life insurance practice test.
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?
$3,000
The insured is also the policy owner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
A policy owner cancels his life policy but instructs the insurance company to transfer the cash value of the policy to an annunity. This nontaxable transaction is called a
1035 exchange
In a traditional IRA plan, at what age may the plan owner begin withdrawing finds without incurring a penalty?
59 1/2
Excess Contributions to a Roth IRA are subject to what tax penalty?
6%
If a company has simplified employee pension (SEP) plan, what type of plan is it?
A defined contribution plan for small business .
A substandard risk company to a standard risk would pay
A higher premium
The Medical Information Bureau (MIB) is
A source of medical information to alert insurers to adverse medical history.
What is the primary purpose of 401(k) plan?
Accumulation of retirement income
When an annuity is written, whose life expectancy is taken into account?
Annuitant
An agent actions show what kind of authority?
Apparent
All of the following person's who do not have an employer sponsored retirement plan would be eligible to set up contributions to a Traditional IRA EXCEPT
Arlene,age 72,a nurse
Which of the following is a characteristic of revocable beneficiary designation ?
Beneficiary may return control of policy to owner with written approval.
An insurance contract must contain all of the following week ends to be considered legally binding Except
Beneficiary's consent
which of the following is NOT true regarding an annuity certain?
Benefits stop at the annuitant's death.
Social security benefits are available for a surviving spouse until the youngest child reaches age 16. Benefits are later resumed when the surviving spouse reaches the retirement age. what is the period called during which the Surviving spouse does not received benefits?
Blackout period.
which of the following statements is is true of both the fixed - period and fixed-amount settlement options?
Both guarantee that the principal and interest will be fully paid out
All the following are non-forfeiture option in life insurance policies EXCEPT.
Cash Surrender Value.
A spouse receives $5,000 a month until the principle and interest on her husband"s life insurance policy have been paid out. Which settlement option did this beneficiary choose?
Cash payment
The 10% early withdrawal penalty from an IRA can be waived for...
Catastrophic medical expenses
If an applicant for insurance submits the application and pays the pret at the same time, the insurer must give which of the following to the applicant .
Conditional receipt.
When must insurable interest exist in life insurance?
Date of application
When the insured purchased a new home he wanted to purchase a life insurance policy that would protect his family against losing the home should he die before the mortgage was paid.
Decreasing term
An Individuals inherited a a large sum of money at age 40 and wanted to is it to provide a guaranteed income after his retirement at age 60. Which of the following types of annuities would best meet this need ?
Deferred
Which of the following terms is used to name nontaxable return of unused premiums?
Dividend
What qualities an individual to contribute to an IRA?
Earned income
For a retirement plan to be qualified, it must be designed for the benefit of
Employees
In an insurance contract, consideration refers to
Exchange of something of value by both parties
An Annuity that guarantees a minimum rate of return is known as a/an
Fixed annunity.
An insurance company that is found under the laws of another state is known as what type of insurer?
Foreign
In a direct rollover, how is the money transferred from one plan to new one?
From the trustee to the new trustee.
Conditions that increase the chances of an insured loss occurring are referred to as.
Hazards.
When would a misrepresentation on an insurance application be considered fraud?
If it is intentional and material.
Which of the following is true regarding term insurance?
If the insured dies after the end of the term, there is no death benefits to the beneficiary.
Under what circumstances will the contingent beneficiary receive the death benefits
If the primary beneficiary dies before the insured.
Which provision states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
Indemnity
All the following may have an insurable interest in the insured Except .
Insured's close friend.
When a beneficiary in a life insurance policy received payments consisting of both principal and interest portions, what will be taxed as income?
Interest only
Which of the following is true about the mandatory free-look period in a life insurance policy?
It commences when the policy is delivered.
If a retirement plan or annuity is "qualified",
It satisfies the requirements of the Internal Revenue Service for favorable tax treatment.
Which of the following is an IRS qualified retirement program for the self-employed
Keogh/HR-10
What does an Annuity protect the contract owner against?
Leaving beneficiaries without income.
Which of the following is an example of a limited-pay life policy?
Life Paid-up at Age 65
Which type of Annuity settlements stops when the annuitant dies?
Life annuity
In a single employer group plan, what is the name of a document that is issued to the
Master contract
Which of the following is NOT a standard exclusion in the insurance policies?
Military service
Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
Which of the following premium payment modes would result in the highest overall premium for life insurance?
Monthly
The approach to determining the amount of personal life insurance that applicant needs that considers such factors as the costs associated with death,costs of educating children, and costs of housing is called the
Needs approach
What is the requirement for a number of employees is a SIMPLE plan?
No more than 100
Because of an jury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium,yet the policy remained in force. The policy includes
Non-forfeiture options.
Generally, the premium paid for personal life insurance is
Not tax deductible
An insured submits the full premium along with a completed application for life insurance. Once the policy is issued, when does the coverage begin?
On the date of the application
If no receipt is issued at the time of application, a statement of good health is usually required at the time of
Policy
Mutual companies are owned by
Policyowners
All of the following are examples of risk of retention Except?
Premiums
An employer has sponsored a qualified retirement plan for it's employees where the employers will contribute money whenever a profit is realized. What is the called?
Profit-sharing plan
What of the the following is an example of an agent's fiduciary responsibilities?
Propmtly forwarding premiums to the insurer
Which of the following week due beost likely to start a tax-sheltered annuity
Public School teachers
Retirement plans can be broadly divided into which of the following categories?
Qualities and non qualified
Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking Insurance?
Race .
The insured pays $1,200 annually for her life insurance premium.This year, she applied to her next premium, this reducing it to 1,025. what dividend option has the insured chosen?
Reduced paid up my
A life insurance policy clause that prevents an insurance company from denying payment of the death claim after a specific period of time is known as the
Reinstatement clause
Which of the following features an insurance policy to remain in force for specific number of days beyond the premium due date?
Reinstatement provision
An annually renewable term policy
Renews each year with an increased premium
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
Require evidence of insurablility
Variable Insurance and variable annuities are regulated by
SEC,FINRA,and Departments of Insurance
Which of the following is an example of a no qualified retirement plan?
Section 457 deferred compensation
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities
which type of life insurance policies generates immediate cash value?
Single premium
An annunity begins payments to the annuitant one month after it is purchase. what type is it?
Single premium immediate annuity
An insurance policy that only requires a payment of premium at it's inception and provides Insurance protection for the life of the insured and endows at the insured's age 100, is called
Single premium whole life.
In insurance contracts, a warranty is a
Statement that must be true
Life insurance death benefits can be used to fund funeral and other expenses that could be other difficult to fund with a loss of the insured's income. Which term is most closely associated with this?
Survivor protection
In life insurance policies, cash value increases are
Tax deferred
For personal life insurance, the lump-sum death benefit is received
Tax free
Which of the following taxation principles applies to annuities
Tax-deferred accumulation
The time period during which an annuitant contributes to an annuity is called
The accumulation period.
Which method is used to determine the taxable portion of each annuity payment?
The exclusion ratio
life insurance companies use mortality tables to predict
The life expectancy of the proposed insured.
All of the following are true of key person Insurance Except.
The plan is funded by permanent insurance only.
Which of the following is true regarding a joint life policy?
The premium is based on the average age of the insureds.
Which of the following statements is true about Annuities?
They can provide a lifetime income
Annuities can be used for all of the following reasons EXCEPT
To create an estate
Which method of dealing g with risk is applied when a person purchase Insurance?
Transfer
Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?
Transfer of value .
Which division of an insurance company is responsible for the selection, evaluation, and classification of risks?
Underwriting.
A policy that allows the beneficiary to collect both the death benefits and cash value upon the death of the insured is
Universal Life,Option B.
The insurer must be able to reply on the statements in the application, and the insured must be able to reply on the insurer to pay valid claims.In the forming of an insurance contract, this is referred to as
Utmost good faith
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
Variable
Who acts on behalf of the principal?
agent
What type of life insurance is most commonly used for group plans?
annually renewable term
Annuities may be purchased with all of the following payment methods EXCEPT
deferred
Avoiding tax consequence when transferring assests from one IRA to another can be accomplished by which of the following?
direct rollover from one plan to the other.
which of the following is true regarding taxation of policy dividend?
dividends are not taxable.
Who bears the investment risk in a fixed annuity?
insurance company
Which of the following is NOT a requirement of qualities plan ?
it must be temporary.
All of the following are true regarding the guaranteed insurablility rider Except
it usually expires at the insured's age 40.
Which of the following has the right to surrender a deferred annuity contract ?
only the annuity owner
In order to reinstate a life insurance policy the insured must do all of the following EXCEPT
pay next year's premium in advance
when a death claim is submitted, the insurer discovered that the insured understand her age on the application for life policy . What action will the insurer take
pay the face amount of the policy if the death occurred after the incontestable period.
With a traditional whole life policy, the death benefit
remains constant over time
All others factor being equal, which of the following types of annuities will provide the highest monthly income?
straight life
Which of the following retirement plans is for nonprofit, charitable, educational or religious organizations?
tax- sheltered annunity 403(b)
Risk is insurance terminology refers to
the uncertainty of financial loss