Life 1st time through - Score 77.5%
what is a key distinction between variable whole life and variable universal life products?
- variable universal life insurance may or may not have a minimum death benefit. - variable whole life insurance guarantees a minimum death benefit
any person who violates an insurance statute or rule of wisconsin can be imprisoned up to how many years
3 years and 6 months, and fined up to $10,000
a claimant who is totally and permanetly disabled, is eligible for social security disability benefits after an elimination period of
5 months
what is the penalty for IRA distributions that are below the required minimum for the year
50%
at times, it is possible for a life insurance agent to affect a savings of premium rates by back dating an application for life insurance. what is maximum amount of time that an application may be back dated?
6 months
an insurance policy is considered a new policy if it has been in effect for what maximum time period
60 days
Annunity Period
also known as the annuitization period, liquidation period or pay out period, is the time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payment to the annuitant.
the minimum interest rate on an equity indexed annuity is often based on
an index like standard and poor's 500 they have a guaranteed minimum interest rate.
a license applicant's trustworthiness and competence will be determined by
criminal record and convictions, accuracy of information given on an application, regulatory actions, violation of orders of any state insurance commissioner, and misrepresentation or fraud in the application process or insurance practice
all of the following could be considered rebates if offered to an insured in the sale of insurance except: a. stocks securities or bonds b. an offer to share in commissions generated by the sale c. dividends from a mutual insurer d. an offer of employment
dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.
life insurance death benefits are
generally not taxed as income
deferred annuities
grow tax deferred and are best suitable for accumulating retirement income or funds for children's college education. annuities do not create an estate but liquidate it
if the payor on a life insurance policy who has an optional benefit rider on the policy becomes disabled or dies what will happen to the premiums?
if the payor is disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21
liquidity
in life insurance refers to the availability of cash to the insured. some insurance policies offer cash values that can be borrowed at any time and used for immediate needs
annually renewable term policies provide a level death benefit for a premium that
increases annually it increases each year with the age of the insured
what are state regulations for record maintence
insurer's report records may be maintained electronically or as a hard copy
equity indexed annuities
invest on an aggressive basis in order to yield higher results. they have guaranteed minimum interest rates they are less riskier than variable annuities. the insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner.
what is a triple indemnity accidental death rider
it means that the company has to pay 3 times the face amount of the policy if the insured dies as a result of an accident. if the death is contributed by the individual on the policy, the beneficiary will still receive the policy's death benefit
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
it will increase because the insured will be 5 years older than when the policy was originally purchased.
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a
joint life annuity
level term insurance
level death benefit and level premium when renewed, premium is based on insureds attained age
variable whole life insurance is based on what type of premium
level fixed
what is the term associated with the result of a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
life expectancy
If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?
lump sum
an agent is selling a client variable life insurance policy and as an inducement shows the client a projection based upon shares or dividends paid on a similar policy. this is
misrepresentation
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is
modified endowment contract it loses the benefits of a standard life contract
Under the Fair Credit Reporting Act (FCRA), individuals rejected for insurance due to information contained in a consumer report
must be informed of the source report
can an insurer refuse cancel or deny insurance coverage to a class of risks based on moral character, physical condition or developmental disability or sexual preference
no
Death benefits payable to a beneficiary under a life insurance policy are generally
not subject to income taxation by the federal government
whole life policies
offer level premium based on the issue age, garanteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans
what is the official name for the social security program
old age survivors disability insurance
accumulation period
period of time over which the annuitant makes payments. the payments earn interest and grow tax deferred
adjustable life policy
policyholder can increase or decrease the premium, change the premium paying period, increase or decrease the face amount of coverage, change the period of protection
Single Life Settlement Option
provides a single beneficiary income for the rest of his/her life. they cannot outlive the income. upon the death of the beneficiary, the payments stop
single life insurance
provides a single beneficiary with income for the rest of their life
traditional IRA contributions
tax deductible but may be limited if the owners income exceeds a certain level
403(b)
tax- sheltered annuities, only employees of public education or employees of charitable organizations
SIMPLE plan
taxation is deferred on both contributions and earnings until funds are withdrawn
If an annuitant dies during the accumulation period, what will the beneficiary receive?
the annuity benefits, either the amount paid into the plan or the cash value - whichever is greater
If the annuity owner or the annuitant dies during the accumulation period without naming a beneficiary. annuities cash value exceeds premiums paid. where does the money go?
the beneficiary is paid either the cash value of the policy or the amount of premiums paid, whichever is larger amount. in this case, a beneficiary is not named, so the cash value will be paid to the annuitant's estate
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 insured may choose to convert to term or permanent individual coverage the insurer will determine the type of coverage, usually permanent insurance
how do premiums work for universal life insurance
the policyowner has the flexibility to increase the amount of premium going into the policy and later decrease it if they would like. they can skip a payment and the policy will not lapse if there is sufficient cash value at the time to compensate for the nonpayment of premium
how are contributions to a tax-sheltered annuity treated with regards to taxation
they are not included as income for the employee but are taxable upon distribution
for what reason may a life insurance producer backdate a life insurance policy
to avoid an increase in premium rate for the insured can backdate up to 6 months
absolute assignment
transferring all rights of ownership to another person or entity
which of the following types of policies allows the policyowner to skip premium payments provided that there is enough cash value in the policy to cover the premium amount?
universal life
what is a class beneficary
using a designation such as "my children" this can be a vague term if the insured has been married more than once or adopted kids. but the beneficiaries are not identified by name
what type of life insurance allows a policyholder to take out a loan from the policys cash value
variable universal life variable life policies have cash value so they allow policy loans.
what does the cash option for annual life insurance mean?
an insured receives an annual life insurance dividend check annually, nontaxable
qualified plan
is approved by the IRS, gives both employer and employee benifits
simplified employee pension (SEP)
- An employer-sponsored individual retirement account that meets certain requirements. - contributions to the plan are not included in the employees taxable income for the year, to the extent that they do not exceed the maximums allowed. distributions from SEP are taxable as ordinary income when received at retirement
Federal tax advantages of a qualified plan
- Employer contributions are tax deductible as ordinary business expense, funds accumulate on tax-deferred basis, employee and employer contributions are not counted as income to the employee for income tax purposes.
what is true about a spouse term rider
- The rider is usually level term insurance - it is available for a limited amount of time, typically expiring at age 65
Joint and Survivor Annuity
- pays benefits based on the lives of two or more annuitants. - The annuity income is paid until the last annuitant dies - the surviving annuitant may receive reduced payments
Common Disaster Clause
When insured and primary die at the same time, it is assumed that the primary died first
when would a 20-pay whole life policy endow?
When the insured reaches age 100
an insurance producer who by contract is bound to write insurance for only one company is classified as
a captive agent
what is an illustration in a life insurance policy
a presentation or depiction that includes non guaranteed elements of a policy
what is the target premium in a universal life policy
a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime
what is a cost of living rider
a rider adjusts the face amount of a policy to maintain the relationship of the face amount and increases the cost of living
for variable products, underlying assets must be kept in
a separate account
Gauranteed insurability rider
allows the policyowner to purchase specific amounts of additional insurance at speceifc dates or events, without proving continued insurability. rates for the additions are based upon attained age
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 what
an executive bonus
The death protection component of a universal life policy is expressed as what type of coverage?
annually renewable term
which service is associated with standard & poors and AM Best?
rating the financial strength of insurance companies
what type of company would be considered a risk sharing arrangement?
reciprocal when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal
the fair credit reporting act
regulates consumer reports, also known as consumer investigative reports, or credit reports
annuities can be used to fund
retirement plans
employer contributions made to a qualified plan are
subject to vesting requirements
the policyowner of an adjustable life policy wants to increase the death benefit. how can they do this?
the death benefit can be increased by providing evidence of insurability for the amount of the increase
what method is used to determine the taxable portion of each annuity payment
the exclusion ratio
who bears the risk in a fixed annuity
the insurance company
unilaterial
the insured is not bound to do anything but the insurer is bound to pay no matter what
in a group life insurance policy, the employer may select what
the type of insurance, the amount of insurance, the premium payor not the beneficiary
which life insurance policy would be considered intrest sensitive?
universal life
which type of life insurance allows for a flexible premium and a variable investment component?
variable universal life insurance
what is the name of the insured in a viatical settlement policy?
viator
when will a policy terminate
when the loan amount with interest equals or exceeds the cash value.
is the policyowner entitled to policy loans through a whole life policy
yes
how long must a life insurance policy be in force before the owner can enter into a viatical settlement contract
2 years
Morale Hazard
A condition of carelessness or indifference that increases the frequency or severity of loss.
reinstatement provision
A lapsed policy may be reinstated if not longer than 3 yrs., & proof of insurability re-established, & back premiums + interest paid.
life insurance proceeds
A specified sum (the face value or maturity value of the policy) paid to the designated beneficiary of the policy by the life insurance company upon the death of the insured.
what produces evaluations of insurers' financial status often used by state departments of insurance?
AM Best
Fixed Annuity
An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to the purchase payment or payments. the annuitant gets a guaranteed interest rate based on a minimum rate specified in the annuity, or current interest rate, whichever is higher.
whole life policy
An insurance plan in which the policyholder pays a specified premium each year for as long as he or she lives; also called a straight life policy, cash-value life policy, or ordinary life policy. cash values are guaranteed, the policy premium is level, the death benefit is level, the policy owner is entitled to policy loans
collateral assignment
Assignment of part of the proceeds of an insurance policy to a bank as collateral to settle the loan balance that may exist at the insured's death.
what is a participating life insurance policy
Contract that allows the policyowner to receive a share of surplus in the form of policy dividends.
joint life policy
Covers two or more lives and provides for the payment of the proceeds at the death of the first among those insured, at which time the policy automatically terminates.
are withdrawals from a MEC taxable?
no
an agent selling variable annuities must be registered with
FINRA they also much hold a life license and a securities license
To sell variable life insurance policies, an agent must receive what licenses and registrations?
FINRA Registration a securities license a life insurance license
MEC
Modified Endowment Contract - policy loans are taxable distributions - accumulations are tax deferred - distributions before age 59.5 incur a 10% penalty on policy gains
OASDI
Old-Age, Survivors, and Disability Insurance
What is FINRA?
The Financial Industry Regulatory Authority; created by the merger of the NASD and NYSE regulatory authorities
the least expensive first year premium is found in which of the following policies? a. annual renewable b. increasing term c. decreasing term d. level term
annually renewable term the death benefit remains level but the premium increases each year with the insured's attained age.
annually renewable term policies premiums
are adjusted each year to the insured's attained age and the policy may be guaranteed renewable death benefits remain level with any term policy there are no cash values
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
consideration the insurer promises to pay claims, the insured promises to pay premiums
1035 exchange is for
exchanging your life insurance policy tax free. Can only be done once every 3 years
decreasing term policy
face amount decreases as the amount of debt is reduced