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NY Life Insurance > GENERAL ADD-ONS > Flashcards

GENERAL ADD-ONS Flashcards

1
Q

Independent Agency System

An insurance distribution system in which the manager and producers are __________ and not affiliated with any single insurer.

Independent agencies typically represent ________ companies.

Managers of independent agents, sometimes called _________ ________ _________ __________ (PPGAs), are solely responsible for hiring, dismissing, and managing producers (brokers).

A

An insurance distribution system in which the manager and producers are fully independent and not affiliated with any single insurer.

Independent agencies typically represent multiple companies.

Managers of independent agents, sometimes called personal producing general agents (PPGAs), are solely responsible for hiring, dismissing, and managing producers (brokers).

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2
Q

Which statement regarding the conversion of a traditional IRA to a Roth IRA is NOT correct?

  1. Income taxes must be paid on the traditional IRA when the account is converted.
  2. To convert to a Roth IRA, a person must have earned income.
  3. Amounts converted to a Roth IRA will grow tax free.
  4. To convert to a Roth IRA, the owner may have any amount of modified adjusted gross income in the year of conversion.
A
  1. To convert to a Roth IRA, a person must have earned income
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3
Q

What is the only part of an annuity’s death proceeds that is taxable?

  1. the amount that exceeds the amount the owner paid into the contract
  2. the amount that exceeds the annuitized amount
  3. the amount that exceeds the amount the annuitant has received as income under the contract
  4. the amount that exceeds the annuitant’s cost basis
A
  1. the amount that exceeds the amount the owner paid into the contract
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4
Q

Jayne is the beneficiary of a $200,000 life insurance policy and has selected a $2,000 monthly payment. She estimates that the payouts will extend for approximately 100 months. If she dies before all of the proceeds are paid, the remaining payments will continue to the contingent beneficiary. Which policy settlement option has Jayne selected?

  1. fixed amount settlement option
  2. fixed period settlement option
  3. interest-only settlement option
  4. straight life settlement option
A
  1. fixed amount settlement option
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5
Q

Which one of the following statements most correctly describes a universal life insurance feature that is NOT available with traditional whole life insurance?

  1. The policyowner cannot withdraw money from the policy’s cash value.
  2. The policyowner can surrender the policy early without penalty.
  3. The policyowner can withdraw part of the policy’s cash value.
  4. The policyowner can take loans from the policy.
A
  1. The policyowner can withdraw part of the policy’s cash value.

With both universal life and traditional whole life insurance, the policyowner can take loans from the policy.

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6
Q

Edward worked for a railroad company that offered a pension plan at the time he was hired. When he retires, he will receive 50 percent of his final salary, payable monthly, for life. What kind of plan does Edward have?

  1. profit-sharing plan
  2. 401(k) plan
  3. defined contribution plan
  4. defined benefit plan
A
  1. defined benefit plan

A defined benefit plan, most often known as a pension, is a retirement account for which your employer ponies up all the money and promises you a set payout when you retire. A defined contribution plan, like a 401(k) or 403(b), requires you to put in your own money.

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7
Q

Which of the following illustrates pure risk?

  1. Knowing that his family depends on his income, Franklin wants to insure his life.
  2. Knowing that he needs to do more to boost his retirement savings, Saul invests his life savings in the stock market.
  3. Hoping to boost his savings in the event of an emergency, Ralph takes a second mortgage on his home and uses the proceeds to gamble in Las Vegas.
  4. Believing his financial situation will be more secure if he were self-employed, Ron cashes in his life insurance policy to start a business.
A
  1. Knowing that his family depends on his income, Franklin wants to insure his life.

Only pure risk is insurable. Pure risk may result only in a loss, unlike speculative risk, which may result in loss or gain.

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8
Q

If a person buys a new life insurance policy to replace an existing one, the producer must give the applicant the Notice Regarding Replacement form no later than when?

  1. when the initial premium is paid
  2. when the application is taken
  3. when the person is first solicited
  4. when the policy is delivered
A
  1. when the application is taken
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9
Q

When completing an application for life insurance, Andrew states that he is 39 years old, though he is actually 45. When the insurer discovers this, what will it probably do?

  1. adjust the benefits
  2. cancel the policy
  3. increase the premium
  4. notify the Director
A
  1. adjust the benefits

The insurer will adjust the benefits to reflect what the premium would have purchased for the correct age.

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10
Q

Andrea bought a $300,000 term-to-55 policy. Which of the following statements about the policy is NOT correct?

  1. The policy gives $300,000 of coverage until Andrea reaches age 55.
  2. The premium for the policy stays the same until the policy ends.
  3. If Andrea dies before age 55, the policy will pay a $300,000 death benefit.
  4. The policy will pay the entire death benefit only if Andrea reaches age 55.
A
  1. The policy will pay the entire death benefit only if Andrea reaches age 55.
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11
Q

Sylvia’s insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy?

  1. a minimum rate of return on the policy’s cash value
  2. to reinstate Sylvia’s policy if it ever lapses
  3. to send an agent to Sylvia’s home to collect the premiums
  4. to pay premiums for Sylvia in the event of emergencies
A
  1. a minimum rate of return on the policy’s cash value
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12
Q

Which statement about the net single premium for a traditional life insurance policy is NOT correct?

  1. Net single premium reflects two of the premium factors: mortality and interest.
  2. The net single premium is the sum of the present values of all the expected benefits under the policy.
  3. The net single premium for a traditional life insurance policy is the amount charged to the policyowner.
  4. The net single premium is the premium that an individual would need to pay, in a lump sum, to provide all the benefits promised in the policy, if no insurer expenses were considered.
A

The net single premium (NSP) is defined as the present value of the future death benefit.

A premium that covers the present value of future claims.

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13
Q

Under the re-entry method, an insured can renew a level term insurance policy at the end of the specified term at a lower rate than the guaranteed rate by doing what?

  1. proving that he or she is under age 50
  2. proving insurability
  3. submitting to a medical examination
  4. agreeing to convert to a permanent life insurance policy
A
  1. proving insurability

Re-entry Option. An option in a renewable term life policy under which the policy owner is guaranteed at the end of the term to renew his or her coverage without evidence of insurability at a premium rate specified in the policy.

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14
Q

Margaret has a life insurance policy with a face value of $100,000. She took a $25,000 loan against the policy and died a week later after spending $10,000 and without making any payments toward the loan. How will the policy’s death benefit be affected?

  1. The death benefit will be $90,000 because she spent $10,000 of the loan proceeds before her death.
  2. The death benefit of any life insurance policy is unaffected by policy loans.
  3. The death benefit will be reduced by the outstanding loan amount.
  4. The death benefit may be reduced by $10,000 if someone can pay back the $15,000 Margaret did not spend.
A
  1. The death benefit will be reduced by the outstanding loan amount.

The death benefit is reduced on a dollar-for-dollar basis for the unpaid loan at the insured’s death.

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15
Q

Which statement about endowment contracts is NOT correct?

  1. If the policy endows while the insured is still alive, the policyowner gets a specified sum as a living benefit.
  2. They are designed to build cash values quickly.
  3. They pay a death benefit whether the insured dies during or after the endowment period.
  4. Policies endow well before age 120, usually at age 65.
A
  1. They are designed to build cash values quickly.

Endowment contracts are a special form of life insurance in which cash values grow rapidly.

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16
Q

All the following statements about family term riders with life insurance are correct, EXCEPT

  1. A family term rider is an alternative to either a separate spousal rider or separate children’s rider.
  2. The family term rider covers multiple family members (spouse plus children) with term insurance based on their ages.
  3. The policyowner can add or drop insureds on this type of policy at any time but must prove insurability if adding insureds.
  4. Children covered by this rider can convert their coverage to permanent coverage at age 21 without proof of insurability.
A
  1. The family term rider covers multiple family members (spouse plus children) with term insurance based on their ages.
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17
Q

A Social Security recipient’s modified adjusted gross income exceeds the threshold level for his or her filing status. What will happen to his or her benefits?

  1. All of his or her Social Security benefits will be subject to tax.
  2. Up to 85 percent of his or her Social Security benefits will be subject to tax.
  3. Up to 50 percent of his or her Social Security benefits will be subject to tax.
  4. Up to 25 percent of his or her Social Security benefits will be subject to tax.
A
  1. Up to 85 percent of his or her Social Security benefits will be subject to tax.
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18
Q

An employee was covered by Jackson Company’s group life insurance policy. The employee retired but is still covered by a $75,000 policy. The employee will be taxed on what amount of coverage?

  1. $100,000
  2. $50,000
  3. $25,000
  4. $0
A
  1. $25,000

The value of group term life insurance coverage that an employee receives above $50,000 ($25,000) is taxable to the employee and will be included on his W-2.

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19
Q

Under a joint life insurance policy, when does the insurer pay the death benefit?

  1. when the first insured dies
  2. when the surviving insured dies
  3. when either insured dies
  4. when both insureds die
A
  1. when the first insured dies
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20
Q

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed?

  1. defamation
  2. rebating
  3. unfair discrimination
  4. coercion
A
  1. defamation

It is considered defamation to publish or circulate a false or derogatory statement about the financial condition of an insurer, when such a statement is designed to injure anyone in the insurance business. It is also unlawful to help another publish or circulate such statements.

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21
Q

Which of the following describes a group whose members pay a pro-rata share of the losses suffered by other members in the group?

  1. risk retention group
  2. reciprocal insurer
  3. reinsurer
  4. self-insurer
A
  1. reciprocal insurer

A reciprocal insurer is a group of people or businesses that exchange this promise: each member agrees to pay a pro-rata share of any loss suffered by any other member. A reciprocal insurer is essentially a formal risk-sharing arrangement.

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22
Q

Julia owns a $250,000 whole life policy that she plans to cancel. If she elects to exercise the extended term nonforfeiture option with the policy’s $25,000 cash value, Julia will receive a term policy with a face value equal to what amount?

$25,000

$225,000

$250,000

$275,000

A
  1. $250,000

If Julia chose the extended term nonforfeiture option, the insurer will apply the cash value of the lapsed policy to buy a term insurance policy. The term insurance is bought in an amount equal to the face amount of the lapsed policy, or $250,000. The term coverage lasts for whatever period the cash value buys.

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23
Q

Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed?

  1. No, because only one commission can be paid on a policy sale.
  2. No, because he is no longer licensed.
  3. Yes, because his license was not revoked or suspended.
  4. Yes, because he was licensed when the policy was sold.
A
  1. Yes, because he was licensed when the policy was sold.
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24
Q

A producer must be licensed by the Financial Industry Regulatory Authority (FINRA) to sell which one of the following types of life insurance?

  1. adjustable life insurance
  2. universal life insurance
  3. variable life insurance
  4. ordinary life insurance
A
  1. variable life insurance
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25
Q

Andrew purchased a variable annuity on June 12 but decides not to keep it. How many days does he have to return the contract for a full refund of the premium?

  1. 10
  2. 14
  3. 21
  4. 30
A
  1. 10
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26
Q

Dustin bought a life insurance policy three years ago. If he commits suicide, what, if anything, is the insurer obligated to pay to the beneficiary?

  1. full death benefit
  2. partial death benefit
  3. refund of the premiums
  4. nothing
A
  1. full death benefit

An individual life insurance policy can exclude death by suicide of the insured for two years after policy issue. If the insured commits suicide after that period, the insurer must pay the death benefit to the beneficiary.

27
Q

Zeta Company plans to form a Multiple Employer Welfare Arrangement (MEWA) to offer group insurance to its employees. All of the following conditions apply in this case EXCEPT

  1. A certificate of authority is necessary if the MEWA is to be fully insured.
  2. There must be at least two employers to form a MEWa.
  3. There must be at least five employers to form a self-insured MEWa.
  4. MEWA employers should be from the same industry.
A
  1. A certificate of authority is necessary if the MEWA is to be fully insured.

The requirement for a state-issued certificate of authority applies to self-insured MEWAs, not to those that will be fully insured.

28
Q

Liam takes out a life insurance policy on his own life and names his son, Brian, as the irrevocable beneficiary. The policy has accumulated considerable cash value, and Liam wants to take out a loan against it.

Which of the following statements is correct?

  1. Liam has the rights to the policy, so he can take a loan using the policy as collateral.
  2. Liam must withdraw Brian as the beneficiary before he can take the loan.
  3. Liam cannot take a loan without Brian’s consent.
  4. A loan can be made against the policy, but both Liam and Brian will be co-borrowers.
A
  1. Liam cannot take a loan without Brian’s consent.

A policyowner cannot make a policy loan or surrender any part of the cash value of the policy without the consent of the irrevocable beneficiary, and the irrevocable beneficiary can be removed only with his or her signed consent.

29
Q

The Notice Regarding Replacement provides all of the following information to the life insurance applicant EXCEPT:

  1. a list of any life insurance policies that will be replaced
  2. whether an existing policy will fund the new policy
  3. the insurer’s identity
  4. the role of the Department of Insurance in regulating replacement transactions
A
  1. the role of the Department of Insurance in regulating replacement transactions

The Notice Regarding Replacement does not discuss the Department of Insurance’s role in regulating replacement transactions.

30
Q

All of the following statements about annuity beneficiaries are correct, EXCEPT:

  1. The beneficiary of an annuity is guaranteed to receive funds from the contract.
  2. If the owner’s (or annuitant’s) death occurs before the contract has annuitized, the beneficiary will receive the contract’s accumulated value.
  3. If the owner or annuitant dies after annuitization begins, the beneficiary’s right to any funds will be based on the income payout option the owner selected.
  4. The beneficiary is the person designated to receive the contract’s values if the owner or annuitant dies before annuitization.
A
  1. The beneficiary of an annuity is guaranteed to receive funds from the contract.

The beneficiary is the person designated to receive the contract’s values if the owner or annuitant dies before annuitization. Unlike the beneficiary of a life insurance policy, the beneficiary of an annuity may or may not receive any funds from the contract.

31
Q

Anthony becomes a producer for Acme Insurance Company. Acme has not filed the notice of appointment with the Superintendent. It must do so within how many days?

  1. 10
  2. 15
  3. 30
  4. 31
A
  1. 15
32
Q

Under a Section 1035 exchange, how many contracts can be exchanged for a single contract?

  1. one
  2. two
  3. three
  4. unlimited
A
  1. unlimited

The number of contracts that can be exchanged for one contract under a 1035 exchange is unlimited. However, all contracts involved must have all the same insureds and have the same owner.

33
Q

Multiple employer welfare arrangements (MEWAs) come in two forms. These are which of the following?

  1. fully vested and partially vested
  2. fully insured and self-insured
  3. contributory and noncontributory
  4. group funded and self-funded
A
  1. fully insured and self-insured

Fully insured MEWAs are formed by two or more employers. Self-insured MEWAs must get a state-issued certificate of authority and follow reporting guidelines similar to insurance companies, and they must have at least five employers and 200 employees.

34
Q

From an insurance risk perspective, a person who smokes heavily and drinks alcohol to excess exhibits which of the following traits?

  1. physical hazards
  2. moral hazards
  3. legal hazards
  4. planned hazards
A
  1. moral hazards

Moral hazards are individual traits or habits that increase the chance of a loss. Physical hazards refer to risk posed by a person’s condition or general health, as opposed to their character or behavior.

35
Q

For universal life insurance, an insurer credits interest to a policy’s cash value based on which of the following?

  1. current interest rates
  2. the performance of the underlying subaccount
  3. an equity index
  4. an interest index
A
  1. current interest rates

The insurer credits to the policy a guaranteed minimum amount of interest each month. However, this amount is not based on the performance of any underlying subaccounts.

36
Q

The guaranteed insurability rider is generally available under all of the following policies EXCEPT:

  1. ordinary whole life
  2. limited pay whole life
  3. universal life
  4. term insurance
A
  1. term insurance

A guaranteed insurability rider allows the policyowner to buy ordinary whole life insurance, limited payment life insurance, or universal life insurance. Term insurance, however, is not normally available under this rider.

37
Q

Jane owns a variable annuity with a guaranteed minimum withdrawal benefit rider. She has invested $50,000 in premiums, and the rider permits annual withdrawals of up to 5 percent. If the values in Jane’s variable annuity declined to zero, what amount can she withdraw this year?

  1. $0
  2. $1,250
  3. $2,500
  4. $5,000
A
  1. $2,500

A guaranteed minimum withdrawal benefit (GMWB) rider promises that a contract owner can withdraw a limited amount each year until net premiums are recovered in full. Even if a variable annuity’s values decline to zero, the owner can still take his or her specified amount every year for the duration of the guaranteed withdrawal period. In this case, Jane can withdraw $2,500 this year.

38
Q

Children covered by a family term rider can convert their coverage to permanent coverage at age 21 without proof of insurability. The converted policy’s face value is limited to which of the following amounts?

  1. the same amount as the term insurance provided under the family term rider
  2. up to two times the coverage under the family term rider
  3. up to three times the coverage under the family term rider
  4. up to five times the coverage under the family term rider
A
  1. up to five times the coverage under the family term rider

Children covered by this rider can convert their coverage to permanent coverage at age 21 without proof of insurability. Typically, the converted policy’s face value can be up to five times the coverage under the family term rider.

39
Q

All of the following distributions from a qualified plan are exempt from the 10 percent penalty tax on premature distributions, EXCEPT

  1. Distributions made because the participant dies.
  2. Distributions made because the participant becomes disabled.
  3. Distributions made because the participant needs the funds to pay for homeowners insurance premiums.
  4. Distributions made because the participant has medical expenses that exceed 10 percent of his or her adjusted gross income.
A
  1. Distributions made because the participant needs the funds to pay for homeowners insurance premiums.

The 10 percent premature distribution penalty tax does not apply to distributions taken because the participant dies.

40
Q

Which of the following best describes the tax treatment of fixed annuity death benefit payments?

  1. The beneficiary must pay taxes on any amount he or she receives that exceeds the sum of the premiums paid into the contract.
  2. The accumulated cash value is taxed as ordinary income.
  3. The cash accumulations less the premiums paid are taxed as ordinary income.
  4. The beneficiary must pay taxes on the entire contract amount.
A
  1. The beneficiary must pay taxes on any amount he or she receives that exceeds the sum of the premiums paid into the contract.

The entire contract amount is not taxable to the beneficiary. But any amount the beneficiary receives that exceeds the sum of the premiums paid into the contract is taxable to the beneficiary.

41
Q

Group life insurance can be provided through a group insurance contract or through

  1. a trustee of the employer fund
  2. a close corporation formed to disburse funds to deceased employees
  3. a sole proprietorship formed by the business owner expressly to pay benefits to deceased employees
  4. an agents’ association formed to collect premiums and disburse them to employees who die.
A
  1. a trustee of the employer fund

As in estate planning, a trustee would manage the transfer of funds for the payment of claims to individual members of the group plan.

42
Q

Which statement about life insurance policy dividends is correct?

  1. Policy dividends are considered a return of unearned premium.
  2. Both participating and nonparticipating life insurance policies pay dividends.
  3. Dividends must be guaranteed.
  4. Dividends are subject to income tax when paid.
A
  1. Policy dividends are considered a return of unearned premium.

Only participating life insurance policies pay dividends, which are considered a return of unearned premium. Dividends are not guaranteed and are generally received income tax free.

43
Q

Which one of the following statements about variable life insurance is correct?

  1. With a variable life insurance policy, the insurer assumes most of the investment risk.
  2. Variable life insurance policies do not guarantee a minimum death benefit.
  3. Variable life insurance policyowners can transfer funds between subaccounts and the insurer’s general account.
  4. The death benefit under a variable life insurance policy will never be more than the stated minimum.
A
  1. Variable life insurance policyowners can transfer funds between subaccounts and the insurer’s general account.

Variable life insurance policies guarantee a minimum death benefit.

44
Q

paying a referral fee to a policyowner’s attorney

entering into a life settlement transaction with a policyowner who is over age 65

concealing a life settlement provider’s financial condition

requiring an applicant to undergo a physical examination before entering into a life settlement contract

A
45
Q

Which one of the following best describes the restrictions an insurer must operate under when using information from the Medical Information Bureau (MIB)?

  1. Insurers must rate or decline a life insurance risk based solely on MIB information.
  2. Insurers can rate, but cannot decline, a life insurance risk based solely on MIB information.
  3. Insurers cannot rate or decline a life insurance risk based solely on MIB information.
  4. Insurers cannot rate, but can decline, a life insurance risk based solely on MIB information.
A
46
Q

Patricia is licensed as a life settlement broker in New York. Which action must she take to renew her license?

  1. renew the license by June 30 every two years
  2. complete at least 20 hours of continuing education and pay the renewal fee
  3. renew the license by her birthday every two years
  4. submit a new set of fingerprints and pay the renewal fee
A
  1. renew the license by her birthday every two years
47
Q

Jeremy and his brothers each purchased individual health insurance policies at a young age, and have kept their policies in force over the years, because of their family history of cancer . Which of the following describes the tendency of Jeremy and his brothers to seek insurance?

  1. implied selection
  2. adverse selection
  3. exposure reduction
  4. risk avoidance
A
  1. adverse selection

Adverse selection is the tendency of persons more likely to have a claim to buy and keep insurance. For example, individuals with a family history of cancer may be more likely to buy health insurance and to keep it in force than individuals without such family history.

48
Q

Morgan is the owner and insured of a $1 million life insurance policy. At her death, the proceeds were payable to her son in a lump sum. What amount, if any, must be included in Morgan’s estate?

  1. $0
  2. $500,000
  3. $750,000
  4. $1 million
A
  1. $1 million

For estate tax purposes, the value of any life insurance policy a person owned when he or she died is included in the value of the estate. Morgan’s estate must therefore include the entire amount of the proceeds in her estate for purposes of determining any estate tax liability.

49
Q

Which of the following entities regulates variable insurance products?

  1. state insurance departments
  2. Securities and Exchange Commission
  3. state insurance departments and the SEC
  4. State and Federal Banking Commission
A
  1. state insurance departments and the SEC

Variable products contain both insurance and securities elements. As such, they are regulated by both insurance and securities authorities.

50
Q

Jack bought a life insurance policy to make sure his surviving family members would have an income for ten years if he died prematurely. Five years after purchasing the policy, Jack died. Beginning with the date of his death, the policy began paying a level monthly benefit to his family for ten years. What type of policy did Jack buy?

  1. ten-year family income policy
  2. ten-year family maintenance policy
  3. ten-year family protection policy
  4. endowment
A
  1. ten-year family maintenance policy

If Jack bought a ten-year family income policy, the period for paying the term portion of the death benefit would begin when the contract was issued..

51
Q

Jill is insured under a $250,000 convertible term policy and would like to convert to a permanent policy. Which of the following statements is most correct?

  1. She must first prove insurability.
  2. The amount of the new policy cannot exceed $250,000.
  3. The premiums for the new policy will be based on Jill’s age when she applied for the term policy.
  4. She must pay a conversion penalty.
A
  1. The amount of the new policy cannot exceed $250,000.

The premiums for the new policy will be based on Jill’s age when the policy is converted.

52
Q

Which of the following provides an additional death benefit for death due to any cause?

  1. accidental death benefit rider
  2. cost-of-living rider
  3. term rider
  4. return of premium rider
A
  1. term rider

Accidental death benefit riders pay a death benefit in addition to the policy’s face amount when an accident caused the death. Accidental death riders are traditionally known as double indemnity or triple indemnity riders.

53
Q

Universal life policies derive much of their flexibility from unbundling. What elements are unbundled in UL policies?

  1. mortality, interest, and expenses
  2. premiums, interest rate, and death benefit
  3. main account, subaccount, and equity index
  4. primary beneficiary, secondary beneficiary, and tertiary beneficiary
A
  1. mortality, interest, and expenses

In a universal life insurance policy, the three factors that are central to the policy: mortality, interest, and expenses; are considered as separate policy elements. In other words, they are unbundled.

54
Q

Robert wants to keep his life insurance out of his taxable gross estate. Which of the following arrangements would help him meet that goal?

  1. The death benefits must be paid to Robert’s estate.
  2. Robert should transfer ownership of his life insurance a few months after purchasing the policy.
  3. Robert could transfer ownership to a third-party irrevocable trust within three years of his death.
  4. A third party (usually an irrevocable trust) should apply for and own the policy from the beginning.
A
  1. A third party (usually an irrevocable trust) should apply for and own the policy from the beginning.

If Robert transfers the life insurance policy to a third party (the trust) and then dies within three years after the transfer, the policy death benefits are included in the insured’s estate for tax purposes.

55
Q

Proceeds from a life insurance policy can be paid out in a variety of ways. Which one of the following most correctly describes the two general categories of life insurance settlement options?

  1. straight life and survivorship
  2. period certain and refund
  3. those without a life contingency and those with a life contingency
  4. fixed period and fixed amount
A
  1. those without a life contingency and those with a life contingency
56
Q

ABC, Inc., provides a defined benefit pension plan for its employees. Twenty-two year old Judy went to work for ABC and four years later, she leaves for a better job. She accrued no benefit under the plan. Based on these facts, which of the following statements is true?

  1. Judy elected to make no contributions to the plan.
  2. The plan has a cliff vesting schedule.
  3. The plan violated participation requirements.
  4. Judy was already covered by another employer’s plan.
A
  1. The plan has a cliff vesting schedule.

Under a cliff vesting schedule, the participant is not vested at all in a plan’s contributions or benefits for the first four years of participation. In the fifth year, the participant is 100 percent vested.

57
Q

Paul is the beneficiary under his wife’s life insurance policy. When he submits a claim under the policy after his wife’s death, the insurer doesn’t respond. After one month, Paul wants to take legal action and consults an attorney. Which of the following is his attorney likely to advise?

  1. to file a suit immediately
  2. to wait before filing suit
  3. to resubmit the claim
  4. to cancel his policy and go with a company that will give him better service on future coverages
A
  1. to wait before filing suit

Policy contract provisions limit the period for filing a lawsuit against an insurer on the basis of a claim typically after 60 days and before two years have passed from filing the claim. The insured cannot sue the insurer until the minimum time has passed after filing the claim.

58
Q

Your client has a 10-year-old son and wants to set up a life insurance policy that would have flexibility for college funding. Which of the following products should you recommend?

  1. 7-pay life policy
  2. 10-year renewable term policy
  3. whole life policy
  4. universal life policy
A
  1. universal life policy

The popular appeal of universal life insurance is due mainly to its flexibility in premiums and coverage. It also credits interest based on current interest rates, which increases savings when interest rates are favorable.

59
Q

Insurers often set children’s term rider limits on the basis of which of the following?

  1. issuing the rider for 50 to 75 percent of the coverage amount on the base policy
  2. issuing the rider for a specified amount or for a specified percentage of the base policy
  3. issuing the rider in term insurance in $500 increments
  4. issuing the rider in term insurance in $1000 increments
A
  1. issuing the rider for a specified amount or for a specified percentage of the base policy
60
Q

Variable life insurance policies may carry all of the following charges and fees EXCEPT

  1. a fixed rate charged for policy loans
  2. a fee for expenses incurred by the separate investment accounts
  3. investment advisory fees
  4. fees for reviewing the prospectus
A
  1. fees for reviewing the prospectus

In addition to premiums, variable life policies may charge a fixed rate if a policyowner takes a loan.

61
Q

Amanda bought a $50,000 ten-year renewable term policy. The premiums she pays for the policy will be

  1. less than for a $50,000 ten-year nonrenewable policy.
  2. the same as for a $50,000 ten-year nonrenewable policy.
  3. more than for a $50,000 ten-year nonrenewable policy.
  4. the same as her initial premium when she decides to renew the policy.
A
  1. more than for a $50,000 ten-year nonrenewable policy.

If Amanda chooses to renew her coverage, the new premium will be based on Amanda’s age at the time of renewal.

62
Q

The life insurance Buyer’s Guide helps prospective buyers determine all of the following EXCEPT:

  1. type of insurance to buy
  2. most qualified insurer
  3. amount of insurance to buy
  4. most suitable policy
A
  1. most qualified insurer

The life insurance Buyer’s Guide helps prospective buyers determine what kind of insurance they need, how much insurance they should buy, and how to find a suitable policy that best suits their needs and objectives.

63
Q

Lisa buys a 10-year renewable term policy at age 30. The renewability provision allows her to

  1. renew coverage every ten years at the same premium rate.
  2. renew coverage at an equal or lower premium rate after proving insurability.
  3. continue coverage without having to prove insurability.
  4. set the terms of her renewal.
A
  1. renew coverage at an equal or lower premium rate after proving insurability.

The renewability provision allows Lisa to renew her 10-year policy at age 40 without having to prove insurability. While her policy may offer a guaranteed renewal rate, the premium will likely be higher due to her age.

64
Q

Which of the following is not considered an unlawful practice in the life settlement business?

  1. paying a referral fee to a policyowner’s attorney
  2. entering into a life settlement transaction with a policyowner who is over age 65
  3. concealing a life settlement provider’s financial condition
  4. requiring an applicant to undergo a physical examination before entering into a life settlement contract
A
  1. entering into a life settlement transaction with a policyowner who is over age 65

NY Life Insurance (56 decks)

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