CHAPTER 4: Taxes, Retirement, and Other Insurance Concepts

What percentage of a company's employees must take part in a noncontributory group life plan? A. 0% B. 25% C. 75% D. 100%

D. 100%. If the employer pays all of the premium, all employees must be covered to avoid adverse selection.

In order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? A. 10 B. 1 C. 3 D. 5

D. 5. If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.

All of the following are characteristics of group life insurance EXCEPT A. Amount of coverage is determined according to nondiscriminatory rules. B. Individuals covered under the policy receive a certificate of insurance. C. Certificate holders may convert coverage to an individual policy without evidence of insurability. D. Premiums are determined by the age, sex and occupation of each individual certificate holder.

D. Premiums are determined by the age, sex, and occupation of each individual certificate holder.

Which of the following statements about group life is correct? A. The premiums are higher than in an individual policy because there is no medical exam. B. The group sponsor receives a Certificate of Insurance. C. The policy can be converted to an individual term insurance policy. D. The cost of coverage is based on the ratio of men and women in the group.

D. Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage on the average age of the group and the ratio of men to women.

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? A. The employer is the owner and the key employee is the beneficiary. B. The key employee is the owner and beneficiary. C. The key employee is the owner and the employer is the beneficiary. D. The employer is the owner and beneficiary.

D. The employer is the owner and beneficiary. With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.

All of the following would be eligible to establish a Keogh retirement plan EXCEPT A. The president and employee of a family corporation. B. A sole proprietor of a service station who employs four employees. C. A sole proprietor of film development store with no employees. D. A hairdresser who operates her business at her house.

A. Keogh plans are for self-employed individuals and their employees.

If an insured surrenders his life insurance policy, which statement is true regarding the clash value of the policy? A. It is taxable only if it exceeds the amounts paid for premiums by 50%. B. It is automatically taxable. C. It is only taxable if the cash value exceeds the amount paid for premiums. D. It is not consider to be taxable.

C. It is only taxable if the cash value exceeds the amount paid for premiums. The cash value of a surrender policy is only considered to be taxable as income if the cash value exceeds the amount of premiums paid for the policy.