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Question 1

An additional “living benefit” has been made available on life insurance policies (term or permanent) for insureds in anticipation of death or because of certain other catastrophic medical conditions, referred to as:

Answer 1

Accelerated benefits provisions.

Question 2

If a healthy individual sells their life insurance policy to a Life Settlement Provider, each of the following statements about tax consequences of the settlement received are true EXCEPT:

Answer 2

the amount received in excess of the premium paid to-date is taxed as capital gain.

Question 3

the amount received in excess of the premium paid to-date is taxed as capital gain.

Answer 3

Survivor Period

Question 4

Whole life insurance paid-up at age 65 (LP-65) endows at age

Answer 4

100

Question 5

Assuming normal life expectancy, an individual considering a life insurance purchase would expect the highest overall out-of-pocket outlay with:

Answer 5

Whole life

Question 6

Variable life insurance (VLI) provides which of the following guarantees?

Answer 6

Minimum death benefit

Question 7

Relative to Universal Life, each month the insurer deducts the cost-of-insurance and credits _________ to the cash accumulation account.

Answer 7

interest

Question 8

In the event of suicide within the suicide exclusion period, what is paid to the beneficiary?

Answer 8

Premium paid to date only

Question 9

Under a “third-party” ownership arrangement, the policyowner cannot do which of the following without the consent of the insured?

Answer 9

Increase the amount of death benefit protection

Question 10

An insured owns a whole life insurance policy with a death benefit of $250,000, cash value of $15,000, with an annual premium requirement of $3,000. If the insured dies during the grace period, having not paid the annual premium, how much will the beneficiary receive?

Answer 10

$249,750 - The insurer has only earned one month of premium, therefore, in the event of death, they will pay the full death benefit less the earned premium (1/12 of the annual). If the full annual premium had been paid and the insured died shortly thereafter, the insurer would have paid the full death benefit and refunded the unearned premium.

The beneficiary will receive $249,750

$250,000 (which includes the $15,000 of cash value) minus one month of premium ($250) = $249,750

Question 11

The insurer has only earned one month of premium, therefore, in the event of death, they will pay the full death benefit less the earned premium (1/12 of the annual). If the full annual premium had been paid and the insured died shortly thereafter, the insurer would have paid the full death benefit and refunded the unearned premium.

The beneficiary will receive $249,750

$250,000 (which includes the $15,000 of cash value) minus one month of premium ($250) = $249,750

Answer 11

flexible premium policies that do not specify a premium requirement.

Question 12

An offer of coverage at other than an insurer’s preferred or standard rate is referred to as a/an:

Answer 12

adverse underwriting decision

Question 13

A life insurance “Policy Summary” is required to provide a statement regarding

Answer 13

Net Payment and Surrender Cost index reflecting 10 and 20 year policy values

Question 14

The premium payment column in a flexible premium policy illustration must be labeled and identified as

Answer 14

Premium Outlay. - The premium column in a life insurance illustration must be labeled either Premium Outlay (flexible premium products) or Contract Premium (fixed premium products).

Question 15

With regards to replacement, when writing an application, an insurance producer is required to provide and obtain a signed statement indicating whether the

Answer 15

proposed insured has existing life insurance policies or annuity contracts.

Question 16

If replacement of an existing life insurance policy is intended, then an additional “Notice” must be signed by the applicant and the insurance producer that identifies:

A)the insured or annuitant,
B)the insurance company, and if available
C)the __________ .

Answer 16

If replacement of an existing life insurance policy is intended, then an additional “Notice” must be signed by the applicant and the insurance producer that identifies:
the insured or annuitant,
the insurance company, and if available
the __________ .

Question 17

Which of the following statements is INCORRECT regarding Group Permanent Life Insurance?

Answer 17

The sponsor pays for the requested benefits on behalf of the individual participants. - This format of group life insurance is typically offered as voluntary coverage through a payroll deduction arrangement. The sponsor collects the premium from the plan participants and submits it to the insurer on their behalf.

Each participant receives an actual policy, not just a certificate. It is the sponsor who decides what policy form is going to be used and the benefit parameters.

Question 18

Which buy-out agreement obligates the partnership to purchase the partnership interest from the estate of a decedent partner?

Answer 18

The partnership entity purchase plan.

Question 19

Which of the following would NOT be a valid purpose for business life insurance?

Answer 19

Indemnify fellow employees

Question 20

What is fixed at purchase on a variable immediate annuity?

Answer 20

The number of annuity units

Question 21

A common accumulation phase death benefit pays:

Answer 21

an amount equal to the premium paid or the account value on the date of death, if greater

Question 22

Which of the following would NOT be an exception to a premature distribution penalty tax for withdrawal from a deferred annuity under the age of 59½

Answer 22

Distributions to cover unreimbursed medical expenses.

Question 23

Premium deposits for variable products are deposited into the insurer’s

Answer 23

Separate Account. - Premium payments made for variable contracts are deposited into the insurer’s Separate Account for allocation to the various sub-accounts as designated by the contract owner.

General accounts support fixed products and general overhead. Variable product deposits are made into a separate account, segregated from general account assets.

Question 24

The annuity __________ retains the sole right to receive benefits and exercise all rights granted by the policy.

Answer 24

owner - Owners retain rights of ownership, e.g. the right to receive benefits and how they are to be received, the right to designate someone else (an annuitant) to receive the income benefit (a parent, a special needs child, etc.), the right to select (or change) a beneficiary designation, etc.

Question 25

To be eligible to market and sell variable annuity contracts, an insurance producer must be a/an:

Answer 25

registered representative of a broker/dealer authorized to transact in this state. - An insurance producer wishing to market variable products must also be a registered representative of a broker/dealer offering variable products in this state.

Question 26

Which of the following would avoid a premature distribution penalty tax in lieu of annuitization?

Answer 26

Payments made in substantially equal periodic payments, paid not less frequently than annually, over the greater of (1) the life expectancy of the annuitant or (2) five years. -

Payments made in substantially equal periodic payment, paid not less frequently than annually, over the greater of (1) the life expectancy of the annuitant or (2) five years; however, if the annuitant retains the right to stop or alter the periodic payment schedule, this exception is not available.

Question 27

A sales charge applied to premium payments is referred to as:

Answer 27

front load. - Money withheld from premium to cover the insurer’s expense is referred to as a front load, whereas, a surrender charge is referred to as a rear load.

Question 28

The amount of retirement income from a defined contribution plan is dependent on the amount of contributions made on behalf of an employee and the __________ on those contributions.

Answer 28

investment earnings

Question 29

In which of the following would a corporate owned deferred annuity receive tax deferred growth?

Answer 29

A group deferred annuity, where the employees are the annuitants and therefore, deemed the beneficial owners. - A corporate owned deferred annuity does not receive tax-deferred growth, except for a group annuity, where the employees are the annuitants and therefore, deemed the beneficial owners.

Question 30

Life insurance purchased inside a qualified plan provides certain advantages. Which of the following statements is NOT true?

Answer 30

Qualified plans may be established for the express purpose of purchasing life insurance on a tax-advantaged basis.

Question 31

Mary is working for a company that has a defined contribution retirement plan that allows for the purchase of life insurance inside the plan, and she will be purchasing a Universal Life insurance policy inside the plan. What is the maximum percentage of her contribution that may be allocated to the premium on the life insurance?

Answer 31

25% -

25% is the maximum amount of the contribution that may be allocated to premium for term or universal life. The maximum percentage of contribution that may be allocated for the purchase of whole life insurance is 50%.

Question 32

Which of the following statements is INCORRECT regarding loan provisions associated with a qualified retirement plan?

Answer 32

Qualified plans are required to include loan provisions.

Question 33

A 403(b) retirement plan is available to:

Answer 33

501(c)(3) tax-exempt organizations.

Question 34

An owner with three employees is installing a Simplified Employee Pension and wants to make the maximum contribution to the plan. Owner contributions are limited to the Deduction Limit for the Self-employed; his earnings this year will be $60,000.
What is the maximum dollar amount he can contribute for himself and what is the percentage of gross employee compensation that he will be obligated to contribute on behalf of his employees?

Answer 34

$12,000 and 25%

Question 35

Pete is married (files a joint return) and has “covered status” in an employer retirement plan. His adjusted gross income exceeds the phase out limit. How much of his IRA contribution may be deducted for income tax purposes?

Answer 35

Zero - He can make the contribution, but since he is a participant in an employer retirement plan, his contribution is not deductible, because his income exceeds the phase-out limit.

Question 36

Is it possible to have both deductible and non-deductible contributions in a traditional IRA?

Answer 36

Yes. If the individual has covered status in an employer retirement plan and his/her adjusted gross income falls within or exceeds the deduction phase-out amount, the deductibility of the contribution may be limited or phased out entirely.

Question 37

John has “covered status” in his employer retirement plan. How much can he contribute to his IRA this year?

Answer 37

The lessor of 100% of earned income up to a stated dollar amount, which changes as they make cost of living adjustments. - The contribution is not reduced because of participation in an employer retirement plan. The deduction on the contribution may be reduced, depending on the amount of Adjusted Gross Income when the employee (or spouse) is participating in an employer retirement plan.

Question 38

Contributions to an IRA can be made at any time:

Answer 38

during the current calendar year and up to filing his/her income tax return in the following year, not including extensions.