A.D. Banker Ch. 6
Under an Industrial or Home Service Contract, what is normally the face amount of the policy?
$1,000 or less
ABC Enterprises is worth $300,000. There are 3 shareholders and each shareholder is an equal owner of the company. If they establish an entity buy-sell agreement, the entity would have to buy policies in the amount of $____________ on each of the owners.
$100,000
A partnership involving four equal partners is valued at $1,800,000. Under a Cross Purchase Plan, the amount of the policy on the life of each partner would be:
$150,000
The Social Security blackout period for surviving spouses begins when the youngest child reaches age ______, and ends when the surviving spouse reaches age ______.
16/60
Generally, children receive Social Security Survivor Benefits until age ________.
18
The Social Security Survivor Benefit covers children to age ______ and may continue coverage to age ______ if enrolled in an accredited elementary or secondary school.
18/19
As part of Social Security benefits, a one-time payment of $_______ may be made paid to a surviving spouse after a taxpayer's death.
255
T has some heart health issues, but needs some additional life insurance coverage. What options should T consider?
A group life insurance plan
Examples of third-party ownership include all of the following, except:
An Adjustable Life policy bought by Sam on Sam
Which of the persons or entities listed below would have an insurable interest in an unrelated individual?
An employer on a Key Employee
Which of the following concerning Noncontributory Group Life insurance is FALSE?
An employer pays 75% of the premium
Which of the following is truly a Key Person (Key Employee)?
An executive sales manager
Open enrollment periods are offered on a(n) ______ basis that allows individuals to enroll without evidence of insurability or to make changes.
Annual
Group Life Insurance is usually written as:
Annual renewable term
What is the minimum requirement for currently insured status under the Social Security system?
At least 6 credits earned in the 13 calendar quarters prior to death or disability
With a Contributory Group Life Plan, what percentage of the employees must participate?
At least 75%
An agreement that establishes a price with the intent to purchase the assets of a business should one of the parties to the agreement predeceases the other is called a ___________.
Buy-Sell Agreement
An individual can make changes to their group life insurance plan at any time for any one of the following reasons, except:
Changing health insurance carriers and deductibles
All of the following are typically what key employee life insurance proceeds are used for, except to:
Close down the business
Who is generally named as the beneficiary when a credit life insurance policy is issued?
Creditor
________ Insured under Social Security means that a worker has at least 6 work credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.
Currently
An individual has secured a $12,000 loan from the bank to purchase a boat, which is scheduled for repayment in monthly installments over 48 months. Which life insurance would be most efficient at protecting the lender should the borrower die prior to retiring the debt?
Decreasing Term
Credit Life insurance is usually what type?
Decreasing Term
Key Person Life Insurance is written for the benefit of the ______.
Employer
Under Social Security, a worker needs 10 years of work to be considered ________ insured.
Fully
For those individuals who have health issues, which of the following would be an insurance plan to consider?
Group
In which market are Certificates of Insurance issued to insured individuals?
Group
In those instances in which the death of a valued employee could cause financial hardship for a company, the company might acquire additional funds through which type of coverage?
Key Person
The proceeds from a _________ plan provide the necessary funds to recruit, hire, and train a replacement employee.
Key employee
Buy-Sell agreements are used for all of the following entities, except:
Large Public Corporations
All of the following are advantages of having a Buy-Sell Agreement in place, except:
Premiums are tax-deductible
The 31 days in which the employee may change his/her group policy to an individual policy upon termination and without evidence of insurability, is known as:
The Conversion Period
Ultimately, who determines if a life insurance policy with an owner other than the insured will be issued?
The insurer
A Credit Life Policy will be cancelled if:
The loan is paid off or refinanced
Group life insurance is a contract between what parties?
The sponsor and the insurer
Industrial insurance is also known as:
home service
Social Security pays an eligible surviving spouse (or minor child) a one-time benefit upon the death of a covered worker. Which of the following is the amount of that benefit?
$255
Carla finances the purchase of a new car. The cost is $30,000. How much credit life insurance can be issued to cover this loan?
$30,000
The LMC Partnership has 3 partners and is concerned about what would happen to their $300,000 business if one of the partners should die. If they consider a buy-sell agreement, then each partner would have to buy a policy in the amount of $__________ on the other partners.
$50,000
L is no longer eligible for the employer's $50,000 group life insurance plan. L dies 28 days later without sending in the required conversion paperwork. What will their beneficiaries receive?
$50,000, less any premiums due
To be fully insured for Social Security, generally a person must have worked and paid into the Social Security system for a minimum of ______ years.
10
Examples of third-party ownership include all of the following, except:
A person buying a policy on themselves
The underwriter's greatest concern when underwriting a group plan is ____________.
Adverse selection
A(n) _________ plan calls for the business to purchase life insurance policies on each of the business owners.
Entity
Which of the following types of buy-sell agreements provides for a business to purchase a life insurance policy on each business partner?
Entity Plan
The __________ allows an insurer to pay death benefits anyone it deems to be entitled in the absence of a designated beneficiary.
Facility of Payment Clause
All of the following are true about a buy/sell agreement, except:
It can only be funded with term life insurance
To help protect against ___________, group plans have a probationary period set by the group sponsor.
Preexisting conditions and immediate claims
All are correct statements concerning noncontributory group life, except:
Premiums are calculated by underwriting each individual in the group
All of the following are correct regarding Key Employee Life Insurance, except:
Premiums are deducted from the employee's salary
A mandatory participation rate for noncontributory group plans is designed to:
Reduce adverse selection
The primary categories of Social Security Benefits provided are:
Retirement, Death, and Survivor
____________ individuals pay a FICA tax amount equal to the total of an employer and employee payment.
Self-employed
Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except:
She will be converting her group term benefit to an individual term benefit
Group life insures a group of people under a _____________.
Single contract
Which of the following is a major risk to an employee covered under an employer's group life insurance plan?
The sponsor can elect to discontinue the plan
The Social Security Death Benefit is payable to the ____________.
The surviving spouse
Which of the following is a likely outcome if a buy-sell agreement in a two person partnership is not in place when one of the partners dies?
The surviving spouse of the deceased becomes the other partner
A grandparent purchases a life insurance policy on a granddaughter this is an example of _________.
Third-Party Ownership
How is the funding for Social Security provided?
Through FICA taxes that are paid by both employers and employees
All of the following regarding credit life are true, except:
Usually the creditor pays the premium
When is a cross purchase buy-sell agreement plan used?
When parties purchase life insurance on each other
When is an entity buy-sell agreement plan used?
When the entity buys life insurance on each of the owners
Franchise insurance is also know as _________ insurance.
Wholesale
Franchise plans are also known as:
Wholesale plans
The advantage of an insurance funded buy-sell agreement is:
It is a legally enforceable agreement, which pre-establishes the value of the business, and provides the funds for an efficient method of transferring the deceased's business interest
A buy-sell agreement can be used in all of the following businesses, except:
Large publicly held corporations
Individuals who do not enroll during the initial enrollment period are considered ___________ enrollees.
Late
Buy-sell agreement life insurance premiums are:
Not deductible and proceeds are income tax free
A key person is typically all of the following, except:
Not directly involved in sales, production, or service
The Social Security Survivor Benefit is computed using which of the following?
PIA
After the blackout period has ended, the widow or widower may receive a Social Security income benefit based on the ___________.
PIA of the deceased spouse
To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor.
Probationary
All of the following are characteristics of Home Service (Industrial) Insurance, except:
The Grace Period is 10 days
Which of the following statements is FALSE regarding Credit Life Insurance?
The amount of coverage is dependent upon the duration of the loan
Which of the following is true in regard to an Entity Purchase Plan?
The business enters into an agreement to purchase the deceased's interest in the business
With credit life, who is normally the policyowner and beneficiary?
The creditor
All of the following are characteristics of Credit Life Insurance, except:
The debtor generally is both policyowner and beneficiary
An employee who is covered under an employer group life insurance plan may assume all of the following are TRUE of the opportunity of conversion, except:
The employee chooses which type of insurance to convert to
How are employee FICA taxes collected?
The employer withholds the employee's tax and pays it along with the employer's portion
If a buy-sell agreement were not in place, all of the following could happen, except:
The estate transfer may be sped up due to emergency business liquidation
All of the following are true regarding industrial life insurance, except:
The grace period is 1 week
When an insurer wishes to implement changes to a group life policy, whom must it notify?
The group sponsor
Which of the following meets the criterion for being a natural group for group life insurance purposes?
The group was formed for a purpose other than for procuring or reducing the cost of insurance
Which of the following is the least important when it comes to determining the cost of the group life insurance plan?
The health of each member of the group
In terms of planning out a company's budget, what must be taken into consideration if a group life insurance plan is in place?
The insurer can increase the premium at renewal
A consumer should know the following aspects of a group insurance policy, except:
The plan sponsor has a say in the form and amount of coverage available to plan participants
All of the following are correct regarding Key Person Insurance, except:
The policy primarily insures the employee's retirement plan
Who are the parties in a third-party life insurance ownership situation?
The policyowner, the insured, and the insurer
If an employee does not enroll during open enrollment and they still want coverage, what happens?
They must provide proof of insurability
The widow or widower's Social Security blackout period lasts until a surviving, non-remarried spouse reaches age ________.
60
The Social Security System is funded through:
Federal Insurance Contribution Act (FICA) taxes
All of the following are characteristics of Group Life Insurance, except:
Group is typically written utilizing Permanent Insurance
Each of the following pertaining to group life insurance is true, except:
Group members are required to prove insurability
When an underwriter evaluates the risks presented with a particular group life application, which of the following is considered the most important?
Group size, turnover, average age and purpose of the group
Proceeds from a buy-sell agreement are received ___________.
Income tax free
All of the following are true regarding credit life, except:
The amount of coverage can exceed the debt
The arrangement under a Buy-Sell Agreement in which each party purchases insurance on the life of his/her partner(s) is called a:
Cross Purchase Plan
Which of the following policies is issued without medical exams required?
Industrial Life
Under an Entity Purchase Plan form of a Buy-Sell Agreement, the business is all of the following, except:
Insured
Which of the following is NOT an example of Third-Party Ownership?
A business owner buying a life policy on his own life
All of the following are examples of third-party ownership, except:
A mother buys a policy for herself and names her son as beneficiary
Which of the following best describes Third-Party Ownership?
A policy owned by one person insuring the life of another person
To be included in an employer-sponsored group plan, an employee must be employed full time by any of the following, except:
A silent partner
With a Noncontributory Group Life Plan, what percentage of the employer's employees must participate?
100%
XYZ Corporation has 59 employees. The company decides to purchase a group life policy and will pay the total premium. What percentage of employees must participate under this arrangement?
100%
To be considered fully insured under Social Security, a worker generally needs how many quarter credits?
40
A partnership has 3 partners who each have an equal ownership interest in their $3,000,000 business. How many policies would have to be purchased under a traditional cross purchase buy-sell agreement plan?
6
To be Currently Insured under Social Security, a worker must have at least _____ quarter credits during the 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or reaches retirement age.
6
The lowest monthly Social Security retirement benefit would occur if started at age _______.
62
A Social Security retirement benefit recipient will receive the greatest benefit starting at which of the following ages?
65
Which of the following is a requirement in order for a third-party ownership policy to be issued by a life insurance company?
Insurable interest must exist between the policyowner and the insured
