Life Part 3 Exam
a split-dollar plan: A. will provide additional compensation to an employee at some future date, usually retirement B. insures the lives of valuable employee's in order to compensate the company in the event of their unexpected death C. divides the cost of purchasing a business interest D. divides the cost of additional insurance for an employee between that employee and the company
D. divides the cost of additional insurance for an employee between that employee and the company
Keogh plan are NOT available to: A. self-employed individuals with no other income source B. self- employed individuals who may also be covered by a qualified corporate retirement plan C. employee's who have their own businesses on the side D. employed persons with a qualified retirement plan who are not also self-employed
D. employed persons with a qualified retirement plan who are not also self-employed
an application for group coverage is signed by the : A. employer, who then receives individual policies to distribute to each individual B. individual insured, who then receive individual policies C. individual insured, but a master policy is issued to the employer D. employer, who then receives and retains a master policy
D. employer, who then receives and retains a master policy
those powers of an insurance agent included in the agreement between the agent and the company are known as: A. implied powers B. apparent powers C. binding powers D. expressed powers
D. expressed powers
which of the following is not permitted of a fraternal benefit society? A. a representative form of government B. a ritualistic form of work C. nonprofit organization D. issuance of capital stock
D. issuance of capital stock
which of the following statements regarding the Medical Information Bureau is NOT true? A. it is a nonprofit agency established by life insurance companies to aid their underwriting B. it supplies member companies with information concerning insurability of proposed insureds C. It must by authorized by the applicant to give information to member companies D. it is not obligated to supply applicants with information it holds about them
D. it is not obligated to supply applicants with information it holds about them
when an agent is made aware of an insured death, the first task is to: A. comfort the family B. provide financial counseling C. contact the beneficiary D. notify the insurance company
D. notify the insurance company
a spouse's conversion privileges under a group policy are the same as the group member's were, EXCPET: A. insurability need not be proven B. conversion must be applied for within one month C. premiums are based on attained age D. the amount to convert is always less
D. the amount to convert is always less
a married couple, filing jointly, neither of whom belong to an employer-sponsored retirement plan, may make a fully deductible contribution to an IRA so long as their combined income does not exceed: A. $20,000 B. $30,000 C. $40,000 D. there is no income limit
D. there is no income limit
controlled businesses may be defined as insurance sold: A. to prospects located by solicitors B. by resident agents C. to replace previous policies D. to the agent, the agent's family and friends and the agent's business associates
D. to the agent, the agent's family and friends and the agent's business associates
a company that has not received permission from an Insurance Commissioner to do business in his/her state is called: A. an admitted company B. a foreign company C. alien company D. unauthorized company
D. unauthorized company
which of the following is NOT a circumstance under which a company will pay a death claim for less than the face amount? A. when there is an outstanding policy loan, plus interest, which must be deducted from the face amount before payment is made to the beneficiary B. when the premium is past due and in the grace period and therefore must be deducted from the face amount before the policy proceeds are paid C. when the age of the insured has been understated at the time the policy was issued, and the face amount must be reduced before payment D. when the age of the insured has been overstated at the time the policy was issued
D. when the age of the insured has been overstated at the time the policy was issued
group life insurance ordinarily differs from individual life insurance in all of the following ways EXCEPT: A. group life premiums are collected more often B. group life is usually lower in cost C. group life does not usually require proof of insurability D. group life builds no cash values
A. group life premiums are collected more often
the amount of coverage on the spouse of a group life policy member that may be provided without tax consequences to the member: A. is limited to $2,000 B. is limited to one half of the member's coverage C. may be any amount that does not exceed the member's coverage D. is limited by the member's ability to pay
A. is limited to $2,000
a retention limit is the: A. maximum amount of risk a company will assume on any one policy B. maximum amount of insurance a company may write in any one state C. minimum amount for which any one policy may be written D. minimum amount of annual premium a company must write to be admitted to a state
A. maximum amount of risk a company will assume on any one policy
insurance coverages that cannot be obtained from any authorized insurers in a state: A. may be purchased from an unauthorized insurer as surplus lines B. may be purchased from the state insurance department C. is unavailable from any other source D. may be purchased from any licensed nonresident agent
A. may be purchased from an unauthorized insurer as surplus lines
Jack's post medical history indicates a 250% mortality rating. The premium for his new coverage is determined from use of this figure. This rating method is the: A. multiple table extra premium method B. rated up age method C. lien method D. temporary flat extra premium method
A. multiple table extra premium method
the most common group life insurance policy is: A. one year renewable term B. decreasing term C. whole life D. one year endowment
A. one year renewable term
an individual who has contributory group life insurance coverage at work: A. pays lower premiums than with comparable individual insurance and usually doesn't have to prove insurability B. probably doesn't need to purchase additional permanent insurance C. may not convert it upon leaving the employer D. may include dependents provided they prove insurability
A. pays lower premiums than with comparable individual insurance and usually doesn't have to prove insurability
the most common eligibility factors for noncontributory group life insurance are: A. salary level and length of service B. age and length of service C. length of service and job classification D. salary level and age
A. salary level and length of service
which of the following would be considered speculative risk? A. the possibility the painting you bought might be a long- lost masterpiece B. the possibility your house will burn down C. the possibility you will die young D. the possibility you will contract cancer
A. the possibility the painting you bought might be a long- lost masterpiece
the social security program is funded by: A. the special payroll tax on employers, employee's and the self-employed. B. the federal income tax C. special-issue Treasury bonds D. state sales taxes
A. the special payroll tax on employers, employee's and the self-employed.
A group deferred annuity or an individual deferred annuity would be most likely used: A. to fund a denned benefit plan B. to fund a denned contribution plan C. both A and B D. neither A not B
A. to fund a denned benefit plan
George, who has a group policy, may, upon leaving his place of employment: A. convert it to permanent insurance, provided he's insurable, within a specified period B. convert it to permanent insurance without proof of insurability, within a specified period C. convert it to permanent insurance at his original age, without proof of insurability, within a specified period D. not convert it to permanent insurance , but may covert it to term insurance on an individual basis
C. convert it to permanent insurance without proof of insurability, within a specified period
which of the following is NOT used to determine a legitimate life insurance contract for the purpose of securing tax advantages? A. cash value accumulation test B. guideline premium test C. economic benefit test D. corridor test
C. economic benefit test
the federal tax that may be imposed on a person's property at death is known as the: A. gift tax B. income tax C. estate tax D. value added tax
C. estate tax
rebating occurs when an agent: A. convinces a policyowner to give up a current policy and buy a new one B. fails to supply a Buyer's Guide to a prospect C. gives a prospect a discount or kickback in order to induce a sale D. fails to remit collected premiums to the company
C. gives a prospect a discount or kickback in order to induce a sale
which of the following is the subject of The Triennial Examination Report issued by the state Insurance Commissioner? A. insurance rates B. insurance practices that have been prohibited C. inspection of domestic insurers D. review of insurance consumer complaints
C. inspection of domestic insurers
the rating procedure that reduces the amount of insurance granted for a stated premium is called the : A. rated up age premium B. permanent flat extra premium C. lien system D. temporary flat extra premium method
C. lien system
when signing the application form, the proposed insured is: A. certifying his or her good health and the company should issue the policy B. swearing to the accuracy of the information contained in the application C. making a formal request to the company for a life insurance policy D. certifying ability to make the premium payments necessary to keep the policy in force
C. making a formal request to the company for a life insurance policy
For a contributory plan with some insurance companies, if the employee does not apply within the eligibility period he or she: A. loses the opportunity to purchase group life insurance B. must pay a penalty for applying late C. may be required to take a medical exam, even for a nonmedical plan D. must wait a full year before being again eligible to apply
C. may be required to take a medical exam, even for a nonmedical plan
the premiums for a group one-year renewable term life insurance policy: A. are based on the average age of the oldest members of the group B. may never be increased once the policy is issued C. may increase or decrease based on average age of the group and other factors D. may increase or decrease as a reflection of changes in the companys operating expenses
C. may increase or decrease based on average age of the group and other factors
The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who served as senior executives. This benefit is not available to other retirees of the company. This is an example of a: A. profit sharing plan B. qualified retirement plan C. non qualified retirement plan D. defined contribution plan
C. non qualified retirement plan
Income payments made from an annuity are: A. always received entirely tax free B. always taxed for their entire amount C. only partly subject to federal taxation D. taxed only by states
C. only partly subject to federal taxation
an employee desiring group coverage must: A. sign an application, name a beneficiary and provide general personal information B. sign and enrollment form and application, provide information about the company, and name a beneficiary C. sign an enrollment card, provide general personal information, and name a beneficiary D. sign an application, submit to a medical exam, and name a beneficiary
C. sign an enrollment card, provide general personal information, and name a beneficiary
participating policies may be issued by: A. stock insurance companies only B. mutual insurance companies only C. stock and mutual insurance companies D. fraternal benefit societies
C. stock and mutual insurance companies
the primary purpose of Section 303 redemption is: A. liquidation of an estate's assets to provide income for survivors B. to provide income for a business owner at retirement C. to provide liquidity to pay estate taxes and administration and funeral costs D. to enable a business owner to redeem shares in payment of debts on a tax-advantaged basis
C. to provide liquidity to pay estate taxes and administration and funeral costs
each of the following would be an element in the definition of fraud EXCEPT: A. an international misrepresentation made by the application B. an intent to gain advantage C. statements relied upon by a second party who then suffers a loss D. an individual warrants a fact stated on the application
D. an individual warrants a fact stated on the application
distributions from a qualified retirement plan: A. are always received tax free B. are taxed only if received in a lump sum C. are taxed only if receievd in annuity installments D. are received tax-free only if they result from previously taxed contributions
D. are received tax-free only if they result from previously taxed contributions
full protection by an insurance policy is provided: A. when the first premium is made B. as soon as the proposed insured passes a physical exam C. when the policy is received by the insured D. as of the policy effective date
D. as of the policy effective date
A company may write insurance in excess of its retention limits: A. under no circumstances B. when its annual premium volume has exceeded the amount specified by the Insurance Commissioner of the jurisdiction in which it's domiciled C. by insuring the excess with other companies through a reinsurance agreement or treaty D. if it is a fraternal benefit society
C. by insuring the excess with other companies through a reinsurance agreement or treaty
should the proposed insured desire to correct an application, he or she: A. can make the change, but must initial it B. must complete another application as no changes are ever allowed on an application C. can telephone the agent or office of the company and let them make the change D. must do so within 10 days
A. can make the change, but must initial it
Credit life insurance is usually written as: A. decreasing term B. increasing term C. one year renewable term D. permanent protection
A. decreasing term
the most important difference between licensed agents and licensed broker: A. agents represent the company; brokers represent the client B. agents represent the client; the broker represent the company C. only agents can solicit prospects for the purpose of selling coverage D. broker are not subject to the same laws and regulations as are agents
A. agents represent the company; brokers represent the client
in an outright gift of life insurance to a charity: A. all the incidents of ownership in the policy belong to the donee B. the donor retains the right to name a new beneficiary C. the cash values in the policy belong to the donor D. the premiums paid by the donor are not tax deductible
A. all the incidents of ownership in the policy belong to the donee
all of the following are examples of insurable interest EXCEPT: A. an airline insuring the lives of its passengers B. a person insuring his or her own life C. a company insuring the life of it's president D. a parents insuring his or her child
A. an airline insuring the lives of its passengers
using the proceeds from a policy on the life of a decreased business owner to purchase his or her business interest probably indicates a: A. buy-sell agreement B. deferred compensation plan C. Keogh plan D. split-dollar insurance plan
A. buy-sell agreement
fully deductible contributions to an IRA may be made by an unmarried individual who is participating in an employer-sponsored retirement plan only if that individual earns no more than: A. $25,000 B. $30,000 C. $40,000 D. There is no income limit
A. $25,000
in order to qualify for group life insurance coverage, an individual employer group must usually have at least: A. 10 members B. 25 members C. 100 members D. 100-200 members
A. 10 members
The Kalamazoo Stove and Screen Door Company applies for life insurance on its key vise president, Harold. Kalamazoo S and SD Company is the premium payer and beneficiary, and controls all rights to the policy. Which of the following is true? A. Harold is the proposed insured; his company is the applicant B. Harold is the applicant; his company is the proposed insured C. Harold is the policyowner; his company is the applicant D. Harold is the policyowner; his company is the beneficiary
A. Harold is the proposed insured; his company is the applicant
anything that increases the chance of premature death is called: A. a hazard B. mortality factor C. human life value D. risk
A. a hazard
in applying for life insurance protection: A. a minor may not assign an application B. a minor may sign an application C. no one under age 18 may sign an application D. no one under 21 may sign an application
A. a minor may not assign an application
when converting a group life policy to an individual policy, the departing group member's new policy must be: A. a permanent or whole life policy B. a term life policy C. an endowment policy D. any of the above
A. a permanent or whole life policy
a "rollover" refers to which of the following? A. a transfer of funds from one IRA to another B. change from a standard to substandard risk C. contributions made by employees to a group life policy D. taxation of withdrawals from a modified endowment contract
A. a transfer of funds from one IRA to another
a business entity that exists legally and separately from its owner or owners is called a: A. partnership B. corporation C. sole proprietorship D. none of the above
B. corporation
Premiums for which of the following policies are deductible by an individual for income tax purposes? A) Term policy B) None of these C) Whole life policy D) Universal life policy
B) None of these
a gift by a single individual of premium payments for an insurance policy that belongs to someone else may be made without any gift tax liability so long as those premium payments do not exceed: A. $2,000 per year B. $10,000 per year C. $20,000 per year D. there is no limit of gifts of insurance premiums
B. $10,000 per year
if a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000, how much of the policy's cash surrender value would be subject to federal income tax: A. $0 B. $3,000 C. $18,000 D. $21,000
B. $3,000
When a group plan is contributory, what percentage of employees must want and be willing to pay for coverage? A. 50% B. 75% C. 100% D. the percentage depends on the size of the group
B. 75%
Taxes are deferred on cash accumulations in all of the following EXCEPT: A. a deferred annuity B. a bank certificate of deposit C. a Keogh plan D. a universal life policy
B. a bank certificate of deposit
a Keogh plan in which a specified amount is invested each year is known as: A. a defined benefit plan B. a defined contribution plan C. a qualified plan D. an endowment plan
B. a defined contribution plan
a "baby Group" is: A. the name given of a group life insurance policy that includes the employee's children B. a group of fewer than 10 members C. a group of fewer thank 100 members D. the name given a group life insurance policy that has been in effective less than one year
B. a group of fewer than 10 members
which is the proper term for a company owned by its policyholders? A. a stock insurance company B. a mutual insurance company C. a legal insurance company D. a fraternal insurance company
B. a mutual insurance company
which of the following would NOT be permitted as a Section 1035 policy exchange? A. a life contract exchanged for another life contract B. an annuity contract exchanged for a life contract C. an annuity contract exchanged for another annuity contract D. an endowment contract exchanged for an annuity contract
B. an annuity contract exchanged for a life contract
an arrangement in which the employer provides the premium for an employee-owned life insurance policy is called: A. a Section 457 deferred compensation plan B. an executive bonus plan C. a Simplified Employee Pension (SEP) plan D. a Keogh plan
B. an executive bonus plan
in a deferred compensation plan, payments made by the company to the employee: A. are tax free to the employee B. are tax deductible to the company at the time they are made to the employee C. cannot be deducted by the company at any time since this is a nonqualified plan D. must be included in the employee's taxable income before they are made
B. are tax deductible to the company at the time they are made to the employee
a "SIMPLE" retirement plan: A. can be a 401(k) plan only B. can be either a 401(k) plan or an IRA C. can be adopted by any size company D. has no limit on employee contributions
B. can be either a 401(k) plan or an IRA
withholding of facts that should be included in an application for insurance is called: A. misrepresentation B. concealment C. fraud D. a warranty
B. concealment
an agent: A. has the authority to tell a proposed insured that a policy will be issued by the insurance company as requested B. does not have the authority to tell a proposed insured that a policy will be issued by the insurance company as requested C. has the authority to approve all statements made by the proposed insured on the application D. should verify all statements made by the application on the application
B. does not have the authority to tell a proposed insured that a policy will be issued by the insurance company as requested
riders used to modify the life insurance protection offered which allow a company to accept an otherwise unacceptable risk are called: A. impairments B. exclusions C. decisions D. deletions
B. exclusions
a company is domiciled: A. if its home office is in the United States B. in the state where its home office is located C. in any state where it has regional offices D. if it has been authorized to do business in a particular state
B. in the state where its home office is located
Which of the following is taxable as income? A. insurance policy proceeds B. interest paid on policy dividends C. policy dividends D. policy loans
B. interest paid on policy dividends
a certificate of insurance: A. is issued to the employer to list which employee's are covered by the group plan B. is issued to each individual covered by the group life insurance C. contains all policy information except the amount of protection and the beneficiary D. is not considered valid proof of coverage
B. is issued to each individual covered by the group life insurance
when may an insurance company arbitrarily increase the rate of premium charged to a particular policyowner? A. whenever its board of directors votes to do so B. never C. when state laws permit D. only within 30 days of insurance
B. never
twisting involves which of the following? A. failure to remit premiums to the insurance company B. policy replacement C. splitting a commission with a client D. promising coverage that cannot be delivered
B. policy replacement
establishing premiums for special class risk by using a regular mortality table, but assuming proposed insureds are a few years older than they actually are, is called: A. the multiple extra premium method B. rating up C. the lien plan D. the flat extra premium charge method
B. rating up
statements made by an applicant for a life insurance policy that the applicant says are true to the best of his or her knowledge are known as: A. warranties B. representations C. declarations D. endorsements
B. representations
at the time of the insured death, the person best equipped to explain the chosen settlement option to the beneficiary is: A. the claims department of the insurance company B. the agent C. the beneficiary's lawyer D. any qualified person from the home office
B. the agent
Incidental limitations refer to which of the following? A. the conversion of a group life insurance to individual life insurance B. the amount of life insurance that may be included in a qualified retirement plan C. the elements of risk D. modified endowment contracts
B. the amount of life insurance that may be included in a qualified retirement plan
the principal difference between an entity purchase and a cross-purchase buy-sell agreement: A. the identity of the insured B. the identity of the beneficiary C. the amount of insurance D. the type of business
B. the identity of the beneficiary
if Nichole purchases a policy insuring the life of her husband with the policy proceeds to go to her upon his death, then Nichole qualifies as being all of the following EXCEPT: A. the beneficiary B. the insured C. the policyowner D. the applicant
B. the insured
when spouses are to be included in the member group life insurance plans: A. 50% of the spouses must be included B. the percentage of the spouses included must be the same as the percentage of covered members C. the company decides which spouses are eligible D. the must prove their insurability
B. the percentage of the spouses included must be the same as the percentage of covered members
if the insurance company accepts a special class risk: A. it then normally writes insurance for that risk in small face amounts B. the premium will be higher than for a normal risk C. the premium will be lower than for a normal risk D. the premium will be the same as for a normal risk
B. the premium will be higher than for a normal risk
risk may be defined as: A. the certainty of loss B. the uncertainty of loss C. a hazard affecting insurability D. insignificant for insurance purpose
B. the uncertainty of loss
Contributions to regular IRA's are limited to ______ in 2001. A. $1,000 B $1,500 C. $2,000 D. $2,500
C. $2,000
Amy dies without having paid the $500 premium on her $50,000 policy that was due a week before her death. With no outstanding policy loans, Amy's beneficiary can expect to receive: A. all $50,000 of the policy proceeds since Amy died during the grace period and the last premium is therefore waived B. none of the policy proceeds since Amy died without having paid her premium C. $49,500, which is the face amount less the premium owed D. all $50,000 of the policy proceeds, but only if the $500 premium is paid by the beneficiary
C. $49,500, which is the face amount less the premium owed
when a group plan is noncontributory, what percentage of eligible employees must be covered? A. 50 % B. 75% C. 100% D. the employer may make this decision
C. 100%
social security disability benefits become available to eligible workers after waiting a waiting period of: A. one month B. 2 months C. 5 months D. 6 months
C. 5 months
if group life insurance is incidental to a job, a group is actively at work, and the older employees are constantly being replaced by younger employee's, then: A. the installment expenses of the insurance company are generally high B. an insurance company is taking a greater risk in insuring the group C. adverse risk selection is slight D. the group is probably a good prospect for permanent insurance
C. adverse risk selection is slight
the applicant, if other than the proposed insured, must have: A. no relationship with the insured B. an insurable interest in the life of the policyowner C. an insurable interest in the life of the insured D. a blood relationship with the insured
C. an insurable interest in the life of the insured
the Fair Credit Reporting Act guarantee's which of the following? A. Equitable insurance rates B. full disclosure of policy benefits C. applicants right to information held about them by any reporting agency D. full disclosure of an insurer's financial condition
C. applicants right to information held about them by any reporting agency
with a 401K plan, employee contributions to the plan: A. must be matched dollar for dollar by the employer B. are made on an after-tax basis C. are made on a pre-tax basis D. are received income tax free at the time of distribution
C. are made on a pre-tax basis
placing a date on an insurance policy that is earlier than when the policy was actually applied for is known as: A. underwriting B. misrepresentation C. backdating D. replacement
C. backdating
When Jonas died, it was discovered that he was actually 6 years older than he had claimed when applying for an insurance policy. As a result of this discovery, the insurance company: A. will not pay the policy proceeds B. will pay the proceeds less the amount of extra premium that Jonas should have paid for the insurance C. will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age D. must pay all the proceeds regardless of Jonas having an incorrect age
C. will pay only the amount of insurance that Jonas' premiums would have purchased at his correct age
If a proposed insured dies before the policy is issued but while in possession of a conditional receipt, the company A. will not pay the policy proceeds under any circumstance B. will always pay the policy proceeds C. will pay the policy proceeds only if it would have issued the policy to the proposed insured had he or she been living D. will pay the policy proceeds up to an established limit
C. will pay the policy proceeds only if it would have issued the policy to the proposed insured had he or she been living
how old must the individual ordinary be to begin taking fund out of a traditional IRA without penalty for premature distribution? A. 70 1/2 B. 65 C. 62 D. 59 1/2
D. 59 1/2
Leroy wants to buy a policy insuring the life of his wife Lauren. What is the limit on how much insurance he can buy? A. Lauren's human life value B. the limit set by the law C. the amount calculated to meet Leroy's needs should Lauren die D. As much as the insurance company is willing to issue and Leroy can afford
D. As much as the insurance company is willing to issue and Leroy can afford