Ch 4 Retirement and other Insurance concepts
What are the consequences of withdrawling funds from a traditional IRA prior to the age of 59 1/2?
10% penalty
Who is a third-party owner?
A policyowner who is not the insured
Who may contribute to an HR-10 plan?
A self-employed individual
What type of policy issue certificate of insurance to the insured?
Group policy
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Groups purpose, size, financial strength, and turnover
What qualified plan is suitable for the self-employed?
HR-10 Keogh
What are some examples of qualified plans?
IRA, 401(k), HR10 (Keogh), SEP, SIMPLE
What is a primary purpose of a 401K plan?
Provide retirement income
Which of the following concerning a simplified employee pension plan(SEP) is incorrect
Sep are suitable for large companies
An IRA purchased by a small employer to cover employees is known as a
Simplfied Employee Pension Plan
Who owns a group life insurance contract?
The employer (also known as the sponsor of the group)
When planning for survivor protection in life insurance, what needs to be considered?
The insured current assets, liabilities, and survivors needs
All of the following statements concerning the use of life insurance as an Executive Bonus are correct except
The policy is owned byt the company
Which of the following insurance arrangements will be appropriate for a parent bying a life insurance policy on a child where the parent is the policy owner?
Third party ownership
What is the purppose of Key Person Insurance
To lessen the risk of finacial loss because of death of a key employee
All of the following are uses of life insurance except
funding against companies general fincancial losses
What is the main purpose of the & pay test?
to determine if its a Modified Endowment Contract
group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is correct
100 percent participation are required in non-contributory plans
Group life insurance is a single policy written to provide coeverage to members of group. Which of the following containing group life is correct?
100% participation of members is required in non-contributory plan
When an employee terminates coverage under a group insurance policy, coverage continues in force for
31 days
An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)
403(b) TSA
In order to qualify for conversion from a group life policy that had 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
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
Employer contributions made to a qualified plan
Are subject to vesting requirements
A partneship buy sell agreement in which each partner purchases insurance on the life of each other partners is called
Cross purchase plan
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 tax
Why are dividends of life insurance polcies not taxable?
Dividends are not considered income tax for purposes; they are a return of unused premium
What required to qualify an individual to contribute to a tradtional IRA
Earned income
Who qualifies for tax sheltered annuities, or 403(b) plans?
Employee of non-profit organizations under section c (3) and employees of public school systems
In qualified plans, are employer contributions taxed as income to the employees?
No employer contributions are not taxed as income to the employers
Is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?
No, lump-sum benefits are received tax free.
Which type of retirement account does not require the owner to start taking distributions at age 72?
Roth IRA They can contrinbute regardless of account holders age
All of the following statment concerning an employer sponsored non qualified retirement plan are true
The employer can receive a tax deduction for any contributions made to the plan
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
The employer is the owner and the beneficiary
If a retirement plan is 'qualified', what does that mean?
The plan has favorable tax treatment
All of the following are characteristics of a group life insurance plan except
There is a reqirement to to prove insurablity on the part of the participants
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
If an insured terminates membership in group life insurance, to what type of coverage can the insured convert the coverage?
Whole life
What is the name of an overfunded life insurance policy?
a modified endowment contract (MEC)
Group life insurance policies are written as what type of insurance?
annually renewable term
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
attained age
What does liquidity mean in a life insurance policy?
availability of cash value
According to the taxation rules of life insurance policies, how are cash value increases taxed?
cash value growth is deferred
For a retirement plan to be qualified, it must be designed for whose benefit?
employees
All of the following statements are true regarding tax qualified annuities except
employer contributions are not taxable
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 advantagage of converting from group life insurance to individual coverage?
evidence of insurablility is not required
What type of policy is typically issued without proof of insurability?
group policy
In what form of payment must 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
Which of the following term means a calculation on the average number of months the insured is projected to live due to medical history and mortality factors
life expectancy
SIMPLE plans are available to groups of how many employees?
no more than 100
Upon surrender of a life insurance policy, what portion of the cash value will be taxed?
only the portion of excess in premium paid
All of the following statements are true regarding group insurance except
participants in the policy each receive a policy
What are the three types of social securities benefits?
retirement diability and surviors
What are the peronal uses of life insurance?
survivorship protection, estate creation and conservation, cash accumulation, and liquidity
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?
the insurer will pay the death benefit from the group policy to the beneficiary
