Life Insurance Questions
What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2?
10% Penalty
What is the penalty for excessive contributions to a traditional IRA?
6%
What is policy replacement?
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.
What is a Blackout period for Social Security Benefits?
A period of time during which the serving spouse does not receive benefits.
What are the two phases of an annuity?
Accumulation and Annuitization (or pay-in & Pay-out)
Whose life expectancy is taken into consideration in an annuity contract?
Annuitant
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?
Annuitant's Estate
When must insurable interest exist in a life insurance policy?
At the time of application
Under what Nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policy owner?
Cash Surrender
In variable Universal life insurance, to what policy component does the term variable refer?
Cash Value & Face amount
What are the living benefits of whole life insurance?
Cash Value (Loan Values)
According to the taxation rules of life insurance policies, how are cash value increases taxed?
Cash value growth is tax deferred
What type of beneficiary is next in line after he primary beneficiary?
Contingent Beneficiary
What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?
Death benefits are generally not subject to income taxes.
What type of life insurance is best suited to cover a mortgage?
Decreasing Term
Why are dividends in life insurance policies not taxable?
Dividends are not considered income for tax purposes; they are a return of unused premium.
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of the application or the date of the medical exam(whichever occurs last)
For a retirement plan to be qualified, it must be designed for whose benefit?
Employees
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Evidence of Insurability
What is the main advantage of converting from group life insurance to individual coverage?
Evidence of insurability is not required.
Which Nonforfeiture option is automatically selected by the company if not chosen by the policy owner?
Extended Term
What does level refer to in level term insurance?
Face amount
What type of annuity is purchased with multiple payments and begins income payments no sooner than one year after the purchase?
Flexible Premium Deferred Annuity
What provision in a life insurance policy extends coverage beyond the premium due date?
Grace period
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Group's purpose, size, financial strength and turnover
What are some examples of qualified plans?
IRA,401(K),HR-10(Keogh),SEP,SIMPLE
What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?
Incontestability
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
What are the three main instances when insurable interest exists in life insurance?
Insuring one's own life, the life of a family member, or the life of a business partner or someone who has financial obligation to the policy owner.
During partial withdrawal from a Universal life policy, which portion, if any, will be taxed?
Interest earned on the withdrawn cash value.
If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?
Interest only
What annuity settlement option provides income payments to the annuitant for the duration of his/her life and also guarantees payment for a specified number of years?
Life income with period certain
A Whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy?
Limited-pay Whole Life
If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?
Lump-Sum Payment
What is included in Part 2 of a life insurance application?
Medical information about the prospective insured
What are the three factors that determine the premium for a particular life insurance policy?
Mortality Interest Expense
How soon can income payments begin in an immediate annuity?
No later than 1 year form the time of annuity purchase
SIMPLE plans are available to groups of how many employees?
No more than 100
What document must a producer provide to the insured during policy replacement?
Notice Regarding Replacement
What are the death benefit options in universal life policies?
Option A- Level death benefit Option B- Increasing death benefit.
What dividend option can increase the death benefit of the existing life policy?
Paid-Up Additions
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?
Permanent
Who controls changes in premium payments, face values and loans in a life insurance policy?
Policy owner
With the interest-only settlement option, what happens to the policy's death benefit?
Policy proceeds are retained by the insurance company only the interest is paid to the the beneficiary.
What are illustrations in a life insurance policy?
Presentation of non guaranteed elements of the policy.
What beneficiary designation has the first claim to the death proceed of a life insurance policy?
Primary Beneficiary
What is the Primary purpose of a 401(K) plan?
Provide retirement income
Which nonforfeiture option provides coverage for the longest period of time?
Reduced Paid-up
What provision allows the policy owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?
Reinstatement
What type of Whole life insurance policies only requires a payment of premium at its inception and, in addition to providing insurance protection for the fie of the insured, endows at the insured's age 100?
Single-Premium Whole Life
What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?
Straight Life
What are the personal uses of Life insurance?
Survivor protection, Estate creation & Conservation, Cash accumulation & Liquidity.
What type of life insurance policy offers ours death protection?
Term
What elements of an adjustable life policy can be changed by the policy owners?
The amount and payment period of the premium, the face amount and the period of protection.
Who does the common disaster clause protect?
The contingent beneficiary
Who owns a group life insurance contract?
The employer(Also known as the sponsor of the group).
In annually renewable term policies, what is the annual premium based upon?
The insured's attained age
Who bears the investment risk in a fixed annuity?
The insurer
What does the term double indemnity mean?
The insurer will pay a benefit of twice the face amount
In calculating the amount of life insurance needed, what is the needs approach based on?
The predicted needs of a family after the premature death of the insured.
In term policies, what happens to the premium throughout the term of the policy?
The premium remains level
What happens to the proceeds of a life insurance policy if there is o named beneficiary?
The proceeds are paid to the insured's estate.
Why are policy loans not available on term insurance?
There is no cash value to borrow against.
What is the main reason for purchasing an annuity?
To porvide income that the annuitant cannot outlive
What is the purpose of the Automatic Premium Loan Provision?
To prevent the unintentional lapse of a policy because of non payment of the premium.
In what type of life insurance policies can the policy owner skip premium payments without the policy lapsing?
Universal life
In a Joint life policy, when is the death benefit paid?
Upon the first death
What type of Annuity requires an agent to have a Securities License?
Variable Annuity
What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?
Waiver of Premium
What are the most common exclusions in life insurance policies?
War & Military Service, Hazard Occupation & Aviation
When would a 20-pay whole life policy endow?
When the insured reaches age 100