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Life 4 1. Which of the following is true concerning key person life insurance? The policy is listed as an asset on the company's balance sheet. The premiums, if paid entirely by the business, are a deductible business expense. It may be funded with a spilt dollar life insurance policy. The cash values are listed as an asset on the company's balance sheet. 2. An employer is paying $450 for $75,000 of group life insurance on it's employees, broken down as follows: The cost for the first $50,000 is $300, the cost for the next $25,000 is $150. Which of the following statements are true? None of the premium will be included as employee compensation All of the premium will be included as employee compensation $300 will be included as compensation $150 will be included as compensation 3. 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 4. Types of groups approved for group insurance include: I. Labor unions and trusteeships II. Debtors of one lender III. Association Groups I II I & II all the above 5. 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 6. 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 7. A plan, usually funded by life insurance, to purchase a deceased partner's share of a business is known as a: deferred compensation plan qualified retirement plan key employee life policy buy / sell agreement 8. 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. 9. 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. 10. What is a franchise policy also known as? A sports team group policy A retail policy A wholesale policy A small business policy 11. All of the following would be considered an employee benefit except: Spilt-Dollar Life Insurance Deferred Compensation Plans Salary Continuation Plans Key Person Life Insurance 12. For whom is the entity plan best suited? a partnership with many partners stock redemption a corporation with many stock holders a corporation with fewer stock holders 13. Florida Law requires what percentage of participation in a non-contributory plan? 0% 25% 75% 100% 14. Floyd, who has $2,000 of group life insurance, has just terminated his employment. Floyd has how many days in which to convert his group coverage to individual coverage? 15 21 28 31 15. Which of the following might not be covered by Social Security? 1. Railroad workers covered under the Railraod Retirement System 2. Civil Service workers hired after 1984 3. Approximately 25% of state & local government employees 1 only 2 only 1 & 2 1 & 3 16. Shaka Kahn, who has $20,000 of group life insurance, has just terminated his employment. The maximum amount that Mr. Kahn will be able to convert is: $500 $1,000 $1,500 $20,000 17. 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. 18. For a group life plan to receive favorable tax treatment, the government imposes certain requirements to ensure that the rank-and-file employees are not discriminated against. Which of the following statements regarding eligibility requirements is not correct? The plan must benefit at least 70% of all employees. At least 85% of participating employees must not be key employees. The life insurance must be the same amount for all. The cost for the first $50,000 of coverage is not included in the employee's salary. 19. Which is not considered a group permanent plan? group paid-up group universal life group credit life group ordinary life 20. Which is not the primary purpose of Key Person insurance? business indemnification preserves business credit creates reserve fund tax deductible premiums 21. Concerning Buy/Sell Plans in a corporation, with 3 equal stockholders, how many policies would be needed? Entity Arrangement - 6 policies Stock Redemption - 3 policies Entity Arrangement - 1 policy Stock Redemption - 1 policy 22. 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 23. Which of the following statements is true concerning split dollar insurance? It is a qualified plan. It is a method of purchasing insurance. It protects the employer against loss of a key employee. It uses term insurance as the funding method. 24. All the following are examples of non-qualified plans except: simple plans salary continuation plans deferred compensation plans split dollar plans 25. Which of the following statements concerning Multiple Employer Trusts (METs) are true? 1. They are designed for employers with a large number of employees. 2. They may be self-funded or funded with contracts from insurance companies. 3. The employer must join the trust. 4. Employees receive a policy. 1, 2, & 3 2 & 3 2, 3, & 4 All the above 26. Which of the following best describes the normal conversion benefit available to terminated employees under a group life insurance policy? The employees may convert to an individual term policy within 31 days by submitting evidence of insurability. The employee may convert to an individual whole life policy within 31 days by submitting evidence of insurability. The employee may convert to an individual term policy within 31 days without submitting evidence of insurability. The employee may convert to an individual whole life policy within 31 days without submitting evidence of insurability. 27. Social Security dependent survivor benefits are: restricted to people over age 64. a type of government life insurance. generally reduced to disabled dependent children who reach 21. available to all, but only after 12 quarters of gainful employment. 28. All of the following are covered under the social security system except: civil service workers hired after 1984 certain railroad workers elected federal officials retired military personnel 29. Which of the following statements concerning social security benefits is true? Ben, a fully insured worker under social security died leaving a wife age 35 and a son age 12. The son will receive benefits until he is 18 (or 22 if in college) and the wife will receive benefits until the child is 16. Michael retired at age 65. He has a 15 year old totally disabled daughter and a wife, age 45. The child will receive income for life. The wife also will receive a monthly benefit, even though she is under age 62. Toomer became disabled at age 64. He had taken early retirement benefits at age 62. His disability benefit will be no less than if he had he not taken early retirement benefits. Social security benefits are completely taxable. 30. A M.E.W.A is not: a type of Multiple Employer Trust fully insured fully self-insured taxd exempt 31. Life insurance can be used in businesses for all the following ways except: as a funding medium as a form of business interruption as tax deductible savings plans as an employee benefit 32. In order to qualify for favorable tax treatment, group life policies: must benefit 100% of employers. must have 70% participation. must have at least 85% of the participants be non-key employees. must be contributory. 33. 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 34. 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 35. Which of the following is not true concerning the FICA tax? It is a tax used to partially fund the medicare system. After one's salary has reached the maximum taxable wage base, only a portion of the FICA tax will be applied. There is no cap on the medicare portion of the FICA tax. The FICA tax has no limits as to the retirement portion. 36. In the "needs approach" where do you account for "my roof is leaking"? mortgage fund education fund emergency fund housing fund 37. What type of benefits does a Multiple Employer Welfare Association provide? PEO EPO Unemployment Insurance 38. 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. 39. The minimum number of employees who may constitute a group for insurance purposes is specified under which law(s) or rule(s)? I. Federal Laws II. State Laws III. Life insurance company underwriting rules I only II only II & III III 40. In a three-person partnership, a buy/sell Cross-Purchase plan requires how many different life insurance policies? two policies three policies six policies nine policies 41. All of the following statements concerning group credit life are true except: The creditor must have a minimum of 100 debtors per year. The amount of insurance may not exceed the amount of the loan. Premiums are paid entirely by the creditor. Debtors can not be forced to obtain coverage from the creditor. 42. The human life value tried to measure what a life was worth in economic value to a family. Which of the following statements would be true of this approach? It replaced the needs approach as a more accurate measuring stick. It calculated other sources of income. Inflation was not taken into account. It is still one of the mose widely used formulas in the financial services arena. 43. 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 44. 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 45. 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. 46. Which of the following describes the favored tax treatment to the business of Key Employee life insurance Premiums are tax deductible to the business. Death proceeds are received by the business tax free. Premiums and death proceeds are tax deductible. Death proceeds are tax free to the insured's family survivors. 47. Ways in which employees may be classified for group life insurance include all of the following EXCEPT: By department By union or non-union status By sex or age By duties 48. With a blanket policy, individuals receive neither a policy or a certificate. true false 49. 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 50. The lump sum death benefit payable under social security is: $250.00 $255.00 $2500.00 $5500.00 51. The following types of GROUP LIFE plans are available EXCEPT: Group paid up plans Group term life Level premium plans Group deferred life plans 52. Which of the following statements concerning deferred compsensation and salary continuation plans are correct? The employee funds the salary continuation plan, the employer funds the deferred compensation plan. The employer funds the salary continuation plan, the employee funds the deferred compensation plan. The employee funds both the salary continuation and the deferred compensation plans. The employer funds both the salary continuation and the deferred compensation plans. 53. Once upon a time there was a $300,000 partnership with 3 equal partners. A buy/sell agreement was established. Assuming a cross-purchase agreement, which of the following statements is true? The partnership purchases 6 policies for $50,000. The partners purchase 6 policies for $100,000. The partnership purchases 6 policies for $100,000. The partners purchases 6 policies for $50,000. 54. 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 55. What is the minimum number of employees required in Florida for group insurance? 1 3 5 8 56. Which of the following statements concerning social security disability benefits is true? The disability must be expected to last at least 5 months. There is a 5 month waiting period to apply for benefits. Benefits are not retroactive. It does not pertain to mental impairments. 57. Lightning Joe died leaving behind a wife, Thunderhead, age 35, and their 12 year son, Cumulonimbus. Thunderhead's blackout period will be for how long? 30 years 21 year 24 years 40 days and 40 nights 58. All the needs that arise when a breadwinner dies arise when the breadwinner becomes disabled except: The final expense fund The education fund The monthly income fund The housing fund 59. What is/was the maximum age the earnings test for social security retirement benefits can be applied? 62 65 70 70 1/2 60. Which type of group coverage would give the individual a policy? franchise insurance employer group blanket group group credit life

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