1-1 Flashcards
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:
Accelerated benefits provisions.
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:
the amount received in excess of the premium paid to-date is taxed as capital gain.
the amount received in excess of the premium paid to-date is taxed as capital gain.
Survivor Period
Whole life insurance paid-up at age 65 (LP-65) endows at age
100
Assuming normal life expectancy, an individual considering a life insurance purchase would expect the highest overall out-of-pocket outlay with:
Whole life
Variable life insurance (VLI) provides which of the following guarantees?
Minimum death benefit
Relative to Universal Life, each month the insurer deducts the cost-of-insurance and credits _________ to the cash accumulation account.
interest
In the event of suicide within the suicide exclusion period, what is paid to the beneficiary?
Premium paid to date only
Under a “third-party” ownership arrangement, the policyowner cannot do which of the following without the consent of the insured?
Increase the amount of death benefit protection
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?
$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
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
flexible premium policies that do not specify a premium requirement.
An offer of coverage at other than an insurer’s preferred or standard rate is referred to as a/an:
adverse underwriting decision
A life insurance “Policy Summary” is required to provide a statement regarding
Net Payment and Surrender Cost index reflecting 10 and 20 year policy values
The premium payment column in a flexible premium policy illustration must be labeled and identified as
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).
With regards to replacement, when writing an application, an insurance producer is required to provide and obtain a signed statement indicating whether the
proposed insured has existing life insurance policies or annuity contracts.
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 __________ .
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 __________ .
Which of the following statements is INCORRECT regarding Group Permanent Life Insurance?
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.
Which buy-out agreement obligates the partnership to purchase the partnership interest from the estate of a decedent partner?
The partnership entity purchase plan.
Which of the following would NOT be a valid purpose for business life insurance?
Indemnify fellow employees
What is fixed at purchase on a variable immediate annuity?
The number of annuity units
A common accumulation phase death benefit pays:
an amount equal to the premium paid or the account value on the date of death, if greater
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
Distributions to cover unreimbursed medical expenses.
Premium deposits for variable products are deposited into the insurer’s
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.
The annuity __________ retains the sole right to receive benefits and exercise all rights granted by the policy.
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.
