Life Ins
And employee does not have to report any income with respect to what Amount group term insurance coverage assuming the plan is not discriminatory
$50,000
Approximately what percentage of all life insurance in force in the United States is on a group basis
40%
Approximately what percentage of all life insurance in force in the United States is on a group basis?
40%
Which of the following problems could be caused by the flexibility offered by a universal life insurance policy
A death benefit reduction may cause the policy to be classified as a modified endowment contract
And increasing premium level death benefit term policy to age 65 is
A one year term policy renewable to age 65
They transferred her value rule applies to
A partner of the insured
A modified endowment contract is a life insurance policy that has failed
The seven pay test
Which of the following is a characteristic of a level premium nonparticipating whole life insurance policy
There is a schedule of guaranteed cash values
Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop playing premiums on his policy and exercise the Extended Term Option. Ted's term benefit will be: a. $25,000 b. $50,000 c. $47,000 d. Varies from company to company
b. $50,000 The Extended Term Option uses the present cash value of the policy, upon its lapse, to buy a single premium term policy of the same face amount.
If a term policy is convertible it means the policy:
gives the policyholder a contractual right to change the term policy for some other type of life insurance policy without evidence of insurability
Group life insurance is a welfare benefit plan. As a result:
it is subject to ERISA
Which of the following types of life insurance allows the greatest amount of death benefit to be purchased for a set amount of premium?
term insurance
A limited-pay whole life insurance policy with a short premium paying period (e.g., 10 years) runs the risk of becoming a "MEC" (Modified Endowment Contract) if:
the insured pays the full annual premium and dividends are applied as additional premiums
A modified endowment contract is a life insurance policy that has failed
the seven-pay test
A key feature of variable life insurance is
there is no guaranteed minimum cash value
An important use of joint life insurance has been
to fund buy-sell agreements in closely-held businesses
Current-assumption whole life insurance is generally a hybrid of:
traditional whole life and universal life insurance
All universal life policies have a guaranteed minimum interest rate, generally ranging from four to six percent.
true
Who is potentially liable for the gift tax on a completed gift of life insurance
Both the donor and the Doney
Most accelerated death benefit payments as well as most viatical settlement are
Excluded from the income because they are deemed to be paid by reason of death of the insured
Which of the following is not one of the major tax traps involved with section 1035 exchanges
Failure to follow and equitable exchange agreement
Accelerated death benefit our amounts received from a third-party who purchases the life insurance policy of an insured
False
An insurance contract entered into before 1988 can never be considered a modified endowment contract
False
An insurance contract entered into before 1988 can never be considered a modified endowment contract?
False
And a 1035 exchange games are deferred but losses maybe taken at the time of the exchange
False
Because of the way that it is taxed, a modified endowment contract is not considered a life insurance policy for tax purposes.
False
Gain on the sale of a life insurance policy is taxed at capital gains rates
False
In a M AC contract insuring a single insured there is a no look back requirement
False
Under ERISA requirement covered by a group term life contract must name his spouse as beneficiary if he is married
False
Variable life or variable universal life insurance is well-suited to individual desiring a minimum basic level of coverage
False
Universal life insurance is
Flexible premium adjustable death benefit current assumption policy
If a term policy is convertible it means
Gives the policyholder a contract right to change policy or some other type of life insurance policy without evidence of insurability
Level-premium whole life insurance policies allow policyowners to borrow amounts under the policy. Typical loan provisions include which of the following requirements?
If the policy is terminated the cash surrender value is reduced by any outstanding policy loans and unpaid interest.
Advantages of ordinary level-premium whole life include all of the following except
Interest on policy loans is generally non deductible
Advantages of ordinary level premium whole life include all the following except
Interest policy loans is generally nondeductible
Which of the following accurately describes a disadvantage of survivorship life insurance
It provides no benefits at the first death unless a special rider is added
Tax implications for death benefit only plans include all the following except
Lump sum payments are not allowable
Which of the following statements is true regarding current assumption the whole life insurance
Policy owners bear more risk of adverse trends and morality or expenses then if they owned traditional whole life policies
Which of the following types of life insurance allows the greatest amount of death benefit to be purchased for a set amount of premium
Term insurance
Advantages of single premium life include all of the following except
The amount of protection is low relative to the premium paid
I life insurance policy is owned in the beneficiaries qualified retirement plan a total of $50,000 was paid in premiums and I think insurance death it had a cash value of $100,000 and a definite fit of $250,000 how much of the deaf and if it will be subject to income tax
$100,000
Which of the following Gift of less than the clients entire interest in property would not generate an income tax deduction
A charitable gift of cash surrender value of the policy of which his son is the beneficiary
A single premium current assumption life policy guarantees all the following except
A fixed level of dividends will be paid through out the time of the policy
Insures all her options that can make joint line particularly attractive which of the following options is not offered
A provision for the exchange under section 1035 of the joint life policy for long-term care insurance policy
Which of the following could never be treated as a modified endowment contract
A single premium policy that was entered on June 1, 1988
Which of the following could never be treated as a modified endowment contract?
A single-premium policy that was entered into on June 1, 1988.
Which of the following would not be a valid exchange under section 1035
After 2009 and annuity contract for a life insurance contract
Life insurance proceeds would be considered payable for the benefit of descendants estate if you stupidly for which of the following
All of the above
The GST tax maybe triggered by which of the following events
All of the above
A policy that originally is not a modified endowment contract will be subject to re-testing if there is a "material change" in the contract. Which of the following would likely be a material change?
An exchange of one policy for another policy in a 1035 exchange.
A single premium life insurance in issued before June 21, 1988 is grandfather that is not the MEC modified endowment contract tax rules however it can lose this tax status if there is
An exchange on the policy for another policy
All of the following items should be considered in relation to enjoying life insurance policy except
An own occupation definition of disability
Important disadvantages of joint life include all the following except
And business markets joint life may eliminate the need for coverage when the need is to ensure the first death among several lives
A policy that originally is not a modified endowment contract will be subject to retesting if there is a material change in the contract which of the following would likely be a material change
And exchange of one policy for another policy and a 1035 exchange
For which of the following is use of a single premium whole life insurance
As a good short-term tax-deferred investment
For which of the following is use of single premium whole life insurance least appropriate?
As a good short-term tax-deferred investment.
Which of the following is a disadvantage of a current assumption whole-life policy?
CAWL policies guarantee maximum mortality and expense rates
Which of the following is a disadvantage of assumption whole life policy
CAWL policies guarantee maximum mortality and expense rates
To determine and individuals net worth the value can generally be determined
Contacting the insurance company and requesting the policies current cash surrender value
All of the following advantages and disadvantage it should be taken into account when helping others understand irrevocable life and trust except
Disadvantages of a fourth party ownership of life insurance
If a limited whole life insurance policy is determined to be a MEC modified endowment contract
Distributions including policy loans will likely be includable in income
Which of the following items are not treated as an income first when distributed from a modified endowment contract
Dividends retained by the insurer to premiums or other consideration for the contract
Because of the way that it is taxed a modified endowment contract is not considered a life insurance policy for tax purposes
False
Most universal life policies are issued with front and load charges rather than back and load charges
False
Once a policy is classified as a modified endowment contract, with certain corrections, it can be later treated as not a modified endowment contract.
False
Once the policy is classified as a modified endowment contract with certain directions it could be later treated as not a modified endowment contract
False
One of the advantages of group term insurance is that the premiums remain level on your employee basis regardless of the ages of the employees
False
Under ERISA requirements, an employee covered by a group term life contract must name his spouse as beneficiary, if he is married.
False
Which of the following statements about the tax aspects of ownership of variable life insurance is false?
Gains received are taxable at capital gains rates.
Which of the following statements about the tax aspects of ownership of variable life insurance is false
Gains received our taxable at capital gains rates
Level premium whole life insurance policies allow policy owners to borrow amount under the policy typically loan provisions include which of the following requirements
If the policy is terminated the cash value is reduced by an outstanding policy loans and unpaid interest
A survivorship life plan that involves a greater portion of term insurance than permanent insurance
Is sensitive to changes in yields or interest-rate's
Which one of the following is not an advantage of group term life insurance
It is can be used as a standard investment option under the employer's 401(k) plan
If the investment performance of a variable universal life policy is poor
Policy owners may be required to pay additional premiums
Which of the following statements is true regarding current-assumption whole life insurance?
Policyowners bear more risk of adverse trends in mortality or expenses than if they own traditional whole life policies.
Advantages of single premium life include all the following except
The amount of protection is low relative to the premium paid
Which item is not a key factor to be weighed and choosing the best variable life are variable universal life policy
The amount of the cash value guarantees
In determining the amount of insurance that the employer must purchase to meet its obligation to pay benefits to an employee under a death benefit only Davio plan which of the following factors is not taken into consideration
The employees years of service
The advantages of death benefit only insurance include all the following except
The entire corporate payment to the beneficiary is subject to income tax
I limited whole life insurance policy with a short premium paying Runs the risk of becoming a MEC modified endowment contract if
The insured pays the full annual premium and dividends are applied as additional premiums
Which of the following statements is true regarding current assumption whole life insurance
The insured promises to credit at least a minimum guaranteed rate of interest
Which of the following statements regarding universal life insurance is not true
The policy is not susceptible to and advertently becoming a modified and down that contract
Hey survivorship rider-permits
The purchase of increase coverage on the insured if the life designated in the rider dies before the insured
Which of the following is true regarding the interest credited to universal life policy's
The right used may be linked to a well-known index of yields if it exceeds a minimum rate guaranteed in the policy
a key feature of variable life insurance is
There is no guaranteed minimum cash value
An important use of joint life insurance has been
To find Byselle agreements in closely held businesses
In which of the following situations would a level-premium whole life insurance policy be appropriate?
To provide funds for the continuation of a business through a "buy-sell" agreement
In which of the following situations would A level premium whole life insurance policy be appropriate
To provide funds for the continuation of a business through a buy sale agreement
Current assumption whole life insurance is generally a hybrid of
Traditional whole life and universal life insurance
A 10% penalty applies to certain distributions from life insurance policy's that are treated as modified and down the contracts
True
A term life insurance policy makes no promise to pay anything at the insured lives beyond this is specified term
True
A term life insurance policy makes no promise to pay anything if the insured lives beyond the specified term
True
Accelerated benefit riders are generally designed to provide for healthcare and medical expenses of the insured
True
Most group insurance is insured as yearly renewable term insurance
True
Most group insurance is issued as yearly renewable term insurance.
True
Most insurance companies do not offer renewable policies to new applicants after a certain age which is usually between 60 and 70
True
One disadvantage of universal life is that policy owners bear more risk of adverse trans and morality or expenses that if they own traditional whole life policies
True
Term life insurance is ideal for temporary need such as paying all funeral estate and inheritance taxes
True
Term life insurance is ideal for temporary needs, such as paying off funeral, estate, and inheritance taxes.
True
Verbal life is a whole life policy where the policy owners
True
Which of the following statements regarding universal life insurance is true
Universal life allows policy owners to participate in favorable investment morality and expanse experience of the company insurance policies
Which of the following statements about variable universal and variable life insurance death benefits is not true?
Variable Life and Variable Universal Life bear no mortality or expense risk.
A significant advantage of a split dollar plan using survivorship life instead of a single life policy is that
Very low table 38 rates are used to measure the pure insurance cost of survivorship life while both is insureds are alive instead of the higher PS 58 rates
Which of the following forms of a Byselle agreement allows planners to Jafar decisions regarding the eventual purchaser until A triggering event occurs
Wait and see
A single premium current-assumption life policy generally guarantees all of the following, except:
a fixed level of dividends will be paid throughout the term of the policy
Which of the following items are NOT treated as income-first when distributed from a modified endowment contract?
dividends retained by the insurer to premiums or other consideration for the contract
A survivorship life plan that involves a greater proportion of term insurance than permanent insurance:
is sensitive to changes in yields, or interest rates
Which of the following accurately describes a disadvantage of survivorship life insurance?
it provides no benefits at the first death, unless a special rider is added
The annual payment from a charitable remainder annuity trust CR a T to a noncharitable beneficiary may not exceed what percentage of the initial fair market value of the property contributed to the trust
50%
A policy received in 1035 exchange has an investment in the contract in the amount of the fair market value of the old policy
False
Excepting accelerated benefits or a viatical settlement does not reduce the policy death benefit
False
The acronym D a G stands for directors argumented gift
False
What are the following items are included in a life insurance contracts investment in the contract
The economic benefit reportable income from life insurance in a qualified plan
Which of the following is required for a buy sell agreement to establish the estate tax value a closely held stock subject to the agreement
The estate must be obligated to sell the stock at a price that is determinable by a reasonable formula or a method contained in the agreement
A life insurance policy that has been given as a gift can be include a hole in the donors grossest day if
The grantor dies within three years of the transfer
I life insurance policy that has been transferred into a room air revocable life insurance trust Camby include a bowl in the grantors gross estate if
The grantor dies within three years of the transfer
The lapse of a crummy power is considered a taxable gift only to the extent that the value of the property exceeds
The greater of $5000 or 5% of the trust assets
Which of the following is not a requirement to have dad's proceeds from the employer own life policy issued after August 2006 received income tax free
The insured must be given notice of the maximum amount that the employer will insure the insured's life for
To give a gift of a policy to charity the requirements for a qualified charity include all except
The organization must be listed as a 501(c)(3) nonprofit organization
Most insurance companies do not offer renewable term policies to new applicants after a certain age, which is usually between 60 and 70.
True
No income tax deduction for premium payments is allowed of the taxpayer is a beneficiary under the policy
True
One disadvantage of universal life is that policy owners bear more risk of adverse trends in mortality or expenses than if they owned traditional whole life policies.
True
One of the primary purposes of a buy sell agreement is to create a market for a shareholder stock
True
Life insurance companies and insurance regulators may use any of the following terms to describe accelerated death benefit provisions except
Waiver of premium
Disadvantages of term insurance include all of the following except
proceeds are not part of a probated estate unless the estate is a named beneficiary.
And employee can name a charity as the sole beneficiary of group term life insurance and avoid any income tax on the economic benefit for coverage over what amount
$50,000
Which of the following factors is a requirement for triggering the transfer for value rule
Consideration
A gift of life insurance to an irrevocable life insurance trust can make all the following results possible except
Continued control and ownership of the life insurance policy
A significant advantage of a split dollar plan using survivorship life instead of a single-life policy is that
very low Table 38 rates are used to measure the pure insurance cost of survivorship life while both insureds are alive, instead of the higher P.S. 58 rates
One of the advantages of group term insurance is that the premiums remain level on a per-employee basis regardless of the ages of the employees.
False
Which of the following problems could be caused by the flexibility offered by a universal life insurance policy?
A death benefit reduction may cause the policy to be classified as a modified endowment contract.
A gift of life insurance to an error irrevocable life insurance trust can make all the following results possible except
Continued control on ownership of the life insurance policy
Gain on the surrender of a life insurance policy is taxed at capital gains rates
False
When driving in a irrevocable life insurance trust the draft he may include all the following except
Granting the trustee to ability to sprinkle income or Sprite capital to a third-party
Life insurance proceeds maybe subject to income tax if there has been a transfer for valuable consideration
True
An increasing premium, level death benefit term policy to age 65 is:
a one-year term policy, renewable to age 65
An individual owns a life insurance policy that is intended to be exchanged in the 1035 exchange the individual has paid a total of $75,000 in premiums into the policy in the policy is now worth $100,000 when the exchange is complete what will the investment in the contract of the new policy be
$75,000
A client died in 2007 and $4 million in policy proceeds were payable to I trust that can sprinkle income or spray principal to the client son or grandson assuming that the $4 million was taxed at 45% percent in the clients federal state and that those taxes were paid by the trust what and additional GST tax would be payable at the trustee immediately distribute the balance to the grandson
$990,000
The increase of a policies cash value is subject to tax at ordinary income rates
False
Which of the following statements is true regarding buysell agreements
If a corporation pays premiums for a policy owned by one shareholder on the life of another shareholder this payment will be likely considered a dividend
Which of the following statements regarding universal life insurance is true?
Universal life allows policyowners to participate in favorable investment, mortality and expense experience of the company. insurance policies.
If a limited-pay whole life insurance policy is determined to be a "MEC" (Modified Endowment Contract):
distributions, including policy loans, will likely be includable in income
An individual owns a life insurance policy with an investment in the contract of $75,000 and a cash value of $125,000 every time they ended individual with drawls $85,000 from the contract how much of the withdrawal with the end of visual be required to recognize or income tax purposes
$10,000
An individual owns it and life insurance policy with investment in the contract at $35,000 in a cash value of $60,000 exchange the policy for a new one that will have a cash value of $55,000 and will also receive $5000 in cash in the exchange how much gain with the individual recognize on this transaction
$5000
I qualified appraisal must be obtained for a tax payer to climb a deduction for a gift of life insurance of
$5000 or more
I client died in 2007 and 4 million was taxed at 45% and the clients federal state and that the $4 million bore the estate tax what additional GST tax is payable on the policy proceeds
682,759
Insurers offer options that can make joint life particularly attractive. Which of the following options is not offered?
A provision for the exchange, under Section 1035, of the joint life policy for a long-term care insurance policy.
Advantages of using life insurance funding in a buy sell agreement include all the following except
Premiums to keep the coverage and affect our deductible as a business expense
Which one of the following is not an advantage of group term life insurance?
It is can be used as a standard investment option under the employer's 401(k) plan.
Group life insurance is a welfare benefit plan as a
It is subject to ERISA
Advantages of term life insurance include all the following except
It is the most cost-effective when the duration of the needed protection is over 15 years
Disadvantages of term insurance include all the following except
Proceeds are not part of a probated estate unless the estate is a named beneficiary
And owner of an insurance policy on the life of another person dies what is includable in the deceased owner's estate
Replacement cost of the life insurance policy
All of the following are Settlement Options, except: a. Fixed Period b. Reduced Paid-Up c. Interest Only d. Life Income Joint and Survivor
b. Reduced Paid-Up Reduced Paid-Up is a Nonforfeiture Option, not a Settlement Option.
The transfer her value rule does not apply to a transfer to
A corporation in which the insured is an officer
The transfer for value rule does not apply to a transfer to
A partnership in which the insured is a partner
A policy that automatically increases the death benefit without evidence of insurability will typically violate the MEC rules
False
Group life provides an after tax benefit for employees and I deduction for employers
False
Group life provides an after-tax benefit for employees and a deduction for employers.
False
I gifted it of a downers entire interest in a life insurance policy will be treated as a gift of appreciated capital gain property
False
If an exchange of insurance policies involves cash or other property it will not qualify a 1035 exchange
False
In cases where the insurance pays premiums on my life insurance policy per sent to a divorce or separation agreement signed prior to 1984 payments are not taxable as alimony to the noninsured spouse
False
Term insurance is always least expensive or form of insurance regardless of the duration of needed coverage
False
Insurance companies generally recover sales commissions and initial policy expenses from variable universal life policy is with in
The first 10 years
Surrendering a universal life policy results in considerable loss if the policy is surrendering during
The first 5 to 10 years
Which of the following is true regarding the interest credited to universal life policies?
The rate used may be linked to a well-known index of yields if it exceeds a minimum rate guaranteed in the policy.
All universal life policies have a guaranteed minimum interest rate generally ranging from 4 to 6%
True
And an exchange of life insurance contract to be a valid 1035 exchange the insured must be the same on the old and new policy
True
As long as a cash value are sufficient to cover policy charges a universal life policy owner may skip premium payments
True
Variable life and variable universal life are especially suited for many business insurance situations where flexibility and growth of cash value are attractive features
True
Which of the following statements about variable universal and variable life insurance death benefit is not true
Variable life and variable universal life bear no morality or expense risk
The premiums paid to add the Automatic Premium Loan (APL) Provision has the following effect on a life policy: a. No effect, there is not a premium for APL. b. Pays premium by loan to increase the death benefit. c. Reduces administration cost. d. Increases cash value.
a. No effect, there is not a premium for APL. The Automatic Premium Loan Provision is available on cash value policies only, with no additional premium.
There are considerable differences in life insurance policies. Which of the following helps to establish basic continuity? a. Options b. Beneficiaries c. Rates d. Premiums
a. Options Life insurance policy options (Settlement, Nonforfeiture, and Dividend) establish basic continuity to the interpretation of life insurance policies.
Which is not a Dividend Option? a. Reduced Paid-Up b. Paid-Up Additions c. Paid in Cash d. Accumulate at Interest
a. Reduced Paid-Up Reduced Paid-Up is a Nonforfeiture Option; the other answer chronicles are Dividend Options.
The interest earned on dividends is: a. Taxable b. Tax deductible c. Nontaxable d. 40% taxable, similar to a capital gain
a. Taxable The dividends themselves are not taxable, but any interest earned on the dividends is taxable.
Albert owned a $100,000 policy that had accumulated a cash value of $9,850, of which he had borrowed $2,500. His beneficiary will receive which of the following amounts? a. The face amount, less the loan and accrued interest b. $107,800 c. $87,920 d. $90,420
a. The face amount, less the loan and accrued interest Any outstanding loans not paid upon the insured's death will be deducted from the face amount (death benefit) along with any interest due.
Angela bought a policy from her friend. After looking it over thoroughly, Angela only has one question. Will she receive dividends? Yes, if it is which of the following? a. Nonparticipating b. Participating c. Cash Value d. Accumulating
b. Participating Dividends are declared under participating policies, are paid as declared, and are to guaranteed. The dividends are a return of excess premiums paid.
Which of the following statements is true? a. There are several dividend options. b. Dividends can only be withdrawn at certain specified intervals. c. Dividends are guaranteed and taxable as income when received. d. Dividends are declared under nonparticipating policies only.
a. There are several dividend options. Dividends are declared under participating policies; they are not guaranteed; if received the dividend itself is not taxable; and they can be withdrawn anytime there is an accumulation.
All of the following are Dividend Options, except: a. Waiver of Premium b. Paid-Up Additional Insurance c. One-Year Term d. Cash
a. Waiver of Premium Waiver of Premium is a rider available to most life insurance policies.
When is the Automatic Premium Loan Provision activated? a. At the beginning of the underwriting period. b. At the end of the grace period. c. At the end of the policy period. d. At time of reinstatement.
b. At the end of the grace period. The Automatic Premium Loan provision automatically becomes effective at the end of the grace period to prevent the policy from lapsing.
Which provision allows an insure to borrow from the cash value of a policy to pay premiums due and prevent the lapse of coverage? a. Nonforfeiture Option b. Automatic Premium Loan c. Spendthrift Clause d. Partial Withdrawal
b. Automatic Premium Loan The Automatic Premium Loan Provision enables the insurer to borrow automatically from the policy's cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.
Mona let her permanent policy lapse. She discovered there was $2,498 in cash remainaing in the policy and decided to reduce her debt load. She exercised which Nonforfeiture Option? a. Accumulation at Interest b. Cash Surrender c. Fixed Amount d. Accelerated Endowment
b. Cash Surrender The only Nonforfeiture Option listed is Cash Surrender. Mona surrenders the policy for its cash value and then uses that cash value to reduce her debt load.
Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which Nonforfeiture Option provides this protection? a. Fixed Amount b. Extended Term c. Reduced Paid-Up d. Paid-Up Option
b. Extended Term Extended Term would allow the present cash value of the policy to buy a single premium term policy of the same face amount for as long as period as it will buy. Fixed Amount is a Settlement Option, and Paid-Up Option is a Dividend Option.
If the policyowner specifies the time over which all installments are to be paid, he/she has chosen which Setllement Option? a. Extended Term b. Fixed Period c. Fixed Amount d. Acceleration of Endowment
b. Fixed Period The key word is time. Anytime the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, policyowner or beneficiary, is the Fixed Period Settlement Option. Acceleration of Endowment is a Dividend Option, and Extended Term is a Nonforfeiture Option.
Burt named Liz as his beneficiary however he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits? a. Burt's estate, since no Settlement Option was chosen. b. Liz c. The insurer d. Statutes require the proceeds be laid lump sum when an option is not chosen.
b. Liz If the owner of the policy does not select a Settlement Option while alive, then the beneficiary may choose an option at the time of claim.
What effect, if any, does the Dividend Option-Acceleration of Endowment have on a policy? a. This is not a Dividend Option b. Makes the endowment date sooner c. None d. Increase premium outlay
b. Makes the endowment date sooner Acceleration of Endowment uses dividends to reduce (shorten) the period for the policy to mature or endow.
A ____ Option protects the policyowner against total loss of benefits in the event of a lapsed policy and add flexibility to a cash value policy. a. Settlement b. Nonforfeiture c. Dividend d. Spendthrift
b. Nonforfeiture Nonforfeiture Options are found in life insurance policies that generate a cash value, and protect the owner against total loss of that cash value, if the policy should lapse or it is cancelled.
Frank's policy lists his wife as beneficiary. Upon Frank's death, she is to receive a stipulated amount until the benefit is exhausted. While he pays premiums, he chooses to have the dividends increase the death benefit. Which of the following Dividends Options was chosen? a. Fixed Amount b. Paid-Up Additions c. Acceleration of Endowment d. Paid-Up Option
b. Paid-Up Additions Frank's objective is to use his dividends to increase the death benefit. Paid-Up Additions purchases single premium additional permanent benefits at the insured's attained age. The additional insurance is added to the face amount and it generates cash values and dividends as if the paid-up additional benefit was part of the original policy.
Which of the following terms correctly matches the given definition? a. Paid-Up Additions - cash value is used to buy a single premium permanent policy. b. Paid-Up Option - dividends are used to pay up a policy sooner than scheduled. c. Life Income Period Certain - term insurance cash value distribution. d. One-year Term - cash value is used to buy a single premium term policy.
b. Paid-Up Option - dividends are used to pay up a policy sooner than scheduled. One-year Term and Paid-Up Additions are incorrect as they are Dividend Options, and dividends (not the cash value) are used to fulfill the objective. Life Income Period Certain is incorrect because term insurance has no cash value.
Lyle owns a $50,000 20-Pay Life Policy that he lets lapse at the end of the fourth year. The Nonforfeiture Option providing the longest period of coverage would be: a. Paid-Up Additions b. Reduced Paid-Up c. Extended Term d. Paid-Up Option
b. Reduced Paid-Up Reduced Paid-Up provides the longest period of coverage. Extended Term would provide the most protection. The other two answers are not Nonforfeiture Options.
What are the Nonforfeiture Options in a Decreasing Term Policy? a. Increased options b. There are none c. Same as Whole Life d. Reduced Paid-Up only
b. There are none There are no Nonforfeiture Options in a Term Policy, as Term policies do not accumulate a cash value.
A beneficiary wants a guarantee that benefits will be paid for a period of ten years before the funds are exhausted, which of the following options should the beneficiary select? a. Fixed Amount b. Fixed Time c. Fixed Period d. Fixed Income
c. Fixed Period Anytime the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, policyowner or beneficiary, is the Fixed Period Settlement Option.
Settlement Options may be used if the insured dies or if the insured: a. Pays policy annually. b. Is covered strictly with Term Insurance. c. Is alive at maturity and receives the face amount. d. Exercises the Irrevocable Option.
c. Is alive at maturity and receives the face amount. Settlement options are used when the insured lives to the endowment date or at the insured's death.
Fred owns a 40-Pay Life Policy. He designated his wife, Ethel, as primary beneficiary. Upon Fred's death, Ethel receives a set amount for life. Fred chose which Settlement Option? a. Joint Life b. Fixed Period c. Life Income Only d. Paid-Up Additions
c. Life Income Only Life Income Only guarantees payment for the lifetime of the recipient. Paid-Up Additions is a Dividend Option.
A retiree elected the Ten Years Certain and Life Income Option. He dies the dash after receiving 119 monthly payments. The contingent payee will receive: a. No more payments b. Five more payment c. One more payment d. Ten more payments
c. One more payment Since the retiree died within the period certain (10 years or 120 months), then the contingent payee would receive only one or more payment since the retiree has received 119 monthly payments. If the retiree had lived beyond the 10 years, then they would have been paid a benefit as long as they lived.
Beth exercised an owner's option on a life policy to stop paying premiums but continue to be covered until she was age 100. Which Nonforfeiture Option did she choose? a. Extended Term b. Application to Reduce Premiums c. Reduced Paid-Up d. Paid-Up Option
c. Reduced Paid-Up The Nonforfeiture Option that would allow Beth to stop paying premiums and continue to be covered at age 100, but for a reduced face amount, is Reduced Paid-Up. Application to Reduce Premiums and Paid-Up Option are Dividend Options.
What happens to the nonforfeiture values when a policy lapses for nonpayment of premium? a. Values are recalculated by actuaries. b. Coverage is rescinded. c. The values are returned to the policyowner. d. The insurer considers them for profit sharing.
c. The values are returned to the policyowner. Nonforfeiture means not to be given up. The purpose of Nonforfeiture Options is to protect the policyowner against total loss of benefits if the policy should lapse or if it is cancelled.
An investor receives ample income each month from the interest earned while retaining his/her principal. This is referred to as which of the following? a. Net Capital b. Capital Gains c. Conservative Earnings d. Capital Conservation
d. Capital Conservation The Interest Option of settlement leaves the principal (capital) with the insurer, thus conserving the capital, and the interest income generated is taxed as ordinary income.
The cash received by the policyowner when he/she terminates a policy is known as what? a. Accrued Premium Value b. Loan Value c. Paid-Up Insurance Value d. Cash Surrender Value
d. Cash Surrender Value The Cash Surrender Value is the Nonforfeiture Option that allows the owner to withdraw the cash value upon the surrender of the policy.
Which Settlement Option pays a specified dollar amount until benefits are exhausted? a. Fixed Period b. Paid-Up Option c. Life Income d. Fixed Amount
d. Fixed Amount The key words are specified dollar amount. Fixed Amount pays benefits at a specified dollar amount (such as $1,000/month) until the benefits are exhausted.
Which Settlement Option pays for a specified period, regardless of who may receive the payments? a. Reduced Paid-Up b. One-Year Term c. Paid-Up Additions d. Fixed Period
d. Fixed Period Anytime the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, policyowner or beneficiary, is the Fixed Period Settlement Option.
Beth owns a 20-Pay Life participating policy. She has chosen the Settlement Option that guarantees payments over a specified period and the dividends are applied toward future premiums. Which Dividend Option did she choose? a. Fixed Period b. Paid-Up Option c. Fixed Amount d. Premium Reduction
d. Premium Reduction The Dividend Option that allows the dividends to be applied toward the next premium due is Premium Reduction. Fixed Period and Fixed Amount are Settlement Options.
A survivorship rider permits
the purchase of increased coverage on the insured if the life designated in the rider dies before the insured
Which of the following is not one of the advantages of making a gift of life insurance to an irrevocable life insurance trust
Cash values can later be withdrawn from the trust if needed the trust is generally protected from the claims of creditors
A policy that automatically increases the death benefit without evidence of insurability will typically violate the MEC rules.
False
Merrily naming a charity as the beneficiary of a life insurance policy will result in an income tax deduction for the doner
False
Payment of life insurance premiums for a policy owned by another is not considered a completed gift
False
The GST tax applies to transfers to any person more than one generation removed from the transferor
False
The price of stock as determined under I buy sell agreement will automatically fix answer value for a state tax purposes
False
There are no tax problems and using group term insurance to find the promises under and I sell agreement
False
There is no game for income tax purposes when I life insurance policy matures at death where that policy was obtained by gift
False
Life insurance qualifies for the federal estate tax marital deduction if payable and lump some to
The descendent insured's surviving spouse
Which of the following would not be a consideration when considering a 1035 exchange
The old policy is a modified endowment contract and the new policy will not be a MEC
A viatical settlement is
The sale of a life insurance policy to a third-party when the insured has a life-threatening disease or illness
The transfer for value role may not apply to a transfer in which the following situations
The sale of a policy by the insured to his spouse
The replacement cost of a life insurance policy is generally equal to the policies interpolated terminal reserve plus
The unearned premium
Which of the following is a characteristic of a level-premium non-participating whole life insurance policy?
There is a schedule of guaranteed cash values.
Which of the following circumstances would be most likely to call the value of the survivor benefit under a death benefit only DBO plan to be included in the estate of a deceased covered employee
They covered employee is a controlling stockholder
Which of the following rights is generally considered an incident of ownership of life insurance
To amend trust that owns a policy on the insureds life
A definite but only Davio plan can be a appropriately used for all that which of the following purposes
To distribute benefits during a key employees lifetime
If stockholders are subject to restrictions on the sale of stock under a buy sell agreement wash their start typic it be marked with a legend stating the existence of the restrictions
To make the restrictions enforceable against a transferee
A 10% penalty applies to certain distributions from life insurance policies that are treated as modified endowment contracts.
True
A charitable remainder trust allows a downer to make it currently deductible charitable gift of every Shannon property while retaining a lifetime income interest
True
A downer who names a qualified charity as Recipient of any dividends from a life insurance policy receives an income tax deduction as the dividends are paid
True
A gift of life insurance from one spouse to another well-qualified for the gift tax marital deduction adduction
True
Each transferor has a GST tax exemption that he may allocate tune generation-skipping transfers
True
The GST tax is a flat tax at the highest federal estate tax rate
True
What a life insurance policy is transferred to in a revocable trust and gift is made subject to the gift tax
True
Advantages of term life insurance include all of the following, except:
it is the most cost effective when the duration of the needed protection is over 15 years
