Pennsylvania Life Insurance - Premiums/Underwriting

A life insurance company just paid a $100,000 death benefit to a beneficiary. When the insured died, the cash value was $15,000 and the total premiums-paid equaled $10,000. How much of the proceeds will be added to the beneficiary's gross income for federal income tax purposes?

$0

Which would be described as a beneficiary designation by class? Children of the insured Estate of the insured Tertiary beneficiary A specific named beneficiary

Children of the insured

Which tax is normally associated with an individual's death? Excise tax Consumption tax Federal estate tax Ad valorem tax

Federal estate tax

Which life insurance settlement option pays a stated monthly amount until the proceeds are gone? Fixed amount option Fixed period option Life income option Interest only option

Fixed amount option

The Medical Information Bureau consists of members from which group? Doctors Hospitals Insurance companies Underwriters

Insurance companies

Where will a life insurance policy's death benefits be directed to if all the beneficiaries die before the insured? Insured's creditors Beneficiary's estate Insured's estate Court-ordered beneficiary

Insured's estate

The initial premium for a life insurance policy is typically handled in what way? The applicant mails it to the insurer after the policy has been approved It is typically obtained by the producer and sent to the insurer It is typically forwarded to the insurer by the applicant The producer pays it from any commissions received

It is typically obtained by the producer and sent to the insurer

Which life insurance settlement option pays lifetime benefits to two or more people? Life income with period certain Joint Joint and survivor Life income

Joint and survivor

What would be the disadvantage of naming a trust as beneficiary of a life insurance policy? Trusts cannot be formed for life insurance purposes Trust administration fees would reduce policy proceeds Trusts cannot be used if a minor is the beneficiary Trustee must be a bank or brokerage

Trust administration fees would reduce policy proceeds

When the disclosure of an insured's nonpublic information is involved, what is the insurer obligated to do? Insurer is not obligated to take any action Insurer is obligated to verify that the producer is in compliance Give notice, explain, and allow opting out Provide the proper NAIC paperwork

Give notice, explain, and allow opting out

Life insurance premiums are based on what three factors? Mortality, interest, dividends Morbidity, interest, expenses Mortality, interest, expenses Morbidity, interest, dividends

Mortality, interest, expenses

Which of these is NOT a factor in the underwriting process of a life insurance application? Credit report National origin Age of applicant

National Origina

The beneficiary of a life insurance policy is normally chosen by whom? Policyowner Contingent beneficiary Estate Insurance company

Policyowner

When there is a named beneficiary on a life insurance policy, the death benefits are directed to a trustee if the insured has any outstanding debts are paid directly to the insured's creditors, with any remaining balance forwarded to the beneficiary are paid directly to the beneficiary, minus any debt claims by the insured's creditors are paid directly to the beneficiary without interference from the insured's creditors

are paid directly to the beneficiary without interference from the insured's creditors

Where is the difference between a standard risk and a substandard risk demonstrated? backdating coverage is not offered premium charges back-end charges

Premium Charges

How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision? 1 month 2 months 4 months 6 months

6 Months

Which of these is an accurate statement regarding a fixed period settlement option on a life insurance policy? A portion of the payments paid to the beneficiary stems from interest generated from the proceeds Payment can be adjusted monthly by the beneficiary A portion of the payments paid to the beneficiary stems from interest generated from policy loans Payments are normally guaranteed for 10 years or more

A portion of the payments paid to the beneficiary stems from interest generated from the proceeds

The highest mortality rate belongs to which group? Age 60 females Age 70 males Age 60 males Age 70 females

Age 70 Males

Which of these factors do NOT affect life insurance premium rates? Expense factor Interest factor Mortality factor An insurer's rating

An insurer's rating

An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true? Applicant can determine which items in the report to leave out Insurer can obtain a copy of this report without the applicant's knowledge Fee for the report is typically paid by the applicant Applicant has a right to receive a copy of the report

Applicant has a right to receive a copy of the report

A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is true? Premium will be refunded with interest and no death benefit paid Premium received by insurer is considered to be unearned Proceeds are prorated to 1/12th of the full amount Beneficiary receives $50,000 income tax-free

Beneficiary receives $50,000 income tax-free

Which of these is NOT considered the responsibility of a producer in the underwriting process? Collecting additional medical information if needed Promptly sending the completed application to the insurance company Forwarding any material personal observations to the insurer Choosing the final approval date

Choosing the final approval date

What must be given to a life insurance applicant when the agent receives an application and the initial premium? Agent's report Conditional receipt Commission disclosure Good health statement

Conditional receipt

Which report contains information regarding an individual's general reputation and credit standing? Credit report Consumer report MIB report Agent's report

Consumer Report

Which of these is NOT an underwriting responsibility of a life insurance agent? Asking relevant questions concerning an applicant's avocations Requesting an attending physician's report (APR) Ordering an inspection report Establishing the applicant's final rate classification

Establishing the applicant's final rate classification

During the underwriting process, all of these may be utilized to help determine a life insurance applicant's insurability EXCEPT a(n) Consumer report Eye examination Urine sample Blood sample

Eye examination

A policyowner fell behind on the premium payments of a whole life policy and it is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period and the policy also contains an outstanding policy loan? Full face amount Face amount minus the past-due premium Face amount minus the loan balance Face amount minus the loan balance and past-due premium

Face amount minus the loan balance and past-due premium

Which tax is normally associated with death? Federal excise tax Sales tax Federal estate tax Payroll

Federal Estate Tax

Which settlement option makes minimum guaranteed dollar payments over a stated number of years? Interest-Only Fixed-Period Fixed-Amount Life Income

Fixed-Period

Which of these documents is signed by an applicant at policy delivery that certifies no change in health has occurred since the original application date? Binding receipt Good health statement Agent's report MIB disclosure

Good health statement

Which of these occurrences could justify an insurer to reduce premiums? Expense factor increase Mortality rates increase Interest factor increase Requiring monthly premium payments instead of annual

Interest factor increase

When a policy loan is requested by a policyowner and it requires the consent of the beneficiary, what kind of beneficiary designation is this? Collateral beneficiary Revocable beneficiary Irrevocable beneficiary Per stirpes beneficiary

Irrevocable beneficiary

How much is normally paid to a policyowner in a life (viatical) settlement? Total premiums paid plus interest Full face amount More than the face amount Less than the face amount

Less than the face amount

During the early years of a whole life insurance policy, the cash value will normally be equal to the total premiums paid more than the total premiums paid less than the total premiums paid unavailable as a policy loan

Less than the total premiums paid

What would be a valid reason for naming a trust as the beneficiary of a life insurance policy as opposed to naming an individual? Avoiding probate Management of proceeds would be provided Trustee can pay off any existing policy loans More settlement options available with a trustee

Management of proceeds would be provided

What is considered a valid reason for an insurer's refusal to pay death benefits directly to a minor? Minors are not capable of having insurable interest Minors are normally not capable of handling money in a reasonable manner Minors are usually not capable of paying for the insurance premium Minors cannot legally enter into a contract

Minors are normally not capable of handling money in a reasonable manner

Which statement most accurately describes a single premium whole life policy? Premiums that can only be paid from a single source A single premium that is due annually Paid-up policy that offers lifetime protection Paid-up policy that offers limited protection

Paid-up policy that offers lifetime protection

When a producer submits an application that reveals personal information regarding the applicant, who supplies the privacy notice?

Producer

Which statement regarding the joint and survivor life insurance settlement option is INCORRECT? Age of the beneficiaries plays a factor when determining the payment amounts Income continues until the last beneficiary dies Two or more beneficiaries can be paid The income payments are larger as compared to a single-life income option

The income payments are larger as compared to a single-life income option

Which statement regarding a fixed period settlement option is correct? The insurance company dictates each installment payment amount A fixed period settlement option can pay no longer than 20 years The installment payment amount is determined by the total number of installments The insurance company dictates the total number of installment payments

The installment payment amount is determined by the total number of installments

When does the producer give a premium receipt for a life insurance application? When the application has been approved When the initial premium has been collected with the application During the medical exam When the completed application has been collected

When the initial premium has been collected with the application

Al surrenders his life insurance policy for its cash value. The total of the premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the premium basis net proceeds cash basis cost basis

cost basis

Death benefits from a life insurance policy are normally considered to be exempt from federal income tax subject to the cost recovery rule subject to attachments from the insured's creditors subject to the value-added tax

exempt from federal income tax

Who is the beneficiary in a life insurance policy? The person designated to have control over the nonforfeiture options The stated person or entity who is designated to receive the death benefit The person responsible for payment of the policy premiums The stated person whose life is insured in the insurance contract

he stated person or entity who is designated to receive the death benefit

When premiums are calculated, one component would be the expenses of the beneficiary insurance company policyowner producer

insurance company

A preferred life insurance premium can be obtained by an applicant exhibiting all of these factors EXCEPT good credit history living in the mountains good health history being a nonsmoker

living in the mountains

All of these settlement options would satisfy the conditions of a spendthrift clause EXCEPT a fixed-period installment life income option fixed-amount installment lump-sum payment

lump-sum payment

The reason for backdating a policy is to avoid being considered a substandard risk due to a recent cancer diagnosis to obtain a premium rate based on an earlier age to decrease the face amount to decrease the Contestable period

o obtain a premium rate based on an earlier age

A contingent beneficiary is described as the primary person who receives the death benefits if the insured dies person who receives the death benefits if the primary beneficiary dies before the insured person who receives the death benefits if there is no named beneficiary person whose approval is needed before a beneficiary designation is changed

person who receives the death benefits if the primary beneficiary dies before the insured

A signed good health statement would be collected by a life producer at the time of policy issue application policy delivery physical examination

policy delivery

A terminally ill policyowner decides to sell his life insurance policy to help support his family. This sale is called a(n) accelerated death benefit assignment viatical settlement nonforfeiture option

viatical settlement