Life Insurance

The full amount is income tax-free.

Sally's $750,000 life insurance policy was payable to her son when she died. Based only on this information, which of the following correctly describes how that money will be treated for income tax purposes?

payor benefit rider

Sandra, a single mom, takes out a 'jumping juvenile' life insurance policy insuring her newborn daughter Karen. Which of the following riders would pay the policy's premiums if Sandra dies or becomes totally disabled?

do nothing as the company has no contractual obligation to the policy owner at this point

Six months ago, Bill surrendered his life insurance policy for its cash value. He now realizes his mistake and asks to reinstate his coverage. The insurance company is obligated to do which of the following?

An applicant who has excellent health, works in a business office and whose family has a very good health history.

Which of the following is most likely to be considered a preferred underwriting risk?

conversion

Which of the following is not a required provision in individual life insurance policies issued in North Dakota?

It can be renewed.

Which of the following is not true about decreasing term insurance?

the application

Which of the following is the primary source of underwriting information?

the annuity owner

Which of the following parties to a deferred annuity contract has the right to decide on the contract's annuitization date?

Contribution limits are the same as they are for 401(k) plans.

Which of the following statements about Section 457 plans is correct?

The beneficiary has full access to the cash value.

Which of the following statements about permanent life insurance cash values is NOT correct?

Employers can deduct premiums paid on a group life insurance plan.

Which of the following statements correctly describes how employer-paid premiums for group life insurance are treated for tax purposes?

Endowment contracts no longer get the good tax treatment given to life insurance policies.

Which of the following statements regarding the tax treatment of endowment contracts is correct?

Both base the premium on a mortality charge that reflects the insured's risk of death.

Which one of the following is most correct with respect to the contract charges and fees charged by variable life and traditional whole life policies?

A policyowner often buys a term life insurance rider on a spouse to provide additional coverage once the children have grown and moved out on their own.

Which statement about spouse/other insured term riders on a life insurance policy is NOT correct?

the business

Who normally owns life insurance used to meet business insurance needs?

selected by the policyowner or beneficiary

With the fixed period life insurance settlement option, the payment period is:

It is prohibited at all times.

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the North Dakota Life and Health Insurance Guaranty Association. What is true about this kind of assurance?

liquidity

A policyowner can access the cash value of many life insurance policies through withdrawals, loans, or policy surrender. Which of the following terms describes the ability to easily convert life insurance into cash?

his or her full retirement age (FRA)

A worker's primary insurance amount (PIA) is paid only if the worker retires at:

20 days

ABC Life Insurance Co. sells term and whole life insurance policies through producers. If it sells a policy, it must give the customer the right to examine the policy for at least how long?

Acme can compare its products to competitors only if such comparisons are fair and complete.

Acme Insurers recently started an advertising campaign in North Dakota for its new life insurance policies. Which statement is TRUE?

the beneficiary

All of the following must sign life insurance applications, EXCEPT:

reinstatement

Brent fails to pay his premium when due, and his life insurance policy lapses. Two years later, he pays the premium. The insurer accepts the payment, and the policy continues in force. Which provision allows this to happen?

A death benefit will be paid under the group plan.

Derek buys an individual life insurance policy after he loses his job and is no longer covered by his former employer's group plan. However, he dies during the conversion period and before the policy takes effect. Which of the following statements is true?

The applicant must be expected to suffer a financial loss when the insured dies.

For insurable interest to exist, which of the following is most correct?

paid-up additions

George buys a participating life insurance policy. A dividend is paid this year, and George wants to use it to purchase small single premium amounts of life insurance. Which dividend option has he selected?

federal laws

Insurance premiums for traditional products reflect all of the following, EXCEPT:

They can never use life insurance policy illustrations during a sales presentation.

Insurance producers must comply with all of the following rules when selling life insurance policies in North Dakota EXCEPT:

Janet's benefits will be permanently reduced.

Janet, age 62, plans to quit her job and apply for Social Security retirement benefits this year. Which of the following statements is correct if Janet claims retirement benefits before she reaches her full retirement age?

can charge a fixed or variable interest rate.

Jason has owned a whole life insurance policy for seven years. If he takes a loan from the policy, the insurer

By August 30

Jasper owns a deferred annuity issued by Acme Insurance Company. Jasper dies suddenly on June 1. His attorney mails proof of death to Acme on June 15, but Acme receives it on June 30. When must Acme pay the annuity benefits?

the applicant's personal information

Part 1 of a life insurance application generally contains:

The interest earned on the dividend is reported as taxable income in the year credited.

Policyowners can withdraw the interest earnings on their dividends or allow the interest to continue to accumulate. In either case, how is the interest treated for income tax purposes?

two months

Ricky owns a deferred annuity and dies on July 1. His estate notifies the insurer of his death on July 8. Within how many days must the insurer pay a lump sum annuity benefit to Ricky's beneficiary after receiving proof of death?

grace period

Roberto was traveling through Italy when he realized that he forgot to pay his monthly life insurance premium. Which provision in the policy will keep the policy in force until he pays the premium one week later?

the policy's cash value

The premiums that a policyowner pays for a universal life policy are directly credited to:

the needs approach

To determine how much life insurance a person needs, an agent will examine the individual's current income, assets and liabilities, goals, current expenses, and risk profile. What is this approach to determining the right amount of life insurance called?

non-payment of premiums

Under a life insurance policy's incontestability clause, after a certain period the insurer cannot contest a claim for any reason, EXCEPT:

reduced paid-up option

Under which nonforfeiture option does permanent life insurance continue in force with no further need for premiums?

Policyowners can choose how to invest their policy's premiums and cash values.

Which one of the following statements about variable life insurance is correct?

Subaccounts are separate from the insurer's general account.

Which one of the following statements about variable life insurance is correct?

pay the next year's premium in advance

Alana let her life insurance policy lapse two years ago and now wants to reinstate the policy. Which action is she not required to take to reinstate the policy?

encouraging employee loyalty

All of the following are common uses of key person life insurance EXCEPT:

to qualify for accelerated benefits, the insured must be certified as having a terminal illness

All the following statements regarding a life insurance policy's accelerated benefits provision are correct EXCEPT:

neighbor and friend

An insurable interest will typically be presumed in all of the following types of relationships EXCEPT:

name a beneficiary and assign the death benefit

An insured employee in a group plan is not the policyowner, but the employee does have certain rights. What are two of the most important rights?

pay dividends to policyowners from company surplus.

Andrea owns a participating life insurance policy, which means that the insurer will

require minimum participation levels by eligible group members

Which of the following is a standard practice used by insurers to reduce the chance of adverse selection in a group life insurance policy?

He can use the cash value to buy an annuity through a 1035 exchange.

How can a life insurance policyowner use his policy's cash value to help fund his retirement without incurring any taxes on the transaction even if the cash value exceeds his basis in the policy?

two years from the date of issue

How long is the standard incontestability period?

three years after the policy expires

How long must insurers keep copies of illustrations used in selling life insurance policies?

fixed deferred annuity

Howard is 45 and has a modest but steady income. He wants to invest in a product that will provide him a steady, dependable monthly income when he turns 65. Which of the following products would be most suitable for Howard?

when the application is taken

If a person buys a new life insurance policy to replace an existing one, the producer must give the applicant the Notice Regarding Replacement form no later than when?

fifth year of participation

If a qualified retirement plan has a cliff vesting schedule, covered employees typically become 100 percent vested in the employer-funded benefits in the:

The full death benefit will be paid.

If the insured under a life insurance policy commits suicide three years after the policy was issued, what will be the insurer's response?

when the policy is delivered

If the insurer provides a ten-day free-look period for a life insurance policy it sells, when may it give the Buyer's Guide and policy summary to the policyowner?

Jim can contribute to both his traditional IRA and Roth IRA , provided the total amount contributed does not exceed the overall contribution limit.

Jim, age 45, is single and earned $50,000 this year. He owns both a Roth IRA and a traditional IRA. Which of the following statements is correct?

70,000

Ken owns a life insurance policy with a $100,000 face amount. Long ago he took a $25,000 loan on the policy, which he never repaid, and the loan accrued $5,000 interest. He recently died in a car crash. How much will be paid to the beneficiaries?

a level premium and a level death benefit

Level term life insurance provides which of the following?

continue coverage without having to prove insurability

Lisa buys a 10-year renewable term policy at age 30. The renewability provision allows her to:

his race

Matt takes out a life insurance policy on himself to protect his family. Matt's insurance company may consider all of the following when underwriting his policy EXCEPT:

the role of the Department of Insurance in regulating replacement transactions

The Notice Regarding Replacement provides all of the following pieces of information to the life insurance applicant EXCEPT:

let a deferred annuity owner make surrender charge-free withdrawals if the interest rate credited to the accumulated value drops below a specified level

The basic purpose for the bailout provision found with some annuities is to:

guaranteed cash value fee

The types of charges and fees common to variable annuities include all of the following EXCEPT:

at three-year intervals

The typical guaranteed insurability rider lets policyowners buy a specified amount of additional insurance on select policy anniversaries until a specified maximum age. The anniversaries are usually at which interval?

ERISA

To be deemed 'qualified' (and thus eligible for favorable income tax treatment), an employer-sponsored plan must adhere to the requirements of the tax law known as:

fixed period option

Under which of the following are payments made for a specified number of, and then end?

lower cost

What is the main appeal of joint life insurance?

the accumulation period

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

nothing

When Terry applied for his life insurance policy four years ago, he omitted any information in the application related to treatment he had received several years earlier for a serious chronic illness. Which of the following actions can the insurance company take when it learns of the omission?

It is taxable as ordinary income.

When a deferred annuity is annuitized, which one of the following most correctly describes the tax treatment of the contract's "gain" (i.e., accrued interest) portion of each payment?

adjust the benefits

When completing an application for life insurance, Andrew states that he is 39 years old, though he is actually 45. When the insurer discovers this, what will it probably do?

a beneficiary who is paid the death benefit if the primary beneficiary is removed or dies before the insured

Which of the following best describes a life insurance policy's contingent beneficiary?

a memo from an insurer's president to employees

Which of the following does not fall within the definition of a life insurance advertisement?

general account

Which of the following holds an insurance company's undivided investment account and the funds that support the contractual obligations of the insurer's fixed and guaranteed products?