Life Insurance, Guaranteed Exam Wrong Questions Part 2

All of the following are general requirements of a qualified EXCEPT... a. The plan must be temporary b. the plan must be approved by the IRS c. The plan must have a vesting requirement d. The plan's benefit cannot discriminate in favor of the "prohibited group"

Answer: A. The plan must be temporary Qualified plans must be permanent. All other characteristics above are also true.

A whole life policy that will generate immediate cash value is a a. Limited-pay policy b. Single premium policy c. Continuous premium policy d. Variable life policy

Answer: B. Single premium policy A whole life policy that will generate immediate cash value is a single premium policy

An insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term described that the agent has done? a. Rebating b. Twisting c. Defamation d. Misrepresentation

Answer: D. Misrepresentation Misrepresentation is the act of portraying sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This refers to all forms of communication.

What is the cost of coverage based on for group life insurance? a. The ratio of men to women b. The insured's individual ages c. The average age and the ratio to men and women d. The average age

Answer: C. The average age and the ratio to men and women One of the aspects of group underwriting that differs from individual insurance is that the cost of coverage is based on the average age of the group and ratio of men to women

Which of the following would NOT trigger the payment of Accelerated Death Benefits? a. Terminal Illness? b. Requiring an organ transplant for the insured to survive c. Being permanently institutionalized d. Being permanently disabled

Answer: D. Being permanently disabled Accelerated death benefits or living riders allow the early payment of some portion of the death benefit if the insured has conditions such as terminal illness, permanent institutionalization, or a life-threatening medical condition that required a dramatic medical intervention. Accelerated death benefit, however, does not cover disability.

Contributions to Roth IRAs are... a. Always subject to a 6% tax penalty b. Paid with pre-tax dollars c. Not taxable deductible d. Tax deductible

Answer: C. Not Tax Deductible Contributions to Roth IRAs are not tax deductible , and excess contributions are subject to a 6% tax penalty

Considering the principles of liquidity, how would the policyowner use today's cash value in a life insurance policy? a. Fund a retirement b. Use it for emergency expenses c. Secure a car loan next year d. Make a down payment on a home in 5 years

Answer: B. Use it for emergency expenses Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for immediate needs.

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is a. Taxed as income on 50% of the excess b. Assessed a fine of 10% of the excess c. Taxed as ordinary income d. Not taxed

Answer: C. Taxed as ordinary Income Upon surrender or endowment, any cash value in excess of cost basis (premium payments) is taxable as ordinary income.

The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT: a. Marriage b. Purchase of a new home c. Approximately every 3 years between the ages of 25 and 40. d. Birth of a child

Answer: B. Purchase of a new home The Guaranteed Insurability Rider allows the owner to purchase additional amounts of insurance without proof of insurability, at marriage, birth of a child, and/or every 3 years or so between the ages of 25 and 40

According to the life insurance replacement regulations, which of the following would be an example of policy replacement ? a. Term insurance is changed to a Whole Life policy b. A lapsed policy is reinstated within a specific timeframe c. A policy is reissued with a reduction in cash value d. A term only expires, and the insured buys another term life policy

Answer: C. A policy is reissued with a reduction in cash value Replacement refers to any transaction in which new life insurance or an annuity is purchased , resulting in reduced paid-up insurance, continuation of extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values

Which of the following would be TRUE of both the fixed-period and fixed-amount settlement options? a. The amount of payments is based on the recipient's life expectancy b. The size of installments decreases after certain period of time c. Both guarantee payments for the life of the beneficiary d. Both guarantee that the principal and interest will be fully paid out

Answer: D. Both guarantee that the principal and interest will be fully paid out Neither the fixed-period nor fixed-amount settlement options guarantee income for the life of the beneficiary; however, they both guarantee that the entire principal and interest will be distributed

J is receiving fixed amount benefit payments from his late wife's insurance policy. he was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? a. Interest only b. Joint and survivor c. Fixed amount d. Fixed Period

Answer: C. Fixed Amount The fixed-amount option pays a fixed, specified amount in installments until the proceeds (principal and interest) are exhausted. The recipient selects a specified fixed dollar amount to be paid until it is gone. If the beneficiary dies before the proceeds are exhausted, installments will continue to be paid to a contingent beneficiary until all proceeds have been paid out.

Which of the following is true regarding pure life annuity settlement option? a. The beneficiary will receive a refund of the principal b. It guarantees income for a specified period of time c. It provides the highest monthly benefit d. It guarantees that all the proceeds will be paid out

Answer: C. It provides the highest monthly benefit The pure life annuity pays the most since it only guarantees to pay for the rest of one's life without a minimum guarantee

A graded premium life insurance policy is a modified form of a. Deferred Annuity b. Universal Life c. Whole Life d. Level Term

Answer: C. Whole Life Graded premium is a whole life policy with premiums that increase annually over the first 5 to 10 years

In a group life policy with a death benefit of more than $50,000.. a. Premium cost below $50,000 is taxable as income to the insured b. Premium cost is tax-deferred c. Premium cost is taxable to the employer d. Premium cost above $50,000 is taxable as income to the employee

Answer: D. Premium cost above $50,000 is taxable as income to the employee Any premiums paid by the employer for an employee's coverage of more than $50,000 are taxable as income to the employee. Premiums for coverage of $50,000 or less are not taxable to the employee.