Retirement and other insurance concepts

Question 8 of 15 All of the following would be different between qualified and nonqualified retirement plans EXCEPT ATaxation on accumulation BTaxation of withdrawals CTaxation of contributions DIRS approval requirements

A.

Question 11 of 15 If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy? AIt is only taxable if the cash value exceeds the amount paid for premiums. BIt is not considered to be taxable. CIt is taxable only if it exceeds the amounts paid for premiums by 50%. DIt is automatically taxable.

A.

Question 11 of 15 Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? AWithdrawals are not taxable. BDistributions before age 59 1/2 incur a 10% penalty on policy gains. CPolicy loans are taxable distributions. DAccumulations are tax deferred.

A.

Question 3 of 15 What is the official name for the Social Security program? AOld Age Survivors Disability Insurance BSocial Insurance Program CDefined Benefit Retirement Insurance DQualified Pension Plan

A.

Question 9 of 15 Who is a third-party owner? AAn irrevocable beneficiary BA policyowner who is not the insured CAn insurer who issues a policy for two people DAn employee in a group policy

B.

Question 12 of 15 In group life policies, a certificate of insurance is given to AThe insurance producer. BThe policyholder to keep on file. CEach insured person. DThe group sponsor.

C.

Question 12 of 15 Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? AThe key employee is the owner and beneficiary. BThe key employee is the owner and the employer is the beneficiary. CThe employer is the owner and beneficiary. DThe employer is the owner and the key employee is the beneficiary.

C.

Question 1 of 15 A tax-sheltered annuity is a special tax-favored retirement plan available to AAnyone. BCertain age groups only. CCertain groups depending on factors such as race, gender, and age. DCertain groups of employees only.

D.

Question 1 of 15 Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? AMortality rate BRisk exposure CMorbidity DLife expectancy

D.

Question 10 of 15 What is the number of credits required for fully insured status for Social Security disability benefits? A4 B10 C30 D40

D.

Question 13 of 15 In life insurance policies, cash value increases AAre only taxed when the owner reaches age 65. BGrow tax deferred. CAre income taxable immediately. DAre taxed annually.

B.

Question 5 of 15 For a retirement plan to be qualified, it must be designed for the benefit of AIRS. BEmployees. CKey employee. DEmployer.

B.

Question 10 of 15 An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable? A$50,000 B$18,000 C$15,000 D$3,000

D.

Question 13 of 15 Which of the following statements concerning buy-sell agreements is true? APremiums paid are deductible as a business expense. BBenefits received are considered income taxable. CBuy-sell agreements pay in the event of a medical emergency. DBuy-sell agreements are normally funded with a life insurance policy.

D.

Question 2 of 15 An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his AExperience Rating. BGroup rate. CInsurer's scheduled rate. DAttained age.

D.

Question 2 of 15 In group life policies, a certificate of insurance is given to AThe group sponsor. BThe insurance producer. CThe policyholder to keep on file. DEach insured person.

D.

Question 2 of 15 Which of the following best describes the tax advantage of a qualified retirement plan? ADistributions prior to age 59½ are tax deductible. BEmployer contributions are tax deductible, as long as employee earnings are considered taxable income. CEmployer contributions are taxed as income to the employee. DThe earnings in a qualified plan accumulate tax deferred.

D.

Question 4 of 15 What percentage of a company's employees must take part in a noncontributory group life plan? A0% B25% C75% D100%

D.

Question 6 of 15 What type of life insurance is most commonly used for group plans? AWhole life BFlexible premium whole life CDecreasing term DAnnually renewable term

D.

Question 14 of 15 What is the purpose of key person insurance? ATo insure retirement benefits are available to all key employees BTo maintain an account that insures the owner of a company remains solvent CTo lessen the risk of financial loss because of the death of a key employee DTo provide health insurance to the families of key employees

C.

Question 3 of 15 Which of the following is an eligibility requirement for all Social Security Disability Income benefits? AHave attained fully insured status BBe disabled for at least 1 year CHave permanent kidney failure DBe at least age 50

A.

Question 3 of 15 To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? A4 credits B6 credits C10 credits D40 credits

B.

Question 11 of 15 Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? AThose who have no history of claims BThose who have been insured under the plan for at least 5 years CThose who have worked in the company for at least 3 years DThose who have dependents

B.

Question 12 of 15 An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? AThe premium for individual coverage will be based upon the insured's attained age. BThe insured may choose to convert to term or permanent individual coverage. CThe insured would not need to prove insurability for a conversion policy. DThe insured may convert coverage to an individual policy within 31 days.

B.

Question 4 of 15 Which of the following statements is TRUE concerning whole life insurance? APolicy loans are tax deductible. BLump-sum death benefits are not taxable. CDividend interest is not taxable. DPremiums are tax deductible.

B.

Question 6 of 15 In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? ACompany is the owner, and the company pays the premium. BExecutive is the owner, and the executive pays the premium. CCompany is the owner, but the executive pays the premium. DBoard of directors is the owner, and the board of directors pays the premium.

B.

Question 6 of 15 Which of the following is true regarding taxation of accelerated benefits under a life insurance policy? AThere is a 10% penalty for early distribution of the death benefit. BThey are tax free to terminally ill insured. CThey are always taxable to chronically ill insured. DThey are always taxed.

B.

Question 8 of 15 Which of the following is INCORRECT concerning a noncontributory group plan? AThe employer pays 100% of the premiums. BThe employees receive individual policies. CThey help to reduce adverse selection against the insurer. DThey require 100% employee participation.

B.

Question 15 of 15 Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? ASEPs have a higher tax deductible contribution limit than an IRA. BEmployer contributions are not included in the employee's gross income. CSEPs are suitable for large companies. DSEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income.

C.

Question 5 of 15 Which of the following would be considered a nonqualified retirement plan? AKeogh plan BRoth IRA CSplit-dollar plan D401(k)

C.

Question 9 of 15 Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? APremiums are not tax deductible as a business expense. BPremiums are tax deductible by the key employee. CPremiums are tax deductible as a business expense. DPremiums are taxable to the employee.

A.

Question 1 of 15 Which of the following is true regarding taxation of dividends in participating policies? ADividends are not taxable. BDividends are taxable only after a certain amount is accumulated annually. CDividends are taxable in some life insurance policies and nontaxable in others. DDividends are considered income for tax purposes.

A. *Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income.

Question 13 of 15 Which of the following terms is used to name the nontaxed return of unused premiums? ADividend BPremium return CInterest DSurrender

A.

Question 7 of 15 Which of the following best describes the tax advantage of a qualified retirement plan? AThe earnings in a qualified plan accumulate tax deferred. BDistributions prior to age 59½ are tax deductible. CEmployer contributions are tax deductible, as long as employee earnings are considered taxable income. DEmployer contributions are taxed as income to the employee.

A.

Question 10 of 15 All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT AEmployee and employer contributions are not counted as income to the employee for income tax purposes. BAt distribution, all amounts received by the employee are tax free. CEmployer contributions are tax deductible as ordinary business expense. DFunds accumulate on a tax-deferred basis.

B. *Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.

Question 14 of 15 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 ASurvivorship insurance. BJuvenile protection provision. CSurvivor protection. DLife planning.

C.

Question 15 of 15 All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT AThe policy is owned by the company. BAny type of insurance policy may be used. CThe employer pays a bonus to a selected employee to fund the policy. DIt is considered a nonqualified employee benefit.

A.

Question 7 of 15 Which of the following is NOT true regarding a nonqualified retirement plan? AIt needs IRS approval. BContributions are not currently tax deductible. CIt can discriminate in benefits and selecting participants. DEarnings grow tax deferred.

A.

Question 4 of 15 In a life settlement contract, whom does the life settlement broker represent? AThe beneficiary BThe life settlement intermediary CThe owner DThe insurer

C.

Question 5 of 15 If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a ANonforfeiture option. BRollover. CSettlement option. DNontaxable exchange.

C.

Question 9 of 15 Death benefits payable to a beneficiary under a life insurance policy are generally ASubject to income taxation by the Federal Government. BExempt from income taxation if under $10,000. CExempt from income taxation if over $10,000. DNot subject to income taxation by the Federal Government.

D.

Question 7 of 15 An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n) ASEP. B403(b) Plan (TSA). CKeogh Plan. DRoth IRA.

B.

Question 15 of 15 All of the following statements are true regarding group insurance EXCEPT AThe group sponsor is the policyholder. BParticipants in a group insurance plan are issued certificates of insurance. CSmall groups such as labor unions are eligible for group insurance. DParticipants in the policy each receive a policy.

D.

Question 8 of 15 All of the following are characteristics of group life insurance EXCEPT ACertificate holders may convert coverage to an individual policy without evidence of insurability. BPremiums are determined by the age, sex and occupation of each individual certificate holder. CAmount of coverage is determined according to nondiscriminatory rules. DIndividuals covered under the policy receive a certificate of insurance.

B.

Question 14 of 15 In a direct transfer, how is money transferred from one retirement plan to a traditional IRA? AFrom trustee to the participant BFrom the participant to the new plan CFrom the original plan to the original custodian DFrom trustee to trustee

D.