Part 1 (General) Taxes, Retirement and other Insurance concepts
An emerging marketplace in which an insured can sell their policy for more than their cash value, but less than the policy face value while they are still alive is known as: A: Life Settlements B: Viatical Settlements C: Annuity D: Cash Refund Options
A: Life Settlements Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.
Which of the following is the term for when the group sponsor is responsible for paying all the premiums in a group life policy? A: Non-contributory B: Contributory C: Credit life D: Group Life
A: Non-contributory In a Non-contributory group policy, the sponsor is solely responsible for paying all group life premiums.
D has just paid off his mortgage and has decided that he no longer needs his life insurance policy which he originally purchased to cover the house payments should he die. If D explores the possibly of selling his policy while he is still alive, it is known as: A: a life settlement B: an annuity C: a Viatical settlement D: STOLI
A: a life settlement Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.
Who is the policy owner in Group Life Insurance? A: group sponsor B: the insureds C: certificate holder D: stock holders
A: group sponsor
In an individual life policy, which of the following best describes federal income tax consequences of premiums and proceeds? A: The premiums are tax deductible and the death benefit is subject to federal income tax. B: The premiums are not tax deductible and the death benefit is not subject to federal income tax. C: The premiums are not tax deductible and the death benefit is subject to federal income tax. D: The premiums are tax deductible and the death benefit is not subject to income tax.
B: The premiums are not tax deductible and the death benefit is not subject to federal income tax In an individual life policy, premiums are not tax deductible and proceeds are paid tax free.
C is working on her continuing education credits. How many days BEFORE C's renewal date, should she complete her credits? A: It is recommended that producers complete all course work no later than the last day to renew their license B: The rule of the Department of Insurance is that producers should complete all continuing education coursework 30 days prior to their renewal date C: The rule of the Department of Insurance is that producers should complete all continuing education coursework 10 days prior to their renewal date D: The rule of the Department of Insurance is that producers should complete all continuing education coursework 14 days prior to their renewal date
B: The rule of the Department of Insurance is that producers should complete all continuing education coursework 30 days prior to their renewal date The rule recommends 30 days be a renewal date to allow time for course reporting by providers as well as a cushion of time to deal with unforeseen problems which may arise.
K has been insured under a group life plan for the last 10 years. On August 1, K left the group and was planning to convert his policy. Unfortunately, K died on August 17th. Which of the following statements is CORRECT about K's situation? A: the insurer will not pay a death benefit because K did not convert the policy when he was alive B: the policy proceeds are paid to K's beneficiary C: the company will require the beneficiary to take a physical D: the company will pay half of the proceeds to the group and the other half to K's beneficiary.
B: the policy proceeds are paid to K's beneficiary The policy proceeds will be paid to the named beneficiary because K died within the 31 day period that insured has to convert a policy. If an insured dies within the 31 day conversion policy, the insurer assumes that the insured would have converted the policy.
H wants to buy a policy to accumulate cash value while he is alive. Under life insurance needs analysis/suitability, H is looking for: A: Providing cash to meet final expenses B: Income Replacement C: Cash Value Buildup and Liquidity D: Estate CreationH wants to buy a policy to accumulate cash value while he is alive. Under life insurance needs analysis/suitability, H is looking for: A: Providing cash to meet final expenses B: Income Replacement C: Cash Value Buildup and Liquidity D: Estate Creation
C: Cash Value Buildup and Liquidity Because H wants to build cash value and be able to use that money if needed while he is alive that is a cash value buildup and liquidity need.
Which of the following statements pertaining to a Premium Fund Trust Account is accurate when a producer handles the premium funds of more than one insurance company? A: A separate PFTA is required for each insurance company B: The producer can put all premium funds from as many companies as they like into a single PFTA. C: Co-mingling the premium funds of more than one insurer into a single account is only allowed with the written consent of each company whose funds will be placed into the single PFTA D: Producers are not allowed to establish more than one PFTA
C: Co-mingling the premium funds of more than one insurer into a single account is only allowed with the written consent of each company whose funds will be placed into the single PFTA Co-mingling of premiums from multiple companies into one PFTA is allowed but only with the written consent of each insurer.
It is legally permissible for a producer responsible for a Premium Fund Trust account to place interest bearing funds into all of the following investment vehicles, EXCEPT: A: A bank certificate of deposit with a one year maximum maturity. B: Highly rated commercial paper. C: Highly rated municipal bond funds maturing in three years or less D: A conservative money market fund.
C: Highly rated municipal bond funds maturing in three years or less PFTA funds can only be placed in highly rated municipal bonds funds maturing in no longer than one year.
If a producer is found guilty of defamation, their producer license may be suspended, revoked or denied and additionally they may be assessed a civil penalty of A: up to $5,000 for a business offense. B: up to $1,000 for violating a cease and desist order of the Director. C: from $200 to $10,000. D: a minimum of $1,000 to a maximum of $10,000.
C: from $200 to $10,000.
In a Group Life policy, which of the following may have to pay premiums? A: group sponsor B: employees C: group sponsor and group members D: employees and group members
C: group sponsor and group members Even though a group policy is owned and controlled by the group sponsor, sometimes the group members have to pay premiums with the sponsor.
Social Security benefits should be: A: ignored by the producer B: laughed at by the producer C: mastered by the producer and use them to assess client needs. D: never be brought up to an insured
C: mastered by the producer and use them to assess client needs. Social Security benefits should always be assessed and integrated into an insured's needs by the producer.
A producer who places insurance with an insurer, either directly or indirectly, with whom the producer does not have an agent contract A: is grounds for license revocation. B: requires a special limited license. C: requires that the producer must post a surety bond in favor of the people of Illinois. D: must pay a state fee based on volume of business placed with such an insurer.
C: requires that the producer must post a surety bond in favor of the people of Illinois. A bond must be posted in favor of the people when a producer places business either directly or indirectly with any insurer with whom they are not contracted as an agent.
All of the following amounts of premiums which are misappropriated by a producer are considered to be a felony violation EXCEPT: A: $100 or less on at least two separate occasions. B: $3 on at least two occasions C: $151 D: $150
D: $150 Misappropriating more than $150 is a Class 3 felony.
What is the fee for a non-resident Illinois producer license? A: $180 every two years B: $250 biannually C: $180 biennially D: $250 biennially
D: $250 biennially A non-resident must pay $250 every two years (biennial renewal) as the producer fee.
Which of the following scenarios would allow someone to receive early retirement benefits through Social Security? A: A retired worker must be 70 years old. B: A individual can only receive retirement if they have earned the required credits. C: A individual does not need to have credits, just be older than 59 1/2. D: A individual who is fully insured and is age 62.
D: A individual who is fully insured and D: A individual who is fully insured and is age 62. . A individual who is fully insured through social security can receive reduced early retirement benefits at age 62.
Group Life insurance death benefits are always paid tax free upon death of a covered insured, however, premiums paid by the Employer are: A: Tax Deductible B: Not Tax Deductible C: Tax Deductible only if the premiums exceed $50,000 D: None of the Above
A: Tax Deductible Premiums paid by a employer for group life premiums are tax deductible and benefits are paid tax free.
An agent makes pejorative statements about another agent. This may be an example of A: False Advertising B: Defamation C: Misrepresentation D: Twisting
B: Defamation Making disparaging or belittling comments about another licensee may be construed as defamation, an unfair business practice.
All of the following are examples of a tax qualified plan EXCEPT: A: IRA B: ROTH IRA C: Keogh Plan D: ESOP
B: ROTH IRA A Roth Individual Retirement Account (ROTH IRA) is an example of a NON-qualified plan because after tax dollars are used to fund the account.
Under Regulation 919, what is the length of time an insurance company is required to keep detailed claims records? A: The current and previous year. B: The past 12 month period C: The current and past two years. D: The previous five years.
C: The current and past two years. Regulation 919 requires claim records must be maintained by an insurer for the current and two previous years.
K is 21 years old and is buying a policy. Since K is in perfect healthy and has good family history, he will be able to buy a lot of coverage for a low premium cost. This is an example of purchasing a policy to: A: Protect an estate B: Pay final expenses C: To immediately create an estate D: To build cash value and take loans later
C: To immediately create an estate A young, healthy insured purchasing a lot of life insurance for a low cost is an example of immediate creation of an estate.
If an insured leaves a group they are allowed to convert their group coverage to an individual policy within ______ days. A: 30 B: 15 C: 40 D: 31
D:31
A Premium Fund Trust Account must be established if a producer holds premiums for A: 15 days or more. B: 10 days or more. C: 7 days or more D: 30 days or more.
A: 15 days or more If the producer holds premiums for 15 days or more before remitting them to the insurer, a PFTA must b established into which the place the funds or the producer has violated fiduciary duty.
If a group is contributory, what percentage of members must be insured by the policy? A: 75% B: 50% C: 100% D: 0%
A: 75% In a Contributory group, the employer and employees share responsibility for paying group premiums and 75% of employees must be included in the policy.
A producer's duty to educate the client on the product, determine their needs and evaluate cost or relative plans is called: A: Analysis and Suitability B: Whole Life C: Term Life D: None of the Above
A: Analysis and Suitability The producer's duty to help a client address all their needs is known as analysis and suitability.
For what period of time must the fiscal or calendar year records of a Premium Fund Trust Account be kept? A: At least 7 years. B: At least 6 years. C: At least 5 years. D: At least 3 years.
A: At least 7 years. The fiscal or calendar year records of a PFTA must be kept for AT LEAST 7 years.
If a producer receives a hearing notice from the director relating to a license revocation and the notice is mailed by the Director on July 1, when will the hearing actually take place? A: Between July 21 and July 31 B: Anytime after July 11 C: On July 21 D: On July 31
A: Between July 21 and July 31
G lost her husband a few years ago. G has been receiving benefits through social security, but she has just been informed she will not receive any more money until retirement because her youngest child has attained age 16. This is known as the: A: Blackout Period B: Elimination Period C: Probationary Period D: Loss of Income Period
A: Blackout Period When a surviving spouse loses their monthly survivor benefit and before they would receive retirement is known as the blackout period. No benefits are paid by social security during the blackout period.
An agreement that uses life insurance to fund a business ownership change is known as: A: Buy/Sell Agreement B: Key Person C: Social Security Survivor D: Survivor Protection
A: Buy/Sell Agreement A buy/sell agreement uses life insurance to fund a business owner change should an insured business owner die.
Which of the following best describes personal life insurance needs analysis/suitability? A: Buying a policy to provide cash to meet funeral expense. B: An individual buying a policy to protect their resale shop if their manager were to die. C: A person buying a policy to fund a business if an owner dies. D: An Individual buying a policy to profit from loss.
A: Buying a policy to provide cash to meet funeral expense. Buying a policy to pay for funeral expense is an example of personal needs analysis and suitability.
To establish if a policy is a Modified Endowment Contract a policy must: A: Fail the 7 pay test B: Pass the 7 Pay Test C: What's a 7 pay test? D: Not be a Single Premium policy
A: Fail the 7 pay test Any policy that fails a 7 pay test is considered to be a Modified Endowment Contract (MEC).
If a producer charges a service fee in addition to being paid a commission for a sale of insurance, what is required of the producer in such an instance? A: If the total compensation will exceed 10% of the annual premium amount there must be a written disclosure document signed by the producer and the applicant for insurance. B: If the total compensation will exceed 10% of the monthly premium amount there must be a written disclosure document signed by the producer and the applicant for insurance. C: The producer must provide written disclosure to the insurance applicant. D: To report the producer's illegal activity to the Director because such a fee is illegal to collect from a prospective insured.
A: If the total compensation will exceed 10% of the annual premium amount there must be a written disclosure document signed by the producer and the applicant for insurance. A producer is allowed to earn a fee plus a commission for the sale of insurance but in such a case, the producer must provide a written disclosure to the applicant which must be signed by both parties.
D has a Roth IRA and wants to save up to retire at age 75. Which of the following statements are CORRECT? A: Since D has a Roth IRA he could save up until age 75 and withdraw after that. B: D cannot wait that long to withdrawal because all IRAs must be withdrawn by age 70 1/2. C: If D waits that long, an extra tax penalty of 10% applies. D: None of the Above
A: Since D has a Roth IRA he could save up until age 75 and withdraw after that. Roth IRAs do NOT have a magic age of 70 1/2 for withdrawals. In addition, the tax penalty applies to early withdrawals prior to age 59 1/2.
If producer Y receives a $175 premium payment on behalf of insurance Company B and keeps the money instead of turning the funds over to the Company B, which of the following is TRUE? A: The law says that the premium is considered to have been received by Company B. B: Y has committed a Class A misdemeanor. C: The insurance applicant will have to pay the $175 premium again. D: Y has done nothing wrong since the amount of money involved is under $200.
A: The law says that the premium is considered to have been received by Company B.
S & J have just funded a buy and sell agreement with term insurance for their house painting company. Which of the following most accurately states the federal tax consequences to the partnership in terms of death benefits and premium paid? A: The premiums are not tax deductible and the death benefit is not subject to federal income tax. B: The premiums are tax deductible and the death benefit is subject to federal income tax. C: The premiums are not tax deductible and the death benefit is subject to federal income tax. D: The premiums are tax deductible and the death benefit is not subject to income tax
A: The premiums are not tax deductible and the death benefit is not subject to federal income tax. In a Buy/Sell agreement premiums paid are not tax deductible and therefore fund the agreement with tax free benefits.
IRA contributions: A: are made in cash and tax deductible B: are made in cash and are not tax deductible C: grow with interest, but interest is taxed D: are available to anyone younger than 59 1/2.
A: are made in cash and tax deductible IRA contributions, when made in cash, are tax deductible. Interest grows on a tax deferred basis and all withdrawals are taxed.
The age limit for contributing money into an IRA is: A: age 59 1/2 B: age 65 C: age 70 D: age 70 1/2
Age 70 1/2 is when an individual must stop making contributions into an IRA and withdrawals must start in April after reaching 70 1/2
According to Social Security rules, a fully insured worker has died. What is the amount of death benefit the insured's survivors will receive? A: $1,000 B: $255 C: Depends on salary D: Depends on credits earned
B: $255
Rip Off Auto Mechanics have a group policy covering each employee for $100,000. Which of the following statement best describes the tax implications of this group's policy? A: Benefits are paid tax free, but any premiums paid on benefits in excess of $30,000 is taxable wages to the employees B: Benefits are paid tax free, but any premiums paid on benefits in excess of $50,000 is taxable wages to the employees C: Benefits are always tax free and unlimited premiums are tax deductible D: Benefits are taxed in excess of $50,000
B: Benefits are paid tax free, but any premiums paid on benefits in excess of $50,000 is taxable wages to the employees
J is a wealthy person who is building assets for his heirs. One of J's concerns is estate tax. What should J's agent advise him to do to address his need? A: Sell the assets and buy a ton of life insurance. B: Buy a policy to protect J's estate. C: Go to a casino and try to double his money. D: Give the money to his heirs now
B: Buy a policy to protect J's estate.
If the employee shares premium paying duties with their employer in a Group Life policy, this is known as a(an): A: Adjustable Life B: Contributory C: Non-contributory D: Credit Life
B: Contributory In a Contributory group, the employer and employees share responsibility for paying group premiums.
When an insured transfers wealth at death, part of the benefits may be life insurance. In the case where proceeds are part of a entire valuation of wealth transfer upon death, they may be: A: Income Taxable B: Estate Taxable C: Tax Free D: Only Taxable if benefits are over $50,000
B: Estate Taxable Any proceeds that are part of a wealthy transfer from an estate are estate taxable.
K is a wealthy individual who has a life policy. When K dies, the policy proceeds are paid into K's estate. Which of the following is CORRECT about the tax implications of this event? A: K's beneficiary receives all of the estate tax free B: K's estate will be taxed, including the life insurance C: K's estate is taxed but proceeds from the life policy are not taxable. D: There is no transfer of property so no taxes are paid.
B: K's estate will be taxed, including the life insurance Since K's policy is paid into his estate upon death, the proceeds are considered to be part of the estate and therefore are estate taxable.
G has just lost his business partner and going to dissolve the business. When the company was created, G purchased a policy to cover any expenses should he die while the company was still transacting business. G decided he no longer needs or wants his life insurance policy and wishes to sell it. This is known as a(an): A: Viatical Settlement B: Life Settlement C: mistake D: Stranger-Originated Life Policy
B: Life Settlement Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.
F wants to pay a policy off for life in one payment. F's agent warns him that by doing this he creates a MEC. What is a MEC? A: Modified Endowment Clause B: Modified Endowment Contract C: Mid Eastern Conference D: Main Endowment Contract
B: Modified Endowment Contract A MEC or Modified Endowment Contract is when the insured pays a policy completely off faster than 7 payments.
All of the following statements are correct about social security benefits EXCEPT: A: A worker must be insured through Social Security to receive any benefits. B: Once a covered workers child hits ago 20, they are no longer able to receive benefits, unless they are disabled. C: A surviving spouse gets monthly benefits until their youngest child attains age 16. D: Social Security pays a death benefit of $255 to the insured's survivors.
B: Once a covered workers child hits ago 20, they are no longer able to receive benefits, unless they are disabled. The dependent child receives benefits up until age 19, if still in high school or after age 19 in the case of disability.
The purpose of the MEC 7 pay test is to: A: Prevent insureds from buying life policies. B: Prevent insureds from building cash values quickly to gain tax deferred interest while limiting taxes on withdrawals. C: Kill the Single Premium life market because it was too expensive for policyholder. D: Prevent insurance companies to write policies as they see fit
B: Prevent insureds from building cash values quickly to gain tax deferred interest while limiting taxes on withdrawals. The purpose of the 7 pay test is to determine if a policy is a MEC which prevents insureds from building cash value so fast they are allowed to take money out of the policy with interest and pay little to no taxes on any gain.
M is the sole wage earner of his family which includes 5 children. If M were to die, his family would struggle to make ends meet. M should buy a policy to: A: Build Cash Value B: Provide Income Replacement C: Start a Business for his family D: All of the Above
B: Provide Income Replacement Buying life insurance to replace income is a suitable reason for buying a life policy, especially in the case of a primary wage earner protecting their family against premature death.
N has a retirement account that allows him to save after tax dollars, receive tax deferred interest and take withdrawals tax free. N has a(an): A: Annuity B: ROTH IRA C: IRA D: Keogh Plan
B: ROTH IRA A Roth Individual Retirement Account (ROTH IRA) is an example of a NON-qualified plan because after tax dollars are used to fund the account. Tax deferred interest is credit during accumulation and all withdrawals are tax free granted the account is open for at least 5 years and K is older than 59 1/2.
Each of the following is an unfair claims practice by an insurance company, EXCEPT: A: Failing to acknowledging important communications regarding claims filed in a timely manner. B: Supplying brochures to claimants that indicate a competitor is in a precarious financial position. C: Purposefully misrepresenting important policy coverage and provisions to all claimants. D: Not supplying claims forms with proper instructions regarding their completion.
B: Supplying brochures to claimants that indicate a competitor is in a precarious financial position. Writing and distributing that a company has an unsafe financial condition is the unfair trade practice of defamation not an unfair claims practice.
An insured is covered by a Key Person policy and dies. Who are the proceeds paid to? A: The insured's selected beneficiary B: The business who insured them C: The insured's estate D: A trust of the insured
B: The business who insured them If a Key person dies, the business that insured them is the beneficiary of the policy.
Once a producer has a felony conviction entered officially against him, what action is most likely to be taken pertaining to his producer license? A: The Director can do nothing until the producer's appeals rights have been exhausted through all state and/or federal courts. B: The producer will have his license revoked. C: The producer will have his license revoked with a mandatory fine. D: Each felony is reviewed on the facts by the Director to determine whether or not license termination is warranted.
B: The producer will have his license revoked. The Director will terminate the producer's license with a possible civil fine attached.
All of the following are examples of Viatical settlements EXCEPT: A: a insured who is diagnosed with a terminal illness sells their policy to a licensed provider. B: a 76 year old insured retires and decides to sell his policy C: a insured who suffers a terrible fall and is told that they will die within 1 year, and sells her policy before death D: All of the Above
B: a 76 year old insured retires and decides to sell his policy A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. While Life Settlements are similar, they do not require the insured to be terminally ill to sell ownership rights.
Life Insurance is purchased by many to: A: have money paid out and profit while they are alive. B: create an immediate estate. C: fund buying a business D: pay a lot of money when the insured dies without having an interest in the insured's life
B: create an immediate estate. Many people buy life insurance to create an immediate estate for an insured and their family.
Under tax laws dividends on a participating policy are received: A: fully income taxable B: fully tax free C: estate taxable D: only half received tax free
B: fully tax free Since dividends are over payment of premium, they are received tax free from a participating policy.
The trust officer of a bank, while performing the incidental duties of his employment, advises bank customers from time to time about maters related to insurance policies. This trust officer A: is guilty of a Class A misdemeanor. B: is exempted from any producer licensing requirements based on these activates. C: must be licensed in all major lines of insurance. D: must be paid by commission when performing such duties for a bank or other financial institution.
B: is exempted from any producer licensing requirements based on these activates. Illinois allows specific occupations to be exempt from licensing if the duties they perform relating to insurance are incidental and no direct payment of income derives from any insurance product
Life Settlements are: A: illegal, because there is intent to sell the policy before inception B: legal so long that there is no intent to sell the policy when purchasing C: illegal, because life insurance policies are not freely transferable assets. D: All of the Above
B: legal so long that there is no intent to sell the policy when purchasing Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. Since there is no intent to buy the policy to sell it in the future (as true with STOLI/IOLI) and life insurance is a freely transferable asset, life settlements are allowed subject to state law.
According to many state laws, Viatical Settlement Providers: A: can be anyone in the country who can afford them B: must be appropriately licensed to transact such business C: must have at least one representative 16 years or older D: are barred from entry into the market
B: must be appropriately licensed to transact such business A Viatical Settlement Provider must be obtain a specific license to transact such business in most states.
A certificate of insurance for a group policy: A: proves ownership of the policy B: proves that the insured has group insurance C: proves that the policyholder and insured are the same person D: proves that the insured's auto policy is in force
B: proves that the insured has group insurance The certificate of insurance proves that a person has insurance through a group but they are not the owner of the policy.
Generally, Viatical Settlement benefits are received: A: As taxable income B: tax free C: subject to long term capital gains taxation D: None of the Above
B: tax free A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.
K is worried that when she dies her family will incur a lot of debt. K's reason for purchasing a policy would fall under: A: Protection of Estate B: Cash Value Buildup C: Cash Value Liquidity D: Survivor Protection
Because K is concerned with survivors having to pay final expenses and all debts, she would fall under survivor protection for life insurance needs suitability.
Producer G brokered $100,000 in insurance premiums last year. Based on this premium amount, what is the penalty (face) amount of the surety bond G is required to maintain in favor of the people of Illinois? A: $1,000 B: $2,500 C: $5,000 D: $50,000
C: $5,000 A producer who is required to maintain a surety bond must hold a bond in the amount of $2,000 minimum or 5% of the previous year's brokered premiums, whichever is the greater amount up to a $50,000 penalty amount maximum. 5% of $100,000 equals $5,000.
Which of the following MAY NOT engage in the business of offering insurance advice for a fee? A: An attorney licensed to practice law who advises his client about a life insurance matter. B: A licensed insurance producer offering advice on a line of insurance for which they hold licensing authority. C: A Certified Public Accountant who solicits a client for the sale of an insurance policy. D: An actuary engaged in a consulting capacity performing incidental duties.
C: A Certified Public Accountant who solicits a client for the sale of an insurance policy. A CPA can offer advice about insurance matters and charge a fee but cannot solicit the sale off insurance without the appropriate producer licensing authority.
Which of the following statements about producer license termination is NOT accurate? A: Revocation can also lead to imposing a civil penalty of up to $10,000 per cause. B: A denial of license precludes the producer from reapplying for a producer license for a minimum of three years. C: A person who has their producer license terminated would still be able to work for an insurance company in a non-sales position.. D: Upon license termination, the producer is entitled to a hearing, upon written request, on the matter before the order of the Director is final.
C: A person who has their producer license terminated would still be able to work for an insurance company in a non-sales position.. A person whose license is denied or revoked is not allowed o engage an any insurance related capacity during the period of revocation or denial (which is at least a three year period of time).
Under Social Security, when do dependent parent survivor benefits begin? A: age 59 1/2 B: whenever the insured dies, regardless of age C: Age 62 or older D: age 25
C: Age 62 or older Dependent parent survivor benefits under social security begin at age 62 or older.
Which of the following is NOT a qualification for producer licensing in Illinois? A: Pass a state licensing exam B: Complete a prelicensing course C: Be at least 20 years of age D: Pay the licensing fee
C: Be at least 20 years of age 18 years of age is the minimum allowed for a producer license.
Company A has a partnership with Company Z. There is an agreement in place that if the CEO of either company were to die, the other company would receive money to buy out the partnership. This is an example of: A: Buy/Sell Agreement B: Crosse Purchase plan C: Business Entity Plan D: Key Person
C: Business Entity Plan Since two separate companies have an agreement for a buyout on an entity and not a individual level it is known as a business entity plan.
D has a small business. K is the general manager of D's company. If K were to die, the business would have trouble surviving. D should buy: A: Group Insurance B: Buy/Sell Agreement C: Key Person D: Term Life
C: Key Person Key person insurance is a life policy that protects a business financially against the loss of an invaluable employee.
If the Director discovers a person has violated the controlled business statute, which of the following may happen as a result? A: The producer will be prosecuted for a Class A misdemeanor. B: The producer will be prosecuted for committing a felony. C: The Director may not grant a renewal of producer license. D: The producer is subject to license revocation and a $100,000 maximum fine
C: The Director may not grant a renewal of producer license.
The regulation that requires a producer to reveal their name and the name of the insurer or firm that they are representing when soliciting the sale of an insurance policy is called A: The Replacement Rule B: The Unfair Trade Practice Act C: The Disclosure Rule D: The Insurance Fraud Prevention Act
C: The Disclosure Rule The disclosure rule requires a producer to reveal who they are and who they work for when soliciting the sale of an insurance policy.
Each of the following is true regarding a Key Person policy EXCEPT: A: The business is the owner of the policy. B: The business is premium payor. C: The insured's family receives 50% of the proceeds. D: Key person is a way for businesses to make up the financial loss of a very important worker.
C: The insured's family receives 50% of the proceeds. In Key Person insurance, the business is the policyholder and the employee is the insured. The business is the beneficiary and receives all of the proceeds.
A policyholder purchased a Single Premium Whole Life policy in 2001 when they were 30 years old. In 2012, the policyholder takes a loan out. Which of the following is CORRECT regarding taxation of this loan? A: The loan is taken tax free B: The loan is taxable C: The loan is taxable plus a 10% penalty D: None of the Above
C: The loan is taxable plus a 10% penalty Since the policy failed the 7 pay test, the loan is a taxable event. Furthermore, since the insured is younger than 59 1/2, there is a tax penalty of 10% as well.
H has just been diagnosed with a terminal illness and has been approached by a company to sell half of his proceeds to them while he is still alive in exchange for immediate cash payment. This transaction is known as a(an): A: Annuity B: Life Settlement C: Viatical Settlement D: Lottery winner
C: Viatical Settlement A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.
All of the following is correct about a Buy and Sell Agreement EXCEPT: A: It uses life insurance to fund a ownership change in the event of an insured dying. B: Premiums are not tax deductible. C: When an insured owner dies, the surviving spouse can sue the living owner to reclaim ownership. D: If two business fund a partnership agreement it is known as an entity plan.
C: When an insured owner dies, the surviving spouse can sue the living owner to reclaim ownership. Once a Buy/Sell agreement is reached, if an owner dies, the surviving family cannot sue the living owner for business control.
Producer J has just received a policy offer from an insurer on behalf of an application J recently wrote. J must deliver the policy and collect the first premium payment. Within how many days must J accomplish this action without violating fiduciary duty? A: Within 10 days B: Within 30 days C: Within 90 days D: Within 20 days
C: Within 90 days A producer must deliver a policy and collect the first premium within 90 days from the issuance of a policy on behalf of an insurer offering the coverage.
Life Settlement Benefits are: A: always taxed as ordinary income B: received completely tax free C: taxed as ordinary income up to current cash value amounts D: fully taxed as capital gains.
C: taxed as ordinary income up to current cash value amounts According to Life Settlement taxation IRS Revenue Ruling 2009-13, any additional profit up to current cash value amount is taxed as income and any payment exceeding cash value is subject to capital gains taxation.
All of the following are characteristics of a TRADITIONAL IRA, EXCEPT: A: contributions can be made in cash B: contributions are tax deducted C: the withdrawals are tax free D: the IRS limits contributions per year
C: the withdrawals are tax free IRAs are Tax-Qualified plans and therefore even though contributions are tax deductible, all withdrawals at retirement are taxed.
The annual license fee for a certified provider is A: $500 per year plus $50 for each course certified B: $2,000 C: $1,000 D: $1,000 plus $20 for each certified course renewal
D: $1,000 plus $20 for each certified course renewal Course providers pay $1,000 a year plus $20 per course that was certified that is being renewed.
Which of the following are elements of a Viatical Settlement? A: The viator must be terminally ill and/or injured and have less than two years to live. B: Benefits are received tax free, but it is always best to consult a tax advisor. C: Viatical providers must be licensed to transact such business by state law. D: All of the Above
D: All of the Above A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor. Viatical providers are subject to state law and must carry a designed license to transact such business.
Which of the following plans would be considered to be Tax Qualified by the IRS? A: IRA B: Keogh C: Annuity purchased through an IRA D: All of the Above
D: All of the Above IRA, Keogh Plans, and an Annuity purchased through an IRA are all examples of Qualified Tax plans which all tax deductible contributions and tax deferred growth, however, all withdrawals are taxable events.
Which of the following are possible situations where a life settlement may occur? A: an insured sells their portion of a business they own and no longer need their policy B: an insured who purchased a policy to cover their mortgage in case of untimely death has just made their last mortgage payment C: a recently divorced couple who do not have children decide there is no reason to have life insurance on each other anymore D: All of the Above
D: All of the Above Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.
Which of the following is an example of Life Insurance Needs Suitability? A: Income Replacement B: Immediate Creation of Estate C: Estate Protection D: All of the Above
D: All of the Above Reasons for purchasing life insurance include Estate creation/protection and income replacement.
When a life policy is purchased with the expectation that an individual must purchase a business upon another individual business owner's death is: A: Key Person B: Keogh C: Buy and Sell Agreement D: Cross Purchase
D: Cross Purchase A Cross Purchase plan is a form of buy and sell insurance where individual owners buy policies on each other to fund a buyout agreement with life insurance proceeds.
All of the following premiums for life policies purchased by a business are not tax deductible EXCEPT: A: Key Employee B: Entity Plan C: Cross Purchase Buy/Sell D: Group Life
D: Group Life Group Life premiums paid by an employer are tax deductible.
Each of the following is true regarding a Group Life insurance policy EXCEPT: A: The policy is one master contract owned and issued to the group sponsor. B: Premiums for groups are generally lower than individual premiums. C: Group insurance policies are guaranteed issued no matter health of the insured. D: Group policies are always written as whole life insurance.
D: Group policies are always written as whole life insurance. Group Life policies are commonly Annual Renewable Term policies but could also be permanent policies as well.
All of the following are considered to be Non-Qualified Tax Plans EXCEPT: A: Whole Life B: Universal Life C: Roth IRA D: IRA
D: IRAD: IRA An Individual Retirement Account (IRA) is an example of a Tax-Qualified plan because the individual is allowed to use pre-tax dollars to fund the account and get tax deferred growth.
B no longer needs her policy because she has won the lottery. B has explored a possible transaction where she can sell her policy for more than the cash value, but less than the death benefit while she is still alive. This transaction is known as a(an): A: Annuity B: Viatical Settlement C: Cash Surrender Value D: Life Settlement
D: Life Settlement Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.
Which of the following is CORRECT about the Roth IRA? A: They are tax deductible. B: They have tax deferred growth, but withdrawals are taxed. C: They have tax deductible contributions, grow with taxable interest and pay tax free benefits. D: None of the Above
D: None of the Above None of the answers are correct. Roth IRA plan contributions are NOT tax deductible and funds grow without taxation if withdrawn later according to IRS rules, making withdrawals income tax free.
An insured purchases a policy to build cash value over time is an example of: A: rebating B: Immediately creating an estate C: Income replacement D: Personal Insurance needs analysis/suitability
D: Personal Insurance needs analysis/suitability Buying a policy for cash value buildup and liquidity is an example of personal insurance needs and suitability.
All of the following statements pertaining to a Premium Fund Trust Account (PFTA) are accurate , EXCEPT: A: The PFTA must be maintained in Illinois, subject to the jurisdiction of Illinois courts. B: PFTA must be printed on the face of all checks. C: Non-premium funds may be deposited into a PFTA if they were received for soliciting a policy of insurance. D: Service fees are not allowed to be deposited into a PFTA.
D: Service fees are not allowed to be deposited into a PFTA.
Which of the following is CORRECT about Individual Retirement Accounts? A: They are available to anyone as long as they have a life insurance policy and they want to save for retirement. B: The individual covered under the account can make contributions past age 70 1/2. C: Contributions have to be made by credit card and are not tax deductible. D: There is a tax penalty of 10% if an individual takes money out of an IRA prior to age 59 1/2
D: There is a tax penalty of 10% if an individual takes money out of an IRA prior to age 59 1/2. An IRA allows any individual with earned income to make tax deductible contributions in cash to save for retirement up until age 70 1/2. All withdrawals are taxed, however, if an individual takes money out prior to age 59 1/2 there will be taxes plus a 10% penalty on withdrawals.
A situation in which a terminally injured insured can sell their existing life insurance proceeds before they die in exchange for funds is known as a: A: Life Settlement B: Cash Surrender C: STOLI D: Viatical Settlement
D: Viatical Settlement A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.
All of the following are valid examples of a life settlement EXCEPT: A: a 76 year old insured is retiring and wants to sell a policy for extra living expenses B: a married couple has decided to divorce and would like to sell their policies for extra funds for their children's education C: an insured has just lost their job and wants to sell part of their life policy to help make ends meet D: an insured has just been diagnosed with a terminal illness and wants to sell the policy to help pay medical bills
D: an insured has just been diagnosed with a terminal illness and wants to sell the policy to help pay medical bills Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business. When an insured sells a policy due to terminal illness it is known as a Viatical Settlement.
If an insured is covered by a Group Life policy and they are terminated, the insured will: A: have to go under COBRA benefit B: not be allowed to convert the policy because he/she was terminated C: be allowed to convert to a permanent policy pending a physical exam D: be allowed to convert to a permanent policy regardless of insurability
D: be allowed to convert to a permanent policy regardless of insurability Group Life insurance has a conversion privilege that allows the insured, who leaves the group for ANY reason, to convert to a permanent policy regardless of insurability.
A Temporary License (180 days) allows the holder to engage in all of the following activities, EXCEPT: A: a surviving spouse of a producer can use the authority to help effect the sale of the insurance business. B: make certain that insureds are paying renewal premiums in a timely manner. C: ask the Director to extend the authority if an anticipated agency sale is taking longer than 180 days. D: sell a new policy to an existing client.
D: sell a new policy to an existing client. The 180 day temp license is strictly used to service existing customers and the sale, solicitation or negotiation of business is prohibited
Which of the flowing activities on the part of a producer will not likely lead to a suspension, revocation or denial of license? A: The non-residence Texas insurance license of the producer is revoked for cause. B: The producer accepts business from and pays commissions to a unlicensed individual. C: the producer engages in several act of rebating. D: the producer pleads guilty to misdemeanor shoplifting.
D: the producer pleads guilty to misdemeanor shoplifting. Illinois currently requires the commission of a felony to lead to license termination from the view point of criminal activity.
Life Settlements are: A: situations in which a terminally ill insured sells their policy while they are alive for immediate cash payment before they die B: the same as STOLI considering there is intent to sell a life policy when purchasing it C: transactions in which a deceased policyholder sells their death benefit for more than the cash value but less than the face amount D: transactions in which a living policyholder sells their death benefit for more than the cash value but less than the face amount
D: transactions in which a living policyholder sells their death benefit for more than the cash value but less than the face amount Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.
Which of the following gifts is not considered a rebate if offered in the purchase of an insurance policy? A: Offering Stock ownership. B: The free use of the producer's lake house for a week. C: An insurance company offering a child passenger restraint system. D: Stock dividends.
State law specifically exempts offering child restraint systems or discounts from the purchase price of child passenger restraints to policyholders.
