Life Insurance
If Jim decides to cancel his whole life insurance policy and uses his policy's cash value to purchase a term life policy with a face amount of equal value but with a likely shorter coverage period, he is utilizing which type of life insurance nonforfeiture option?
Extended term option
Carl purchased an Immediate Annuity with a 5-year 'life with period certain option,' which pays him $1,000 per month. Exactly 3 years after his policy start date Carl dies. How much money will his beneficiary receive for the remainder of the policy?
$24,000
Theodore, who has purchased an immediate annuity with 20-year period certain coverage and receives $1000 monthly, dies after receiving payments for 15 years. What is the amount his beneficiary will receive?
$60,000
An 'in force' life insurance policy illustration is defined as an illustration that is furnished at any time after the policy that it depicts has been in force for at least how long?
1 Year
Modified Endowment Contracts are double taxed as ordinary income and as a return of premium on any earned interest. In addition, policyowners who receive benefits before the age of 59 1/2 years old are also imposed with a ____ early withdrawal penalty tax.
10%
In a qualified employer retirement plan, an employee is entitled to what percentage of the vested interest in benefits that accrue from his or her contributions?
100%
Charles has a $85,000 25-year mortgage and wants to purchase a life insurance policy that would cover any outstanding balance on the mortgage if he were to pre-maturely die, which of the following policies would be the most logical for him to purchase?
25-year $85,000 Decreasing Term Life policy
According to the NAIC Model Group Life Insurance Provisions, what is the standard grace period?
30-31 days.
What is the maximum number of Social Security credits an individual can earn per year?
4 Credits
What is the full amount of Social Security credits needed to be fully insured for benefits?
40 Credits
For individuals who have reached their normal retirement age, their spouses are entitled a retirement benefit that is equal to what percentage of the retired worker's primary insurance amount (PIA)?
50%
In a 3 partner cross-purchase plan, how many policies need to be purchased in order to protect each partner against the loss of any other partner?
6
In order to be considered currently insured and thus eligible for limited survivor benefits from Social Security, a worker must have earned ___ credits during the 13-quarter period ending with the quarter in which the worker died.
6
If an individual wants to transfer funds from their 401(k) plan into a Rollover IRA, what is the maximum allowed time in order to be eligible for a tax-free rollover?
60 days
Under a stock redemption corporate buy-sell agreement, how many policies must be written if the corporation is owned by 7 shareholders?
7
Which of the following BEST describes a tertiary beneficiary?
A beneficiary who receives a policy's death benefits if both the primary and secondary beneficiaries have died before the insured
Which of the following statements below regarding a life policy's grace periods is CORRECT?
A life policy's grace period extends for 30 or 31 days after the date in which the premium is normally due.
In the event that a life insurance policy has lapsed, which of the following actions is NOT required of the policyowner before an insurance company will reinstate the policy?
A new application for insurance must be established
How is a conditional receipt BEST described?
A receipt given to an applicant when an agent collects both the application and initial premium. Under a conditional receipt, the applicant is covered against loss, should it occur, before the policy becomes effective, on the 'condition' that the applicant is found to be insurable as applied for by the insurer's underwriting department upon completion of its underwriting process.
Variable annuities are characterized by:
A variable rate of growth and a variable benefit payable to the annuitant
An insurance contract becomes a Modified Endowment Contract (MEC) if which of the following occurs?
Fails the 7-day test.
Which of the following is NOT considered to be a life policy settlement option?
Extended Term option
The period of time in which an annuity's value increases as a result of tax-deferred compounding interest is called the
Accumulation Period
Which of the following defines the period during which funds grow in an annuity?
Accumulation Period
Under the 1035 policy exchange provision, which of the following will NOT receive favorable tax treatment?
An annuity contract exchanged for a life insurance policy
Which of the following is NOT associated with a term life policy?
An important feature of whole life insurance that is not associated with term life insurance is that a whole life policy includes an investment component which accumulates 'cash value' and increases over time based on earned interest.
What is the most common type of employment-related group life insurance?
Annual Renewable Term
Which of the following qualified employer retirement plans is NOT recognized as a 'defined contribution' plan?
Annuity Funding Plan
Which of the following statements regarding variable annuities is CORRECT?
Because the contract owner bears the investment risk, variable annuities are considered to be securities rather than simple life insurance.
Which type of business life insurance 'buyout' agreement is used to purchase the interest of a deceased partner so that the business can continue to operate without financial interruption?
Buy-Sell Agreement
In the event that a whole life insurance policy lapses due to nonpayment or it is intentionally cancelled, which of the following nonforfeiture options are available to the policyowner?
Cash surrender option, reduced paid-up option and extended term option
Which provision or clause below will illustrate the frequency and amount of policy premiums?
Consideration clause
When a primary beneficiary dies before the insured, the beneficiary who will then receive policy proceeds is called the:
Contingent beneficiary
Which of the following is NOT a retirement vesting schedule?
Deffered Vesting
Due to the historical mismanagement of employee retirement plans, which federal law did Congress pass to protect employee retirement plans against misuse?
Employee Retirement Income Security Act (ERISA)
Which type of buy-sell agreement is most practical when purchasing life insurance on several partners within the company?
Entity Plan
Which formula is used to compute the taxable portion of an annuity payment?
Exclusion Ratio
Linda now owns a $120,000 term life policy after she forfeited her whole life policy and reinvested its cash value. As described by her actions, which nonforfeiture option did Linda exercise?
Extended Term Option
Which approach is more commonly used when assessing the correct amount of life insurance, taking into account medical deductibles, final expenses, surviving family maintenance income such as mortgage payments and cost-of-living expenses, as well as future income needs such as college tuition and spousal retirement income?
Family Needs assessment
Which of the following life policy settlement options provides installments composed of both the policy's face amount and earned interest, the amount of which is determined by the length of time in which payments are to be made to the policy's beneficiary?
Fixed-Period Option
In the event a policy's premium is paid late, which of the following provisions will keep the policy in force for a short period of time thereafter to allow the policyowner to submit payment?
Grace Period Provision
Which type of whole life insurance policy is characterized by affordable premiums in its initial years, then gradually increasing over the next few years until finally leveling off at a slightly higher rate than a standard whole life policy?
Graded Premium Whole Life
Which type of whole life policy is characterized by premiums that are typically lower for the first few years, and then increases each year until leveling off?
Graded Premium Whole Life Policy
Which rider, also known as an 'insurance protection' rider, states that at certain dates in the future, the insured can purchase additional insurance without evidence of insurability?
Guaranteed insurability rider
Susan has been paying premiums on her whole life policy for the past 14 years. Recently, she decided to stop making payments, but did not select a nonforfeiture option. Since she did not select such option, what actions will her insurer take?
Her insurer will issue a paid-up term life policy with the same face value as the original whole life policy and a term length based on the amount of cash value that the forfeited whole life policy can purchase.
Leon currently receives $650 per month from his variable annuity. Since he is scheduled to receive payments from his variable annuity for the remainder of his life, what will most likely occur to Leon's distribution payment amount as time goes on?
His distribution payment amount will fluctuate depending on the return of interest at the time of each distribution payment
Social Security does NOT provide financial assistance in the event of:
Hospitalization
Which life insurance valuation assessment takes into consideration an individual's life in terms the earnings potential in determining a life insurance value to replace such individual's earnings should he or she die prematurely?
Human Life Value assessment
Which type of insurance is designed for individuals and families with low income who need minimal protection in the event of death?
Industrial Life Insurance
Which type of life insurance includes a weekly premium mode, a small face amount and is referred to as 'burial' insurance?
Industrial Life Insurance
Which of the following is NOT involved in an annuity contract?
Insured
In the event that a policyowner surrenders his or her individual whole life policy, which outcome will likely occur?
Interest earned will be taxed, but premiums paid into the policy will not be taxed.
Which of the following statements is CORRECT in regards to a Roth IRA?
Interest is not taxed upon withdrawal due its funding from post-tax dollars
The primary function of an Equity Index Annuity is to:
Link excess interest to the upward movement of an outside market index, such as the S&P 500, while maintaining a minimum guaranteed interest rate
The cash value in a whole life policy is also considered to be the policy's:
Living Benefits
Which life rider allows for care in a convalescent or nursing home?
Long-Term Care Rider
Social Security is also known as:
Old Age Survivors and Disability Insurance (OASDI)
All of the following statements are true in regards to the incontestability of a life insurance policy EXCEPT
Once this period of time ends, an insurance company cannot contest the validity of a policy and must pay its death benefits, even if a policyowner had no insurable interest in the insured at the time of application
Which of the following life policy riders is also referred to as a 'child' rider?
Other (Additional) Insured(s) Rider
In the event that a parent dies or becomes disabled, which rider allows surviving child coverage to continue until the child reaches a specified age?
Payor Rider
Which federal organization was created under ERISA to guarantee payments of pension benefits in defined benefit plans that terminate due to a lack of funding to cover benefit payments?
Pension Benefit Guaranty Corporation (PBGC)
Benefits that are passed to a beneficiary's child or children in equal shares in the event that the beneficiary dies is known as the:
Per stirpes rule
In order for a beneficiary to receive double indemnity, which of the following scenarios must occur?
Referred to as 'double indemnity,' an Accidental Death Benefit rider provides an additional amount of life insurance, equal to the face amount of the policy, to the designated beneficiary if the insured's death results from an accident.
According to the NAIC Life Insurance Solicitation Model, when soliciting life insurance, a producer is required to provide a prospect with a ______ and a _______ specific to the product being marketed.
general buyer's guide; policy summary
Incorrect In a group life contract, evidence of insurability is
required only after the enrollment period ends
Carla has named her husband Jeffrey as the beneficiary to her life insurance policy. Under which beneficiary designation does she remains in control of the policy and can make any changes she sees fit in the future?
Revocable Designation
Annuity policies written by dually licensed agents are monitored by which group?
Securities and Exchange Commission (SEC)
Which of the following life policy clauses or provisions protects a life policy's proceeds against a beneficiary's creditors?
Spendthrift Clause
Mr. Baker has named his son as the beneficiary to his life insurance policy, but he is worried about his son's spending habits and the money his son might already owe when he receives the death benefit. Which policy provision, clause or rider best fits his situation?
Spendthrift Provision
Kevin, who has been receiving payments from his annuity for the past 17 years, has recently died. As a result, no additional payments are available and all remaining funds in the annuity are forfeited back to the insurer. Which type of annuity did Kevin own?
Straight Life Income Annuity
Incorrect Which of the following is established to fund a multiemployer plan?
Taft-Hartley Trust
In an employer-related group life contract, an employee may choose any of the following individuals or entities to serve as his or her policy's beneficiary EXCEPT
The Employer
Which of the following statements BEST describes the Social Security 'blackout' period?
The blackout period begins when the youngest dependent child turns age 16 and continues until the surviving spouse reaches the age of 60.
Nicholas has purchased a whole life insurance policy; however, while completing his life insurance application he accidentally wrote down an incorrect date of birth. As a result, the insurance company believes he is 2 years younger than his actually age. When he brings this to the attention of the insurance company, what will likely be the course of action as a result of the Misstatement of Age provision?
The company will adjust the amount of future premiums and request payment of the additional premium Nicholas should have paid
If Justin submitted an initial premium with his life insurance application, was provided a conditional receipt by the insurance company and was ultimately issued a policy as applied for, when would his insurance policy be considered in force?
The date of his application or the day he completed any required medical exam
During the annuity period, which of the following is considered correct in regards to variable annuities?
The number of annuity units is fixed, but the value of each unit will fluctuate.
Barbara is currently in her Social Security 'blackout' period. Which answer BEST describes this period?
The period after a surviving spouse's youngest child is no longer eligible and before the surviving spouse turns age 60, or age 50 if he or she is disabled
Barbara is currently within her Social Security 'blackout' period. Which of the following BEST describes this period of time?
The period of time after a surviving spouse's youngest child is no longer eligible and before the surviving spouse turns age 60.
Which of the following reasons would justify a policy replacement?
The policy no longer meets the needs of the client
Tonya failed to pay her life policy's premium on the date in which it is normally due and is currently 23 days late. As a result of her policy's grace period provision, which outcome will occur?
Tonya is within her grace period and can pay her premium up to 30 or 31 days after the date in which the premium is normally due; however, she does not need to pay back any outstanding loans to the insurer.
True or False? Variable annuity units are fixed but the annuity payment will vary according to the value of the annuity unit.
True
Ted, and the beneficiary to his policy Robin, have both perished in an accident. Considering there is no sufficient evidence to show who died first, Ted is considered to have outlived Robin in regards to policy proceeds as a result of the:
Uniform simultaneous death act
The Incontestable Clause states that the insurer cannot contest the validity of a life insurance policy as long as it remains in force after what period of time?
Usually 2 years, but in some states only 1 year
An individual, company or legal entity that purchases ownership of a life insurance contract from a policyowner who, in return, receives compensation amounting to less than the policy's death benefit, usually 60%-80% of the policy's proceeds is known as a :
Viatical Settlement Provider
Shelly is considered to be terminally ill and has decided to sell her life insurance policy in exchange for living benefits to fulfill some final comforts and expenses before her death. In selling her life insurance policy, Shelly is referred to as a(n)_________and she will receive a percentage of her life policy's face amount in exchange for ownership of her policy.
Viator
Which two life insurance riders can Bill purchase to guarantee that his policy will continue without further commitment from him and that income will be paid to him if he becomes totally and permanently disabled?
Waiver of premium and Disability Income Riders
Under a family plan life insurance policy, coverage on the breadwinner is often provided by which of the following insurance types?
Whole Life
