Taxes, Retirement, and Other Insurance Concepts Chapter 4

Question 3 of 15 Who is a third-party owner?

A policyowner who is not the insured

Question 5 of 15 Which of the following terms is used to name the nontaxed return of unused premiums?

Dividend

Question 2 of 15 In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

From trustee to trustee

Question 12 of 15 When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

Question 6 of 15 What is the main purpose of the Seven-pay Test?

It determines if the insurance policy is a MEC

Question 10 of 15 Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable

Question 5 of 15 Which of the following is INCORRECT concerning a noncontributory group plan?

The employees receive individual policies

Question 8 of 15 Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?

The employer is the owner and beneficiary

Question 14 of 15 In a life settlement contract, whom does the life settlement broker represent?

The owner

Question 4 of 15 The minimum number of credits required for partially insured status for Social Security disability benefits is

6 credits

Question 1 of 15 Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income

Question 1 of 15 SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees

Question 2 of 15 What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time

Question 3 of 15 Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

Question 10 of 15 What is the name of the insured who enters into a viatical settlement?

Viator

Question 12 of 15 All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder

Question 11 of 15 Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?

They are tax free to terminally ill insured

Question 13 of 15 What type of life insurance is most commonly used for group plans?

Annually renewable term

Question 8 of 15 A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection

Question 6 of 15 When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on

$11,000

Question 15 of 15 The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is

A nonqualified annuity plan

Question 9 of 15 A key person insurance policy can pay for which of the following?

Costs of training a replacement

Question 7 of 15 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?

She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan

Question 11 of 15 An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?

Viatical settlement

Question 7 of 15 The premiums paid by the employer in a business life insurance policy are

Tax deductible by the employer

Question 4 of 15 All of the following are true of key person insurance EXCEPT

The plan is funded by permanent insurance only

Question 9 of 15 All of the following are general requirements of a qualified plan EXCEPT

The plan must provide an offset for social security benefits

Question 15 of 15 What is the official name for the Social Security program?

Old Age Survivors Disability Insurance

Question 14 of 15 Which of the following applicants would NOT qualify for a Keogh Plan?

Someone who works 400 hours per year

Question 13 of 15 Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate