Life Insurance Studying
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of
$10,000
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
What is the maximum Social Security Disability benefit amount an insured can receive?
100% of the insured's Primary Insurance Amount (PIA)
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
An insurer may normally delay the payment of a cash value loan or surrender value for up to
6 months
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as
A fraternal benefit society
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
Adhesion
How long does the coverage normally remain on a limited-pay life policy?
Age 100
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
Which premium schedule results in the lowest cost to the policy owner?
Annual
Any changes made on an insurance application requires the initials of whom?
Applicant
Traditional individual retirement annuity (IRA) distributions must start by:
April 1st of the year following the year the participant attains age 70 1/2
Under a Graded Premium policy, the premiums
Are lower during the policy's early years
In a qualified retirement plan, the yearly contributions to an employee's account:
Are restricted by Maximum levels set by the IRS
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:
Bilateral
Variable Whole Life Insurance can be described as
Both an insurance and securities product
A Whole Life insurance policyowner does NOT have the right to
Change the grace period
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
The incontestable clause allows an insurer to:
Contest a claim during that contestable period.
Which of the following consists of an offer, acceptance, and consideration
Contract
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory
What type of group insurance plan involves employees sharing the cost?
Contributory plan
Dividends payable to a policyowner are
Declared by the insurance company
The Combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy
Decreasing
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
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
All of these are characteristics of an Adjustable Life policy EXCEPT
Face amount can be adjusted using policy dividends
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium
Variable Life products require a producer to
Hold a Life insurance license and a Securities license
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy
All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT
Income derived from the TSA is received income-tax free
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
A life insurance policy would be considered a wagering contract WITHOUT:
Insurable interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:
Insurable interest in the proposed insured
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
In a life insurance contract, an insurance company's promise to pay stated benefits is called the:
Insuring clause
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT
Interest Only
B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
Interest only
Which one of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
A policy owner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need?
Irrevocable
A policyowner rights are limited under which beneficiary designation?
Irrevocable
The accidental Death and dismemberment (AD&D) provision policy would pay additional benefits if the insured:
Is blinded in an accident
Dividends paid from a life insurance policy are
Issued by the insurer
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 insurance
Stranger Originated Life Insurance has been found to be in violation of which of the following contractual elements
Legal Purpose (Insurable Interest)
What kind of premium does a Whole Life policy have?
Level
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more then its cash value?
Life settlement contract
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
Limited Pay Life
An insured's inability to perform two or more activities of daily living may trigger which type of life policy rider?
Long term care
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
Mandatory income tax withholding on the transfer amount
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this?
Modified Premium Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole life
Which of these is Not an element of Life insurance premiums?
Morbidity rate
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of plan assets are in key employee accounts
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
Which of these is NOT considered to be of an insurance contract?
Negotiating
Which of the following actions is required by an insured who leaves the primary area of medical coverage and seeks medical care?
Obtain prior approval from the insurer for the medical service
All of these statements concerning Settlement Options are true, EXCEPT:
Only the beneficiary may select
K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?
Paid-Up Additional Insurance
Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT:
Partial withdrawal features beyond a surrender charge period.
When a policy pays dividends to its policyholders, it is said to be
Participating
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
Insurance policies are considered aleatory contracts because
Performance is conditioned upon a future occurrence
Which of the following best describes contingent beneficiary?
Person designated by the insured to receive policy proceeds in that the primary beneficiary dies before the insured.
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the:
Policy proceeds
Which of the following information is NOT required to be included in a Whole Life policy
Policy's guaranteed dividend table
On a life insurance policy, who is qualified to change the beneficiary designation?
Policyowner
Which is true concerning a variable universal life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?
Portion of the premiums paid for by the employer may be a tax deduction
A Limited-Pay Life policy has:
Premium payments limited to a specified number of years
Which of these is NOT a type of agent authority?
Principal
What is the consideration given by an insurer in the consideration clause of a life insurance policy
Promise to pay a death benefit to a named beneficiary
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
J would like to maintain the right to change beneficiaries. What beneficiary designation should be used?
Revocable
Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT:
Signed HIPAA disclosure
Which of the following BEST describes a warranty?
Statement guaranteed to be true
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed.
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
The initial premium was NOT submitted with the application
A policy of adhesion can only be modified by whom?
The insurance company
What advantage does the renewability feature give to a term policy?
The insured may extend the coverage period
Which statement regarding the Change of Beneficiary provision is true?
The policyowner can change the beneficiary
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
The advantage of reinstating an original life policy is
The premiums are based on a younger age
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
This clause provides the payment of proceeds to the insured's estate
The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
Universal
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal life
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of the last insured
A term life insurance policy matures:
Upon the insured's death during the term of the policy
A(n) _________ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
Variable
In order to sell a (n)____ Life policy, a producer is required to register with financial Industry Regulatory Authority (FINRA).
Variable
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Variable life
The part of a life insurance policy guaranteed to be true is called a(n):
Warranty
At what point does a Whole Life Insurance policy endow?
When premium paid equals the death benefit
A return of Premium life insurance policy is:
Whole life and Increasing term
Under an interest sensitive whole life policy
cash values are determined by interest rates
Under an interest sensitive whole life policy,
cash values are determined by interest rates
