Quiz Questions

Focus quiz

Take some time to review the questions you missed in the session you just completed. This list shows all of the questions that you missed in the session you just completed. The answer you selected is in bold. The correct answer is highlighted in green. #3. All of the following are true of key person insurance EXCEPT a) The plan is funded by permanent insurance only.- b) There is no limitation on the number of key employee plans in force at any one time. c) The employer is the owner, payor and beneficiary of the policy. d) The key employee is the insured. Key Person coverage may be funded by any type of life insurance. #5. Which of the following best describes annually renewable term insurance? a) It is level term insurance.- b) It requires proof of insurability at each renewal. c) Neither the premium nor the death benefit is affected by the insured's age. d) It provides an annually increasing death benefit. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost. #7. An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a) Decreasing term- b) Variable life c) Universal life d) Whole life A decreasing term policy's face amount decreases as the amount of debt is reduced. #9. Which of the following applies to the 10-day free-look privilege? a) It allows the insured 10 days to pay the initial premium. b) It can be waived only by the insurance company. c) It is granted only at the option of the agent. d) It permits the insured to return the policy for a full refund of premiums paid.- A policyowner may return a policy for any reason during the free-look period and receive a full refund. #10. What is the purpose of a suicide provision within a life insurance policy? a) To protect the policyowner b) To protect the insurer from persons who purchase life insurance with the intention of committing suicide- c) To limit the insurer's liability after the 2 year waiting period d) To deter the policyowner from committing suicide The suicide provision protects the company from those individuals who purchase life insurance with the intention of committing suicide. If the insured commits suicide after the 2 year period, the policy will pay the death proceeds to the designated beneficiary the same as if the insured had died of natural causes. #11. An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Adhesion b) Consideration- c) Good faith d) Representation The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss. #16. Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? a) The Entire Contract Provision b) The Consideration Clause c) Assignment Rights d) Owner's Rights- Policyowners can learn about their ownership rights by referring to the policy. #17. A Return of Premium term life policy is written as what type of term coverage? a) Increasing- b) Decreasing c) Renewable d) Level Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid. #21. If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a a) Nonforfeiture option. b) Rollover. c) Settlement option.- d) Nontaxable exchange. A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender. #25. Which of the following statements concerning buy-sell agreements is true? a) Premiums paid are deductible as a business expense. b) Benefits received are considered income taxable. c) Buy-sell agreements pay in the event of a medical emergency. d) Buy-sell agreements are normally funded with a life insurance policy.- A buy-sell agreement is simply a contract that establishes what will be done with a business in the event that an owner dies. Buy-sell agreements are normally funded with a life insurance policy.

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?

5 yrs

Focused Exam

#1. In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? a) 1 b) 3 c) 5- d) 10 If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage. #3. An insured is dissatisfied with her insurance policy and wants to negotiate certain provisions of the contract. What entity would her producer represent? a) The government b) The insured c) The insurer- d) The Commissioner of Insurance Under agency law, producers legally represent the insurance company with which they are contracted. #6. Insurance companies that hold a Certificate of Authority to transact insurance in Louisiana must be examined how often? a) Each year b) Every two years c) Every four years d) Every five years or as often as the Commissioner feels is necessary.- Insurers will be examined at least every five years or more often if based on the recommendation of the Louisiana Insurance Guaranty Association. #7. All of the following are characteristics of group life insurance EXCEPT a) Amount of coverage is determined according to nondiscriminatory rules. b) Individuals covered under the policy receive a certificate of insurance. c) Certificate holders may convert coverage to an individual policy without evidence of insurability. d) Premiums are determined by the age, sex and occupation of each individual certificate holder.- Premiums are determined by the age, sex and occupation of the entire group.- #12. Traditional IRA contributions are a) Deducted based on the income level. b) Never tax deductible. c) Partially tax deductible depending on the income level. d) Tax deductible.- The following taxation rules apply to contributions made to traditional IRA plans: tax-deductible contributions for the year of the contribution (based on the person's income); contributions must be made in "cash" in order to be tax deductible; excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA; and tax-deferred earnings are not taxed until withdrawn. #13. When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? a) It decreases over the term of the policy. b) It remains the same as the original policy, regardless of any differences in value. c) It is reduced to the amount of what the cash value would buy as a single premium.- d) It is increased when extra premiums are paid. In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death. #18. An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $8,000, tax on growth only b) $10,000, tax on growth only c) $10,000, no tax consequence- d) $8,000, no tax consequence During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other. #21. What is the maximum amount of time that could pass before an insurer's financial stability would be examined? a) 4 years b) 5 years- c) 10 years d) 15 years Insurers will be examined at least every five years or more often if based on the recommendation of the Louisiana Insurance Guaranty Association.

First Focus Exam 1 Review

#3. An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders? a) 2% b) 2.5%- c) 3% d) Whatever interest rate the company deems appropriate Insurance companies promise guaranteed minimums on the fixed annuities (2.5% in this scenario). This means that if the investments draw less than that, the company will have to pay 2.5% anyway. If the investments earn over 2.5%, the company will pay that excess. #4. Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? a) The beneficiary will receive the lump sum, plus interest. b) The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. c) The beneficiary will only receive payments of the interest earned on the death benefit.- d) The beneficiary must pay interest to the insurer. With the Interest Only settlement option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, or annually). #5. An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act? a) Defamation b) Unfair discrimination c) Errors and omissions d) Fraud- According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer. #8. 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) Receive written permission from the Department of Insurance b) Receive a signed statement from the insured which authorizes the investigation c) Sign a waiver that the information will be kept confidential d) 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. #10. Using a class designation for beneficiaries means a) Naming an estate as the beneficiary. b) Naming each beneficiary by his or her name. c) Naming beneficiaries as a group.- d) Not naming beneficiaries. Class designations are used when an insured chooses to distribute benefits among the living beneficiaries and/or their heirs without naming each individual person, such as "all my children." #15. Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? a) Straight whole life b) Universal life- c) Variable life d) Decreasing term 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. #22. All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? a) Half the amount b) Lower- c) Higher d) As high Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life. #30. Which of the following is TRUE about a class designation? a) Beneficiaries must be part of the insured's immediate family. b) It is not allowed. c) It determines the succession of beneficiaries. d) Beneficiaries are not identified by name.- A class of beneficiary is using a designation such as "my children". This can be a vague term if the insured has been married more than once, or has adopted or illegitimate children. Many insurers encourage the insured to name each child specifically and to state the percentage of benefit they are to receive. #32. Which of the following is true regarding taxation of dividends in participating policies? a) Dividends are not taxable.- b) Dividends are taxable only after a certain amount is accumulated annually. c) Dividends are taxable in some life insurance policies and nontaxable in others. d) Dividends are considered income for tax purposes. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income. #34. Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Life annuity with period certain b) Increasing term c) Limited pay whole life- d) Interest-sensitive whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100. #36. A Universal Life insurance policy has two types of interest rates that are called a) Guaranteed and Current.- b) Option A and Option B. c) Fixed and Variable. d) Minimum and Target. 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. #39. If a settlement option is not chosen by the beneficiary or policyowner, which option will be used? a) Fixed period b) Fixed amount c) Lump sum- d) Life income Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement. #47. An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a) $8,000, tax on growth only b) $10,000, tax on growth only c) $10,000, no tax consequence- d) $8,000, no tax consequence During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other. #48. In forming an insurance contract, when does acceptance usually occur? a) When an insurer's underwriter approves coverage- b) When an insurer delivers the policy c) When an insurer receives an application d) When an insured submits an application In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy. #49. Which of the following is NOT true regarding policy loans? a) Policy loans can be repaid at death. b) An insurer can charge interest on outstanding policy loans. c) A policy loan may be repaid after the policy is surrendered. d) Money borrowed from the cash value is taxable.- Money borrowed from the cash value is not taxable. Policy loans can be repaid at any time, including surrender and death. An insurer can charge interest on outstanding policy loans

focused

#1. All of the following are characteristics of a group life insurance plan EXCEPT a) The cost of the plan is determined by the average age of the group. b) There is a requirement to prove insurability on the part of the participants.- c) The participants receive a Certificate of Insurance as their proof of insurance. d) A minimum number of participants is required in order to underwrite the plan. There is no individual underwriting for group life insurance. #6. When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) In lesser amounts for the remaining policy term of age 100. b) Equal to the cash value surrendered from the policy c) The same as the original policy minus the cash value d) Equal to the original policy for as long as the cash values will purchase.- With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age. #11. An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover? a) $10,000, 60 days b) $10,000, 30 days c) $8,000, 60 days- d) $8,000, 30 days Generally, IRA rollovers must be completed within 60 days from the time the money is taken out of the first plan. If the distribution from the first plan is paid directly to the participant, 20% of the distribution must be withheld by the payor. #14. Insurer examinations must occur no less frequently than every a) 2 years. b) 3 years. c) 4 years. d) 5 years.- Insurers will be examined at least every 5 years or more often if based on the recommendation of the Louisiana Insurance Guaranty Association. #16. An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? a) She can only convert her coverage without proof of insurability if she has the master policy. b) She must apply for a new policy, which requires her to provide proof of insurability. c) She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.- d) She will still be covered under the group plan, but will have to pay an individual policy premium. If a person has life insurance under a group plan and then leaves the group, he/she may convert group coverage to individual coverage within 31 days of leaving the plan without proof of insurability. #17. According to agency law, the producer always represents the a) Insurance company.- b) Client. c) Public. d) State Insurance Department.

fq

#1. A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a) The amount of the distribution is reduced by the amount of a 20% withholding tax.- b) No taxes are due since the plan participant is over age 59 1/2. c) There is a 10% early withdrawal penalty. d) The amount distributed is subject to ordinary income tax. Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum IRA distributions begin (which is generally no later than age 70 1/2). Since this client actually took a distribution (instead of making a trustee-to-trustee roll over), the distribution is subject to 20% withholding tax. #2. All of the following could own group life insurance EXCEPT a) An alumni group. b) A debtor group. c) A group needing low-cost life insurance.- d) A group sponsored by an employer. Groups purchasing group life insurance must be formed for a reason other than purchasing insurance. #11. According to agency law, the producer always represents the a) Client. b) Public. c) State Insurance Department. d) Insurance company.-