Test Questions
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 Year Convertible Term
A non-contributory plan requires ____ participation of all eligible employees
100%
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated?
1970- Fair Credit Reporting Act
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20 Pay Life accumulates cash value faster than Straight Life
J is 35 years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20 pay life
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
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to file for social security benefits?
5
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%
Three law partners form a cross puchase buy and sell agreement. This agreement is funded with individual life insurance. How many life policies are needed for this agreement?
6
How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 days
Which of these is NOT a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
An employee requested that the balance of her 401k account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled overr into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at age 70
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the prinvipal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the individual and his dependents
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
What action should a producer take if the initial premium is NOT submitted with the app?
Forward the app to the insurer without the initial premium
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child.
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
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
Insured
Who has the option to renew a Renewable Term policy?
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
Variable annuities may invest premium in each of the following, EXCEPT:
Insurer's corporate business account
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:
Interest Only
How are policy owner dividends treated in regards to income tax?
Interest on accumulations is taxed
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 statement regarding third party ownership of a life insurance policy is true?
It is used extensively in estate planning as well as business circumstances
D needs life insurance that provides coverage for only a limited amount of tiime while also paying the lowest possible premium. What kind of policy is needed?
Level term
Which of these are NOT an example of a Nonforfeiture option?
Life Income
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for tthe balance of the 20 years. What type of annuity is this?
Life annuity with period certain
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole 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 is NOT considered to be a right given to a policy owner?
Modify a provision in the insurance contract
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
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
A provision in a life insurance policy that pays the policy owner an amount that does not surpass the guaranteed cash value is called the:
Policy Loan provision
On a life insurance policy, who is qualified to change the beneficiary designation?
Policy owner
Which is true concerning a Variable Universal Life policy?
Policy owner controls where the investment will go and selects tthe amount of the premium payment
Which of these describe a participating insurance policy?
Policy owners are entitled to receive dividends
Which of the following is an example of a nonforfeiture option?
Reduced Paid-Up option
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
M purchased an Accidenrtal Death and Dismemberment policy and named his son as beneficiary. M has the right to change the beneficiary designation at any time. What type of beneficiary is his son?
Revocable
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Risk classification
Post tax dollar contributions are found in:
Roth IRA investments
Which of the following are equity indexed annuities typically invested in?
S&P 500
What does a 401(k) plan generally provide its participants?
Salary deferral contributions
The annuity that represents the larges possible monthly payment to an individual annuitant is a(n):
Straight life annuity
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income
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
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term Life
What kind of life insurance product covers children under their parent's policy?
Term rider
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
Which statement regarding a key employee life policy is NOT true?
The beneficiary is named by the key employee
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
USA Patriot Act
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment
A variable annuity has which of the following characteristics?
Underlying equity investments
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
A pilot applies for life insurance. The insurer approves the app with a $10 additional monthly premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will then likely issue the coverage with a(n):
Aviation Exclusion
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
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called:
representations
T is covered by an accidental death and dismemberment policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
request of the change will be refused
A(n) ____ beneficiary may be changed by the policy owner WITHOUT the consent of the beneficiary
revocable
An immediate annuity consists of a:
single premium
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
split dollar plan
The investment gains from a Universal Life Policy usually go toward:
the cash value
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:
the cost
A contract owner terminates an annuity before the income payment period begins. The owner will then receive
the current contract surrender value
Who is normally considered to be the owner of a 403b tax sheltered annuity?
the employee
The Consideration clause in a life insurance policy indicates that a policy owner's consideration consists of a completed application and
the initial premium
a level premium indicates:
the premium is fixed for the entire duration of the contract
The free-look provision begins
upon receipt of the policy by the policy owner
When is the face amount paid under a Joint Life and Survivor policy?
upon the death of the last insured
A term life insurance policy matures:
upon the insured's death during the term of the policy
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
varies according to the contract
The part of a life insurance policy guaranteed to be true is a(n)
warranty
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
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
Which parts of the life insurance policy are guaranteed to be true?
Warranty
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
aleatory
Group life insurance policies are generally written as
annually renewable term
To be eligible for social security disability benefits, an employee must be unable to perform:
any occupation
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
T is the policy owner for a life insurance policy with an irrivocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the
beneficiary
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT:
beneficiary's age
What is considered to be a characteristic of an immediate annuity?
benefit payments start within one payment period of purchase
Which of these actions is taken when a policy owner uses a Life Insurance policy as collateral for a bank loan?
collateral assignment
Insurance contracts are known as ___ because certain future conditions or acts must occur before any claims can be paid.
conditional
T is given a receipt after completing a life insurance app and paying the initial premium. Under this situation, T's coverage is
conditional, depending on the insurer's underwriting guidelines
What type of group insurance plan involves employees sharing the cost?
contributory plan
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
conversion provision
An employee of 20 years recently retired at age 59 1/2. This employee's gruop life contract can be:
converted to an individual permanent policy at an individual rate
D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance app, D makes a mistake. In this situation, D MUST
correct the info and have the prospect initial the change
A(n) ____ term life policy is normally used when covering an insured's mortgage balance.
decreasing
What is the purpose of the USA Patriot Act?
detect and deter terrorism
A variable insurance policy:
does not guaranttee a return on its investment accounts
A life insurance app may be rejected on the basis of all these factors EXCEPT:
gender
Variable Life products require a producer to
hold a Life Insurance license and a Securities license
In life insurance, the needs approach is used mostly to establish:
how much life insurance a client should apply for
How would a contingent beneficiary receive the policy proceeds in an accidental death and dismemberment policy?
if the primary beneficiary dies before the insured
When must insurable interest exist for a life insurance contract to be valid?
inception of the contract
A policy owner's rights are limited under which beneficiary designation?
irrevocable
Which type of life insurance beneficiary requires his or her consent when a change of beneficiary is attempted by the policy owner?
irrevocable beneficiary
Credit Life insurance is:
issued in an amount not to exceed the amount of the loan
An employer that offers a qualified retirement plan to its employees is eligible to:
make tax deductible contributions to the plan
A trustee to trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
mandatory incomme tax withholding on the transfer amount
B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will
pay the amount that the premium would have purchased at the correct age
Which of these statements concerning an individual straight life annuity is accurate?
payments are made to an annuitant for life
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
A policy loan is made possible by which of these life insurance policy features?
Cash value provision
Company XYZ offers a Term Life insurance plan to its employees. What does each employee covered under this plan receive?
Certificate of insurance
An individual working part time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductable IRA contribution allowable?
$2,500
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a:
$25,000 individual whole life policy
N is a 40-year old applicant who would like to retire at age 70. He is looking tto buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 pay life
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
A policy owner may generate taxable income from which of the following Dividend options?
Accumulation at Interest
All statements are true statements regarding the underwriting process EXCEPT:
Aids and HIV virus exams can be conducted in a discriminatory fashion
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
All proceeds are income tax free in the year they are received
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
Traditional individual retirement annuity (IRA) distributions must start by:
April 1st of the year following the year the participant attains age 70 1/2
What action can a policy owner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
Which of these is NOT considered to be a cost connected with an individual's death?
Business expenses
Which statement about a whole life policy is true?
Cash value may be borrowed against
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance company?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the app off to the insurance company
The combination of Whole Life and ____ Term insurance is referred to as a Family Income Policy
Decreasing
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
Additional coverage can be added to a Whole Life policy by adding a(n):
Decreasing term rider
A 45 year old woman won $100,000 in a scratch off lottery ticket. She purchased an annuity that will pay her $1,500 per month beginning at age 60. Which of these annuities did this woman purchase?
Deferred Fixed annuity
Which of these is NOT a source of funding for SS benefits?
Federal Government
Taking receipt of premiums and holding them for the insurance company is an example of:
Fiduciary responsibility
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed deferred
The payments on Q's annuity are no less than $250 quarterly. WHich of the following annuities does Q own?
Flexible Installment Deferred
If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee?
Nothing
Which tax woulld an IRA participant be subjected to on distributions received prior to age 59 1/2?
Ordinary income tax and a 10% tax penalty for early withdrawal
K owns a Whole Life policy. If K want an increasing Death Benefit to protect against inflation, which Dividend Option should she choose?
Paid-Up Additional Insurance
All of the following statements are true regarding a policy's Grace period EXCEPT:
Past due premiums are waived
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
Under federal tax laws, what is the tax treatment for an empoloyer 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
What determines the full amount of social security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
A primary beneficiary has died before the insured in a life policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary
P is a producer who notices 5 questions on a life app were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single premium
K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving paments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase?
Single premium immediate joint with survivor annuity
What is old age and survivors health insurance (OASDHI) also known as?
Social Security
Why must an insurance applicant answer all questions on the app?
Statements and representations on the app are part of the consideration for issuing a policy
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate when using this phrase?
The duration of premium payments
J chooses a monthly premium payment mode on his whole life insurance policy. Which of these statements is correct?
The gross premium is higher on a monthly payment mode as compared to being paid annually
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 app
A policy of adhesion can only be modified by whom?
The insurance company
Which statement regarding the change of beneficiary provision is true?
The policy owner can change the beneficiary
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:
The premiums can be lowered or raised, based on investment performance
What is the basic function of an annuity?
The systematic liquidation of accumulated funds
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
A(n) ___ Life policy offers the owner investment in products such as money-market funds, long term bonds and equities
Variable
A $20,000 life insurance policy application is completed; however, the producer does not collect the initial premium. At what point does the coverage go into effect?
When the applicant receives the policy and pays the initial premium
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole Life
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole Life Policy with an Other Insured Rider
A life insurance policy that provides a policy owner with cash value along with a level face amount is called:
Whole life
T, age 70, withdraws cash from a profit-sharing plan and purchases a straight life annuity. What will this transaction provide?
income that cannot be outlived by the owner
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable Life Policy?
increase face amount
A life insurancde policy would be considered a wagering contract WITHOUT:
insurable interest
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 sttill F. Howeverr, and insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
F
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance Policy
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
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the applications asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000, minus any outstanding policy loans
G purchased a family income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
Which of these needs is satisfied by Adjustable Life insurance?
Insured's need for flexible premiums
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 witha 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
The cash value in a(n) ___ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
Universal
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as:
Variable Life
Which of these types of life insurance allows the policy owner to have level premiums and to also choose from a selection of investment options?
Variable Life
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
A(n) ____ ____ Life policy combines investment choices with a form of Term coverage
Variable Universal
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
Variable Universal Life Policy
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life
A Cost of Living rider gives the insured
additional death benefits
Variable Whole Life Insurance can be described as:
both an insurance and securities product
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
D is the policy owner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Current wife
The provision that can be used to put an insurance policy back in force afterr it has lapsed due to nonpayment is called:
Reinstatement
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policy holders is called:
Reserves
Who elects the governing body of a mutual insurance company?
policy holders
The amount of coverage on a group credit life policy is limited to:
the insured's total loan value
