Retirement and Other Insurance Concepts Questions

What percentage of a company's employees must take part in a noncontributory group life plan? 0% 25% 75% 100%

100%

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 corporation dollars, and it does not meet government approval standard. This annuity plan is An executive annuity plan Subject to government standards Illegal A nonqualified annuity plan

A nonqualified annuity plan

Who is a third-party owner? An employee in a group policy An irrevocable beneficiary A policy owner who is not the insured An insurer who issues a policy for two people

A policy owner who is not the insured

Who is a third-party owner? An employee in a group policy An irrevocable beneficiary A policyowner who is not the insured An insurer who issues a policy for two people

A policyowner who is not the insured

Who can make a fully deductible contribution to a traditional IRA? Someone making contributions to an educational IRA A person whose contributions are funded by a return on investment An individual not covered by an employer-sponsored plan who has earned income Anybody; all IRA contributions are fully deductible regardless of income level

An individual not covered by an employer-sponsored plan who has earned income

All of the following are examples of third-party ownership of a life insurance policy EXCEPT An insured couple purchases a life insurance policy insuring the life of their grandson A company purchases a life insurance policy on their manager, who is an important part of the operation When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company An insured borrows money from the bank and make a collateral assignment of a part of the death benefit to secure the loan

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

An employee quits his job and converts his group policy with an individual policy; the premium for the individual policy will be based on his Experience rating Group rate Insurer's scheduled rate Attained age

Attained age

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a Key person policy Split-dollar plan Stock redemption plan Buy-sell agreement

Buy-sell agreement

All of the following are personal uses of life insurance EXCEPT Estate creation Cash accumulation Buy-sell agreement Survivor protection

Buy-sell agreement

What does "liquidity" refer to in a life insurance policy The death benefit replaces the assets that would have accumulated if the insured had not died The policyowner recives dividend checks each year The insured receives payments each month in retirement Cash values can be borrowed at anytime

Cash values can be borrowed at anytime

A key person insurance policy can pay for which of the following? Workers Compensation Hospital bills of the key employee Costs of training a replacement Loss of personal income

Costs of training a replacement

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a Split-dollar plan Stock-redemption plan Cross-purchase plan Key person plant

Cross-purchase plan

Which of the following is true regarding taxation of dividends in participating policies? Dividends are not taxable Dividends are taxable only after a certain amount is accumulated annually Dividends are taxable in some life insurance policies and notaxable in others Dividends are considered income for tax purposes

Dividends are not taxable

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(n) Key person policy Fraternal association Aleatory contract Executive bonus

Executive bonus

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? Company is the owner, but the executive pays the premium Board of directors is the owner, and the board of directors pays the premium Company is the owner, and the company pays the premium Executive is the owner, and the executive pays the premium

Executive is the owner, and the executive pays the premium

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA? From trustee to the participant From the participant to the new plan From the original plan to the original custodian From trustee to trustee

From trustee to trustee

Two attorneys operate their practive 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 403(b) olan 401(k) plan HR-10 (keogh plan) Section 457 deferred compensation plan

HR-10 (keogh plan)

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income? Neither principal nor interest Principal only Interest only Both principal and interest

Interest only

What is the main purpose of the Seven-pay Test It requires level premium payments for 7 years It ensures that the policy benefits are paid out in 7 years It guarantees the minimum interest It determines if the insurance policy is a MEC

It determines if the insurance policy is a MEC

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? Mortality rate Risk exposure Morbidity Life expectancy

Life expectancy

Traditional IRA contributions are tax deductible based on which of the following? How long the plan has been in force Owner's age IRA limit Owner's income

Owner's income

All of the following are characteristics of group life insurance EXCEPT Certificate holders may convert coverage to an individual policy without evidence of insurability Premiums are determined by the age, sex, and occupation of each individual certificate holder The amount of coverage is determined according to nondiscriminatory rules Individuals covered under the policy receive a certificate of insurance

Premiums are determined by the age, sex, and occupation of each individual certificate holder

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? Premiums are taxable to the employees Premiums are not tax deductible as a business expense Premiums are tax deductible by the key employee Premiums are tax deductible as a business expense

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 Survivorship insurance Juvenile protection provision Survivor protection Life planning

Survivor protection

The premiums paid by the employer in a business life insurance policy are Always taxable to the employee Never taxable to the employee Tax deductible by the employer Tax deductible by the employee

Tax deductible by the employer

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then The benefit is received tax free The benefit is subject to the exclusionary rule IRS has no jurisdiction The benefit is received as taxable income

The benefit is received tax free

Which of the following is an example of liquidity in a life insurance contract? The flexible premium The money in a savings account The cash value available to the policy owner The death benefit paid to the beneficiary

The cash value available to the policy owner

Which of the following best describes the tax advantage of a qualified retirement plan? Distributions prior to age 59 ½ are tax deductible Employer contributions are tax deductible, as long as employee earnings are considered taxable income Employer contributions are taxed as income to the employee The earnings in a qualified plan accumulate tax deferred

The earnings in a qualified plan accumulate tax deferred

Which of the following is INCORRECT concerning a noncontributory group plan? The employer pays 100% of the premium The employees receive individual policies They help to reduce adverse selection against the insurer They require 100% employee participation

The employees receive individual policies

Who is the owner and who is the beneficiary on a Key Person Life insurance policy? The employer is the owner and the key employee is the beneficiary The key employee is the owner and beneficiary The key employee is the owner and the employer is the beneficiary The employer is the owner and beneficiary

The employer is the owner and beneficiary

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

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

In a life settlement contract, whom does the life settlement broker represent? The beneficiary The life settlement intermediary The owner The insurer

The owner

All of the following are true of key person insurance EXCEPT The plan is funded by permanent insurance only There is no limitation on the number of key employee plans in force at any one time The employer is the owner, payor and beneficiary of the policy The key employee is the insured

The plan is funded by permanent insurance only

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT The policy is owned by the company Any type of insurance policy may be used The employer pays a bonus to a selected employee to fund the policy It is considered a nonqualified employee benefit

The policy is owned by the company

Which of the following best defines the "owner" as it pertains to life settlement contracts? A fiduciary for the contract The insurance provider The policyowner of the life insurance policy A financial entity that sponsors the transaction

The policyowner of the life insurance policy

Which of the following is NOT true of life settlements? The seller must be terminally ill They could be used for a key person coverage They could be sold for an amount greater than the current cash value The involve insurance policies with large face amounts

The seller must be terminally ill

Which of the following is the best reason to purchase life insurance rather than an annuity To liquidate a sum of money over a period of years To create regular income payments To liquidate a sum of money over a lifetime To create an estate

To create an estate

Which of the following is the best reason to purchase life insurance rather than an annuity? To liquidate a sum of money over a period of years To create regular income payments To liquidate a sum of money over a lifetime To create an estate

To create an estate

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

To lessen the risk of financial loss because of the death of a key employee

Social security was created to provide all of the following benefits EXCEPT Retirement income Unemployment income Survivor's benefits Disability income

Unemployment income