Exam review 3
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits? a)The entire living benefit is considered taxable income. b)A portion of the benefit up to a limit is tax free; the rest is taxable income. c)Principal is tax free, but interest is taxed. d)The entire benefit will be received tax free.
B
The interest earned on policy dividends is a)Nontaxable. b)Tax deductible. c)40% taxable, similar to a capital gain. d)Taxable.
D
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a)Adjustment in the amount of death benefit. b)No change whatsoever. c)Automatic lapse. d)Recession of the policy.
A
As a field underwriter, a producer is responsible for all of the following tasks EXCEPT a)Obtain appropriate signatures on the application for insurance. b)Issue the policy that is requested. c)Help prevent adverse selection. d)Solicit business that will fall within the insurer's underwriting guidelines.
B
A Return of Premium term life policy is written as what type of term coverage? a)Renewable b)Level c)Increasing d)Decreasing
C
Insurance is the transfer of a)Hazard. b)Peril. c)Risk. d)Loss.
C
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a)The annual dividend is retained by the company. b)The interest is credited at a rate specified by the policy. c)The policyholder has the right to withdraw the accumulations at any time. d)The interest is not taxable since it remains inside the insurance policy.
D
Which of the following is NOT true regarding policy loans? a)Policy loans can be repaid at death. b)An insurer can charge interest on outstanding policy loans. c)A policy loan may be repaid after the policy is surrendered. d)Money borrowed from the cash value is taxable.
D
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a)Universal Life - Option B b)Equity Indexed Universal Life c)Variable Universal Life d)Universal Life - Option A
D
Which of the following would be considered a nonqualified retirement plan? a)401(k) b)Keogh plan c)Roth IRA d)Split-dollar plan
D
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is a)A nonqualified annuity plan. b)An executive annuity plan. c)Subject to government standards. d)Illegal.
A
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? a)Payor Benefit b)Jumping Juvenile c)Juvenile Premium Provision d)Waiver of Premium
A
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than a)Prior to filling out an application for insurance. b)With the policy. c)Upon issuance of the policy. d)Within 30 days after the first premium payment was collected.
B
If the Commissioner is not able to serve due to disability, resignation, or death, which of the following will happen? a)The Department will form a committee to serve as the Commissioner until the next election. b)The Chief Deputy Commissioner will serve as the Commissioner until the next election. c)The Governor will serve as the Commissioner until the next election. d)The Department will elect a new Commissioner immediately.
B
The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called a)Joint life annuity. b)Life income with period certain. c)Life income with refund. d)Joint and survivorship.
B
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT a)Payment of premium. b)Delivery receipt. c)Signed waiver of premium. d)Statement of good health.
C
Which of the following best describes annually renewable term insurance? a)Neither the premium nor the death benefit is affected by the insured's age. b)It provides an annually increasing death benefit. c)It is level term insurance. d)It requires proof of insurability at each renewal.
C
Which of the following is TRUE about nonforfeiture values? a)A table showing nonforfeiture values for the next 10 years must be included in the policy. b)Policyowners do not have the authority to decide how to exercise nonforfeiture values. c)They are required by state law to be included in the policy. d)They are optional provisions.
C
Which of the following terms will be permissible in describing a life insurance policy in company advertisements? a)Investment plan b)Retirement plan c)Variable plan d)Risk-free plan
C