Quiz Chapter 4

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time

A key person insurance policy can pay for which of the following?

Costs of training a replacement

when an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a

Executive bonus

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policyowner

All of the following are true of key person insurance EXCEPT

The plan is funded by permanent insurance only

what is the name of the insured who enters into a viatical settlement

Viator

Which of the following is NOT an example of a business use of LIfe Insurance

Workers comp

which of the following is an example of liquidity in a life insurance on the life of each of the other partners is called a

cross-purchase plan

What is the number of credits required for fully insured status for Social Security disability benefits?

40

who is a third-party owner?

A policyowner who is not the insured

Which of the following is true regarding taxation of dividends in participation policies?

Dividends are not taxable

if a life insurance policy develops cash value faster than a seven pay whole life contract, it become a

Modified endowment contract

Death benefits payable to a beneficiary under a life insurance policy are generally

Not subject to income taxation by the Federal Government

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

an ira purchased by a small employer to cover employees is known as a

Pension Plan

Which of the following is correct concerning the taxation of premioms in a key-person life insurance policy?

Premiums are not tax deductible as a business expense

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor Protection

An employee is isured under her emplyer's group life plan. If she terminates her group coverage, which of the following sttements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage

Which of the folllowing employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

Those who have been insured under the plan for at least 5 years

All of the following are example of third-party ownership EXCEPT

amn insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan

If a retirement plan or annuity is qualified, this means

it is approved by the IRS

Which of the following is the best reason to purchase life insurance rather than annuities

to create an estate