Taxes, Retirement, and Other Insurance Concepts Quiz Questions

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

D Cross-purchase plan

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

D 100%

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is A Fully insured. B Partially insured. C Correctly insured D Permanently insured

A Fully insured

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? A Viatical settlement B Estate liquidation C Nonpayment of Premium D Change of Beneficiary

A Viatical settlement

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

B The plan is funded by permanent insurance only

If a retirement plan or annuity is "qualified," this means A It is approved by the IRS. B It has a penalty for early withdrawal. C It accepts after-tax contributions D It is noncancellable

A It is approved by the IRS

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an A Endowment. B Non-qualified annuity. C Modified endowment Contract D Accelerated benefit policy

C Modified endowment Contract

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 A Survivorship insurance. B Juvenile protection provision. C Survivor protection. D Life Planning

C Survivorship Protection Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.

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

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

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

A Premiums are not tax deductible as a business expense

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 corporate dollars, and it does not meet government approval standards. This annuity plan is A Subject to government standards. B Illegal. C A non-qualified annuity plan D An executive annuity

C A non-qualified annuity plan

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? A Mortality rate B Risk exposure C Morbidity D Life Expectancy

D Life Expectancy

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? A The employer is the owner and the key employee is the beneficiary. B The key employee is the owner and beneficiary. C The key employee is the owner and the employer is the beneficiary D The employer is the owner and the beneficiary

D The employer is the owner and the beneficiary Correct! With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.