Life Overall

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Life Overall 1. Dude paid a total of $25,000 for his $100,000 life insurance policy. He borrows $35,000 against the cash value. How much will Dude have to report as a gain? $35,000 $25,000 $10,000 $0 2. The policyowner/insured of a $100,000 life insurance policy died of a heart attack four months after taking out the policy. The company then learned that the insured had been treated for a heart condition nine months prior to being insured, but the fact had been omitted from the application. Which course of action would the company likely follow? 1. The company had to pay the death benefit because the discrepancy was not uncovered prior to the insured's death. 2. The company had to pay the death benefit because the contract is incontestable after the payment of the initial premium. 3. The company will not have to pay the death benefit, but will return the premiums. 1 only 2 only 3 only 1 & 2 3. Ernest has a life insurance policy with a death benefit of $100,000, consisting of $50,000 whole life and a $50,000 level term rider. His agent has informed him that electing the extended term non-forfeiture option would provide him with a death benefit of how much? $100,000 $50,000 $25,000 Nothing 4. If 100 men, age 25, desired to provide their beneficiary with $10,000, how much would each have to pay if we knew three were going to die? $30 $300 $3000 $309 5. Which of the following is a distinguishing element of an insurance contract? consideration competent parties incontestability offer and acceptance 6. Which of the following statements concerning equity indexed annuities is/are correct: 1. The returns are credited to a specific equity or stock index 2. There are guaranteed interest rates 3. The principle is guaranteed 4. Annuitization can be fixed or variable 1 & 2 2 & 3 1 & 4 all the above 7. Signing over ALL rights of ownership in a policy by the owner is: policy owner privilege. an absolute assignment. a policyowner amendment. a transfer of rights. 8. "Under no circumstances are you to send me the money", Joe told his insurance company when he turned 65. Joe had an endowment policy for $50,000 that matured at age 65. He had paid in a total of $25,000 and did not want to pay the taxes quite yet desiring to delay the inevitable for as long as possible. "Too bad", said the IRS. "You're taxed." Under what rule was Joe taxed? the non-deferral rule the make it, pay it rule the rule of constructive receipt the endowment rule 9. Harry the Hobo has no estate problems. His estate is worth very little. He finds some money under the bridge and buys a $100,000 whole life insurance policy, naming his mother as beneficiary. (We don't want to get toooo serious.) How has this changed his estate. $0 $50,000 $75,000 $100,000 10. Where is the insuring clause of a life insurance policy found? On the cover of the policy With all riders and endorsements On file in the company's home office All of the above 11. Industrial life insurance is known as all the following types of insurance except: Debit Insurance Burial Insurance Home Service Insurance Ordinary Insurance 12. In the "needs approach" where do you account for "my roof is leaking"? mortgage fund education fund emergency fund housing fund 13. In order to comply with the Fair Credit Reporting Act, at which of the following times must an agent notify an applicant that a credit report may be requested? at the initial interview at the time of the application when the applicant's credit is actually checked when the policy is delivered 14. What is the maximum annual contribution an eligible person may make to an Individual Retirement Account (IRA)? $1,500 or 15% of earned income, whichever is less. The greater of $3,000 or 20% of salary or wages. $7,500 or 15% of annual income, whichever is less. The lesser of $4000.00 or 100% of income 15. Which of the following individual policy conversions is usually permitted without any evidence of insurability? Conversion from a Term policy to a Whole Life policy Conversion from a Whole Life policy to a Term policy Conversion to a larger amount of insurance Conversion to a lower premium plan 16. Which of the following regarding a Roth IRA is true? withdrawals must commence by April 1 of the year following attainment of age 70 1/2 as with traditional IRA's, there are income limits for contributions one of the qualified withdrawal requirements is that the funds must have been held in the account for five years A spousal Roth IRA is available 17. Clockster surrenders his $25,000 life insurance policy with $10,000 of cash value. He has paid a total of $5,000 in premiums. He had received $2,000 of dividends of which he bought $7,000 of paid-up insurance. How much will Clockster have to report to the IRS as a gain? $7000 $5000 $10000 $0 18. An agent's license will terminate if he or she allows how many years to pass with-out an appointment? Two years Four years Five years Six years 19. Which of the following is provided by a PAYOR rider on a policy with a minor child as the insured? If the child is disabled 6 months or longer premiums are waived. If the premium payor dies, premiums are waived until the insured child reaches age 21 or 25, as stated in the policy. If the minor child dies the benefit is doubled. If the premium payor is unemployed benefits are waived. 20. Features that may be included in most Term policies include which of the following? 1. Convertibility 2. Renewability 3. Waiver of Premium provision 1 and 2 only 1 and 3 only 2 and 3 only 1, 2, and 3 21. Justin purchases a plan that will pay his beneficiary a lump sum and then payments for 10 years after he dies. Which type of plan did Justin purchase? Family Plan Family Maintenance plan Family Income plan Modified Whole Life policy 22. Which of the following statements is true about a policy assignment? It permits the beneficiary to designate the person or persons to receive the benefits. It is valid during the insured's lifetime only, because the death benefit is payable to the named beneficiary. It transfers the owner's rights under the policy to the extent expressed in the assignment form. It is the same as a beneficiary designation. 23. On May 8, a prospect filled out an application for a life insurance policy but paid no premium. The insurance company approved the application on May 14 and issued the policy on May 15. The agent delivered the policy on May 26 and collected the first premium. The coverage became effective on: May 8 May 14 May 15 May 26 24. The incontestable clause permits insurers to contest a death claim: for any misrepresentations, regardless of the elapsed time. for material misrepresentation beyond 2 years. for material misrepresentations if under 2 years. whenever there is a question of self destruction. 25. To be considered chronically ill and qualify for benefits under an accelerated benefit rider, a licensed health care practitioner must certify that the person is unable to perform: at least two activities of daily living for 90 days at least three activities of daily living for 60 days at least two activities of daily living for 60 days at least three activities of daily living for 90 days 26. The delayed payment provision permits an insurer to postpone payments of cash surrender values after policyowners request payment for a period of: 30 days 60 days 90 days 6 months 27. How is the Medical Information Bureau funded? It is funded by the states and authorized insurance companies. It is funded by the states. It is funded by more than 700 member insurance companies. It is funded by the states and the federal government. 28. Profit Sharing and Money Purchase Plans are: Defined Contribution Plans Defined Benefit Plans Require yearly contributions Can't remember 29. All statements on an application are considered to be: warranties representations material facts all the above 30. Which is not the primary purpose of Key Person insurance? business indemnification preserves business credit creates reserve fund tax deductible premiums 31. At age 30, OohJay wishes to purchase a Whole Life policy. His agent explains that he can pay for the policy in several ways. One method is called 20-Pay Life, and another Straight Life. OohJay wishes to know which plan will accumulate cash value at a faster rate in the early years of the policy. Which of the following would be the agent's most appropriate response? Straight Life will accumulate cash value faster. 20-Pay Life will accumulate cash value faster. Both plans will accumulate cash value at the same rate. The rate of cash value accumulation depends on the profitability of the insurance company. 32. An accelerated death benefit rider could be found in which type of policy? individual plans group plans both group and individual 33. Which of the following is/are true about GROUP LIFE? 1. Group life is not concerned with the selection of individual risks, but rather the selection of risks by classification. 2. The group life policy must be incidental to the group's purpose. 3. Each insured receives his/her policy as proof of insurance. 1 only 2 only 2 & 3 1 & 2 34. How often must an annuitant be informed of the number of units and the value of those units? yearly monthly quarterly bi-annually 35. Nancy wants to name Tonya as the beneficiary of her life policy. However, she wishes Tonya to be at the bottom of the list. Nancy should have Tonya named as: Irrevocable beneficiary Revocable beneficiary Secondary beneficiary Tertiary beneficiary 36. A Florida life insurance company may issue "Group Variable Annuity Contracts" without registering as an investment firm if the contracts are used for qualified retirement plans and cover at least _____ people? 50 25 10 5 37. Most business assignments of life insurance policies are made in order to protect the: insured's insurability lender's financial interest in the insured beneficiary from the claims of creditors insurance company from fraudulent claims 38. In Florida, all of the following must appear in the application except: agent's name beneficiary company name agent's I.D. number 39. Which of the following contracts require a series of benefit payments be made at specified intervals? Endowment Annuity 20-Pay Life Modified Whole Life 40. In a typical split dollar policy the employer and the employee split the cost of the insurance. On an annual basis, the employer's outlay is equal to the: cash value half of the premium increase in cash value full premium 41. Who has jurisdiction over all variable annuity contracts issued by life insurance companies? The State The S.E.C. The State and the S.E.C. The State, the S.E.C. and the F.D.I.C. 42. With a joint and full survivor annuity option: 1. If the secondary annuitant dies first, payments to the primary annuitant will increase because only one life is now considered. 2. If the primary annuitant dies first, payments to the secondary annuitant will stay the same. 3. If the secondary annuitant dies first, payments to the primary annuitant remain the same for life. 1 only 2 only 3 only 2 & 3 43. An Annuity is designed to provide which of the following financial features? 1. The liquidation of principal and interest 2. A favorable tax treatment for income received 3. The creation of an estate 1 and 2 only 1 and 3 only 2 and 3 only 1, 2, and 3 44. Who will receive the lowest monthly annuity payment, all else being equal? an elderly man an elderly woman a young man a young woman 45. The insuring clause is typically undersigned by: The president of the insurance agency and the agent The general agent and the career agent The president and the secretary of the company The president of the company and the general agent 46. A Coverdell Savings Account is: A means of saving for education with pre-tax dollars A retirement account funded with pre-tax dollars An after tax savings vehicle for education A retirement account covering Dell employees 47. After a GROUP LIFE master policy has been issued, what action may the insurer take on future policy anniversaries? The insurer may cancel the insurance of any group members who have become seriously ill or impaired. The insurer may adjust the premium to bring it in line with current mortality and operating expenses. The insurer can not make any changes in the contract or in the enrollees. The insurer may refuse to insure covered members with excessive claims. 48. Owners of Variable Annuities will realize better investment growth when? The bond market outperforms fixed-dollar investments The futures market outperforms the bond market The stock market outperforms fixed-dollar investments Fixed dollar investments outperform all other investments 49. Variable Life insurance is considered: An insurance contract only A securities contract only An insurance and general contract An insurance and securities contract 50. The following statements about INSURABLE INTEREST are true EXCEPT: Brothers and sisters have an insurable interest in each other. A creditor can have an insurable interest in a debtor limited to the amount of indebtedness. An insurable interest must exist between the policy owner and the insured at the time of the claim. People are considered to have an insurable interest in themselves. 51. Wilma the widow is receiving payments under the fixed period settlement option. The company is currently paying the payments at an interest rate of 5%. If, in the future, the company elects to raise the interest rate to Wilma, what effect would this have on her payout? There is not a chance this could happen. The period would be longer. Her payments would be higher. Wilma would be very very happy. 52. An insured commits suicide with-in the first two years of the life insurance policy, which course of action will the insurance take? Pay full benefits Pay the death benefit but subtract the premium Deny the claim Deny the claim and return the premium 53. The Florida Guarantee Association: Protects the insured if the insurer becomes insolvent Protects the insurer if the insurer becomes insolvent Protects the agent if the insurer becomes insolvent Protects the insurer if the insured becomes insolvent 54. Which of the following would be entitled to a tax free rollover from an IRA? a surviving spouse the person who establishes the IRA and any named beneficiary the person who established the IRA, a spouse, and children all the above 55. With a Key Employee insurance policy, who is normally the beneficiary? the family of the insured the business the insured's estate the key employee 56. The fifth dividend option will purchase: Term insurance equal to the face amount Paid-up insurance not to exceed the face amount Term insurance not to exceed the cash value Paid-up insurance not exceed the cash value 57. Under a viatical settlement arrangement, an insured received $80,000 for his $100,000 life insurance policy. Which of the following statements are true? 1. The $80,000 will be tax free. 2. The $80,000 will be taxable. 3. The $20,000 gain paid to the buyer will tax free. 4. The $20,000 gain paid to the buyer will be taxable. 1 & 3 2 & 3 1 & 4 2 & 4 58. Which is true concerning a VARIABLE LIFE insurance policy? It provides a minimum guaranteed death benefit. Benefits vary and are linked to the Dow-Jones stock averages. It has a guaranteed minimum cash value. Premiums and benefits are both variable. 59. A group of pharmacists or dentists might be covered under: a reinsurance group a risk retention group a reciprocal group a fraternal group 60. Which of the following is not true concerning the National Association of Insurance Commissioners? It created the advertising code and the Unfair Trade Practices Act. It encourages uniformity in state insurance laws by legislative acts. It is concerned with the preservation of state regulation. It develops standards for policy provisions. 61. Which of the following statements concerning SIMPLE plans is/are correct? 1. Tax exempt and 100 employees or less are eligible 2. Mandatory employer contributions up to 5% of the employees contribution 3. 100% immediate vesting 4. Graded Vesting schedules 1 & 2 1 & 3 1 & 4 2 & 4 62. The purpose of the Medical Information Bureau is to: Provide doctors a way to share information To help keep premiums down To provide a way for insurance companies to share underwriting decisions Provide insureds an easier way to obtain their medical records 63. Karen is 30 years old. She has a daughter age 10. If Karen's husband were to die, the blackout period would last how long? 6 years 20 years 24 years 29 years 64. Rebating would be permitted in all the following cases except: The rebate must be available to all insureds in the same actuarial class The percentage of rebate cannot discriminate Rebates should be given to insureds who purchases a policy from an insurer that prohibits rebating Rebating is illegal in Florida 65. Which of the following pertaining to Group Credit Life Insurance is correct? It is a form of whole life insurance. The insurance amount may exceed the amount of debt. Premiums are paid wholly by the insured. Policy proceeds are paid to the insured's spouse or other beneficiary. 66. What is on part 3 of the application? The agent's report The medical report The inspection report Special questionaires 67. All of the following are methods of tax deducting life insurance premiums except: key person life business creditors employer group life life insurance by an ex-spouse as part of an alimony decree 68. All of the following statements about life insurance and the risk it covers are true EXCEPT: Life insurance is a mechanism for pooling and sharing risks. As the number of separate risks of the same type increases, the amount of loss within a given group becomes more certain. The probability of an individual insured's death increases each year until it becomes a certainty. Life insurance is like a mutual fund in that a certain sum of money must be set aside each year to meet the contractual obligations of the insured. 69. Which of the following would be eligible for a Keogh Plan? Any business A small family held 'S' corporation An independent financial planner 70. The Waiver of Premium: has a normal waiting period of 30 days. is removed at age 70. covers accidental disability on the first day. is an option that may be rated or denied. 71. Which of these is not a common form of term insurance? Level Increasing Decreasing Modified Graded 72. Which is correct concerning a GRADED PREMIUM WHOLE LIFE policy? It is a form of term insurance. Premiums are reduced each year during the early policy years and then remain level. Premiums are payable to age 65. Premiums start low, increasing each year during the early years of the contract and then remain constant for life. 73. Which type of settlement option could possibly be paid out to the beneficiary completely tax free? lump sum interest only fixed-amount life income 74. All the following statements concerning deferred compensation plans are correct except: They receive favorable tax treatment from the IRS. They allow employers to pick and choose any employee they want to reward. They are more flexible than a qualified plan. They are usually funded with cash value insurance. 75. A field underwriter: decides who will be issued the policy. is responsible to agents in the field. is the agent. supervises agents in the field. 76. Which of the following statements are true? There is no ordinary income tax during the annuity period The taxes imposed during the accumulation period will be at ordinary income rates During the annuity period taxes will be imposed at ordinary income rates The annuity period might be taxed at ordinary income rates or capital gain rates depending on how long they kept the investments 77. John owned a life insurance policy on his sister. His sister's children were named as the beneficiaries. If his sister and her children were killed in an accident, to whom would the insurance company pay the benefits? the sister's estate John's estate John his sister's husband 78. The period of time following the death of a breadwinner during which the children are living at home is a/an: Loss of use period Income Period Blackout Period Dependency period 79. The transfer for value rule states that if a policy is sold any amounts received by the purchaser above his cost basis would be taxable at ordinary income rates. This would not apply to which of the following? If transferred to the insured If transferred to a partner of the insured If transferred to a corporation in which the insured is an officer All of the above 80. The provision in a life insurance policy that provides protection against unintentional policy lapse is known as the: Reduction of Premium option Waiver of Premium benefit Payor clause Automatic Premium Loan provision 81. All of the following statements concerning IRA withdrawals are correct except: Mike, age 45, elects to annuitize his IRA. The 10% penalty would not apply Payments must begin by April 1 following the year in which they reach age 70 1/2 a 50% penalty is imposed if minimum distributions are not made 100% of any withdrawal will be taxed 82. The "right of subrogation" means the insurance company may acquire the right of the insured against liable third parties, those that may have contributed to the loss, in the event a claim is paid. This could be found in which type of contract? a life insurance contract a valued contract disability contracts indemnity contracts 83. Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period during which the insured will have limited financial resources? Term Whole Life Annuity Endowment 84. All the following are examples of non-qualified plans except: simple plans salary continuation plans deferred compensation plans split dollar plans 85. Forrest owns a 30-Pay Life policy that he purchased at the age of 30. The cash value will equal the face amount of the policy when he reaches the age of: 60 65 70 100 86. Which is true about the net payment cost comparison index and the surrender cost comparison index? They are found at the end of the policy They are found in the policy summary They are found in the entire contract They must be presented at policy delivery 87. The following types of GROUP LIFE plans are available EXCEPT: Group paid up plans Group term life Level premium plans Group deferred life plans 88. Under SOCIAL SECURITY, a covered worker's P.I.A. is: an amount equal to the worker's retirement benefit at age 62. equal to the full retirement benefit at age 65. is not used as a base to calculate other benefit levels. is equal to a percentage of the insured's death benefit. 89. Which of the following statements regarding Coverdell Education Savings Accounts are true? Contributions are tax deductible Contributions must be made before the beneficiary turns 18 Maximum contribution limits are $4000 per beneficiary When beneficiary turns 25 any remaining funds will be taxable 90. Which is not considered a group permanent plan? group paid-up group universal life group credit life group ordinary life 91. Which of the following statements are true about exercising a Guaranteed Insurability option? 1. The new insurance is available at the original issue age rate. 2. Evidence of insurability is not required. 3. The insured can exercise the option at any time after the age of 21. 4. The maximum purchase is specified in the contract. 1 and 2 only 2 and 4 only 3 and 4 only 1, 2, and 3 only 92. Which of the following statements about a life annuity with 10 years certain is/are true? 1. If the annuitant lives for 20 years after the start of the income period, he will receive income payments for 20 years. 2. If the annuitant dies 5 years after the start of the income payment period, the beneficiary will receive income payments for an additional 10 years. 1 only 2 only 1 and 2 Neither 1 nor 2 93. Which of the following would not be a characteristic of an annuity? surrender charges in the first few years provides a life time income restrictions of how long an annuity can be deferred typical mandatory distributions by age 70 1/2 94. Which of the following statements concerning an insurance company's separate account is/are true? 1. Separate account funds are free from the claims of the insurance company's creditors 2. In the event of insolvency of the insurance company, the separate account funds are protected for the policyowner. 3. Indexed annuities may be set up with separate accounts. 4. Separate account funds are guaranteed. 1 & 2 1 & 3 1, 2 & 3 2, 3, & 4 95. Which of the following is/are true concerning the N.A.I.C.? They are instrumental in developing guidelines and model legislation They develop standards for policy provisions They created the Unfair Trade practices act and the Advertising Code All of the above 96. Robert named Becky as an absolute irrevocable beneficiary. If Becky dies before Robert: All rights revert back to Robert. Becky's estate will still have an interest in the policy. One should never name an absolute irrevocable beneficiary 97. Lanny, covered under his company's group life plan, was terminated June 1. He died June 15. His life insurance policy will pay: nothing return premiums full benefit pro-rated benefit 98. All of the following statements concerning Deferred Compensation plans are correct except: They may be used by businesses to discriminate in favor of key employees. Contributions may be tax deducted. They do not receive favorable tax treatment. May be set up at the employee's request. 99. Which of the following concerning deferred compensation plans are correct? 1. Life insurance may be used as a funding vehicle. 2. They are qualified plans. 3. They are non-qualified plans. 4. They are regulated by ERISA. 1, 2, & 4 1, 3, & 4 1 & 3 2 & 4 100. To determine the amount of income that is considered taxable from a life annuity, an exclusion ratio is used. Which of the following would be correct? The amount invested divided by the life expectancy The amount invested divided by the expected interest rate The amount invested divided by the expected return The full amount would be considered as taxable income

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