Life Insurance Licensing Chapter 4

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

$10,000, no tax consequence

Which of the following is NOT a possible penalty for a violation of the Insurance Code?

A fine up to $100,000

When transacting business in this state an insurer formed under the laws of another country is known as a/an

Alien insurer

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an

Authorized insurer

Which of the following instances would the premium be tax deductible?

Premiums paid by an employer on a $30,000 group term life insurance plan for employees

For which of the following actions can an agent's license be suspended or revoked?

Rebates of premiums

What is the primary purpose of a 401(k) plan?

Retirement

The premiums paid by the employer in a business life insurance policy are

Tax deductible by the employer

An agent discovers his newest client was the result of a referral. To show his thanks to the referring customer, the agent could

Thank the customer

All of the following employees may use a 403(b) plan for their retirement EXCEPT

The CEO of a private corporation

All of the following are characteristics of a group life insurance plan EXCEPT

There is a requirement to prove insurability on the part of the participants

Which of the following types of insurance policies would perform the function of cash accumulation?

Whole life

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?

5

No one whose license has been revoked can receive another license in Texas for

5 years

The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every

5 years

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?

Foreign

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable

What is the official name for the Social Security program?

Old Age Survivors Disability Insurance

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

In a life settlement contract, whom does the life settlement broker represent?

The owner

All of the following are true of key person insurance EXCEPT

The plan is funded by permanent insurance only

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

Which of the following statements regarding the taxation of Modified Contracts is FALSE?

Withdrawals are not taxable

During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes

Misrepresentation

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an

Modified endowment contract

What is the purpose of the Life Insurance Guaranty Association?

To help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company?

Which of the following is the required number of participants in a contributory group plan?

75%

The minimum number of credits required for partially insured status for Social Security disability benefits is

6 credits

Two Individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Discrimination

Which of the following insurance providers must be nonprofit and sell insurance to only its members?

Fraternal

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

The insurer will pay the full death benefit from the group policy to the beneficiary

An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?

There is no misconduct

For a retirement plan to be qualified, it must be designed for the benefit of

Employees

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium

An insurance professional advises a client regarding the benefits of her life insurance policy, in exchange for a fee. Which of the following terms best describes this type of insurance professional?

Counselor

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a

Cross-purchase plan

Which of the following is an IRS qualified retirement program for the self-employed?

Keogh