Life insurance

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what are the three nonforfeiture options in life insurance policies

cash surrender reduced paid up and extended term

what type of life insurance offers an applicant a cash value elements

permeant insurance (whole life)

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

pure life

who is responsible for the contents of insurance advertisements

the insurance company

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Absolute assignment

what are the two phases of an annuity

Accumulation and annuitization (or pay-in and pay-out)

what is the main responsibility of a company's underwriting unit

Risk selection

what are the personal uses of life insurance

Survivor protection, estate creation and conservation, cash accumulation and liquidity

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%

who received income payments from an annuity

Annuitant

what are the two types of refund life annuities

Cash refund and installment refund

what type of annuity credits its interest based upon an index such as S&P 500

Equity index annuity

all other factors being equal which premium payment mode will require an overall higher premium monthly or annual

Monthly

What type of plan is 401(k)?

Qualified profit-sharing plan

If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment?

current

what is included in part 2 of a life insurance application

medical info about the prospective insured

What type of beneficiary can be changed at any point by the policyowner?

revocable

what term is used to describe methods of payments of the death benefits to the beneficiary upon the insured death

settlement options

What type of assignment is used to secure the payment of a debt with an existing life insurance policy?

Collateral assignment

What qualified plan is suitable for the self-employed?

HR-10 or Keogh

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

Grace period

can a business or a corporation be an annuitant

No, an annuitant must always be a natural person

how long is income paid under a pure life annuity

Only for the life of the annuitant

What are accumulation units in annuities?

Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)

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

Paid-up additions

What dividend option is automatically selected by the company if not chosen by the policyowner?

Paid-up additions

what is the term that describes the frequency and the amount of the premium of the payment

Premium mode

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

Primary Beneficiary

what is insurance underwriting

The process of risk selection and classification

How long will a life annuity with a 15-year period certain pay?

for the life of the annuitant unless they die within the first 15 years of the annuitization period then the payments will last for 15 years.

what does the term double indemnity mean

The insurer will pay a benefit of twice the face amount

An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit?

pay a reduced death benefit

what controls changes in premium payments, face value, and loan in a life insurance policy

policy owner

who has the right to the cash value of a life insurance policy

policy owner

what is the advantage of reinstating life insurance policy as opposed to applying for a new one

policy premium in a reinstated policy will be set according to the insureds original age

an employer is sponsoring a qualified requirement plan for its employees where the employer contributes money whenever the business has profit what is his plan called

profit sharing plan

what is the primary purpose of a 401K plane

provide retirement income

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 is the difference between a single premium an a flexible premium payment options in a deferred annuity

the number of payments that purchase the annuity

who must have insurable interest in the insured

the policy owner

what are the most common exclusion in life insurance policys

war and military service, hazardous occupation, and aviation

what are the two phases of annuity

Accumulation and annuitization (or pay-in and pay-out)

what are some examples of qualified plans

IRA, 401(k), HR10 (Keogh), SEP, SIMPLE

what type of insurance creates an immediate estate

Life insurance

What is the purpose of a free-look period?

To allow the insured to return the policy with a full refund

what is the main purpose of the 7-pay test

To determine if a life insurance policy is a Modified Endowment Contract

When can an insurance company use suicide as a defense against paying a death claim?

When a suicide is committed within a specified period of time after the policy is purchased (usually 2 years)

what type of licenses are required in order to sell variable annuities

a life insurance and a securities license

what is the name for an overfunded life insurance policy

a modified endowment contract

who must be a member of insurance guaranty associations

all insurers authorized to write insurance within a state

in flexible premium payments annuities the term flexible referes to what.

amount of premium

Who's 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

annuitants estate

in an annuity the accumulated money is converted into a stream of income during which phase

annuitization period

an individual has a contract that will provide him with a certain amount of income for the contract does this person have

annuity

Who has all of the rights in an annuity contract?

annuity owner

when must insurable interest exist exist in a life insurance policy

at the time of the application

when must the policy summary for a life insurance policy be delivered to the policy owner

at the time of the policy delivery

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

beneficiary

What are the dividend options in life insurance policies?

cash reduced premiums, accumulation at interest, paid up additions, paid up option, on year term , and acceleration of endowment

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

cash surrender

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 the 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

If the annuitant dies during the annuitization period starts, what will the beneficiary receive

either the amount paid into the annuity or the cash value whichever is greater

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

employees

who qualifies for tax sheltered annuities or 403B planes

employees of nonprofit organizations under section 501C3 and employees of public school systems

what are the income tax benefits or a qualified plan

employer contributions are tax deductible and are not taxed as income to the employee the earnings accumulate tax deferred

life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell all assets from the estate what is this called

estate conversation

What nonforfeiture option is automatically selected by the company if not chosen by the policyowner?

extended term

An annuity purchased with multiple payments that begins income payments after one year from the moment of purchase is known as what type of annuity?

flexible premium deferred annuity

In a direct rollover how is the money transferred from one retirement plan to a new one

from trustee to trustee

What required provision protects against unintentional policy lapse?

grace period

how does the premium mode affect the total premium paid for insurance for the year

higher frequency of premium payments will result in higher overall premium

what are the tho classifications of annuities according to the time when the annuity payments begin

immediate and deferred

in what form of payment must the contributions to a traditional IRA be made

in cash

what is the disadvantage of owning a fixed annuity as opposed to variable

in times of inflation the benefit of a fixed annuity will have decreased purchasing power

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

insuring your own life, the life of a family member or the life of a business partners or someone who has a financial obligation to the policyowner

What portion of a nonqualified annuity payment would be taxed?

interest earned on principle

is the beneficiary of a life insurance policy receives death benefit payments that consist of principle and interest which portion if any will be taxed

interest only

what type of report provides info about the applicants hobbies habits and financial status

investigative consumer report

if an insured changes his payment plan from monthly to annually what happens to the total premium

it will decrease

If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?

joint life annuity

morality tables are used by insurance companies to predict what

life expectancy and the death rates for specific groups of individuals

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

life income with period certain

when annuity settlement option provides income to the annuitant for the duration of their life, also guarantees payment for a specific number of years

life income with period certain

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

only the portion in excess of the premium paid

what is the name for a life insurance policy rider that provides coverage on the insureds family members

other insured rider

What document describes the specific information about a policy?

policy summary

What are illustrations in a life insurance policy?

presentations of non guaranteed elements of the policy

How are annuities classified depending on how many lives they cover?

single life and multiple life annuities

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 is the purpose of the agents report during the application process

the agents report discusses personal observations about the proposed insured that may help in the underwriting process

a policy owner borrowed a portion of cash value from his whole life policy if the loan is not repaid how will that affect the death benefit to the beneficiary

the amount of the loan will be subtracted from the death benefit

Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?

the annuitant receives payments from the annuity during the annuitization period the beneficiary receives benefits after the annuitants death

what causes a variable annuity benefit to vary

the annuity's underlying investments

a business is the owner and beneficiaries of a key person life policy. when the business collects the policy benefits how is it taxed

the benefit is received tax free

when planning for survivor protection in life insurance what needs to be considered

the insureds current assets, liabilities and survivors needs

who bears the investment risk in a fixed annuity

the insurer

in the fixed period settlement option how will the number of installments for the death benefit proceeds determine the amount of the installments

the longer the period selected the smaller each installment will be

If a retirement plan is 'qualified', what does that mean?

the plan has a favorable tax treatment

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

what happens to the proceeds of a life insurance policy if there is no named beneficiary

the proceeds are paid to the insureds estate

what is the purpose of settlement options in life insurance policies

to determine how the death benefit will be paid to the beneficiary

what is the purpose of automatic premium loan provisions

to prevent the unintentional laps of a policy because of nonpayment of the premium

When would life insurance policy proceeds be included in the insured's taxable estate?

when there is an incident of ownership at the time of death

What type of annuity can be purchased with a single premium?

immediate annuity

what is the main reason for purchasing an annuity

To provide income that the annuitant cannot outlive

to meet the requirement of the entire contract policy provision an insurance policy must contain what

a copy of the original insurance application

Is the beneficiary required to have insurable interest in the insured?

no

what is the purpose of insurance guaranty associations

to protect policy owners, insured, and beneficiaries from financial losses caused by involved insurers

what dose the common disaster clause protect

the contingent beneficiary

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

Reduced paid up

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).

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

An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit?

the death benefit will be adjusted to the amount that the insured could obtain for her correct age

with the reduction of premium dividend opinion how is the dividend used

the dividend is applied to the next years premium (it reduces the next years premium)

Who is the beneficiary on a key-person life insurance policy?

the employer

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?

the existence of insurable interest between the applicant and the insured

With a single premium deferred annuity, when will the annuity payments become available?

no sooner than 1 year after the annuity purchase

what term describes the fee a person pays an insurance company to receive coverage

premium

in qualified plans are employer contributions taxed as income to the employees

no employer contributions re not taxed as income to the employees

SIMPLE plans are available to groups of how many employees?

no more than 100

the sole beneficiary of a life insurance policy dies before the insured if the policy owner does not amend the beneficiary designation what will happen to the policy's death benefit

it will be paid to the insureds estate

What settlement options are available in life insurance policies?

lump sum/ cash, fixed period, fixed amount, life income, interest only

Is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?

no lump sum benefits are received ta free

what is required to qualify an individual to contribute to a traditional IRA

Earned Income

what are policy dividends

Return of unused premiums

Why are dividends in life insurance policies not taxable?

dividends are not considered income for tax proposes, they are a return of unused premiums

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

no advertising of the existence of the guaranty association for the purposes of the solicitation and sale of insurance policies by insurers is an illegal business practice

with interest only settlements option, what happens to the policy's death benefit

policy proceeds are retained by the insurance company, only the interest is paid to the beneficiary

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

Morality, interest and expenses

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?

entire contract

What type of annuity requires an agent to have a securities license?

variable annuity

what causes variable annuity benefit to vary

The annuity's underlying investments

what is the purpose of key person insurance

To minimize the risk of financial loss caused by the death of a key employee

what dose liquidity mean in a life insurance policy

availability of cash value

what happens to a policy's cash value under an extended term nonforfeiture option

he cash value is converted to the same face amount as in the whole life policy

what life policy riders allow the company to forgo collecting the premium if the insured becomes disabled

waiver of premium

When will a contingent beneficiary receive death benefit from a life insurance policy?

when the primary beneficiary dies before the insured


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