Field underwriting procedures, Life Insurance Practice Questions (chapter 4)
being age 65
All of the following are requirements of eligibility for social security disability income benefits EXCEPT
Profit sharing plan
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
They are not included as income for the employee, but are taxable upon distribution.
How are contributions to a tax-sheltered annuity treated with regards to taxation?
a qualified plan for a small business
If a company has a Simplified Employee Pension plan, what type of plan is it?
Require evidence of insurability
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
fully insured
If an insured worker has earner 40 quarters of coverage, the worker's status under Social Security disability is
each insured person
In group life policies, a certificate of insurance is given to
no
In qualified plans, are employer contributions taxed as income to the employees?
executive is the owner, and the executive pays the premium
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?
in cash
In what form of payment must the contributions to a traditional IRA be made?
premiums paid by an employer on a $30,000 group term life insurance plan for employees -premiums paid for life insurance are not tax deductible. The exception to this is an employer buying group term life insurance for his employees since it is considered a business expense.
In which of the following instances would the premium be tax deductible?
No more than 100
SIMPLE plans are available to groups of how many employees?
retirement, disability and survivors
What are the three types of social security benefits?
there is a requirement to prove insurability on the part of the participants
Which is NOT true about a group life insurance plan?
group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.
Which is true about group life insurance?
third-party ownership
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
an individual not covered by an employer-sponsored plan who has earned income
Who can make a fully deductible contribution to a traditional IRA?
a self-employed individual
Who may contribute an HR-10 plan?
the amount of the distribution is reduced by the amount of a 20% withholding tax
a 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
buy-sell agreement
a life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a
cross-purchase plan
a partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a
cash value growth is tax deferred
according to the taxation rules of life insurance policies, how are cash value increases taxed?
the plan must provide an offset for social security benefits
all of the following are general requirements of a qualified plan EXCEPT
taxation on accumulation
all of the following would be different between qualified and nonqualified retirement plans EXCEPT
the president and employee of a family corporation -KEOGH PLANS ARE FOR SELF-EMPLOYED INDIVIDUALS AND THEIR EMPLOYEES
all of the following would be eligible to establish a Keogh retirement plan EXCEPT
the insured may choose to convert to term or permanent individual coverage. -THE INSURER WILL DETERMINE THE TYPE OF COVERAGE, USUALLY PERMANENT
an employee is insured under he employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
join during the open enrollment period
an employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do?
profit-sharing plan
an employer is sponsoring a qualified retirement plan for its employees where the employer contributes money whenever the business has profit. What is this type of plan called?
403(b) Plant (TSA)
an internal revenue code provision that specifically provides for an individual retirement plan for public school teachers is a(n)
what is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided?
application
in a replacement situation, all of the following must be considered EXCEPT
assets
to comply with fair credit reporting act, when must a producer notify an applicant that a credit report may be requested?
at the time of application
what document describes an insured's medical history, including diagnoses and treatments?
attending physician's statement
employees
for a retirement plan to be qualified, it must be designed for the benefit of
what phase begins after a new policy is delivered?
free-look period
under the privacy rule for HIPAA, protected information includes all individually identifiable health information
held or transmitted in any form
contributions are excluded from the employee's taxable income, but are taxable upon withdrawal.
how are income payments from a 403(b) taxed?
it is approved by the IRS
if a retirement plan or annuity is "qualified," this means
interest only
if the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?
from trustee to trustee
in a direct rollover, how is the money transferred from one retirement plan to a new one?
master contract
in a single employer group plan, what is the name of the policy issued to the employer?
5 years
in order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
which of the following entities can legally bind coverage?
insurer
who must pay for the cost of a medical examination required in the process of underwriting?
insurer
no, lump-sum benefits are received tax free
is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?
an applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. she receives a conditional receipt two weeks later. which of the following has the insurer done by this point?
neither approved the application nor issued the policy
what is the best way to change an application?
start over with a fresh application
whose responsibility is it to determine if all of the questions on an application have been answered?
the agent
before a customer's agent delivers his policy, the insurer makes a last-minute change to the policy. the agent informs the customer of this change, and he accepts it. what must the agent do now?
the agent should ask the customer to sign a statement acknowledging that he is aware of the change
an insurer is attempting to determine the insurability of an applicant and decides to obtain medical information from several different sources. which entity must be notified of the investigation?
the applicant
which is true regarding obtaining underwriting sources?
the applicant must be informed of the sources contracted and how the information is being
6 credits
the minimum number of credits required for partially insured status for Social Security disability benefits is
which of the following is true regarding health insurance underwriting for a person with HIV?
the person may not be declined for medical coverage solely based on HIV status
an agent is in the process of replacing the insured's current health insurance policy with a new one. which of the following would be a proper action?
the policy should stay in force until the new policy is issued
tax deductible by the employer
the premiums paid by the employer in a business life insurance policy are
they are tax deferred until withdrawn
under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
only the portion in excess of the premium paid
upon surrender of a life insurance policy, what portion of the cash value will be taxed?
IRA, 401(k), HR10 (Keogh), SEP, SIMPLE
what are some examples of qualified plans?
10% penalty
what are the consequences of withdrawing funds from a traditional IRA prior to the age of 59.5?
employer contributions are tax deductible and are not taxed as income to the employee. The earnings accumulate tax deferred.
what are the income tax benefits of a qualified plan?
earned income
what is require to qualify an individual to contribute to a traditional IRA?
death benefits are generally not subject to income taxes
what is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?
to determine if a life insurance policy is a modified endowment contract
what is the main purpose of the seven-pay test?
a modified endowment contract (MEC)
what is the name for an overfunded life insurance policy?
40
what is the number of credits required for full insured status for Social Security disability benefits?
0.06
what is the penalty for excessive contributions to a traditional IRA?
provide retirement income
what is the primary purpose of a 401(k) plan?
interest earned on principal
what portion of a non-qualified annuity payment would be taxed?
HR-10 or Keogh
what qualified plan is suitable for the self-employed
annually renewable term
what type of life insurance is most commonly used for group plans?
qualified profit-sharing plan
what type of plan is a 401(k)?
interest only
when a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
when there is an incident of ownership at the time of death
when would life insurance policy proceeds be included in the insured's taxable estate?
participants in the policy each receive a policy
which is NOT true regarding group insurance?
it needs IRS approval
which of the following is NOT true regarding a nonqualified retirement plan?
it has a tax benefit for both employer and employee
which of the following is TRUE of a qualified plan?
Keogh
which of the following is an IRS qualified retirement program for the self-employed
split-dollar plan
which of the following would be considered a nonqualified retirement plan?
Roth IRA
which type of retirement account allows contributions to continue beyond age 70.5 and does not force distributions to start at age 70.5
a policyowner who is not the insured
who is a third-party owner?
employees of nonprofit organizations under section 501(c)(3) and employees of public school systems
who qualifies for tax-sheltered annuities, or 403(b) plans?
dividends are not considered income for tax purposes; they are a return of unused premium
why are dividends in life insurance policies not taxable?
