renewable term policies is that a. these features are automatically included in all term policies b. they are considerably less expensive than other term policies for the life of the policy c. they accumulate cash values d. the insured is not required to show proof of insurability in order to renew or convert

D

Producers selling variable life insurance a. must be registered with FINRA only b. must have a valid life license only c. need not be licensed d. must have a valid life license and must be registered with FINRA

D

all of the following are elements of a contract EXCEPT a. legal purpose b. consideration c. offer and acceptance d. assignment

D

all of the following individuals are required to sign documents to complete the insurance application EXCEPT: a. the insured b. the applicant c. the agent d. the beneficiary

D

in a whole life insurance policy a. the cash value is greatest at the start of the policy, and the insurance protection is greatest at the end of the policy period b. the cash value and insurance protection are greatest at the start of the policy c. the cash value and insurance protection are greatest at the end of the policy period d. the cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy

D

the punishment for fraud or making false statements may include a. fines only b. imprisonment only c. either fines or imprisonment d. fines, imprisonment, or both

D

when the annuity period begins in a variable annuity contract, the accumulation units are converted to a. separate account assets b. shared account assets c. cash d. annuity units

D

which of the following classification of risks would typically have the lowest premium payment? a. substandard risks b. declined risks c. standard risks d. preferred risks

D

which statement about accelerated death benefits is correct? a. the maximum benefit amount is the amount of cash value b. death must be expected within 36 months c. the insured must meet Medicaid's definition of "impoverished" d. benefits could be paid up to a certain percentage of the death benefit

D

Ed has a $50,000 policy with cash values of $10,000. Including the interest owed, there is a $2,000 policy loan outstanding. Ed finds he can no longer make premium payments on this policy. If Ed chooses the cash surrender value option, he will receive a. $7,000 b. $10,000 c. $9,000 d. $8,000

D. $8,000 cash surrender value - outstanding ($10,000 - 2,000)

an insurance contract is an aleatory contract. this means a. equal value is not given by both parties to the contract b. the contract is personal in nature c. the contract is one sided d. the insurance company is relying on the truthfulness of the applicant

a