Life missed questions 2

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) The benefit is subject to the exclusionary rule. b) IRS has no jurisdiction. c) The benefit is received as taxable income. d) The benefit is received tax free.

The benefit is received tax free Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

Which of the following is TRUE about credit life insurance? a) Creditor is the policyowner. b) Debtor is the annuitant. c) Creditor is the insured. d) Debtor is the policy beneficiary.

Creditor is the policyowner. In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy? a) It is increased when extra premiums are paid. b) It decreases over the term of the policy. c) It remains the same as the original policy, regardless of any differences in value. d) It is reduced to the amount of what the cash value would buy as a single premium.

It is reduced to the amount of what the cash value would buy as a single premium. In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.

Which of the following documents must be provided to the policyowner or applicant during policy replacement? a) Policy illustrations b) Notice Regarding Replacement c) Disclosure Authorization Form d) Buyer's Guide and Policy Summary

Notice Regarding Replacement During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

All of the following are considered unfair trade practices in the business of insurance EXCEPT a) Sharing commissions. b) Boycott. c) Rebating. d) Defamation.

Sharing commissions Sharing commissions is allowed as long as both producers are properly licensed. All other choices are unfair trade practices

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs? a) Adjustable Life b) Single Premium Whole Life c) Interest-sensitive Whole Life d) Decreasing Term

Adjustable Life Adjustable life policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay for the mortality. Any increase in face amount requires proof of insurability

Traditional IRA contributions are tax deductible based on which of the following? a) IRA limit b) Owner's income c) How long the plan has been in force d) Owner's age

Owner's income Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.

In term policies, what happens to the premium throughout the term of the policy? a) Premium gradually decreases. b) Premium fluctuates. c) Premium always remains level. d) Premium gradually increases.

Premium always remains level. There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy.

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this? a) Incontestable clause b) Grace period c) Reinstatement provision d) Waiver of premium provision

Reinstatement provision A lapsed policy may be reinstated within a specified period of time by paying back premiums, with interest, and proving insurability.

An individual who sells insurance solely as a foreign military sales agent works with a a) Alien license. b) Restricted license. c) Military license. d) Temporary license.

Restricted license An individual may transact insurance as a foreign military sales agent in foreign countries or territories on U.S. military installations or with U.S. military personnel under a restricted license.

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? a) Single life b) Fixed-amount c) Life income with period certain d) Joint and survivor

Life income with period certain The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.

All of the following are types of term policies based on what happens to the face amount during the policy term EXCEPT a) Increasing. b) Renewable. c) Decreasing. d) Level.

Renewable There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is often level throughout the term of the policy. Only the amount of the death benefit may fluctuate.

The automatic premium loan provision is activated at the end of the a) Elimination period. b) Policy period. c) Grace period. d) Free-look period

c. Grace period Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.

A young father would like a life insurance policy to provide coverage for all five family members at the lowest cost. Which type of policy would he most likely buy? a) Level Term Policy b) Family Protection Policy c) Universal Life Policy d) Family Income Policy

Family Protection Policy Family protection insurance combines protection for all members of a family into one policy. It usually provides a permanent plan of insurance on the base insured, and term riders on other members of the family. Because they are all covered under a single policy, there is only one policy fee.

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? a) The Consideration Clause b) Assignment Rights c) Owner's Rights d) The Entire Contract Provision

Owner's Rights Policyowners can learn about their ownership rights by referring to the policy