Life and Health Insurance Course
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
Which of these is NOT a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
Which of the following is NOT included in an annuity contract?
AD&D rider
Insurance policies are offered on a "take it or leave it" basis, which make them:
Contracts of Adhesion
When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans?
Contributory
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Dividends payable to a policyowner are
Declared by the insurance company
Which contract permits the remaining partners to buy-out the interest of a disabled business partner?
Disability Buy-Sell
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
How are Roth IRA distributions normally taxed?
Distributions are received tax-free
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
All of these statements about the Waiver of Premium provision are correct EXCEPT
Insured must be eligible for Social Security disability for claim to be accepted
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Limited Pay Life
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
Living Benefit
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate
The _____ is authorized to assign a Life insurance policy as collateral for a loan.
Policyowner
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
Which of the following are Equity Indexed annuities typically invested in?
S&P 500
What does a 401(k) plan generally provide its participants?
Salary-deferral contributions
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security Social Security, also known as Old Age, Survivors, and Disability Insurance (OASDI), was signed into law in 1935 by President Roosevelt as part of the Social Security Act.
Which of the following BEST describes a warranty?
Statement guaranteed to be true
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life annuity
What type of life insurance are credit policies issued as?
Term. The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance.
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
The amount of the benefits available from other sources
Which statement is TRUE regarding a group accident & health policy issued to an employer?
The employer receives the policy and each employee is issued a certificate
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
The full face amount
A policy of adhesion can only be modified by whom?
The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.)
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the
cost of insurance
A(n) ______ term life policy is normally used when covering an insured's mortgage balance
decreasing
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
deferred
All of these are characteristics of an Adjustable Life policy, EXCEPT:
face amount can be adjusted using policy dividends
Which of these is NOT a source of funding for Social Security benefits?
federal government
The purpose of the ________ Period clause is to avoid an unintentional lapse of a life insurance policy.
grace
A Nonforfeiture clause gives the policyowner
guaranteed values even if the policy has lapsed
In life insurance, the needs approach is used mostly to establish:
how much life insurance a client should apply for
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)
installment refund annuity
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
insured
Dividends paid from a life insurance policy are
issued by the insurer
Credit Life insurance is:
issued in an amount not to exceed the amount of the loan
What kind of premium does a Whole Life policy have?
level
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
All of the following statements about traditional individual retirement accounts are false ЕХСЕРТ
10% penalty is applied to withdrawals before age 59 1/2
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
100
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
Pis a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:
Bilateral Unilateral, aleatory, and adhesion are all special features of insurance contracts. Bilateral is not.
G is an accountant who has ten employees and is concerned about how the business would survive financially it G became disabled. The type of policy which BEST addresses this concern is
Business Overhead Expense
Many small business owners worry how their business would survive financially if the owner becomes disabled. The policy which BEST addresses this concern is:
Business Overhead Expense
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
Claims are denied under the Suicide clause of the policy
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the individual and his dependents
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
F
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance Policy
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured's contingent beneficiary
Which of the following claims are typically excluded from Medical expense policies?
Intentionally self-inflicted injuries
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
What kind of Accidental Death and Dismemberment (AD&D) insurance beneficiary requires his/her consent when a change of beneficiary is made?
Irrevocable beneficiary
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
K is an insured under a life insurance policy owned by a third party. Which of these statements is true?
K has no ownership rights
K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT
K's wife dies at age 66
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?
Key Person Life Policy
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest)
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor clause
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Who elects the governing body of a mutual insurance company?
Policyholders
A Variable Annuity has which of the following characteristics?
Underlying equity investments
Life and health insurance policies are
Unilateral contracts.
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as:
Variable Life
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable Universal Life
A Cost of Living rider gives the insured
additional death benefits
To be eligible for Social Security disability benefits, an employee must be unable to perform:
any occupation
Group/voluntary long-term care policy premiums are typically deducted from the employee's income and
are less costly as compared to individual long term care coverage
In a qualified retirement plan, the yearly contributions to an employee's account:
are restricted to maximum levels set by the IRS
The Automatic Premium Loan provision is designed to:
avoid a policy lapse
T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the
beneficiary
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT
beneficiary's age
Variable Whole Life Insurance can be described as
both an insurance and securities product
Under an interest sensitive whole life policy
cash values are determined by interest rates
A Whole Life insurance policyowner does NOT have the right to
change the grace period
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
conditional
Which of the following consists of an offer, acceptance, and consideration?
contract
Which of these is NOT considered to be an element of an insurance contract?
negotiating
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
Which type of policy pays benefits to a policyholder covered under a Hospital Expense policy?
reimbursement
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
renewable
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called
reserves
Under a Graded Premium Whole Life policy
the premium increases each year during the early years of the contract and remains the same after that time
An individual who purchases a Life annuity is given protection against:
the risk of living longer than expected
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) life policy.
universal
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
