Life insurance
Which of the following statements best describes the purposes that annuities serve?
Annuities accumulate and/or distribute sums of money.
Which one of the following statements most correctly describes how interest-sensitive whole life and current assumption whole life insurance differ?
Current assumption policies guarantee minimum cash values while interest-sensitive policies guarantee the death charges and expenses.
an insured bought a 75,000 ten-year level term policy. which of the following statements about the insureds policy is NOT correct?
If the insured dies after ten years, only the policy's cash value will be paid to the beneficiary.
A married couple is insured under a joint life policy. The first spouse dies. What can the surviving spouse do with the policy?
The surviving spouse may convert the policy without proving insurability
Which statement about annuity death benefits is NOT correct?
Unlike a deferred annuity, If the owner or annuitant of a variable annuity dies during the accumulation period, a beneficiary does not receive as a death benefit an amount at least equal to that invested in the contract.
Which one of the following statements most correctly describes the transfer-for-value rule in life insurance taxation?
When life insurance policies are sold or transferred to another party for valuable consideration, the beneficiary may be subject to income tax when the death benefits are paid.
Which of the following individuals' lives is typically used in determining the monthly income amount that will be derived from an annuity?
annuitant
If an agent is performing actions in his day-to-day business dealings that are not stated in the agent's contract but are necessary to carry out his express authority, he is exercising what kind of authority?
implied
Annuity income payments are most commonly paid on what schedule?
monthly
the automatic premium loan APL provision does which of the following?
prevents a life insurance policy from lapsing if the policy owner fails to pay a premium.
An annuity owner has many options for receiving annuity income payments. What are these payout options generally called?
settlement options
Of the various life contingency income options, which option provides the largest monthly income payment for a given amount of annuity funds?
straight life income (also referred to as pure life income)
Julie is the beneficiary of her husband's $150,000 life insurance policy. When he dies, Julie chooses to receive payments of about $800 a month, or $9,600 a year, which will continue as long as she lives, whether she lives past her life expectancy or dies before it. Payments are to cease when she dies, whenever that may occur. Julie has chosen which of the following settlement options?
straight life income settlement option
Sam and Elena were married and had purchased a life insurance policy that covered both their lives. Sam died on June 1. One year later, Elena died, and the policy proceeds were paid to her son as beneficiary. Which type of policy did Sam and Elena own?
survivorship life
which on of the following types of insurance would an agent recommend for a married couple that wants the policy exclusively to provide funds to pay estate taxed and settlement costs when the second spouse dies?
survivorship life
Which of the following is NOT a party to an annuity?
the agent
A life insurance policy matures or endows when its guaranteed cash value equals its face amount. With an endowment contract, when does the policy endow?
well before age 120, usually at age 65
Under a joint life insurance policy, when does the insurer pay the death benefit?
when the first insured dies
all of the following are standard exclusions found in most policies, Except
Military service
Sam is planning to buy a deferred annuity. When will he select a settlement option?
He can choose the settlement option when the deferred contract annuitizes or when he buys the annuity
Wally annuitized his fixed annuity and now receives $1,800 each month. Of this amount, $1,500 represents his investment in the annuity, and $300 represents interest earnings. Which statement regarding the taxation of Wally's annuity payments is correct?
$300 is taxed as ordinary income.
Fred has an annuity valued at $150,000. His annuity purchase rate is $5 per $1,000 of accumulated value. Fred's income from this annuity will be what amount?
$750
Regarding qualified plan required minimum distributions (RMDs), the penalty tax that is assessed on any shortfall (i.e., the difference between the annual RMD amount and actual amount) is what amount?
50 percent
All of the following statements about annuity beneficiaries are correct, EXCEPT:
The beneficiary of an annuity is guaranteed to receive funds from the contract.
which statement about death benefits paid to a beneficiary under a group life insurance plan is NOT correct?
They are fully tax exempt
Why are endowment contracts NOT considered life insurance?
They endow before age 95
Settlement options for annuities are similar to those for life insurance in that they both can be based on which of the following?
a life contingency
Richard just retired at age 72 and owns a $500,000 life insurance policy. Because he no longer needs insurance protection, Richard would like to sell his policy and use the proceeds to travel during retirement. Which option would be best suited for this purpose?
a life settlement
Brian purchased a $1 million life insurance policy on his wife, Glenda, and named himself as beneficiary. Ten years later, Brian and Glenda divorced, and Glenda died shortly thereafter. Assuming no changes were made to the insurance contract, how will the proceeds be paid?
to Brian
Settlement options can be based on the length of the joint lives of which of the following?
two or more annuitants
What does a family life insurance policy offer?
whole life on the primary insured and term life insurance coverage on the spouse and each child to age 21
Which one of the following statements regarding a $100,000 level term-to-65 policy is most correct?
It gives $100,000 of coverage until the insured reaches age 65.
Which of the following statements best describes an annuity payout period?
It guarantees income will be paid for any period the owner wants.
the comprehensive vesting schedule for employer-qualified plans requires which of the following?
The plan must offer a way for employees to receive full rights to the employer contributions.
Anne turned 70 this year on march 15. by what date does she have to begin taking distributions from her retirement plan
april 1 next year
Once annuitized income payments begin, what are they generally considered?
irrevocable
Which of the following is not a commonly used joint life annuity settlement option?
joint and 200 percent survivor
Which of the following annuity settlement options will pay the annuitant an income for life no matter how long he lives, and will pay the beneficiary a death benefit equal to the difference between the total contract value at annuitization and the sum of payments made if the annuitant dies prematurely?
life income with guaranteed minimum (refund guarantee or life annuity certain)
As beneficiary of his wife's life insurance, Vince chooses a settlement option when his wife dies that provides income payments for the rest of Vince's lifetime. If Vince dies before receiving payments equal to the amount placed under the settlement option, the remainder goes to a contingent payee. What option has Vince chosen?
life income with refund
The life insurance Buyer's Guide helps prospective buyers determine all of the following EXCEPT:
most qualified insurer
What type of life insurance company is owned by the policy owners?
mutual company
with interest sensitive whole life insurance policies, insurers may change interest and premium rates after reviewing their investment experience. what is the process that insurers use to make these changes called?
Redetermination
Richard is the father of Danny, age seven. Richard has applied for a juvenile life insurance policy on his son's life. Which one of the following statements is most correct?
Richard will be the policyowner.
Your client has a $100,000 deferred annuity and wants to receive monthly payments for as long as he lives with a lump sum payment payable to the beneficiary should he die before the $100,000 is fully paid out. What settlement option would you recommend to achieve that objective?
life income with refund guarantee
Which of the following would be most appropriate for Haley, 55, if her primary objective is to ensure having an income she cannot outlive?
an annuity
Sam has heard that life insurance can be used to create an estate. When his agent meets with him to discuss the product, all of the following will be relevant to their discussion of Sam's objective EXCEPT:
Life insurance can be used to fund Sam's retirement.
A joint and survivor income option can allow the joint payees to choose a period certain. Suppose the joint payees choose a ten-year period certain. If the second of the joint payees dies before ten years of income payments are made, then what happens?
The insurer pays the contingent payee for the balance of the ten-year period.
Georges wife ellen, will receive income payments from george's annuity when he dies. under the annuity contract what is ellen
the beneficiary
Sue, an annuity owner, names her 15-year-old son and 10-year-old daughter as joint annuitants of her contract. Upon whose life (or lives) are income payments determined?
the joint life expectancy of Sue's son and daughter
which statement about endowment contracts is NOT correct
the pay a death benefit whether the insured dies during or after the endowment period
under a joint life insurance policy, when does the insurer pay the death benefit?
when the first insured dies
Diana pays 3,000 each year in premiums for her variable annuity and plans to annuitant the contract when she retires in ten years. which of the following statements is correct while Diana annuity is still in the accumulation phase?
Diana premiums payments will grow on a tax deffered basis
Which of the following best describes the difference between a disability income benefit rider and a waiver of premium rider?
A disability income benefit rider pays a monthly income to the insured if he or she becomes disabled. The waiver of premium rider waives the policy's premiums
Which of the following statements is true regarding types of insurance sales systems?
Direct response companies sell insurance directly to consumers through the mail or television advertising, without the use of a licensed producer.
A husband and wife, ages 49 and 51, earn $175,000 a year. Each also participates in a qualified plan at work and contributes to a traditional IRA each year. Which of the following statements is correct?
Any contributions that they make to a traditional IRA will not be tax deductible.
All of the following statements about the tax treatment of qualified employer retirement plans are correct EXCEPT
Employee contributions are made with after-tax dollars.
Which of the following statements best describes how employer-paid premiums for group life insurance are treated for tax purposes?
Employers can deduct premiums paid on a group life insurance plan
Social Security benefits are funded through payroll taxes, which are shown as what on a payroll statement?
FICA
Carl decides to surrender his life insurance policy. Which of the following most correctly describes the option(s) available to him?
He may choose from all settlement options that are available with the policy's death benefit.
Blake, age 39, just purchased a 20-pay whole life policy. What happens when he turns age 59?
He stops paying premiums.
Hillary purchased a fixed deferred annuity from ABC Insurers and named her daughter, Bess, as annuitant and her husband, Charles, as beneficiary. Which of these parties is specifically authorized to make withdrawals from the annuity?
Hillary
Funds collect within an annuity on a tax-deferred basis. What does this mean?
Interest earnings and growth are not taxable to the owner while they accumulate in the contract.
Stone owns a life insurance policy and has chosen the straight life income settlement option. He is the beneficiary. Which of the following best describes distribution of the policy proceeds?
Policy proceeds will be converted into payments that Stone will receive for as long as he lives.
Which statement about life insurance settlement options is NOT correct?
The beneficiary's choice of settlement option always takes precedence over the policyowner's choice.
ann is the beneficiary of an annuity owned by jim. jim intended to annuitize the contract at retirement but died shortly before retiring. what benefits will ann receive from the annuity
ann will recieve the annuity's accumulated value and may select a payout option
What are the two types of annuity payout options that are not based on a life contingency?
fixed period and fixed amount
Fred's wife was the primary beneficiary of his $750,000 life insurance policy. She received payments of approximately $900 a month in interest during her life, and at her death, their son received a lump-sum payment equal to $750,000. What settlement option was in effect at Fred's death?
interest-only option
insurers often set childrens term rider limits on the basis of which of the following?
issuing the rider a specified percentage of the base policy
John and Mary, a married couple, want to be assured a stable income to extend over both of their lives. They would likely choose which payout option?
joint and survivor income option
The FICA tax is split between an employee and employer, with the employee paying how much?
one-half (50 percent) of the total tax.
When an employee retires, what is the general tax treatment of the payments he or she receives under a deferred compensation plan?
taxable to the employee as he or she receives benefits
Jack bought a life insurance policy to make sure his surviving family members would have an income for ten years if he died prematurely. Five years after purchasing the policy, Jack died. Beginning with the date of his death, the policy began paying a level monthly benefit to his family for ten years. What type of policy did Jack buy?
ten-year family maintenance policy
Annuity settlement options may be based on all of the following, EXCEPT
the annuitant's life expectancy at the time of annuitization
A life insurance policy generally may not be backdated more than how many months before the date of the original application?
three