LIFE EXAM

How many hours of prelicensing education approved by the Commissioner must each applicant complete?

20 hrs

Reinsurance manager

A "reinsurance manager" is any person who has authority to bind, or manages all or part of the assumed reinsurance business of a reinsurer and acts as an agent for the reinsurer.

All other factors being equal, which of the following individuals would receive the largest monthly check from a single premium straight life immediate annuity?

A 60-year-old man Among other factors, the annuity income amount is based upon the annuitant's age and gender. An annuitant whose life expectancy is shorter will have the largest income installments. In this example, an older man will have the shortest life expectancy.

adhesion

A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it is written.

Which of the following persons is not required to complete CE?

A limited lines intermediary with 40 years of continuous licensure

morale hazard

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? A morale hazard is someone who has an indifferent attitude towards an insurance company.

The equity in an equity index annuity is linked to

An index like Standard & Poor's 500.

captive agent

An insurance producer who by contract is bound to write insurance for only one company or group of companies is classified as a/an

mutual

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Which of the following products will protect an individual from outliving his or her money?

Annuity

Which of the following statements is true of insurance licensing in the state of Wisconsin?

Applicants must pass a state licensing exam.

needs approach

Attempting to determine how much insurance an individual would require based upon their financial objectives is known as

Which of the following is a feature of a variable annuity?

Benefit payment amounts are not guaranteed. - the annuitant assumes the risk on investment

Ann is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)

Equity Indexed Annuity.

Which of the following is NOT true about a group annuity?

It can be owned by individual employees.

Which of the following is true regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred. NOT: It would not occur in a deferred annuity.

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity

Key Person Insurance

Key Person coverage may be funded by any type of life insurance.

Transfer

When an individual purchases insurance, what risk management technique is he or she practicing?

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

annuitant must be a natural person

In an annuity, the accumulated money is converted into a stream of income during which time period?

annuitization period

Whole Life

cash accumulation

Nonqualified retirement plans

do NOT need IRS approval do NOT meet IRS requirements

Equity indexed annuities

seek higher returns

SIMPLE Plans

small business not more than 100 employees

The advantage to qualified plans to employers is

tax deductible contributions

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

the date of medical exam

In a life settlement contract, whom does the life settlement broker represent?

the owner

Life insurance as an executive bonus

the policy is owned by the employee

Which of the following is true for both equity indexed annuities and fixed annuities?

they have a guaranteed minimum interest rate

Defined Benefit Plans

-the amount of contributions made by the employer is determined by an actuarial formula - High-salaried employees with only a few years until retirement receive the highest contribution

Within how many days of requesting an Investigative Consumer Report must an insurer notify the consumer in writing that the report will be obtained?

3 days

An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policyholders?

3%

Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that that annuity owner will have to pay?

Current interest rate at the time of surrender

A life insurance policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?

Insurer's guaranteed minimum rate of interest

Jack and Jill are twins. When their grandfather died, he left each of them $100,000, which they each used to purchase an annuity. When they retire, since each select the life income option, which will receive the larger monthly annuity payment?

Jacks payment will be larger Because Jill's life expectancy is greater, her payments will be less.

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

Joint and Survivor

Moral Hazard

Moral hazards refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer. - an individuals tendency to be dishonest

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?

Nonforfeiture option guarantees that the owner will receive a surrender value of the contract

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments

Which of the following is NOT true regarding the annuitant?

The annuitant cannot be the same person as the annuity owner

Annuities differ from life insurance in all of the following ways EXCEPT

The annuitant must be living to collect. There is no stated amount of death benefit. They can be used in a qualified retirement plan. NOT: They are purchased with premiums.

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is true?

The beneficiary will receive the greater of the money paid into the annuity or the cash value

consideration

The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss. ex: Representations on the application Submitting a Statement of Good Health Premium payment paying claims

In a defined contribution plan,

The contribution is known and the benefit is unknown

Which of the following is true regarding a modified guaranteed annuity?

The owner is guaranteed a fixed interest rate for a specific period of time.

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?

The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge.

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments It may last for the lifetime of the annuitant.

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?

The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges.

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

Fraternal benefit society

Which of the following entities is not an insurer, but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Federal tax advantages of a qualified plan

accumulate on a tax deferred basis contributions are not counted as income to employee employer contributions are tax deductible NOT: At distribution, all amounts received by the employee are free of taxes.

viatical settlement

allows an insured with a life-threatening condition to sell his/her existing policy in order to receive benefits when they are most needed.

ROTH IRA

allows contributions to continue past 70.5 and does not force distributions to start at age 70.5

Deferred Compensation Funding

any employer retirement, savings, or other deferred compensation plan that is not a qualified retirement plan.

Which of the following will NOT be an appropriate use of a deferred annuity?

creating an estate

Which of the following are NOT fundable by annuities?

death benefits

10% tax penalty on distributions

distributions are made on a policy before 59.5

Tax advantage to a qualified retirement plan

earnings in plan accumulate tax defered

All of the following are true regarding tax-qualified annuities EXCEPT

employer contributions are not tax deductible

tax sheltered annuity

excluded from employees current taxable income, but are taxable upon withdrawl only available to Certain groups of employees only.

Non qualified retirement plan

executive bonus

Nonqualified retirement plan

executive bonus plan

qualified annuity

favorable tax treatment

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

fixed amount

Single premium life insurance

generates immediate cash value

Qualified plan

grow tax deferred but at distribution will be taxed

Qualified plans

have tax benefits for both employer and employee has favorable tax treatment

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?

illegal

pure life annuity

income is payable by the company only for the life of the annuitant

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

joint life annuity

Employer contributions to a qualified plan

must have a vesting requirements

Distributions pulled before 59.5

pay a 10% tax unless of divorce (no tax)

surrendering an annuity

pay current interest rate at time of surrender

accumulation period of annuity

pay-in-period

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?

payments for 15 years

annuity period

period of time during which accumulated money is converted into income payments it may last for the lifetime of the annuitant

Permanent Insurance

permanent insurance provides lifetime death protection and a savings or cash value option.

An employer has sponsored a qualified retirements plan for its employees where the employer will contribute money whenever profit is reached

profit sharing plan

annuity

protect an individual from outliving his or her money?

Installments for a fixed period

the annuitant selects the time period for the benefits, and the insurer determines how much each payment will be

If a licensee wants to transact insurance under a different name than that listed on his or her producer's license, which of the following must occur?

the change must be reported to the department

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain?

Individual

What form of life insurance may be used to fund a buy-sell agreement

any form of life insurance

Single premium immediate annuity

begin receiving income payments no later than 1 year

SEP Simplified Employee Pension plan

benefit plan that is designed to be provided by a small employer for the benefit of the employees Larger amounts can be contributed Employer can contribute up to 3% of employees income

When Jerry purchased a life insurance policy, the agent dated the application 4 months prior. When asked by Jerry, the agent said he was allowed to backdate policies up to 6 months if it would

cause the insured to pay a lower premium

403(b) plan TSA

certain tax exempt employers that may provide a retirement plan for its employees

All are defined benefit plans EXCEPT

contributions are tied to company profits

Primary purpose of 401(k)

retirement

HR-10 (Keogh plans)

specifically for self-employeed and their employees qualified retirement plan IRS qualified retirement program A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.

Straight life annuity payments

stop at death

SIMPLE plan

tax defered until withdrawn

After the original hearing and a final order is issued, an aggrieved person may request a re-hearing within

20 days

Are insurance company underwriters allowed to discriminate? A

Yes, but not unfairly

reinsurance broker

a person, other than an officer or employee of the ceding insurer, who solicits, negotiates, or places reinsurance cessions on behalf of a ceding insurer?

When an annuity is written, whose life expectancy is taken into account?

annuitant

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend

straight life

Which of the following is the best reason to purchase life insurance rather than annuities?

to create an estate