Life insurance
what are the three nonforfeiture options in life insurance policies
cash surrender reduced paid up and extended term
what type of life insurance offers an applicant a cash value elements
permeant insurance (whole life)
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?
pure life
who is responsible for the contents of insurance advertisements
the insurance company
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?
Absolute assignment
what are the two phases of an annuity
Accumulation and annuitization (or pay-in and pay-out)
what is the main responsibility of a company's underwriting unit
Risk selection
what are the personal uses of life insurance
Survivor protection, estate creation and conservation, cash accumulation and liquidity
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%
who received income payments from an annuity
Annuitant
what are the two types of refund life annuities
Cash refund and installment refund
what type of annuity credits its interest based upon an index such as S&P 500
Equity index annuity
all other factors being equal which premium payment mode will require an overall higher premium monthly or annual
Monthly
What type of plan is 401(k)?
Qualified profit-sharing plan
If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment?
current
what is included in part 2 of a life insurance application
medical info about the prospective insured
What type of beneficiary can be changed at any point by the policyowner?
revocable
what term is used to describe methods of payments of the death benefits to the beneficiary upon the insured death
settlement options
What type of assignment is used to secure the payment of a debt with an existing life insurance policy?
Collateral assignment
What qualified plan is suitable for the self-employed?
HR-10 or Keogh
what provision in a life insurance policy extends coverage beyond the premium due date
Grace period
can a business or a corporation be an annuitant
No, an annuitant must always be a natural person
how long is income paid under a pure life annuity
Only for the life of the annuitant
What are accumulation units in annuities?
Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)
What dividend option can increase the death benefit of the existing life policy?
Paid-up additions
What dividend option is automatically selected by the company if not chosen by the policyowner?
Paid-up additions
what is the term that describes the frequency and the amount of the premium of the payment
Premium mode
What beneficiary designation has first claim to the death proceeds of a life insurance policy
Primary Beneficiary
what is insurance underwriting
The process of risk selection and classification
How long will a life annuity with a 15-year period certain pay?
for the life of the annuitant unless they die within the first 15 years of the annuitization period then the payments will last for 15 years.
what does the term double indemnity mean
The insurer will pay a benefit of twice the face amount
An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?
pay a reduced death benefit
what controls changes in premium payments, face value, and loan in a life insurance policy
policy owner
who has the right to the cash value of a life insurance policy
policy owner
what is the advantage of reinstating life insurance policy as opposed to applying for a new one
policy premium in a reinstated policy will be set according to the insureds original age
an employer is sponsoring a qualified requirement plan for its employees where the employer contributes money whenever the business has profit what is his plan called
profit sharing plan
what is the primary purpose of a 401K plane
provide retirement income
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 is the difference between a single premium an a flexible premium payment options in a deferred annuity
the number of payments that purchase the annuity
who must have insurable interest in the insured
the policy owner
what are the most common exclusion in life insurance policys
war and military service, hazardous occupation, and aviation
what are the two phases of annuity
Accumulation and annuitization (or pay-in and pay-out)
what are some examples of qualified plans
IRA, 401(k), HR10 (Keogh), SEP, SIMPLE
what type of insurance creates an immediate estate
Life insurance
What is the purpose of a free-look period?
To allow the insured to return the policy with a full refund
what is the main purpose of the 7-pay test
To determine if a life insurance policy is a Modified Endowment Contract
When can an insurance company use suicide as a defense against paying a death claim?
When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years)
what type of licenses are required in order to sell variable annuities
a life insurance and a securities license
what is the name for an overfunded life insurance policy
a modified endowment contract
who must be a member of insurance guaranty associations
all insurers authorized to write insurance within a state
in flexible premium payments annuities the term flexible referes to what.
amount of premium
Who's 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
annuitants estate
in an annuity the accumulated money is converted into a stream of income during which phase
annuitization period
an individual has a contract that will provide him with a certain amount of income for the contract does this person have
annuity
Who has all of the rights in an annuity contract?
annuity owner
when must insurable interest exist exist in a life insurance policy
at the time of the application
when must the policy summary for a life insurance policy be delivered to the policy owner
at the time of the policy delivery
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
beneficiary
What are the dividend options in life insurance policies?
cash reduced premiums, accumulation at interest, paid up additions, paid up option, on year term , and acceleration of endowment
Under what nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policyowner?
cash surrender
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 the 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
If the annuitant dies during the annuitization period starts, what will the beneficiary receive
either the amount paid into the annuity or the cash value whichever is greater
For a retirement plan to be qualified, it must be designed for whose benefit?
employees
who qualifies for tax sheltered annuities or 403B planes
employees of nonprofit organizations under section 501C3 and employees of public school systems
what are the income tax benefits or a qualified plan
employer contributions are tax deductible and are not taxed as income to the employee the earnings accumulate tax deferred
life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell all assets from the estate what is this called
estate conversation
What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?
extended term
An annuity purchased with multiple payments that begins income payments after one year from the moment of purchase is known as what type of annuity?
flexible premium deferred annuity
In a direct rollover how is the money transferred from one retirement plan to a new one
from trustee to trustee
What required provision protects against unintentional policy lapse?
grace period
how does the premium mode affect the total premium paid for insurance for the year
higher frequency of premium payments will result in higher overall premium
what are the tho classifications of annuities according to the time when the annuity payments begin
immediate and deferred
in what form of payment must the contributions to a traditional IRA be made
in cash
what is the disadvantage of owning a fixed annuity as opposed to variable
in times of inflation the benefit of a fixed annuity will have decreased purchasing power
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 are the three main instances when insurable interest exists in life insurance
insuring your own life, the life of a family member or the life of a business partners or someone who has a financial obligation to the policyowner
What portion of a nonqualified annuity payment would be taxed?
interest earned on principle
is the beneficiary of a life insurance policy receives death benefit payments that consist of principle and interest which portion if any will be taxed
interest only
what type of report provides info about the applicants hobbies habits and financial status
investigative consumer report
if an insured changes his payment plan from monthly to annually what happens to the total premium
it will decrease
If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?
joint life annuity
morality tables are used by insurance companies to predict what
life expectancy and the death rates for specific groups of individuals
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?
life income with period certain
when annuity settlement option provides income to the annuitant for the duration of their life, also guarantees payment for a specific number of years
life income with period certain
Upon surrender of a life insurance policy, what portion of the cash value will be taxed?
only the portion in excess of the premium paid
what is the name for a life insurance policy rider that provides coverage on the insureds family members
other insured rider
What document describes the specific information about a policy?
policy summary
What are illustrations in a life insurance policy?
presentations of non guaranteed elements of the policy
How are annuities classified depending on how many lives they cover?
single life and multiple life annuities
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 is the purpose of the agents report during the application process
the agents report discusses personal observations about the proposed insured that may help in the underwriting process
a policy owner borrowed a portion of cash value from his whole life policy if the loan is not repaid how will that affect the death benefit to the beneficiary
the amount of the loan will be subtracted from the death benefit
Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
the annuitant receives payments from the annuity during the annuitization period the beneficiary receives benefits after the annuitants death
what causes a variable annuity benefit to vary
the annuity's underlying investments
a business is the owner and beneficiaries of a key person life policy. when the business collects the policy benefits how is it taxed
the benefit is received tax free
when planning for survivor protection in life insurance what needs to be considered
the insureds current assets, liabilities and survivors needs
who bears the investment risk in a fixed annuity
the insurer
in the fixed period settlement option how will the number of installments for the death benefit proceeds determine the amount of the installments
the longer the period selected the smaller each installment will be
If a retirement plan is 'qualified', what does that mean?
the plan has a favorable tax treatment
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
what happens to the proceeds of a life insurance policy if there is no named beneficiary
the proceeds are paid to the insureds estate
what is the purpose of settlement options in life insurance policies
to determine how the death benefit will be paid to the beneficiary
what is the purpose of automatic premium loan provisions
to prevent the unintentional laps of a policy because of nonpayment of the premium
When would life insurance policy proceeds be included in the insured's taxable estate?
when there is an incident of ownership at the time of death
What type of annuity can be purchased with a single premium?
immediate annuity
what is the main reason for purchasing an annuity
To provide income that the annuitant cannot outlive
to meet the requirement of the entire contract policy provision an insurance policy must contain what
a copy of the original insurance application
Is the beneficiary required to have insurable interest in the insured?
no
what is the purpose of insurance guaranty associations
to protect policy owners, insured, and beneficiaries from financial losses caused by involved insurers
what dose the common disaster clause protect
the contingent beneficiary
What nonforfeiture option provides coverage for the longest period of time?
Reduced paid up
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).
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
An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?
the death benefit will be adjusted to the amount that the insured could obtain for her correct age
with the reduction of premium dividend opinion how is the dividend used
the dividend is applied to the next years premium (it reduces the next years premium)
Who is the beneficiary on a key-person life insurance policy?
the employer
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
the existence of insurable interest between the applicant and the insured
With a single premium deferred annuity, when will the annuity payments become available?
no sooner than 1 year after the annuity purchase
what term describes the fee a person pays an insurance company to receive coverage
premium
in qualified plans are employer contributions taxed as income to the employees
no employer contributions re not taxed as income to the employees
SIMPLE plans are available to groups of how many employees?
no more than 100
the sole beneficiary of a life insurance policy dies before the insured if the policy owner does not amend the beneficiary designation what will happen to the policy's death benefit
it will be paid to the insureds estate
What settlement options are available in life insurance policies?
lump sum/ cash, fixed period, fixed amount, life income, interest only
Is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?
no lump sum benefits are received ta free
what is required to qualify an individual to contribute to a traditional IRA
Earned Income
what are policy dividends
Return of unused premiums
Why are dividends in life insurance policies not taxable?
dividends are not considered income for tax proposes, they are a return of unused premiums
Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?
no advertising of the existence of the guaranty association for the purposes of the solicitation and sale of insurance policies by insurers is an illegal business practice
with interest only settlements option, what happens to the policy's death benefit
policy proceeds are retained by the insurance company, only the interest is paid to the beneficiary
what are the three factors that determine the premium for a particular life insurance policy
Morality, interest and expenses
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?
entire contract
What type of annuity requires an agent to have a securities license?
variable annuity
what causes variable annuity benefit to vary
The annuity's underlying investments
what is the purpose of key person insurance
To minimize the risk of financial loss caused by the death of a key employee
what dose liquidity mean in a life insurance policy
availability of cash value
what happens to a policy's cash value under an extended term nonforfeiture option
he cash value is converted to the same face amount as in the whole life policy
what life policy riders allow the company to forgo collecting the premium if the insured becomes disabled
waiver of premium
When will a contingent beneficiary receive death benefit from a life insurance policy?
when the primary beneficiary dies before the insured