Xcel Solutions Life Insurance Chap 3
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
$6000
_________ of personal life insurance premiums is usually deductible for federal income tax purposes.
0%
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay life
The USA Patriot Act was enacted in:
2001
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):
Anti-Money Laundering violation
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation exclusion
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE?
Each partner owns a $500,000 policy on their partner's life
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in:
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Policy was returned within the free-look period, premium will be fully refunded
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K's estate if P dies within a specified time
T is covered by an Accidental Death and Dismemberment (AD&D policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as:
a representation
A Nonforfeiture clause gives the policyowner
guaranteed values even if the policy has lapsed
Variable Life products require a producer to
hold life insurance and security license
Which type of contract liquidates an estate through recurrent payments?
annuity
Using an existing life insurance policy's cash value to purchase another policy with the same insurer for the sole purpose of earning additional commissions is called
churning
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
Before a life policy is issued, which of these contract elements is necessary?
A signed application by the prospect
A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT
Change the policy's interest rate
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
Term insurance has which of the following characteristics?
Expires at the end of the policy period
A sole proprietor may use this plan ONLY if the employees of this business are included.
Keogh Pension Plan
Which of these do NOT constitute policy delivery?
Policy issued with a rating
The underwriting process involves all of these, EXCEPT for:
Policy loan
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Risk classification
What does a 401 (k) plan generally provide its participants?
Salary-deferral contributions
Which of these factors does NOT influence an applicant's need for life insurance?
Self-maintenance expenses
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight life
What kind of life insurance product covers children under their parent's policy?
Term rider
Which premium schedule results in the lowest cost to the policyowner?
annual
When can a policyowner change a revocable beneficiary?
anytime
Any changes made on an insurance application requires the initials of whom?
applicant
In a qualified retirement plan, the yearly contributions to an employee's account:
are restricted to maximum levels set by the IRS
A Whole Life insurance policyowner does NOT have the right to
change the grace period
In Georgia, which of the following is considered an Unfair Trade Practice?
coercion
A(n) term life policy is normally used when covering an insured's mortgage balance.
decreasing
Additional coverage can be added to a Whole Life policy by adding a(n):
decreasing term rider
A variable insurance policy:
does not guarantee a return on its investment accounts
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70
A policyowner's rights are limited under which beneficiary designation?
irrevocable
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
mandatory income tax withholding on the transfer amount
An example of rebating would be
offering a client something of value not stated in the contract in exchange for their business
B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will
pay the amount that the premium would have purchased at the correct age
Which of these is an element of a Variable Life policy?
A fixed, level premium
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
Which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum number of employees is required to participate
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n):
Accidental Death and Dismemberment rider (AD&D)
A policyowner may generate taxable income from which of the following Dividend Options?
Accumulation at interest
Before a life insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
At the time of application
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire Contract provision
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
What is being delivered during a policy delivery?
Insurance contract to the proposed insured
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured's contingent beneficiary
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:
Interest only
K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT
K will forfeit the right to use the automatic loan provision upon reinstatement
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole Life
Which statement is true regarding a minor beneficiary?
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
Which of the following documents must an agent submit to the replacing insurance company during the replacement of an existing life insurance policy?
Notice to existing and replacing insurers of intention to replace
The is authorized to assign a Life Insurance policy as collateral for a loan.
Policyowner
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?
Portion of the premiums paid for by the employer may be a tax deduction
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
All of these are considered sources of underwriting information about an applicant, EXCEPT:
Rating Services
Which of the following are Equity Indexed annuities typically invested in?
S&P 500
An immediate annuity consists of a:
Single Premium
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
A Return of Premium life insurance policy is:
Whole life and Increasing term
A Cost of Living rider gives the insured
additional death benefits
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the:
applicant's physician
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
The investment gains from a Universal Life Policy usually go toward:
cash value
The incontestable clause allows an insurer to:
contest a claim during the contestable period
D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D MUST
correct the information and have the prospect initial the change
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the
cost of insurance
Which of these is NOT a source of funding for Social Security benefits?
federal government
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
none
An agent would be guilty of rebating by
returning a portion of a premium as incentive to purchase insurance
A(n) beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.
revocable
The premiums paid by an employer for his employee's group life insurance are usually considered to be:
tax-deductible to the employer
A noncontributory group term life plan is characterized by:
the entire cost of the plan is paid for by the employer
A(n) Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
variable
In order to sell a(n) Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA).
variable
Which of these is NOT a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing term
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n):
Straight Life annuity
When the Commissioner examines an insurer's records, who pays for the costs associated with the examination?
The insurance company being examined
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage Is
conditional, depending on the insurer's underwriting guidelines
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:
The premiums can be lowered or raised, based on investment performance
