Chapter 4: Taxes, Retirement, and Other Insurance Concepts
All of the following are examples of third-party ownership of a life insurance policy EXCEPT:
An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit secure the loan.
All of the followings are personal uses of life insurance EXCEPT:
Estate liquidation
Which of the following is correct concerning the taxation of premiums in a key- person life insurance policy?
Premiums are not tax deductible as a business expense.
Which of the following would be considered a nonqualified retirment plan
Split-dollar plan
Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?
Buy-Sell agreement
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
All of the following are true of key person insurance EXCEPT
The plan is funded by permanent insurance only.
What is the purpose of key person insurance?
To lessen the risk of financial loss because of the death of a key employee
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?
100% participation of members is required in noncontributory plans
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?
Life expectancy
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?
Viatical settlement
Non qualified Plans Include:
1) Contributions NOT currently TAX DEDUCTIBLE 2) Plan DOES NOT NEED IRS APPROVAL 3) Plan CAN DISCRIMINATE 4) Earnings grow TAX DEFFERED 5) EXCESS over cost basis is TAXED
Qualified Plans Include:
1) Contributions currently TAX DEDUCTIBLE 2) Plan APPROVED by the IRS 3) Plan CANNOT DISCRIMINATE 4) Earnings grow TAX DEFFERED 5) ALL WITHDRAWALS are TAXED
What is the number of credits required for fully insured status for Social Security disability benefits?
40
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financilaly able to buy the interest of the deceased partner. What type of insurance policy may be used to fud this agreement?
Any form of life insurance
Which of the following is INCORRECT concerning a noncontributory group plan?
The employees receive individual policies
All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT:
The employer can eceive a current tax deduction for any contributions made to the plan
In a life settlement contract, whom does the life settlement broker represent?
the owner
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
The employer is the owner and beneficiary
All of the following are bsuiness uses of life insurance EXCEPT:
Funding against general company financial loss.
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?
The insurer will pay the full death benefit from the group policy to the beneficiary. This is because you have 31 days to switch.
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
Third-party ownership
A producer is helping a married couple determine the financial needs to 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 quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
Attained age
Which of the following best defines the "owner" as it pertains to life settlemetn contracts?
The policy owner of the insurance policy.
