Life Insurance - OR
What is the Paid up addition mean?
The annual dividends is put towards buying additional amounts of insurance based on their attained age
What determines the penalty for surrendering a market value adjusted annuity prematurely?
The current interest rate at the time of surrender
With a insurance policy that is an Executive Bonus, who owns the policy?
The policy is owned by the employee
Waiver Cost of Insurance is found where?
Universal Life Insurance
When does the Guaranteed Insurability Rider expire? What and when does this happen?
Usually age 40. The insured can buy additional insurance without proof of insurability but at their attained age. usually every 3 years or at a big event in their life
What is a settlement option?
When an immediate annuity is purchased with the face amount at death or with the cash value at surrender
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
Unlike life insurance, annuities do no _______ but ______
create an estate but liquidate it
a reduced paid up policy purchases what kind of policy
permanent polocy
What nonforfeiture option provides coverage for the longest period of time?
reduced paid-up
What are annuities certain?
short term annuities
What is consideration in a policy?
something of value that is transferred between two parties to form a legal contract
Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is
taxed as ordinary income
What % will you be charged if you surrender an annuity during its accumulation
10% prior to age 59 1/2
A man purchased a 100,000 life insurance policy with a double amount death rider. He gets in an accident and dies 91 days after. How much is the death benefit?
100,000 because he died after 90 days of the accident
A temporary insurance producer license is valid for how long?
180 days
What does liquidity refer to in insurance
Cash values can be borrowed at any time
What type of interest rate is guaranteed in universal life policies?
Contract interest rate
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date prior to the policy issue
Which of the following best describes pure life annuity
It provides the highest monthly benefits
Michael is an insurance producer who has a very successful business. Unexpectedly Michael dies. His wife Andrea realizes the need for her to continue to service his existing business. How long is she able to carry on business as usual without passing an insurance examination?
180 days
How long does a resident producer have to notifiy the Director of a change of residence or business addresses?
30 days
A replacing insurer must notify the existing insurer about the replacement within ___
5 business days
How. long must the replacement insurer and the existing insurer keep the record notifications of the replacement for?
5 years
What is the penalty for IRA distributions that are below the required minimum for that year?
50% of the shortfall of the distributions for that annual amount
A distribution from an employer spomdered retirement plan or from an IRA is eligible for tax free rollower if it is reinvestited in an IRA within?
60 days
Variable life insurance regulated by all the following entities EXCEPT? a. The US department of Treasury b. The SEC c. The Department of Insurance/ Financial Services d. FINRA
A. Variable products are comprised of insurance and securities
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?
Inspection Report
A policy owner fails to pay the premium on his whole life after the grace period passes but the policy remains in force. THis is due to the
Automatic premium loan
Are Executive Bonuses approved by the IRS and what is a term for that approval/disproval?
No - nonqualifed
When making payments into an annuitity, is the money taxed?
No it is taxed deferred
In a life insurance application, all of the following signatures will be required EXCEPT?
Homeoffice underwriter
If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising?
Retention
When are dividends taxable?
When you choose to receive the value of dividends through the "accumulation at interest." There the insurance company keeps the interest in an account where it accumulates interest. The Owner can withdraw dividends at any time and it compounds annually. The dividends are NOT ACTUALLY TAXABLE but the INTEREST on them is.
What is the Life time period certain annuity settlement option?
You set a number of years to receive the payments and you or your beneficiary will reieve them until those years are over
What are dividends?
a return of excess premiums paid and are not taxable
An insured purchases a nonparticipating whole life policy. This policy includes all of the following except? a. Dividends b. Premium calculated closest to the cost of insurance c. Permanent protection d. Cash values
a. only participating policies pay dividends
What are MORALE hazards
arise from a state of mind that causes indifference to loss, such as carelessness. ex. Driving recklessly
If the annuitant dies during the accumulation period, what will be included in the annuitant's estate
Accumulated Cash Value.
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this show?
Adhesion. Its a contract prepared only by the insurer and the insured can only accept for reject
If an insured dies, and its discovered that the insured misstated his her age, the life insurance company will?
Adjust the death benefit to what the premium would have purchased at the actual age or gender
What type of insurance is used for a Executive Bonus?
Any type of insurance
How long is the grace period for an individual life insurance policy?
At least 30 days
A 60yr old participant in a 401 (k) plan takes a distribution and rolls it over into an IRA w/in 60 days. What happens?
Because the 60yr old took distributions out herself and not from a trustee to a trustee, the distribution is subject to a 20% withholding tax.
Partners in a business want to make sure that if one of them were to pass away their surviving family will receive a fair value for their potion int the business. What life insurance arrangement would be most suited? a. Deferred Compensation plan b. Executive Bonus plan c. Split Dollar plan d. Buy-sell agreement
Buy-Sell Agreement
An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount?
Children's term rider
Which of the following is the distinguishing characteristic of the interest adjusted net cost method?
Considering the time value of money in comparing life insurance costs
When an individual obtains an insurance license for the primary purpose of writing their own insurance of insurance for family, or their business, this is called?
Controlled Business.
What are the 5 riders that effect the death benefit
Cost of Living Accidental Death Guaranteed Insurability Return of Premium Accelerated Living Benefit
What are the automatic events that happen if no dividend, nonforieture, or settlement issue is listed in contract
Dividend = Paid up Additions Non = Extended Term Settlement = Lump Sum Cash
An adjustable life policy can assume the form of
Either term insurance or permanent insurance
When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?
Extended Term.
Is it Fixed Period or Fixed Income that selects how long they want to recieve income? how much they want to receive each month?
FP - how long FI - how much
Joey bought a policy that requires him to pay $150 in premiums on the 15th of each month. Joey tkaes an an extended vacation and forgets to pay his premium. 10 days later, his policy is still in effect and has not lapsed. This is due to the
Grace period provision. It is a mandatory provision in all health and life insurance policies
What does the Payor Benefit do?
If the payor (adult) dies or becomes disabled longer than 6 months, the premiums are waived until age of 21
If an applicant for a life insurance policy and the person to be insured by the policy are two different people, the underwriter would be concerned about?
If there is insurable interest between them
What does a waiver cost of insurance mean?
In the event the insured becomes disabled, the cost of insurance is waived but premiums still have to be paid
Waiver of Premium
In the event the insured becomes disabled, the insurer will pay back the premiums after 6 months and until they are 65 yrs old
What type of life insurance does a return of premium cover?
Increasing Term Insurance
Which portin of a non-qualified annuity payment is taxable?
Interest earned on principle
What are the three key factors for determining an insured's premium?
Interest, Mortality, Expense
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
It is a % of the cash value and it decreases over time
When comparing a Joint Life Policy to two individual life policies of the same amount on the same insureds, which condition is true?
Joint Life has a lower premium than the total of the two individual policies
In a nonforfeiture situation what option last the longest and what option provides the most?
LL= reduced paid up (whole life) PM = extended term
Is it Life-only or Life with Guaranteed Minimun that recieves a high monthly benefits but there is no guarantee that the entire principal will be paid out
Life only. GM is when you recieve a lower benefits but you or your beneficiary will receive all of the benefits no matter if you die or not
What is another word for Participating Life Insurance?
Mutual Life Insurance
When the insurer uses the guaranteed insurability rider, do you have to be able to prove your insurability and at what age are you insured?
No, you do not have to prove insurability. You are insured at your attained age
An insured's life expectancy is 6th months. How often may a life settlement provider contact the insured and inquire about the insured's health status?
Once a month. If he was expected to live over a year it would be 3 months.
Key person insurance can provide protection for all of the following econimic losses to a business except?
Pay the death benefit to the estate of the insured
Who receives the dividends in a Participating Life Insurance?
Policy-owners
What is the value of a surrender annuity?
Premiums + Interest - Surrender Charge
An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information?
Present the insured with a Disclosure Authorization Notice
If a life insurance company uses HIV testing as apart of its underwriting, when must an applicant be notified of the procedure?
Prior to the performance of the test
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan
Another name for substandard risk is
Rated
Which rule would apply if an agent is going to take an old policy and cash it in in order to purchase a new policy? Conversion Replacement Disclosure Reinstatement
Replacement rule
What rider usually ends at age 60?
Return of Premium. Dividends can be used to pay off the. next years premium. When you die you get face value + premiums
Sally set up an individual account that her employer is now contributing to. Her employers' contributions are not included in her gross income. What kind of retirement plan does Sally have?
Simplified Employee Pension (SEP)
How are Market Value Adjusted annuities paid?
Single Premium deferred
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?
Survivor Protection
Who regulated the HIV testing of an insured?
The State and it must meet the criteria for the US department of Health and Services
What happens to the face amount of a whole life policy if the insured reaches the age of 100?
The face amount is paid to the insured
Life insurance creates an immediate estate. Which of the following best explains this statement?
The face value of the policy is payable to the beneficiary upon the death of the insured
Where are fixed annuity premiums placed?
The insurance companys GENERAL ACCOUNT
With Adjustable Life, the owner can change all of the following EXCEPT
The insured
What is a one year option
The insurer takes the divedens and buys a one year term coverage
What is paid up insurance option
The insurer takes the dividends and pays off the policy early
If the insured lied about something and it has passed 2 years when he dies, what will happen?
The insurer will pay the full death amount unless he lied about his age, sex, or identity
To which of the following policies would the State regulations on illustrations NOT APPLY? a. whole life policy with guaranteed death benefit of $11,000 b. individual term policy c. group life policy d. individual variable life policy
d. It could be a if it was 10,000 or less
When an insured terminates membership in the insured group, the insured can convert to
Whole life w/o proof of insurability
How is a business with a Key Person Insurance taxed? It it helpful or not really?
Yes and No. Contributions are not tax deductible, but receiving the benefits are tax free
What is the purpose of the Medical Information Bureau?
assists underwriters in evaluating and classifying risks
The Human Life value approach to determining Life Insurance needs is based upon which of the following ideas? a. Retirement Needs b. Loss of the breadwinner's income c. replacement of assets d. Specific needs for college education
b
The accelerated benefits provision will provide an early payment of death benefits when the insured a. becomes disabled b. becomes terminally ill c. loses job
b
Which of the following is the right to change the beneficiary, choose options, and receive proceeds in a policy? a. assignment rights b. ownership rights c. the entire contract provision
b
All of the following forms of policies are exempt from the standard policy regulation for insurers EXCEPT a. Structured settlements b. Group life policies where there is direct solicitation c. Credit Life Insurance d. Policies uses to fund employee pension plan
c
All of the following statements are true regarding an Ordinary Life policy EXCEPT? a. it builds cash value b. If the insured lives to age 100, the policy matures and the face amount is paid to the insured c. it does not have a guaranteed death benefit d. funded by a level premium
c. it does not have a guaranteed death benefit
If the annuitant dies before the annuity start date, the interest a. is tax free if beneficiary is a spouse b. is nontaxable c. is taxable d. will not be tax deferred
c. the interest is taxable
All of the following are true regarding the waiver of cost of insurance rider EXCEPT? a. The rider waives insurance costs in the events the insured becomes disabled b. The rider is the only applicable to universal life policies c. The rider cannot waive the cost of premiums that accumulate cash value d. The rider expires when the insured reaches age 60
d. The waiver of cost of insurance rider waives the cost of insurances and other expenses in the event the insured becomes disabled. Any premiums necessary to accumulation of cash values cannot be waived
Traditional IRA contributions are tax deductible, based on which of the following? a. Owners age b. IRA limit c. How long the plan has been in force d. Owners income
d. Traditional IRA contributions are tax deductible , but may be limited if the owners income exceeds a limit
