Life Insurance Final Exam
Although excluded in the contract, a court may direct the insurer to pay a claim under the doctrine of:
Reasonable expectations
A 30 year old client invests $20000 in a deferred annuity, which grows to $50000 in 20 years. at age 50, the annuitant takes a partial withdrawal in the amount of $10000. How is this taxed?
100% ordinary income plus 10% penalty
Which of the following would have the lowest mortality rate:
50 year old female
All of the following are true about Adjustable Life insurance, EXCEPT
A physical exam is always required when premiums are adjusted
Mr. Smith bought a Life insurance policy on his six-year-old son, Jimmy, naming himself as beneficiary. Now that Jim is 18 years old, Mr. Smith may transfer all rights of ownership in the policy to him by executing a(n):
Absolute assignment
A client who contributes to a 430b TSA on a payroll deduction basis may:
Also make non-deductible contributions to a roth IRA up to specified limits
Upon death of an annuitant during the accumulation period of a deferred annuity, the proceeds:
Are taxable to the beneficiary above the annuitants cost basis
A life insurance rider that provides whole life on the primary insured and term life on the insured's spouse and children is the
Family rider
A pure life annuity is also known as a:
Life income annuity
Distributions taken from a tax-sheltered annuity (TSA) are:
Taxable as ordinary income in the year of the distribution.
All are true about joint life policies, except:
They pay when the last party dies
Which of the following beneficiary designations on a life insurance policy is "by class"
To all my children
Parents of children ages six and eight are considering IRA's for them. What would you advise them:
To consider alternative investments, since IRAs are only for those with earning s and their spouses.
A person who is in good health and does not drink nor smoke is considered
a preferred risk
On a 403b Tax Sheltered Annuity, all of the following are true, EXCEPT:
distributions are not taxable
Producers should be very concerned about possible errors and omissions when:
replacing life insurance
A producer or agent could go to jail for all of the following except:
selling insurance in this state with a non-resident insurance license
The average person is known as a:
standard risk
The face amount of a Credit Life policy is limited by:
the amount of the loan
all are characteristics of an immediate annuity except:
they are purchased with installment payments
Death of an annuity owner may create a tax burden for the beneficiary. How can the spouse of an annuity owner, as beneficiary, avoid this burden:
they may continue the contract and defer taxes
The cash value of a life insurance policy may be used for all, EXCEPT:
to meet the expenses of college tuition one year after purchase
A client bought an annual renewable Term policy with a face amount of $100,000 on June 1st for an annual premium of $200. If they died on June 20th of the following year without paying their renewal premium when due, the insurer would pay:
$99,800
On most qualified retirement plans, such as traditional IRAs, distributions must begin no later than age 70 1/2 If they dont, as excise tax of _____ applies:
50%
On a modified endowment contract, the IRS considers which of the following to be a "material change"
An increase in benefits
All of the following are true about employer group life, except:
Conversion is based upon original age
All of the following are false about insurable interest on life insurance, Except:
It must exist at the time of the application
if the interest on a policy loan is not repaid
It will be added to the amount of the loan outstanding
All of the following are true about the payout period on a Joint and Survivor annuity, EXCEPT:
Mothly payments are highr than they would be on joint life annuity
All of the following are true about group life insurance except:
Proceeds paid to the beneficiary are taxable
All are true about a fixed annuity, EXCEPT:
The annuitant bears the investment risk
All of the following are guaranteed on a participating whole life insurance policy, except
The dividend scale
Which of the following is true when life insurance is used by an employer as an executive bonus plan:
The employer pays the premium
Why would an annuitant consider making a 1035 exchange to another contract issued by the same insurer:
The new contract has a higher interest rate
All of the following are true about equity indexed annuities, EXCEPT:
They have purchasing power risk
Industrial life insurance is typically sold by
debit agents
A producers responsibility to the insurer they represent is known as the
doctrine of agency
Under Privacy Protection laws, regarding an insurer's release of an insured's non-public information to an unaffiliated third party, all of the following are true, EXCEPT:
the insured must agree to the release of such information
Which is not a reason to buy life insurance on the life of a child
to provide the child with benefits in the event that a parent dies
A product with a flexible premium, guaranteed minimum rate of return, tax deferred earnings and tax free death benefit is:
universal life
A revocable beneficiary
Has no vested interest in the policy
A preferred risk has a
Longer than average life expectancy
When an insured with a terminal illness sells their Life insurance policy to an investor, it is known as:
Viatical settlement
For tax purposes, all modified Endowment contacts issued to an insured will be considered to be one modified endowment contract if issued:
Within 12 moths
Upon death of an annuitant, proceeds payable to a beneficiary are:
taxed as ordinary income above the annuitants invested capital
A 60-year-old client buys a $100,000 Immediate Annuity. Which pay out option will pay them the highest monthly payment for life:
Life income
A life insurance benefit payable while the insured is still living is
accelerated benefits
A contract where the outcome depends upon chance and the consideration is not equal is known as:
aleatory
A producer uses the "needs" approach when selling life insurance to determine:
how much coverage is necessary to cover final expenses
which whole life non-forfeiture option provides lifetime coverage:
Reduced paid up
Failure of an insurer to enforce a provision in their policy is known as
waiver
An insured on a tight budget who has a whole life insurance policy written by a mutual insurer should select which dividend option:
Reduction on premium
Life insurance sold to fund a small partnership buy/sell agreement is also called
Cross purchase plan
What insurance product has a flexible premium, fixed rate of return, tax deferred growth and a death benefit equal to the cash value
Flexible premium deferred annuity
Under Internal Revenue Code Section 1035, an annuity may be exchanged for:
For another annuity written on the same annuitant with a different insurer
All of the following are true about an agent or producer, except:
Insurers are responsible for all acts of their agents
The life span of the beneficiary of a life insurance policy is needed to
determine the amount of monthly payments that will be taxable if the life income option is selected.
On a tax deferred annuity, distributions must begin by age:
No age limit applies
An employee covered by a Group Life policy elects to cover three dependents as well. How many Certificates of Insurance must the group insurer issue:
one
In the absence of a monetary interest, insurable interest may be based upon:
Close kinship
a collateral assignment on a life insurance policy:
Is a partial assignment of some rights to a creditor
all are false about automatic premium loan on a life insurance policy except
It pays premiums due at the end of the grace period
All of the following are true about the fair credit reporting act, except:
It requires applicants to sue in order to get inaccurate data corrected.
Tom and joe are 21 year old identical twins in good health. Both have $500 a year to spend on life insurance. Tom buys five-year renewable term and joe buys whole life. All of the following are true, except:
Joes policy will provide more coverage in the early years.
A Survivorship Life insurance policy will pay benefits when the:
Last party dies
Which life insurance settlement option takes into account the life span of the beneficiary:
Life income option
All of the following are true about joint life insurance policies except:
They are often written to pay estate taxes
All of the following are false about single premium whole life insurance except:
They have an immediate cash value
Life insurance policy dividends are considered to be:
a return of premium overcharge
when the initial premium is paid along with the application for life insurance, he agent or producer should give the applicant a:
conditional receipt
Most people buy deferred annuities to
earn tax deferred income to supplement retirement
buying insurance does all of the following except:
eliminates the risk
If an insurer waives a legal right under the policy, they can no longer assert that right. This is known as:
estoppel
If the beneficiary of a life policy wants the proceeds to be paid out in equal monthly payments, they should select which settlement option:
fixed amount
The human life value approach to life insurance mainly considers the insured's
future earnings
Investment income earned by life insurance companies
helps offset the premiums that insurance companies charge
Key person life insurance:
helps pay for the cost of training a new employee
The insuring agreement or clause in a Life insurance policy contains all of the following, EXCEPT:
how to change the beneficiary
Universal life insurance offers all of the following, EXCEPT:
level cost of insurance throughout the insured;s lifespan
A life insurance rider added to cover a child is usually what type of insurance:
level term
Which financial services product creates an immediate estate:
life insurance
Insurable interest does not exist on a
life long friend
A 10-year level renewable term insurance policy:
may be renewed without a physical exam
A stock insurer who issues non-participating life insurance policies:
might pay taxable dividends to shareholders
Which type of life insurance does not permit changes in death benefits:
modified whole life
All of the following are true about the cash value in Life insurance policies, EXCEPT:
on limited pay whole life the cash value will equal the face amount at the end of the premium paying period
To take cash surrender on an annuity, the insurer needs the permission of the:
owner
All of the following are non-forfeiture options on a Whole Life insurance policy, EXCEPT:
paid up additions
Which annuity guarantees payments for a specific period of time even if the annuitant dies:
period certain
what changes on a term life insurance policy when an insured exercises the re-entry option
premium
All of the following are true about the reinstatement of a lapsed Life insurance policy, EXCEPT:
reinstatement is based upon current age
Mary brings in a business partner instead of operating as a sole proprietor. This is a form of risk:
sharing
When an employer and an employee share the cost of the employee's Life insurance, it is known as:
split dollar plan
On her 401k, Dana (age 60) takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true:
the amount of the diestribution is reduced by the amount of a 20% withholding tax
The annuitants cost basis on a non qualified deferred annuity is
the amount of the premiums paid in
Annuity contracts are based upon the life of which of the following:
the annuitant
On a refund annuity, who is entitled to the refund:
the beneficiary
If an isured buys the return of premium rider and dies, the policy will pay the beneficiary
the face amount plus all premiums paid up until the date of death.
A Keogh plan is a qualified plan for
the self empolyed
All of the following are true about annuities, EXCEPT:
upon death of an annuitant, proceeds payable to a beneficiary of an annuity are always tax free
