Retirement and other insurance concepts LIFE
who owns a group life insurance contract
the employer (also known as the sponsor of the group)
when planning for survivor protection in life insurance, what needs to be considered
the insureds current assests, liabilities, and survivors needs
if a retirement plan is qualified, what does that mean
the plan has favorable tax treatment
what is the primary purpose of a 401(k) plan
provide retirement income
what are the three types of social security benefits
retirement, disability, and survivors
what are the personal uses of life insruance
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%
what qualified plan is suitable for the self employed
HR-10 or Keogh
what are some examples of qualified plans
IRA, 401(k), HR10 (keogh), SEP, SIMPLE
what is the name for an overfunded life insurance policy
a modified endowment contract (MEC)
whom may contribute to an HR-10 plan
a self-employed individual
who would be considered a third-party owner
an individual or entity who is not the insured
group life insurance policies are written as what type of insurance
annually renewable term
what does liquidity mean in a life insurance policy
availability of cash value
According to the taxation rules of life insurance policies, how are cash value increases taxed?
cash value growth is tax deferred
why are dividends in life insurance policies not taxable
dividends are not considered income for tax purpose; they are a return of unused premium
what is required to qualify an individual to contribute to a traditional IRA
earned income
for a retirement plan to be qualified, it must be designed for whose benefit
employees
who qualifies for tax-sheltered annuities, or 403 (b) plans
employees of nonprofit organizations under section 501 (c)(3) and employees of public school systems
life insurance may be used to pay state inhertiance taxes and federal estate taxes eliminating the need to sell assets from the estate. what is this called
estate conservation
what is the main advantage of converting from group life insurance to individual coverage
evidence of the insurability
what type of policy is typically issued without proof of insurability from the insured
group policy
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 main purpose of the 7-pay test
to determine if a life insurance policy is a modified endowment contract
what type of policy issues certificate of insurance to the insureds
group policy
what are the characteristics of the group that underwriters will consider before issuing a group life policy
groups purpose, size, financial strength and turnover
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
in what form of payment must the contributions to a traditional IRA be made
in cash (or cash equivalents)
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
SIMPLE plans are available to groups of how many employees
no more than 100
in qualified plans, are employer contributions taxed as income to the employees
no, employer contributions are not taxed as income to the employees
is the death benefit of a life insurance policy taxed to the beneficiary if its received as a lump sum
no, lump sum benefits are received tax free
when would life insurance policy proceeds be included in the insureds taxable estate
when there is an incident of ownership at the time of death
if an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage
whole life
