Taxes,Retirement,and Other Insurance Concepts
What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2?
10% penatly
What is the penalty for excessive contributions to a traditional IRA?
6%
Who would be considered a third -party owner
An individual or an entity who is not the insured
Why are dividends in life insurance policies not taxable
Dividends are not considered income for tax purpose; they are a return of unused premium
What is required to qualify an individual to contribute to a traditional IRA?
Earned income
What type of policy issues certificated of insurance to the insured?
Group policy
What qualified plan is suitable for the self-employed
HR-10 or Keogh
What are some examples of qualified plans?
IRA,401(k), HR10(Keogh), SEP, SIMPLe
Is the death benefit of a life insurance policy taxed to the beneficiary if it is received as a lump sum?
No, lump-sum benefits are received tax free
Who owns a group life insurance contract?
Th employer (also known as the sponsor of the group)
When would life insurance policy proceeds be included in the insured's taxable estate?
When there is an incident of ownership at the time of death
What is the name for an overfunded life insurance policy?
a modified Endowment Contract (MEC)
who may contribute to an HR-10 plan?
a self-employed individual
Group life insurance policies are written as what type of insurance
annually renewable term
According to the taxation rules of life insurance policies, how are cash value increases taxed?
cash value growth is tax deferred.
What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy
death benefits are generally not subject to income taxes
Who qualifies for tax-shelter annuities or 403(b) plans?
employees of nonprofit organization under Section 501(c)(3) and employess of public school systems
Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?
estate conservation
What is the main advantage of converting from group life insurance to individual coverage?
evidence of insurability is not required
What type of policy is typically issued without proof of insurability from the insured>
group policy
What are the characteristics of the group that underwriters will consider before issuing a group life policy
group's purpose,size, financial strength and turnover
What are the characteristics of the group that underwriters will consider before issuing a group life policy
group's purpose,size, financial strength, and turnover
In what form of payment mut be the contributions to a traditional IRA be made>
in cash(or cash equivalents)
If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?
interest only
if the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest,which portion, if any, will be taxed?
interest only
SIMPLE plans are available to groups of how many employess?
no mare than 100
In qualified plan, are employer contribution taxed income to the employees>
no, employer contributions are not taxed as income to the employees
Upon surrender of a life insurance policy, what portion of the cash value will be taxed
only the portion in excess of the premium paid
Upon surrender of a life insurance policy, what portion of the cash value will be taxed?
only the portion in excess of the premium paid
What is the primary purpose of 401(K) plan
provide retirement income
What are the three types of Social Security benefits
retirement, disability and survivors
what are the personal uses of life insurance
survivor protection,estate creation and conservation,cash accumulation and liquidity
When planning for survivor protection in life insurance, what needs to be considered>
the insured's current assets, liabilities and survivor's needs
If a retirement plan is qualified, what does that mean?
the plan has favorable tax treatment
What is the main purpose of the 7-pay Test?
to determine if a life insurance policy is a modified endowment contact
If an insured terminate membership in group life insurance, to what type of insurance can the insured convert the coverage
whole life
