Life Insurance Questions

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What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2?

10% Penalty

What is the penalty for excessive contributions to a traditional IRA?

6%

What is policy replacement?

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.

What is a Blackout period for Social Security Benefits?

A period of time during which the serving spouse does not receive benefits.

What are the two phases of an annuity?

Accumulation and Annuitization (or pay-in & Pay-out)

Whose life expectancy is taken into consideration in an annuity contract?

Annuitant

If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?

Annuitant's Estate

When must insurable interest exist in a life insurance policy?

At the time of application

Under what Nonforfeiture option does the company pay the policy's surrender value and have no further obligations to the policy owner?

Cash Surrender

In variable Universal life insurance, to what policy component does the term variable refer?

Cash Value & Face amount

What are the living benefits of whole life insurance?

Cash Value (Loan Values)

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Cash value growth is tax deferred

What type of beneficiary is next in line after he primary beneficiary?

Contingent Beneficiary

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?

Death benefits are generally not subject to income taxes.

What type of life insurance is best suited to cover a mortgage?

Decreasing Term

Why are dividends in life insurance policies not taxable?

Dividends are not considered income for tax purposes; they are a return of unused premium.

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Either on the date of the application or the date of the medical exam(whichever occurs last)

For a retirement plan to be qualified, it must be designed for whose benefit?

Employees

When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?

Evidence of Insurability

What is the main advantage of converting from group life insurance to individual coverage?

Evidence of insurability is not required.

Which Nonforfeiture option is automatically selected by the company if not chosen by the policy owner?

Extended Term

What does level refer to in level term insurance?

Face amount

What type of annuity is purchased with multiple payments and begins income payments no sooner than one year after the purchase?

Flexible Premium Deferred Annuity

What provision in a life insurance policy extends coverage beyond the premium due date?

Grace period

What are the characteristics of the group that underwriters will consider before issuing a group life policy?

Group's purpose, size, financial strength and turnover

What are some examples of qualified plans?

IRA,401(K),HR-10(Keogh),SEP,SIMPLE

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Incontestability

What two elements are necessary for a life insurance contract to have a legal purpose?

Insurable interest and consent

What are the three main instances when insurable interest exists in life insurance?

Insuring one's own life, the life of a family member, or the life of a business partner or someone who has financial obligation to the policy owner.

During partial withdrawal from a Universal life policy, which portion, if any, will be taxed?

Interest earned on the withdrawn cash value.

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

Interest only

What annuity settlement option provides income payments to the annuitant for the duration of his/her life and also guarantees payment for a specified number of years?

Life income with period certain

A Whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy?

Limited-pay Whole Life

If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer?

Lump-Sum Payment

What is included in Part 2 of a life insurance application?

Medical information about the prospective insured

What are the three factors that determine the premium for a particular life insurance policy?

Mortality Interest Expense

How soon can income payments begin in an immediate annuity?

No later than 1 year form the time of annuity purchase

SIMPLE plans are available to groups of how many employees?

No more than 100

What document must a producer provide to the insured during policy replacement?

Notice Regarding Replacement

What are the death benefit options in universal life policies?

Option A- Level death benefit Option B- Increasing death benefit.

What dividend option can increase the death benefit of the existing life policy?

Paid-Up Additions

If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?

Permanent

Who controls changes in premium payments, face values and loans in a life insurance policy?

Policy owner

With the interest-only settlement option, what happens to the policy's death benefit?

Policy proceeds are retained by the insurance company only the interest is paid to the the beneficiary.

What are illustrations in a life insurance policy?

Presentation of non guaranteed elements of the policy.

What beneficiary designation has the first claim to the death proceed of a life insurance policy?

Primary Beneficiary

What is the Primary purpose of a 401(K) plan?

Provide retirement income

Which nonforfeiture option provides coverage for the longest period of time?

Reduced Paid-up

What provision allows the policy owner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

Reinstatement

What type of Whole life insurance policies only requires a payment of premium at its inception and, in addition to providing insurance protection for the fie of the insured, endows at the insured's age 100?

Single-Premium Whole Life

What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?

Straight Life

What are the personal uses of Life insurance?

Survivor protection, Estate creation & Conservation, Cash accumulation & Liquidity.

What type of life insurance policy offers ours death protection?

Term

What elements of an adjustable life policy can be changed by the policy owners?

The amount and payment period of the premium, the face amount and the period of protection.

Who does the common disaster clause protect?

The contingent beneficiary

Who owns a group life insurance contract?

The employer(Also known as the sponsor of the group).

In annually renewable term policies, what is the annual premium based upon?

The insured's attained age

Who bears the investment risk in a fixed annuity?

The insurer

What does the term double indemnity mean?

The insurer will pay a benefit of twice the face amount

In calculating the amount of life insurance needed, what is the needs approach based on?

The predicted needs of a family after the premature death of the insured.

In term policies, what happens to the premium throughout the term of the policy?

The premium remains level

What happens to the proceeds of a life insurance policy if there is o named beneficiary?

The proceeds are paid to the insured's estate.

Why are policy loans not available on term insurance?

There is no cash value to borrow against.

What is the main reason for purchasing an annuity?

To porvide income that the annuitant cannot outlive

What is the purpose of the Automatic Premium Loan Provision?

To prevent the unintentional lapse of a policy because of non payment of the premium.

In what type of life insurance policies can the policy owner skip premium payments without the policy lapsing?

Universal life

In a Joint life policy, when is the death benefit paid?

Upon the first death

What type of Annuity requires an agent to have a Securities License?

Variable Annuity

What life policy rider allows the company to forgo collecting the premium if the insured becomes disabled?

Waiver of Premium

What are the most common exclusions in life insurance policies?

War & Military Service, Hazard Occupation & Aviation

When would a 20-pay whole life policy endow?

When the insured reaches age 100


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