LIFE INSURANCE PART 3
If a person applies to become a life insurance producer, what is the minimum number of hours of prelicensing education that must be completed in a classroom? A 7.5 B 10 C 12.5 D 20
A 7.5
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is A A nonqualified annuity plan. B An executive annuity plan. C Subject to government standards. D Illegal.
A A nonqualified annuity plan.
f a company has a Simplified Employee Pension plan, what type of plan is it? A A qualified plan for a small business B The same as a 401(k) plan C The same as an IRA, with the same contribution limits D An undefined contribution plan for large businesses
A A qualified plan for a small business
Which of the following correctly describes controlled business? A Anytime more than 50% of the total premiums collected by a producer comes from themselves, his or her spouse, employer, or own business B A producer obtaining a license and never selling insurance C A producer obtaining a license for the purpose of selling to the general public D A producer obtaining a license for the purpose of selling 20% to his or herself and his or her spouse, 80% to the public
A Anytime more than 50% of the total premiums collected by a producer comes from themselves, his or her spouse, employer, or own business
Life insurance death proceeds are A Generally not taxed as income. B Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. C Taxed as a capital gain. D Taxed as ordinary income.
A Generally not taxed as income.
Which of the following is an eligibility requirement for all Social Security Disability Income benefits? A Have attained fully insured status B Be disabled for at least 1 year C Have permanent kidney failure D Be at least age 50
A Have attained fully insured status
The Life Solicitation Rule applies to which of the following? A Individual life B Variable life C Annuities D Credit life
A Individual life
Which of the following defines the term controlled business? A Insurance written on the interests of the producer who solicits a policy B Insurance policies regulated by the State Department of Insurance C Lines of authority for which a producer is licensed D Transactions that are subject to the examination by the Director
A Insurance written on the interests of the producer who solicits a policy
Which of the following is an IRS qualified retirement program for the self-employed? A Keogh plan B Split dollar C Buy-sell agreement D 401(k) plan
A Keogh plan
The Replacement Regulation minimizes A Misrepresentation. B The need for replacement. C Unnecessary replacement. D Illegal policy renewal.
A Misrepresentation.
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an A Modified endowment contract. B Accelerated benefit policy. C Endowment. D Nonqualified annuity.
A Modified endowment contract.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? A Premiums are not tax deductible as a business expense. B Premiums are tax deductible by the key employee. C Premiums are tax deductible as a business expense. D Premiums are taxable to the employee.
A Premiums are not tax deductible as a business expense.
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a A Settlement option. B Nontaxable exchange. C Nonforfeiture option. D Rollover.
A Settlement option.
60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? A The amount of the distribution is reduced by the amount of a 20% withholding tax. B No taxes are due since the plan participant is over age 59 1/2. C There is a 10% early withdrawal penalty. D The amount distributed is subject to ordinary income tax.
A The amount of the distribution is reduced by the amount of a 20% withholding tax.
Which of the following best describes the tax advantage of a qualified retirement plan? A The earnings in a qualified plan accumulate tax deferred. B Distributions prior to age 59½ are tax deductible. C Employer contributions are tax deductible, as long as employee earnings are considered taxable income. D Employer contributions are taxed as income to the employee.
A The earnings in a qualified plan accumulate tax deferred.
At what annual rate does interest on life insurance proceeds accrue from the date of death of the insured? A 5% B 10% C12% D15%
B 10%
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? A 4 credits B 6 credits C 10 credits D 40 credits
B 6 credits
Who is a third-party owner? A An irrevocable beneficiary B A policyowner who is not the insured C An insurer who issues a policy for two people D An employee in a group policy
B A policyowner who is not the insured
To which of the following policies would the state regulation on illustrations NOT apply? A A term policy B An individual variable life policy C A whole life policy with a guaranteed death benefit of $20,000 D A group life policy
B An individual variable life policy
A tax-sheltered annuity is a special tax-favored retirement plan available to A Certain groups depending on factors such as race, gender, and age. B Certain groups of employees only. C Anyone. D Certain age groups only.
B Certain groups of employees only.
All of the following are prohibited practices EXCEPT A Refusing to insure an applicant solely because of a military status. B Denying a claim after an investigation. C Permitting rate distinctions based on the applicant's disability. D Discrimination based on national origin.
B Denying a claim after an investigation.
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? A Company is the owner, and the company pays the premium. B Executive is the owner, and the executive pays the premium. C Company is the owner, but the executive pays the premium. D Board of directors is the owner, and the board of directors pays the premium.
B Executive is the owner, and the executive pays the premium.
All of the following are business uses of life insurance EXCEPT A Funding business continuation agreements. B Funding against company's general financial loss. C Compensating executives. D Funding against financial loss caused by the death of a key employee.
B Funding against company's general financial loss.
Traditional IRA contributions are tax deductible based on which of the following? A IRA limit B Owner's income C How long the plan has been in force D Owner's age
B Owner's income
In which of the following instances would the premium be tax deductible? A Premiums paid by an employer on the life of a key person B Premiums paid by an employer on a $30,000 group term life insurance plan for employees C Premiums paid by an individual on his/her own life insurance D Premiums paid by a mother on her son's policy
B Premiums paid by an employer on a $30,000 group term life insurance plan for employees
Under standard circumstances, at what point should a Buyer's Guide be distributed to a prospective buyer? A At the time of acceptance B Prior to the initial premium C During the initial premium-paying period D At the time of application
B Prior to the initial premium
Which of the following applicants would NOT qualify for a Keogh Plan? A Someone who works for a self-employed individual B Someone who works 400 hours per year C Someone who has been employed for more than 12 months D Someone who is over 25 years of age
B Someone who works 400 hours per year
All of the following would be different between qualified and nonqualified retirement plans EXCEPT A IRS approval requirements B Taxation on accumulation C Taxation of withdrawals D Taxation of contributions
B Taxation on accumulation
All of the following are correct regarding misrepresentation EXCEPT A Misleading advertisements are considered misrepresentations. B The fines for misrepresentation range from $50 to $1,000. C The fines for misrepresentation range from $200 up to $10,000. D Misrepresentation includes the guarantee of dividends.
B The fines for misrepresentation range from $50 to $1,000.
An applicant receives a temporary insurance producer license. After 80 days, the owner of the insurance company decides to sell the business. Which of the following is TRUE? A The Director will assess the case and make the ultimate decision. B The license will automatically terminate. C The license can be applied elsewhere. D The license may be converted to a permanent producer license.
B The license will automatically terminate.
Which of the following is correct regarding the Director's ability to revoke or suspend a producer's license? A The producer may not lose their license for conviction of any felony. B The producer must be given the reason, in writing for the nonrenewal, suspension, or denial of a license, and has the right to request a hearing within 30 days. C The producer will not lose a license for failure to repay student loans owed to the Illinois Student Assistance Commission. D The producer may lose their license without a hearing.
B The producer must be given the reason, in writing for the nonrenewal, suspension, or denial of a license, and has the right to request a hearing within 30 days.
Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? A There is a 10% penalty for early distribution of the death benefit. B They are tax free to terminally ill insured. C They are always taxable to chronically ill insured. D They are always taxed.
B They are tax free to terminally ill insured.
Which of the following is the best reason to purchase life insurance rather than an annuity? A To liquidate a sum of money over a lifetime B To create an estate C To liquidate a sum of money over a period of years D To create regular income payments
B To create an estate
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? A$7,000 B$3,000 C$13,000 D$10,000
B$3,000
The Replacement Regulation does NOT apply to situations in which the total existing coverage to be replaced represents less than how much of the face amount? A$2,000 B$5,000 C$8,000 D$10,000
B$5,000
How long must an insurer's advertisements be kept on file? A 2 years B 4 years C 7 years D Permanently
B. 4 years
What is the maximum percentage of the face amount of a life insurance policy that can be paid in an acceleration of benefits? A25% B50% C75% D100%
C 75%
Who can make a fully deductible contribution to a traditional IRA? A Someone making contributions to an educational IRA B A person whose contributions are funded by a return on investment C An individual not covered by an employer-sponsored plan who has earned income D Anybody; all IRA contributions are fully deductible regardless of income level
C An individual not covered by an employer-sponsored plan who has earned income
Which of the following statements concerning buy-sell agreements is true? A Benefits received are considered income taxable. B Buy-sell agreements pay in the event of a medical emergency. C Buy-sell agreements are normally funded with a life insurance policy. D Premiums paid are deductible as a business expense.
C Buy-sell agreements are normally funded with a life insurance policy.
Which of the following is NOT an exclusion to the requirement stating that no insurer may recommend the purchase of an annuity if the recommendation results in an insurance transaction unless the recommendation is suitable for the consumer? A Government or church plans B Prepaid funeral plans C Contracts designed for senior citizens D Deferred compensation plans
C Contracts designed for senior citizens
Which of the following terms is used to name the nontaxed return of unused premiums? A Interest B Surrender C Dividend D Premium return
C Dividend
Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose A 403(b) plan. B 401(k) plan. C HR-10 (Keogh Plan). D Section 457 Deferred Compensation Plan.
C HR-10 (Keogh Plan).
The Director must find all of the following to be true of a viatical supplement provider applicant before a license will be issued EXCEPT A The applicant has paid the fee. B The applicant possesses a good business reputation. C The applicant posts a bond with the Department of Insurance. D The applicant has provided a detailed plan of operation.
C The applicant posts a bond with the Department of Insurance.
What is the maximum fine for a violation of a cease and desist order? A$100 B$500 C$1,000 D$5,000
C$1,000
What is the resident producer license fee payable once every two years? A$50 B$105 C$215 D$250
C$215
An employee 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? A $8,000, no tax consequence B $8,000, tax on growth only C $10,000, tax on growth only D $10,000, no tax consequence
D $10,000, no tax consequence
In the state of Illinois, a viatical settlement contract must contain an unconditional right to cancel. How long does this right remain in effect? A 15 days from the date the contract is delivered B 30 days from the receipt of the viatical settlement proceeds C 10 days from the date the contract is delivered D 30 days from the date the contract is executed
D 30 days from the date the contract is executed
What is the number of credits required for fully insured status for Social Security disability benefits? A 4 B 10 C 30 D 40
D 40
Who can make a fully deductible contribution to a traditional IRA? A Anybody; all IRA contributions are fully deductible regardless of income level B Someone making contributions to an educational IRA C A person whose contributions are funded by a return on investment D An individual not covered by an employer-sponsored plan who has earned income
D An individual not covered by an employer-sponsored plan who has earned income
Each year a license viatical settlement provider must file with the Director a(n) A Warranty Guarantee. B Grievance. C Viatical agreement. D Annual statement.
D Annual statement.
The necessary qualifications for obtaining a producer's license in Illinois include all of the following EXCEPT A Be considered competent and trustworthy. B Have completed an approved prelicensing course. C Have a good business reputation. D Be at least 21 years of age.
D Be at least 21 years of age.
A legally acceptable attempt by an existing insurer to dissuade a current policyowner from the replacement of existing life insurance is called A Solicitation. B Rebating. C Retention. D Conservation.
D Conservation.
In group life policies, a certificate of insurance is given to A The group sponsor. B The insurance producer. C The policyholder to keep on file. D Each insured person.
D Each insured person.
How often does a viatical settlement provider's license expire? A Every 2 years B Every 3 years C Every 5 years D Every year
D Every year
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true? A He will have to pay a penalty regardless of his age. B He will not have to pay a penalty, regardless of his age. C He cannot withdraw money from his MEC before age 59½. D He will have to pay a penalty if he is younger than 59½.
D He will have to pay a penalty if he is younger than 59½.
If a licensee charges any fee separate from a commission off of the insured's premium, and if the fee exceeds 10% of the premium's value, what must the licensee obtain? A Director's permission B Special tax form C Premium Fund Trust form D Insured's signature
D Insured's signature
Which of the following best describes a misrepresentation? A Making a deceptive or untrue statement about a person engaged in the insurance business B Making a maliciously critical statement that is intended to injure another person C Discriminating among individuals of the same insuring class D Issuing sales material with exaggerated statements about policy benefits
D Issuing sales material with exaggerated statements about policy benefits
Duties of the replacing insurer include all of the following EXCEPT A Make sure that the producer signs the Notice. B Maintain records related to replacement for 3 years. C Send to the existing insurer, within three days of receiving the replacement application, the Notice Regarding Proposed Replacement of Life Insurance or Annuity. D Keep records related to replacement for at least 5 years.
D Keep records related to replacement for at least 5 years.
Ronald is buying life insurance policies. He is unclear which one to buy, and his insurer explains the costs of similar plans, in addition to their basic features. Which rule requires the insurer to disclose such information? A Insurance Disclosure Rule B Informational Rule C Policy Information Rule D Life Solicitation Rule
D Life Solicitation Rule
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of A Concealment. B Unfair claim practice. C Rebating. D Misrepresentation.
D Misrepresentation.
What is the official name for the Social Security program? A Social Insurance Program B Defined Benefit Retirement Insurance C Qualified Pension Plan D Old Age Survivors Disability Insurance
D Old Age Survivors Disability Insurance
All policy applications must identify which of the following? A Conditions of acceptance B MIB C Director D Producer who solicited the applicant's business
D Producer who solicited the applicant's business
A transaction where new life insurance is purchased, and as part of the transaction, existing life insurance is lapsed or surrendered, is known as A Conversion. B Conservation. C Renewal. D Replacement.
D Replacement.
In order for a firm to maintain its registration as a legal insurance company, what must it do? A Nothing. Once a firm is registered with the Director, there is nothing that an insurer must do in order to maintain the registration. B Submit registration application annually C Pass a semi-annual inspection for the first 2 years D Submit a biennial fee to the Director
D Submit a biennial fee to the Director
A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the disclosure regulation? A Disclosure regulation does not apply to limited insurance representatives. B Disclosure regulation does not apply to group insurance. C The name of the representative must be displayed on each certificate of insurance. D The representative's name and signature must appear on the master policy.
D The representative's name and signature must appear on the master policy.
All of the following are characteristics of a group life insurance plan EXCEPT A The participants receive a Certificate of Insurance as their proof of insurance. B A minimum number of participants is required in order to underwrite the plan. C The cost of the plan is determined by the average age of the group. D There is a requirement to prove insurability on the part of the participants.
D There is a requirement to prove insurability on the part of the participants.
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? A An irrevocable beneficiary B A buy-sell agreement C Family term rider D Third-party ownership
D Third-party ownership