Insurance study
Life insurance that covers an insured's whole life with level premiums paid of a limited time is called: Adjustable life Renewable term Limited pay life Joint life
Limited pay life
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the: Marital deduction Death benefits Section 1035 exchange Capital gains tax rate
Marital deduction
What kind of life insurance product covers children under their parent's policy? Family maintenance rider Term rider Family income rider Payor benefit
Term rider
In order to sell a (n)____ Life policy, a producer is required to register with financial Industry Regulatory Authority (FINRA). Variable adjustable straight term
Variable
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as: Adjustable life Graded premium life Variable life Modified whole life
Variable life
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called Joint life policy Endowment Variable universal life policy Universal life policy
Variable universal life policy
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? No deduction allowed $6000 $5000 $4000
$6000
Which statement is true regarding a variable whole life policy? -A minimum guaranteed death benefit is provided -it is a combination of an endowment and an increasing term policy -it's premiums and benefits are variable -it has guaranteed dividends
A minimum guaranteed death benefit is provided
A cost of living rider gives the insured: Tax incentives Monthly income Decreasing premiums Additional death benefits
Additional death benefits
A cost of living rider gives the insured: Tax incentives monthly income decreasing premiums additional death benefits
Additional death benefits
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of: Adherence assimilation aleatory adhesion
Adhesion
Q purchase is a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This is change of unequal values reflects which of the following insurance contract features? Aleatory adhesion unilateral consideration
Aleatory
Q purchases a $500,000 life insurance policy and pays $900 in premiums are ready for six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features? Aleatory Adhesion Unilateral Consideration
Aleatory
A policy loan is made possible by which of these life insurance policy features? Extended term provision Cash value provision Owners rights provision Consideration clause
Cash value provision
The Combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy Decreasing universal variable level
Decreasing
Credit life insurance is typically issued with which of the following types of coverage? Annual renewable term Decreasing term Individual whole life Group term
Decreasing term
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it? Modified whole life 20 pay life Decreasing term Endowment
Decreasing term
Which of these types of policies may not have the automatic premium loan provision attached to it? Modified whole life 20 pay life decreasing term endowment
Decreasing term
Additional coverage can be added to a Whole Life policy by adding a(n): Payor rider Accelerated benefit rider Decreasing term rider Automatic premium loan rider
Decreasing term rider
How are surrender charges deducted in a life policy with a rear end loaded provision? Deducted from the death benefit Deducted when the policy is discontinued Deducted from the policies cash value Deducted when assigned to another policy owner
Deducted when the policy is discontinued
P owns a $25,000 life policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P on? - straight life - modified life - whole life paid up at age 70 - endowment at age 70
Endowment at age 70
Which of these terms accurately defines an underwriters assessment of information on a life insurance application? Risk classification Warranty review Insurable interest Inspection report
Risk classification
What does a 401(k) plan generally provide to his participants? Tax-free distributions Salary deferral distributions Salary deferral contributions A defined retirement benefit
Salary deferral contributions
What type of life insurance are credit policies issued as? Whole variable term Universal
Term
Which of the following life insurance policies combined term insurance with an investment element? Increasing term Life decreasing term life universal life graded life
Universal life
Which of the following life insurance policies combined term insurance with an investment element? Increasing term life Decreasing term life Universal life Graded life
Universal life
Which of the following life insurance policies combined term insurance with an investment element? Increasing term life decreasing term life universal life graded life
Universal life
A producer MUST leave a buyer's guide with an applicant for which type of policy? Group life insurance Annuity Universal life insurance Credit life insurance
Universal life insurance
The free look provision begins: Upon the date of the sales presentation Upon receipt of the policy by the producer Upon receipt of the policy by the policy owner Upon the completion of the application
Upon receipt of the policy by the policy owner
A term life insurance policy matures: -Upon endowment of the contract -upon death of the insured -when the cash value equals the death benefit -upon the insured's death during the term of the policy
Upon the insured's death during the term of the policy
How long does an individual have to roll over funds from an IRA or qualified plan? 60 days 90 days 120 days no limit
60 days
All of the following are considered to be typical characteristics describing the nature of an insurance contract except Bilateral unilateral aleatory adhesion
Bilateral
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own? immediate fixed Quarterly flexible Flexible installment deferred Adjustable deferred
Flexible installment deferred
What is considered a valid reason for small businesses to ensure the lives of its major shareholders? -To provide an income for the surviving dependents -reduce the companies tax liability -to pay for final expenses -fund a buy sell agreement
Fund a buy sell agreement
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable? Increasing decreasing adjustable level
Level
Which of these are not an example of a nonforfeiture option? Extended term Reduced paid up Cash surrender Life income
Life income
A whole life insurance policy owner does not wish to continue making premium payments. Which of the following enables the policy owner to sell the policy for more than its cash value? Cash surrender Life settlement contract Buy sell arrangement 1031 exchange
Life settlement contract
An employee with $25,000 group term life coverage was recently fired. This employees group coverage may be converted to a: $125,000 individual whole life policy $25,000 modified whole life policy $25,000 individual term life policy $25,000 individual whole life policy
$25,000 individual whole life policy
Which of these actions is taken when a policy owner uses a life insurance policy as collateral for a bank loan? Revocable assignment beneficiary change irrevocable assignment collateral assignment
Collateral assignment
Which provision allows the policy owner to change a term life policy to a permanent one without providing proof of good health? Modification conversion exchange adjustable
Conversion
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: Inherent risk Commission rate Inflation factor Cost of insurance
Cost of insurance
And employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee? -distribution is subject to capital gains tax -distribution is subject to ordinary income tax -distribution is subject to a tax penalty -distribution is subject to federal income tax withholding
Distribution is subject to federal income tax withholding
All of these are considered sources of underwriting information about an applicant EXCEPT: Inspection report Credit report Rating services Medical information bureau
Rating services
The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors. Universal Graded Term Endowment
Universal
Which of the following life insurance policies combined term insurance with an investment Element? Increasing term life Decreasing term life Universal life Graded life
Universal life
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? -Premiums are normally not tax deductible -Cash dividends are normally not taxed -Entire cash surrender value is taxable -Proceeds are received tax free if there is a named beneficiary
Entire cash surrender value is taxable
What provision in a life insurance policy states that the application is considered part of the contract? Application provision policy exclusions provision entire contract provision incontestability provision
Entire contract provision
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level of risk. Which product should S be advised to purchase? Equity index insurance Endowment Graded whole life policy Return of premium policy
Equity index insurance
A universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, cost of insurance, and the Inherent risk commission rate inflation factor expense charges
Expense charges
D owns a whole life policy that was purchased 10 years ago. If the premium payment suddenly stop and D takes no additional action, which nonforfeiture option will the insurer likely proceed with ? Extended term Loan provision Reduced paid up Cash surrender
Extended term
Which federal law allows an insurer to obtain an inspection report on a potential insured? -medical information bureau act -freedom of information act -fair credit reporting act -medical information act
Fair credit reporting act
All of the following statements regarding a tax sheltered annuity are true except -income derived from the TSA is received income tax free -TSA's are available to public school employees -contributions to the TSA or tax deductible -interest earned by TSA is tax deferred
Income derived from the TSA is received income tax-free
Information obtained from a phone conversation to the proposed insured can be found in which of these reports? Agents report MIB report Inspection report Attending physicians report
Inspection report
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n) Installment refund annuity Joint refund annuity Straight refund annuity Equal value annuity
Installment refund annuity
A life insurance policy would be considered a wagering contract without: Insurable interest Premium payment Agent solicitation Constructive Delivery
Insurable interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: -all statements be warranties -insurable interest in the proposed insured -The agent complete a third-party application -all those involved be family related
Insurable interest in the proposed insured
All of these statements about the Waiver of Premium provision are correct EXCEPT -A waiting period must pass before becoming eligible for benefits -waiver of premium is available on both permanent and term insurance policies -insured must be eligible for Social Security disability for a claim to be accepted -insured must be totally disabled to qualify
Insured must be eligible for Social Security disability for claim to be accepted
Which of these needs is satisfied by Adjustable Life insurance? -insured's needs for level premiums -insured's needs for a flexible premium -insured's needs for flexible nonforfeiture option -insured's needs for level death benefit
Insured's need for flexible premiums
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n) Entire contract provision Consideration clause Insuring agreement Assignment agreement
Insuring agreement
A life insurance arrangement which circumvents insurable interest statutes is called? A contract of adhesion An indemnity contract Key person insurance Investor originated life insurance
Investor originated life insurance
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this? Endowment Graded premium life Straight life Modified Premium life
Modify Premium life
In an individual retirement account IRA rollover contributions are: Subject to capital gains tax Subject to ordinary income tax Partially limited by dollar amount Not limited by dollar amount
Not limited by dollar amount
Insurance policies are considered aleatory contracts because: -they are take it or leave it contract -both parties consent to the contract -performance is conditioned upon a future occurrence -contract is voidable upon proof of fraud
Performance is conditioned upon a future occurrence
Which of the following information is NOT required to be included in a whole life policy? Policy's loan interest rate Policy's guaranteed dividend table Policy's premium Policy's cash value table
Policies guaranteed dividend table
Which is true concerning a variable universal life policy? -Policy owner controls where the investments will go and select the amount of the premium payment -Policy owner has no say where the investment won't go back and choose the premium mode -The investment vehicle for this type of policy is held in the insurer's general portfolio -The death benefit can vary but the policy owner has no say in the premium amount paid
Policy owner controls where the investment will go and selects the amount of the premium payment
A limited pay life policy has: Graded death benefits No cash value Premium payments limited to a specific number of years Premium payments that are paid till age 100
Premium payments limited to a specific number of years
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive? Primary insurance amount Total taxes paid into FICA Number of dependents State of residence
Primary insurance amount
Which of these is not a type of agent authority? Express Implied Principal Apparent
Principal
A retirement plan that sets aside part of the community's net income for distributions to qualified employees is called a: Rollover plan 403B plan Profit sharing plan Salary reduction plan
Profit sharing plan
Whole life insurance is sometimes referred to as straight life what does the word straight indicate when using this phrase? -The incontestable period -The ability to borrow against the cash value -The grace period -The duration of premium payments
The duration of premium payments
Who is normally considered to be the owner of a 403B tax sheltered annuity? The 403B custodian The financial institution The employer The employee
The employee
