Life Insurance Exam Questions
Who may contribute to an HR-10 plan?
A self-employed individual
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
Employer contributions made to a qualified plan
Are subject to vesting requirements
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?
Inspection Report
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other-insured rider
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit
how many hours of Ethics must a producer complete as part of continuing education every 2 years?
3
This state provides for a temporary license for all of the following EXCEPT
A producer's retirement
Which of the following is TRUE of a qualified plan?
It has a tax benefit for both employer and employee
Death benefits payable to a beneficiary under a life insurance policy are generally
not subject to income taxation by the federal government
if a nonresident producer for this state changes his or her home address, what must the producer do to comply with the Oregon rules
nothing
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will will stop when the annuitant dies
All of the following are true regarding a decreaseing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
decreases
which of the following ultimately determines the interest rates paid to the owner of a fixed annuity
insurer's guaranteed minimum rate of interest
Why is an equity indexed annuity considered to be a fixed annuity?
it has a guaranteed minimum interest rate
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
revocable beneficiary
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
settlement option
what is the waiting period on a waiver of premium rider in life insurance policies
6 months
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value
which of the following statements concerning a simplified employee pension plan (SEP) is incorrect
SEPs are suitable for large companies
What limits the amount that a policyowner may borrow from a whole life insurance policy?
cash value
which of the following would be an example of an insurer participating in an unfair competition practice of discrimination?
chargint the insured higher premiums based on their race
Which of the following is true regarding payment of claims by an insurer
claims must be either paid or acknowledge within 30 days of notification
annually renewable term policies provided a level death benefit for a premium that
increases annually
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
it is a percentage of the cash value and decreases over time
Which of the following is TRUE regarding the accumulation period of an annuity
it is a period during which the payments into the annuity grow tax deferred
Which of the following is another term for the accumulation period of an annuity?
pay-in period
an applicant wants to buy a policy that has a cash value element. what type should she buy
permanent
Annuities can be used to fund which of the following?
Retirement plans
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
cash option
Which of the following is a characteristic of a reciprocal insurance exchange
the chief administrator of the insurer is called an "attorney-in-fact"
Which of the following is NOT true regarding a non-qualified retirement plan? A)It needs IRS approval B)Contributions are not currently tax deductible C)it can discriminate in benefits and selecting participants D)Earnings grow tax deferred
A
Which of following is called a "second-to-die" policy? A)Family income B)Juvenile life C)Joint life D)Survivorship life
D
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)
Equity Indexed Annuity
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
Executive bonus
A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?
Joint and survivor
Concerning Juvenile Life insurance, which of the following statements is INCORRECT?
Juvenile Life is classified as any life insurance purchased by a minor
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
Limited-pay life
Which of the following policies would be classified as a traditional level premium contract?
Straight life
after three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?
Surrender charge
J transferred his life insurance policy to his son two years before his death. Which of the following is true?
The entire face value of the policy will be included in J's taxable estate
Which of the following best describes annually renewable term insurance?
it is level term insurance
When must an IRA be completely distributed when a beneficiary is not named?
December 31 of the year that contains the fifth anniversary of the owner's death
Which of the following is NOT an allowable 1035 exchange? A)A life insurance policy is exchanged for an annuity B)A whole life insurance policy is exchanged for a term insurance policy C)A while life insurance policy is exchanged for a Universal life insurance policy D)An annuity is exchanged for another annuity
B
What is the main purpose of the Seven-pay Test?
It determines if the insurance policy is an MEC.
What type of annuity activity will cause immediate taxation of the interest earned
surrendering the annuity for cash
Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that the annuity owner will have to pay?
Current interest rate at the time of surrender
During the accumulation period in a non-qualified annuity, what are the tax consequences of a withdrawal ?
Taxable interest will be withdrawn first and the 10% penalty will be imposed if under age 59 1/2
Which of the following protects consumer against the circulation of inaccurate or obsolete personal or financial information?
The Fair Credit Reporting Act
All of the following are general requirements of a qualified plan except
The plan must provide an offset for social security benefits
The two types of assignments are
absolute and collateral
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
guaranteed insurability rider
which of the following is true of a children's rider added to an insured's permanent life insurance policy?
it is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
joint life
An adjustable life policyowner can change what?
the coverage period
An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?
$8000, 60 days
If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitants estate?
Accumulated cash value
Which of the following terms is used to name the nontaxed return of unused premiums? A)Interest B)surrender C)Dividend D)Premium return
C
The automatic premium loan provision is activated at the end of the
Grace period
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?
Guaranteed surrender value
Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose
HR-10 (Keogh Plan)
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
The annuitant will receive the higher of either the guaranteed minimum rate or current rate
The Waiver of Cost of Insurance rider is found in what type of insurance?
Universal Life
which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life - Option A
An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
application
which of the following best defines target premium in a universal life policy
the recommended amount to keep the policy in force throughout its lifetime
Which of the following is NOT true regarding equity indexed annuities
they earn lower interest rates than fixed annuities
In a survivorship life policy, when does the insurer pay the death benefit
upon the last death
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
consideration
which of the following will NOT be an appropriate use of a deferred anuity
creating an estate
How often may a life settlement provider contact an insured regarding the insured's health status if the insured's life expectancy is more than one year?
once every 3 months
Traditional IRA contributions are
tax deductible
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
the annuitant must be a natural person
Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?
withdrawn amounts are taxed on a last in, first out basis
All other factors being equal, the least expensive first-year premium payment is found in
Annually Renewable Term
Which of the following is NOT true regarding the annuitant? A)The annuitant must be a natural person B)The annuitant cannot be the same person as the annuity owner. C)The annuitants life expectancy is taken into consideration for the annuity D)The annuitant receives the annuity benefits
B
Which of the following is TRUE regarding the accumulation period of an annuity? A)It is limited to 10 years B)It is a period during which the payments into the annuity grow tax deferred C)it is also referred to as the annuity period D)It is a period of time during which the beneficiary receives income
B
A long stretch of national economic hardship causes a 7% rate of inflation. Devonne notices that the face value of her life insurance policy has been raised 7% as a result. What is the name of the provision that caused this change?
Cost of Living Rider
When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions?
Distributions are taxable
For a retirement plan to be qualified, it must be designed for whose benefit?
Employees
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
Joint Life Policy
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insure, it is a(n)
Joint life annuity
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
any form of life insurance
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan
an insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristics does this describe?
conditional
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
joint and survivor
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?
SEPs are suitable for large companies
An IRA purchased by a small employer to cover employees is known as a
Simplified Employee Pension Plan
All of the following would be different between qualified and non qualified retirement plans EXCEPT
Taxation on accumulation
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
The employer is the owner and beneficiary
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation
human life value approach
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?
installments for a fixed period
an insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insure, and matures at the insured's age 100 is called
single premium whole life
What must happen when an individual policy or annuity has been personally delivered to the policy owner?
the policy owner must sign a delivery receipt
which of the following best describes gross annual premium? A)expense premium B)net premium plus expenses C)annual loading D) basic insurance rate plus commissions
B
Which of the following scenarios will incur a 10% tax penalty on distributions?
Distributions are made on a policy before age 59 1/2
Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic
Which of the following is true regarding a modified guaranteed annuity?
The owner is guaranteed a fixed interest rate for a specific period of time
Which of the following information about the applicant is NOT included on Part 1 of the application for insurance
medical background
which of the following is not true about a joint and survivor annuity benefit option
payments stop after the first death among the annuitants
what does "liquidity" refer to in a life insurance policy?
cash values can be borrowed at any time
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating
When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy?
Return of Premium
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term
If a cease and desist order is issued, what must the violator do
quit the actions stipulated in the order
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
Which of the following describes the tax advantage of a qualified retirement plan
the earnings in the plan accumulate tax deferred
What is the penalty for IRA distributions that are below the required minimum for the year
50%
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A)Payment of premium B)Delivery receipt C)signed waiver of premium D)statement of good health
C
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
survivor protection
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Common Disaster Clause
