life focused 1 Flashcards
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
any form of life insurance
The paid-up addition option uses the dividend
The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.
In an annuity, the accumulated money is converted into a stream of income during which time period?
The “annuitization period” (annuity period) is the time during which accumulated money is converted into an income stream.
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.
When would a 20-pay whole life policy endow?
A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.
Which of the following is true about the premium on the children’s rider in a life insurance policy?
The premium does not change on the inclusion of additional children; it is based on an average number of children
Both Universal Life and Variable Universal Life have a
Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?
If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most likely need to fill out a Statement of Good Health.
An employee is insured under her employer’s group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.
Which of the following statements is TRUE concerning irrevocable beneficiaries?
Once irrevocable beneficiaries are indicated for the policy, their written consent is required to change the beneficiary.
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?
Under the fixed-period installments option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period.
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other.
Both Universal Life and Variable Universal Life have a
Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit
In which of the following instances would the premium be tax deductible?
As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
The interest earned on policy dividends is
Dividends are a return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income.
Which of the following policies would be classified as a traditional level premium contract?
Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.
Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?
Any unanswered questions need to be answered before the policy is issued. If the insurer receives incomplete applications, they need to be returned to the applicants for completion.
Which of the following dates must be contained in a policy summary?
A policy summary must contain the date that the summary was prepared.
A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within how many days after the due date of the premium in default?
A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within 60 days after the due date of the premium in default
Which of the following entities is responsible for agent licensing and administrative supervision?
The Office of Insurance Regulation is responsible for all activities concerning insurers, including licensing and certificates of authority, rates, policy forms, claims, solvency, administrative supervision, and any other related provisions of the Insurance Code.
If an agent does not notify the insurer of an address change, what is the maximum penalty that can be imposed for a one-time offense?
If the department is not notified within the required time period, a maximum fine of $250 will be imposed for the first offense; for subsequent offenses, either a minimum fine of $500 will be imposed or the agent’s license will be suspended or revoked.
If an employer decides to change its life insurance policy to a similar one with a different insurer, which of the following describes the extent that replacement regulations will be exercised?
If a new life insurance policy is provided under a group life insurance policy covering employees or members of an association, replacement regulations do not apply.
