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Insurance Liscense > CH4 > Flashcards

CH4 Flashcards

1
Q

What does life settlement refers to? and what would a life settlement require?

A

It when the owner of a life insurance policy sells their life insurance policy to a third party,

An Absolute assignment

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2
Q

Who normally does life settlements? What’s an advantage?

A

Old people who do not want to keep paying for premiums.

The sellers will receive more from selling than receiving the cash value from the policy

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3
Q

Who is a Life Settlement Broker?

A

It is a person who, for compensation, negotiates a life settlement contract

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3
Q

What is an advantage of a qualified retirement plan?

A

They have tax advantages

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3
Q

A group life insurance is written as what? and what are two characteristics that distinguish group insurance from individual insurance?

A

As an annually renewable term insurance

Evidence of insurability is usually not required, and insureds do not receive a policy because they do not own the policy.

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3
Q

What does business of life settlement refer to?

A

The sale of a life settlement contract to a third party who has no insurable interest in the insured.

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3
Q

Contributions to a traditional IRA are…
Contributions to a Roth IRA are…

A

pre-tax dollars (tax deductible)

after-tax dollars (NOT tax deductible).

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3
Q

Who is a Life Settlement Provider?

A

It is a person (other than the owner) who enters into a life settlement contract with the owner.

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4
Q

What does the Life Settlement Contract establish?

A

It establishes the terms under which the life settlement provider will pay compensation to the policyowner

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4
Q

What are some things the underwriter of a group life insurance has to take into consideration?

A
  • Purpose or nature of the group
  • Size of the group
  • Turnover of the group
  • Financial strength of the group
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4
Q

What are each insured given instead of the policy contract, since they do not own the policy?

A

A certificate of insurance

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4
Q

Traditional IRAs and Roth IRAs are for which individuals?

A

Individuals with earned income

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5
Q

Can a group life insurance be converted into an individual policy? and what are some characteristics?

A

Yes
- Evidence of insurability is not required
- Can’t be converted into term insurance (mainly is converted to whole life)
- Employee has 31 days to convert the policy

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6
Q

Traditional IRA distributions are…
Roth IRA distributions are…

A

taxable

Not taxable

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7
Q

What is a rollover? and within how many days does an IRA rollover must be completed by?

A

A rollover is a tax-free distribution of cash from one retirement plan to another

IRA rollovers must be completed within 60 days from the time the money is taken out of the first plan

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8
Q

What does the term transfer (or direct transfer) refer to in IRAs?

A

Refers to a tax-free transfer of funds from one retirement program to a traditional IRA

8
Q

What are the qualified retirement plans for self employed persons?

A

HR-10 (Keogh Plans)

9
Q

What is a 401(k) plan?

A

A qualified retirement plan that allows employees to take a reduction in their current salaries by placing the amounts into a retirement plan.

9
Q

Taxation is what in SIMPLE Plans?

A

Taxation is deferred

10
Q

Who uses 403(b) retirement plans? and what is it also known as?

A

nonprofits and public-school systems.

tax sheltered annuity

10
Q

T or F

Contributions to qualified plans are unlimited to a maximum amount (established by the IRS).

A

F

Contributions are LIMITED

11
Q

What are Buy-Sell Agreements used for?

A

They are used to contractually establish the intent of someone else to purchase the business upon the insured’s death

12
Q

Are premiums tax deductible?

A

No

13
Q

When is the death benefit tax free and when is it taxed?

A

It is tax free if the beneficiary receives the death benefit in a lump sum payment.

The death benefit is taxed if the death benefit is received in instalments.

14
Q

In settlement options, what is tax free and what is taxed?

A

The principal is tax free, but the interest is taxable.

15
Q

In a group life insurance, are the premium payments for employees’ policies tax deductible? and only under what circusmtance?

A

Yes, and they are even reported as business expenses.

When the beneficiary is not the employer (the company)

16
Q

What is Social Security also refered to as?

A

Old Age Survivors Disability Insurance

16
Q

What happens if a policy is over funded? and what happens to the policy from that day forward?

A

I will fail the 7-pay Test and the policy will be converted to a MEC (will lose tax benefits).

The policy will always be a MEC

17
Q

How many QCs do you need to be fully insured under SS? and how many QCs do you need to be partially insured?

A

40 quarters of coverage

6 quarters of coverage

Insurance Liscense (12 decks)

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