chapter 4

Who can make a fully deductible contribution to a traditional IRA?

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

when an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a

executive bonus.

An IRA purchased by a small employer to cover employees is known as a

simplified employee pension plan.

what is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee.

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.

An employees quits her job where she has a balance of $10,000 in her qualified plan. if she decides to do a direct transfer from her plan to a traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

$10,000, no tax consequence.

The premiums paid by the employer is a business life insurance policy are

Tax deductible by the employer.

Life insurance death proceeds are

Generally not taxed as income

which of the following is INCORRECT concerning a noncontributory group plan?

The employees receive individual policies.

All of the following are true of key person insurance EXCEPT

The plans is funded by permanent insurance only.

All of the following statements concerning the use of life insurance as an executive bonus are correct EXCEPT

The policy is owner by the company.

which of the following best defines the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy.

what is the name of the insured who enters into a viatical settlement?

Viator

a life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a

buy-sell agreement

All of the following are personal uses of life insurance except

buy-sell agreement.

what does "liquidity" refer to in a life insurance policy?

cash values can be borrowed at any time.

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

costs of training a replacement.

which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

life expectancy

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

premiums are not tax deductible as a business expense.

which of the following is the best reason to purchase life insurance rather than annuities?

to create an estate.

what is the number of credits required for fully insured status for social security disability benefits?

40

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a

cross-purchased plan.

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.