Chapter Exam Review-AL (L & H)

An individual who buys a Life annuity is given protection against..?

The risk of living longer than expected.

Which is NOT true regarding Medicare Supplement policies? a. designed for individuals who are enrolled in Medicare b. must define all terms the same as the federal Medicare program c. must include a min. 20-day free look provision d. must not duplicate Medicare benefits

They must include a min. 20-day free look provision

What is a certificate of insurance?

a certificate issued to each individual covered by the group life insurance

What type of retirement plan promises a specified payment to the plan by the employer

a defined benefit plan

Ron turns over all rights in his policy over to an assignee. What is this called? a. an absolute assignment b. a conditional assignment c. a collateral assignment d. a transference assignment

absolute assignment

What describes a retirement plan that promises a specified benefit to the EMPLOYEE at retirement?

defined benefit plan

What is the purpose of the U.S.A PatriotAct?

detect and deter terrorism

A policyowner would like to change the benficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need? a. revocable b. contingent c. irrevocable d. primary

irrevocable

A policyowners rights are limited under which beneficiary designation? a. revocable b. tertiary c. contingent d. irrevocable

irrevocable

What kind of life insurance beneficiary requires his/her consent when a change of beneficiary is made?

irrevocable beneficiary

A retirement plan intended for a sole proprietor and his/her employees would be a..? a. individual retirement plan b. keogh plan c. simple plan d. 403 (b) plan

keogh plan

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

life annuity with period certain

Extended residence in a nursing home is covered by a..? a. disability policy b. medicare Part D policy c. long term care policy d. blanket policy

long term care policy

What does Disability Buy-Sell insurance provide? a. periodic payments b. death benefits c. lump sum benefit d. none

lump sump benefit

Which of these is an element of a Single Premium annuity? a. deferred payment b. lump-sum payment c. fixed income d. tax-deductible

lump-sum payment

An employee that offers a qualified retirement plan to its employees is eligible to..?

make tax-deductible contributions to the plan

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the..? a. marital deduction b. death benefits c. section 1035 exchange d. capital gains tax rate

marital deduction

A policyowner is allowed to pay premiums more than once a year under which provision? a. insuring b. consideration c. payor d. mode of premium

mode of premium

When is a plan considered to be "top heavy"?

more than 60% of plan assets are attributable to key employees

According to Alabma law, agents of a Health Maintenance Organization (HMO) ..? a. are not exempt from continuing education requirements b. are not subject to producer licensing requirements c. must be licensed as insurance producers d. are subject to max. commission earnings

must be licensed as insurance producers

Information received from the MIB about a proposed insured may be released to whom?

proposed insured's physician

What is the underlying concept regarding level premiums? a. level premiums build cash value quicker in early years b. the early years are charged more than what is needed c. the early years are charged less than what is needed d. level premiums can only be paid annually

the early years are charged more than what is needed.

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity? a. the employer b. the employee c. the financial institution d. the 403(b) custodian

the employee

a departing employee has decided to continue his group coverage through Cobra who pays the premium in this situation?

the employee pays the premium for continued group coverage through COBRA.

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

50%

How long does an individual have to "roll over" funds from an IRA or qualfied plan?

60 days

Terry owns a 20 year life annuity certain and dies before the period of 20 years has elapsed. What happens to any monies left? a. paid to the beneficiary in a lump sum payment b. paid to the beneficiary for the rest of the certain period c. forfeited to the insurance company d. paid to terry's estate

Paid to the beneficiary for the rest of the certain period.

One becomes eligible for Social Security disability benefits after having been disabled for..?

5 months

The min. grace period for a life insurance policy sold in alabama is..? a. 10 days b. 14 days c. 30 days d. 45 days

30 days

Required Provision 3 states that the min. grace period for ALL policies (except those with monthly or weekly premium modes) is..? a. 7 days b. 14 days c. 21 days d. 31 days

31 days

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the max, deductible IRA contribution allowable?

$25,000

A disability policy in Alabama that is paid on a monthly basis is required to have a grace period of...? a. 7 days b. 10 days c. 14 days d. 31 days

10 days

Premature IRA distributions are assessed a penalty tax of..?

10%

An individual participant personally received eligible rollover funds from a profit-sharing plan. what is the income tax withholding requirements for this transaction?

20% is withheld for income taxes

Which of the following is a TRUE statement regarding dental insurance? a. comprehensive dental care policies usually cover a PERCENTAGE of reasonable and customary charges for non-routine treatment b. comprehensive dental care policies usually cover a ALL of reasonable and customary charges for non-routine treatment c. comprehensive health benefit plans always include dental insurance d. specialized dental care is usually covered with the same max. and deductibles as routine dental treatment.

Comprehensive dental care policies usually cover a PERCENTAGE of reasonable and customary charges for non routine treatment.

Medicare Advantage Part C allows the utilization of benefits through an..?

HMO, PPO, or traditional insurer

P is a producer who notices 5 questions on a life application were not answered. What actions should P take? a. mail incomplete application to applicant to be completed and returned to the agent. b. submit the application as is to the insurer c. call the applicant and complete application over the phone d. set up a meeting with the applicant to answer the remaining questions

Set up a meeting with the applicant to answer the remaining questions.

An immediate annuity consists of a..?

Single Premium

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Social Security

A qualified profit-sharing plan is designed to..?

allow employees to participate in the profits of the company

An insurance company licensed to solicit insurance in a specific state is called..? a. an admitted company b. a domestic company c. a foreign company d. an alien company

an admitted company

Group life insurance policies are generally written as..? a. a term rider b. annually renewable term c. increasing term d. group whole life

annually renewable term

What type of contract liquidates an estate through recurrent payments?

annuity

When can a policyowner change a revocable beneficiary?

anytime

Any changes made on an insurance application requires the initials of whom?

applicant

Traditional IRA distributions must start when?

april 1st of the year following the year the participant attains age 79 1/2.

At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid? a. after the contestable period. b. when the policy proceeds are paid. c. at the time of the application. d. when the insured dies

at the time of the application

Who is NOT required to sign a life insurance application?

beneficiary

What is considered to be a characteristic of an immediate annuity? a. benefit payments start within one payment period of purchase b. benefit payments start within 5 years of initial purchase c. normally tied to a specific equity or stock index d. periodical contributions begin immediately

benefit payments start within one payment period of purchase

What type of receipt binds the insurer to coverage as of the date of the application or medical exam, provided the insured is determined to be an acceptable risk?

binding receipt

What type of employee welfare plans are not subject to ERISA regulations? a. church plans b. major medical plans c. corporate d. qualified plans

church plans

What type of group plan involves employees sharing the cost?

contributory plan

What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? a. entire contract b. owner's rights c. nonforfeiture options d. conversion

conversion

paul has a major medical policy which begins with basic first dollar coverage that pays up to its limits, then he must pay a certain dollar amount of covered expenses before the major medical portion steps in. The dollar amount Paul must pay is called the: A. carryover deductible B. internal limit C. corridor deductible D. stop-loss limit

corridor deductible

P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?

deferred

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee? a.. distribution is subject to capital gains tax b. distribution is subject to ordinary income tax c. distribution is subject to a tax penalty d. distribution is subject to federal income tax withholding.

distribution is subject to federal income tax witholding.

How are Roth IRA distributions normally taxed? a. 10% penalty tax is applied b. taxed as ordinary income c. capital gains tax is applied d. distributions are received tax free

distributions are received tax-free.

A policyowner can collect the face amount on what type of policy? a. 20-pay life policy b. endowment policy c. straight life policy d. adjustable policy

endowment policy

Which of the following is considered the "automatic" Non forfeiture Option that most insurers will use? a. reduced paid up option b. 1 year term c. extended term d. lump sum cash

extended term

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase? a. fixed period b.fixed deferred c. fixed immediate d. fixed variable

fixed deferred

An insurance company licensed to do business in Alabama, but incorporated in another state, is called..? a. non admitted company b. a domestic company c. an alien company d. a foreign company

foreign company

A _________ company is one that is domiciled in another state and has not received a license to do business in alabama.

foreign nonadmitted

Ann is an employee covered by a Group Life plan through her employer. When Ann is terminated, her employer fails to inform her about the plan's conversion option. Two weeks later, Ann dies in an automobile accident. How will this situation be handled?

full benefits must be paid by the insurer.

Which of these will NOT result in an increase in life insurance policy dividends? a. lower expenses b. higher interest earnings c. lower mortality d. higher reserves

higher reserves

How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy? a. if the primary beneficiary is a minor at the time of the insured's death b. if the primary beneficiary dies before the insured c. if the insured died of accidental causes d. if the insured died of natural causes

if the primary beneficiary dies before the insured.

The automatic premium loan provision is NOT used in which of the following policies? a. whole life policy b. increasing term policy c. 20-year endowment policy d. limited-pay policy

increasing term policy

What is being delivered during a policy delivery? a. a binding receipt to the proposed insured b. insurance contract to the proposed insured c. application and initial premium to the insurer d. policy summary sheet and disclosure material to the proposed insured

insurance contract to the proposed insured

A life insurance beneficiary has chosen a settlement option in which the principal never decreases unless the beneficiary makes a withdrawal. This settlement option is called the..? a. interest only option b. lump sum option c. fixed amount option d. life income option

interest only option

A life insurance beneficiary has chosen a settlement option in which the principal never decreases unless the beneficiary makes a withdrawal. this settlement option is called the...? a. interest only option b. lump sum option c. fixed amount option d. life income option

interest only option

An insured covered by life insurance has just died. What will happen if the primary beneficiary had already died before the insured and contingent beneficiary?

proceeds will go to the contingent beneficiary.

Im an individual retirement account (IRA) rollover contributions are..? a. subject to capital gains tax b. subject to ordinary income tax c. partially limited by dollar amnt. d. not limited by dollar amount

not limited by dollar amount

When the gross premium of a life insurance policy is computed, which of these factors is NOT included? a. interest income b. number of beneficiaries c. mortality factor d. operating expenses

number of beneficiaries

Terry owns a 20 year life annuity certain and dies before the period of 20 years has elapsed. What happens to any monies left?

paid to the beneficiary for the rest of the certain period

Which dividend option allows a policyowner to use his/her dividends to buy life insurance on a single premium basis? a. premium reduction option b. single premium option c. paid up additons option d. cash option

paid up additions option

Which of these is a correct statement? whole life insurance cannot build cash value term life insurance cannot be converted/renewed policy dividends CANNOT be guaranteed policy dividends are ALWAYS taxable

policy dividends CANNOT be guaranteed.

Which of these do NOT constitute policy delivery? a. policy mailed to applicant b. policy mailed to agent c. policy delivered to the applicant by the agent d. policy issued with a rating

policy issued with a rating

A policyowner is able to choose the frequency of premium payments through what policy feature? a. consideration b. payor benefit c. premium mode d. assignment provision

premium mode

An issued policy can never be changed by..?

producer

Which of the following dividend options allows the continuation of cash value accumulation? a. cash surrender b. reduced premium c. reduced paid up insurance d. extended term

reduced paid up insurance

An insurance company that cedes a portion of an insured's coverage to another insurer is said to be engaged in..? a. transference b. reinsurance c. participation d. mutuality

reinsurance

Alabama's annuity disclosure regulation: A. establishes maximum disclosure standards to annuitants B. requires the delivery of a buyer's guide and a disclosure document to an annuity applicant C. applies only to individual annuities D. is designed to protect insurers

requires the delivery of a buyer's guide and a disclosure document to an annuity applicant

What term accurately defines an underwriter's assessment of information on a life insurance application? a. Risk classification b. warranty review c. insurable interest d. inspection report

risk classification

What does a 401(k) plan generally provide its participants? a. tax free distributions b. salary-deferral contributions c. salary-deferral distributions a defined retirement benefit

salary-deferral contributions

Under COBRA, dependents of employees covered by group plans have...?

same extension and conversion privileges available to them as the employee

A widow who has insured under her husband's group life plan can continue her life insurance protection under the following conditions EXCEPT: a. she must convert the coverage to a permanent type of policy b. she must prove her insurability through a medical examination c. she must apply for conversion within a month of her husband's death d. she must pay premiums based on her attained age at the time of conversion.

she must prove her insurability through a medical examination

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation? a. 304(b) plan b. deferred premium c. single premium d. period certain

single premium

A hubby and wife purchase a life insurance policy that covers both of them. The policy paid nothing when the hub died. two years later, the wife dies and a death benefit is paid to beneficiary. What type of policy is this? a. survivor ship life policy b. joint life policy c. renewable life policy d. adjustable life policy

survivor ship life policy

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made? a. surrender charge is applied b. the account can be rolled into the surviving spouses IRA c. distributions will be received tax-free if surviving spouse is over age 59 1/2. d. future distributions are payable to the owner's estate

the account can be rolled into the surviving spouse's IRA.

All of these statements concerning a Key employee life policy are true, EXCEPT: a. the company pays the premiums and names the beneficiary b. the key employee must sign the application c. the key employee names the beneficiary d. the company is the owner of the policy

the key employee names the beneficiary

Which statement regarding the Change of Beneficiary provision is true? a. the beneficiary can only be changed with the consent of the insurer b. the policyowner can change the beneficiary c. the insured can change the beneficiary d. a beneficiary change is subject to underwriting procedures

the policyowner can change the beneficiary

A level premium means that the premium...?

the premium is fixed for the duration of the contract

Which of the following statements about a NONCANCELLABLE policy is FALSE? a. so long as the premiums are paid, the policy cannot be changed in anyway b. noncancellable provisions are most commonly found in disability income policies c. the premium rate CAN be increased over time d. the premium rate CANNOT be increased over time

the premium rate CAN be increased over time.

All of the following are benefits of Social Security EXCEPT: a. retirement benefits b. survivor benefits c. unemployment benefits d. disability benefits

unemployment benefits

Susan owns a life insurance policy that has accumulated $10,000 in cash value in which she can no longer pay its premiums. If she elects to take the extended term option, which of these actions would she take? a. uses the 10,000 to buy a reduced paid up policy b. uses the 10,000 to buy term life insurance of the same face amount as her original policy c. surrenders the 10,000 cash value and purchases an annuity d. none

uses the 10,000 to buy term life insurance of the same face amount as her original policy.

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

variable

Which term best describes this: the employee's right to the employer's contributions in a retirement plan if employment terminates prior to retirement?

vesting

Carol is a life insurance policyowner who has transferred her ownership to a third party in exchange for a percentage of the death benefit. What is this called?

viatical settlement agreement

Transfers ownership to a third party in return for a percentage of the death benefit. This is called..?

viatical settlement agreement

Which parts of a life insurance policy are guaranteed to be true?

warranty

When does the free-look period begin?

when the policy is delivered to a policyowner