Qualified Plans
What type of settlement is generally used when getting a big influx of money (lottery, inheritance, etc...)?
Lump-Sum Settlement
When do the income payments of a deferred annuity start?
After 1 year
All of the following would be different between qualified and nonqualified retirement plans EXCEPT A - IRS approval requirements B - Taxation on accumulation C - Taxation of withdrawals D - Taxation of contributions
B - Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.
Which of the following is an IRS qualified retirement program for the self-employed? A - Buy and Sell Agreement B - 401(k) C - Keogh D - Split Dollar
C - Keogh The Keogh or HR-10 plan allow self-employed individuals to establish tax favored retirement plans for themselves and their eligible employees.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT A - The employer pays a bonus to a selected employee to fund the policy. B - It is considered a nonqualified employee benefit. C - The policy is owned by the company. D - Any type of insurance policy may be used.
C - The policy is owned by the company. The policy is owned by the employee.
Which of the following Life Insurance policies would be considered interest sensitive? A - Whole life B - Increasing term C - Universal life D - Adjustable life
C - Universal life As well as being a flexible premium policy, universal life is also an interest-sensitive policy. The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information? A - Sign a waiver that the information will be kept confidential B - Present the insured with a Disclosure Authorization Notice C - Receive written permission from the Department of Insurance D - Receive a signed statement from the insured which authorizes the investigation
B - Present the insured with a Disclosure Authorization Notice Before an insurer can obtain information from investigators regarding an applicant, it must first present the insured with a Disclosure Authorization Notice. This notice states the insurer's information collection practices and how the information will be used.
Which of the following Life Insurance policies would be considered interest sensitive? A - Adjustable life B - Whole life C - Increasing term D - Universal life
D - Universal life As well as being a flexible premium policy, universal life is also an interest-sensitive policy. The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
Which of the following applicants would NOT qualify for a Keogh Plan? A - Someone who has been employed for more than 12 months B - Someone who is over 25 years of age C - Someone who works for a self-employed individual D - Someone who works 400 hours per year
D - Someone who works 400 hours per year A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.
The advantage of qualified plans to employers is A - Tax-free earnings. B - No lump-sum payments. C- Taxable contributions. D - Tax-deductible contributions.
D - Tax-deductible contributions. Qualified plans have these tax advantages: employer contributions are tax deductible and are not taxed as income to the employee; the earnings in the plan accumulate tax deferred; lump-sum distributions to employees are eligible for favorable tax treatment.
Which of the following best defines target premium in a universal life policy? A - The maximum amount the policyowner may pay on a policy B - The minimum amount to make sure the policy is annually renewable C - The corridor of insurance D - The recommended amount to keep the policy in force throughout its lifetime
D - The recommended amount to keep the policy in force throughout its lifetime The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? A - Taxes must be paid in full. B - Employer's matching contribution can be 50% of employee's salary. C - 75% of employee's contributions are taxed. D - They are tax deferred until withdrawn.
D - They are tax deferred until withdrawn. Taxation is deferred on both contributions and earnings until funds are withdrawn.
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? A - Variable life B- Decreasing term C - Straight whole life D - Universal life
D - Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.
When do payments stop in Pure Life (Life-only or straight life) Annuity? A - When annuitant dies B - When payout funds have been exhuasted
A - When annuitant dies No guarantee that all proceeds will be fully paid out
How must a replacing producer respond to an applicant wishing to replace existing life insurance? A - The producer must provide the applicant with a Notice Regarding Replacement. B - The producer must collect the existing policies and turn them over to the replacing insurer. C - The producer must request the permission of the existing insurer. D - The producer has no specific duties.
A - The producer must provide the applicant with a Notice Regarding Replacement. In a replacement transaction, a producer must present to the applicant a Notice Regarding Replacement, signed by both the applicant and the producer.
What is an underwriter
The process of evaluating a loan applicant's financial information and facts about the real estate used to secure a loan to determine whether a potential loan is an acceptable risk for a lender.
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? A - 50% tax on the amount not distributed as required B - No penalties, since the owner is older than 59 ½ C - 10% for early withdrawal D - 15% for early withdrawal
A - 50% tax on the amount not distributed as required When immediate annuities are used to pay IRA benefits, distributions must begin no later than age 70½ in order for the annuitant to avoid penalties. The penalty is 50% of the shortfall from the required annual amount.
In terms of Social Security, what is the name for the time period after the youngest child of a family turns 16 and before the surviving spouse may start receiving retirement benefits? A - Blackout period B - Nonpayment interval C - Benefit reduction D - Accumulation period
A - Blackout period Blackout period begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60. No benefits are paid during this time.
What is the maximum amount of coverage that the Utah Life and Health Insurance Guaranty Association (ULHIGA) will pay? A - $300,000 B - $500,000 C - $200,000 D - $100,000
B - $500,000 The maximum that the ULHIGA will pay under any circumstances is the applicable amount of coverage or $500,000 (whichever is lower).
An applicant wants to buy a life insurance policy in which he can count on receiving the same benefits as stated in the contract. Which type should he buy? A - Any type of annuity B - Fixed C - Permanent D - Variable
B - Fixed Fixed life insurance policies offer minimum guaranteed or fixed benefits stated in the contract. Variable life insurance or annuities are contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.
A 35-year-old spouse of the insured collects early distributions from her husband's retirement plan as a result of a divorce settlement. What penalties, if any, will she have to pay? A - 15% penalty tax B - Age-based penalty stipulated in the contract C - No penalties D - 10% penalty tax
C - No penalties Under normal circumstances, a 10% penalty tax is imposed on distributions made before the age of 59½. There are exceptional circumstances, however, that are exempt from the penalty tax, including distributions made as a result of a divorce decree.
Which of the following statements regarding deferred compensation funds is INCORRECT? A - They can be made with cash deposits to an annuity. B - They generally provide additional retirement benefits. C - They are usually qualified plans. D - They can be established by employers.
C - They are usually qualified plans. Deferred Compensation Funding refers to any employer retirement, savings, or other deferred compensation plan that is not a qualified retirement plan. Funding involves a contractual commitment between the employer and employee to pay compensation in future years. These plans are typically made with selected employees to provide additional retirement benefits.
Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose A - Section 457 Deferred Compensation Plan. B - 403(b) plan. C - 401(k) plan. D - HR-10 (Keogh Plan).
D - HR-10 (Keogh Plan). HR-10 (Keogh Plans) are plans specifically for self-employed and their employees.
Stranger-originated life insurance policies are in direct opposition to the principle of A - Law of large numbers. B - Good faith. C - Indemnity. D - Insurable interest.
D - Insurable interest. Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest.
Which of the following is NOT true regarding a nonqualified retirement plan? A - Contributions are not currently tax deductible. B - It can discriminate in benefits and selecting participants. C - Earnings grow tax deferred. D - It needs IRS approval.
D - It needs IRS approval. Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be approved by IRS.
How many Continuing Education hours rollover from one licensing period to another?
None.
What are illustrations in a life insurance policy?
Presentations of nonguaranteed elements of the policy