Life Insurance 4

Sue, an annuity owner, names her 15-year-old son and 10-year-old daughter as joint annuitants of her contract. Upon whose life (or lives) are income payments determined? the joint life expectancy of Sue's son and daughter Sue's daughter's life Sue's life Sue's son's life

the joint life expectancy of Sue's son and daughter

Jackie Jones is the CFO of Delta Industries and has been instrumental in the company's growth and success over the years. Because of the significant financial loss that it would suffer if she died, Delta purchased a key person insurance policy covering Jackie. All the following statements regarding this scenario are correct EXCEPT: If Jackie dies, the insurer will pay the death benefit to Delta. If Jackie dies, the death benefits can be used to pay Delta's outstanding loans. If Jackie ends her employment, Delta can keep the policy and collect the death benefit when she dies. If Jackie ends her employment, she can demand that Delta surrender the policy and give her the cash value.

If Jackie ends her employment, she can demand that Delta surrender the policy and give her the cash value.

Joanna has a $500,000 permanent life insurance policy that she no longer wants to keep in force. In order to enter into a viatical settlement, what must Joanna prove? She has a financial need to sell her policy. She is terminally or chronically ill. She is her family's breadwinner. She will use the funds to pay for medical expenses.

She is terminally or chronically ill.

If an insured qualifies for and takes an accelerated benefit from a life insurance policy, which of the following accurately describes the impact this will have on the death benefit? The death benefit is reduced by the amount of the accelerated benefit payment and may be further reduced to cover lost interest. The death benefit is reduced by an amount equal to the cash value. The death benefit is reduced by the amount of the accelerated benefit payment, and no more. The death benefit is not reduced; the cash value is reduced by the accelerated benefit payment.

The death benefit is reduced by the amount of the accelerated benefit payment and may be further reduced to cover lost interest.

What is the name of the period during which premium funds are paid into an annuity contract? the annuity period the benefit period the annuity payout the accumulation period

the accumulation period

What does a viatical settlement allow? It allows an insured to assign a life insurance policy to a third party, who will use the proceeds to pay the insured's estate taxes. It allows a chronically or terminally ill insured to leave an inheritance to heirs. It allows an insured to sell a life insurance policy for a full refund of premiums paid. It allows chronically or terminally ill insureds to sell their permanent life policy for a sum of money that is needed to pay medical expenses or to enhance the quality of life.

It allows chronically or terminally ill insureds to sell their permanent life policy for a sum of money that is needed to pay medical expenses or to enhance the quality of life.

All the following statements regarding an insured executive bonus plan are correct EXCEPT: The executive owns the life insurance policy. The executive can choose the beneficiary under the policy. The employer can take an income tax deduction for premium payments it makes under the policy. The employer is required to pay all of the premiums for the policy.

The employer is required to pay all of the premiums for the policy.

ll the following statements about key employee life insurance coverage are correct EXCEPT: The amount of coverage typically reflects the financial loss that the business would suffer if the key employee died. The business applies for and owns the policy. The key employee has no ownership rights in the policy. The key employee's family receives the death benefits.

The key employee's family receives the death benefits.

Which of the following doubles or triples the benefits if the insured dies as the direct result of an accident? accidental death benefit (ADB) riders guaranteed insurability riders cost-of-living (COL) riders impairment riders

accidental death benefit (ADB) riders

Under a family term rider to a life insurance policy, children who are covered under the rider can typically convert their coverage to permanent coverage as early as: age 25, without having to provide evidence of insurability age 21, as long as evidence of insurability is provided age 21, without having to provide evidence of insurability age 25, as long as evidence of insurability is provided

age 21, without having to provide evidence of insurability

Which of the following statements correctly describes the accidental death benefit (ADB) rider on a life insurance policy? It pays benefits only in the event of accidental death. It pays benefits if the insured dies unexpectedly as result of an accident or a sudden illness. It pays benefits if the insured suffers a disabling injury, permanent dismemberment, or death resulting from an accident. It pays benefits if the insured dies as result of an accident or a self-inflicted injury.

It pays benefits only in the event of accidental death.

All the following statements regarding children's term riders in life insurance are correct EXCEPT: Children who have not yet reached the limiting age remain covered under the rider while it ends for their older siblings who reach the maximum coverage age. The insurer must write separate riders for each child in a family. Depending on the insurer, the age limit for coverage under a children's term rider may be 18, 21, or 25. The coverage for any covered child normally ends when he or she reaches a certain age.

The insurer must write separate riders for each child in a family.

Which statement correctly describes a deferred compensation plan? They are nonqualified retirement plans that allow executives to delay receiving current compensation until a future time. They are qualified retirement plans that let employees avoid taxes on future income. They are qualified retirement plans that are only available to executives. They are nonqualified retirement plans that let executives permanently avoid paying taxes on compensation paid by the employer.

They are nonqualified retirement plans that allow executives to delay receiving current compensation until a future time.

The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider? return of premium rider guaranteed insurability rider cost-of-living rider accidental death benefit rider

accidental death benefit rider

Which one of the following is the most appropriate use of life insurance? buying life insurance to save for a big vacation in several years buying life insurance to obtain workers' compensation protection buying life insurance to insure all the parties to a business buy-sell agreement buying life insurance on an unrelated person as an investment

buying life insurance to insure all the parties to a business buy-sell agreement

Which of the following annuities specifies the exact premium payment amounts (and when they must be paid) for the contract to generate the desired future income payments? immediate annuity flexible premium deferred annuity fixed premium deferred annuity deferred annuity

fixed premium deferred annuity

All the following are types of riders that are available with most types of life insurance policies EXCEPT: accidental death benefit rider cost-of-living rider guaranteed dividend rider guaranteed insurability rider

guaranteed dividend rider

Which of the following distribute a sum of money regularly, starting very shortly after they are bought? retirement annuities immediate annuities deferred annuities life insurance

immediate annuities

What do most insurance producers use today to determine a prospective customer's life insurance needs? the needs approach financial loss analysis the human life value approach cost-benefit analysis

the needs approach

All the following statements about life insurance living benefits riders or provisions are correct EXCEPT: Accelerated benefits are payable to insureds who require hospitalization for any reason. There are two basic types. If they are used, the net death benefit paid to beneficiaries is reduced in most cases. They provide access to the policy's death benefit while the insured is alive.

Accelerated benefits are payable to insureds who require hospitalization for any reason.

Which statement regarding life insurance accelerated benefits is correct? The insured must use these funds only for medical care. There is a cost, in the form of additional premium, in having the accelerated benefit rider or provision in the policy. An accelerated benefit rider pays out part or all of the policy's face value while the insured is still living. Accelerated benefits are payable anytime the insured requires hospitalization.

An accelerated benefit rider pays out part or all of the policy's face value while the insured is still living.

Ann is beneficiary of an annuity owned by Jim, who is also the annuitant. If Jim annuitizes the contract at retirement and dies shortly afterward, what benefits will Ann receive from the annuity? Ann will receive the annuity proceeds. Ann's will receive income for 20 years. Ann will receive lifetime income. Ann's right to any funds will be based on the income payout option Jim selected.

Ann's right to any funds will be based on the income payout option Jim selected.

Which statement about converting coverage under a children's term rider is correct? Conversion is possible even if the child is uninsurable and is limited to the amount provided under the rider. Conversion is possible only if the child is insurable and is limited to the amount provided under the rider. Conversion is possible only if the child is insurable, and the converted policy coverage amount may be greater than the amount provided under the rider. Conversion is possible even if the child is uninsurable, and the converted policy coverage amount may be greater than the amount provided under the rider.

Conversion is possible even if the child is uninsurable, and the converted policy coverage amount may be greater than the amount provided under the rider.

The charge-free withdrawals provision of a deferred annuity contract does which of the following? It exempts deferred annuity withdrawals from surrender charges and all taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge. It permits annuity contract owners to withdraw a specified percentage of the accumulated value on a one-time basis without imposing a surrender charge. It exempts deferred annuity withdrawals from surrender charges and penalty taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value.

It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge.

If a life insurance policy's death benefit is paid to the insured's estate, which of the following statements is correct? The proceeds can be used to pay for estate taxes or other costs that an estate may face. The proceeds will never be subject to federal income tax. The proceeds cannot be given to heirs named in a will. The proceeds cannot be used to make charitable gifts.

The proceeds can be used to pay for estate taxes or other costs that an estate may face.

Four shareholders of ABC Corporation, who each own a $1,000,000 interest in the company, enter into a stock redemption agreement funded with life insurance. If one shareholder dies six months later, all the following statements are correct EXCEPT: This is a form of entity-purchase buy-sell plan. The three remaining shareholders will buy the deceased owner's interest from his estate. Each of the surviving shareholders will then own a one-third share of ABC Corporation. The insurer will pay the $1,000,000 death benefit from the deceased owner's policy to ABC Corporation.

The three remaining shareholders will buy the deceased owner's interest from his estate.

Which statement regarding corporate-owned life insurance (COLI) plans is correct? They remain very popular despite the fact they do not benefit employees. They do not benefit employees and their popularity has waned in recent years. Though not as popular as they once were, they remain a valuable employee benefit. They are a very popular form of employee benefit.

They do not benefit employees and their popularity has waned in recent years.

Which of the following statements about nonqualified deferred compensation plans is correct? Life insurance must be used with deferred compensation plans. The employer will not receive any tax deductions for its support of a deferred compensation plan. If the executive dies before retirement, his or her heirs will not receive any of the deferred compensation. When an executive receives the deferred compensation, he or she will generally be in a lower tax bracket and will pay lower taxes.

When an executive receives the deferred compensation, he or she will generally be in a lower tax bracket and will pay lower taxes.

Which of the following statements best describes the purposes that annuities serve? While their basic purpose is to distribute a sum of money, annuities can also be used to accumulate money. Annuities are income distribution instruments that are not able to accumulate money. An annuity is a form of insurance that ensures a guaranteed death benefit. Annuities collect premiums to pay them back to the annuitant in a lump sum sometime in the future.

While their basic purpose is to distribute a sum of money, annuities can also be used to accumulate money.

All the following statements regarding deferred annuity beneficiaries are correct EXCEPT: With annuitant-driven contracts, the annuitant's death before annuitization triggers payment of the contract value to the beneficiary even if the owner is still alive. With owner-driven contracts, the owner's death before annuitization triggers payment of the death benefit to the beneficiary, even if the designated annuitant is still alive. The distinction between annuitant-driven and owner-driven deferred annuities disappears if the owner and annuitant are the same person. With an annuitant-driven contract, the beneficiary must annuitize the contract immediately if the annuitant dies before annuitization.

With an annuitant-driven contract, the beneficiary must annuitize the contract immediately if the annuitant dies before annuitization.

The Acme Company sets up a plan that provides annuities to its employees when they retire. The individuals those annuities cover hold "certificates of participation." Which type of plan is that? 403(b) plan group annuity multiple-lives annuity fixed annuity

group annuity

One of the first systems developed for determining life insurance needs, which it did by calculating a person's economic value, was called the: needs approach human life value approach cost-benefit analysis financial loss analysis

human life value approach

The needs approach to determining life insurance needs quantifies two basic categories of life insurance needs, which are: immediate lump-sum cash needs and funds to pay estate taxes and settlement costs immediate lump-sum cash needs and funds to pay final expenses ongoing income needs of survivors and funds to pay monthly expenses immediate lump-sum cash needs and ongoing income needs

immediate lump-sum cash needs and ongoing income needs

The amount of coverage provided by a children's term life rider is usually: any amount the policyowner wishes limited to the base policy's face amount limited to a modest flat dollar amount or a small percentage of the base policy's face amount equal to the base policy's cash value

limited to a modest flat dollar amount or a small percentage of the base policy's face amount

Which of the following distributes income payments over time beginning soon after purchase and can be funded only with a single lump-sum premium payment? fixed premium deferred annuity single premium immediate annuity flexible premium immediate annuity single premium deferred annuity

single premium immediate annuity

George purchased an annuity that will provide his wife, Anna, with monthly income payments for as long as she lives. In this scenario, what is Anna called? the annuitant the owner the agent the beneficiary

the annuitant

What does the length of an annuity's surrender charge period depend on? the age of the beneficiary the period selected by the owner when the annuity is purchased the contract design the age of the annuitant

the contract design

Frank intends to use his life insurance to make the down payment on a vacation home. In so doing, Frank is using which of the following? the policy's cash value the policy's net amount at risk the policy's death benefit the policy's pure insurance protection

the policy's cash value

Under the integrated long-term care option, what percentage of the base policy's face amount can be used for long-term care expenses? up to 25 percent, depending on the insurer up to 50 percent, depending on the insurer up to 100 percent, depending on the insurer up to 75 percent, depending on the insurer

up to 75 percent, depending on the insurer

When a person dies, the survivors often immediately need a certain amount of money to cover costs. The survivors will need an immediate lump sum to pay for all of the following EXCEPT: estate taxes final medical and funeral expenses debts incurred by the insured utilities and clothing

utilities and clothing