Questions Flashcards
Which nonforfeiture option has the highest amount of insurance protection?
Extended term
Agents selling variable life products must be registered and have what licenses?
Registered with FINRA, have a securities license, and must be license within the city to sell life insurance. SEC registration is for securities not agents
How are contributions to a tax sheltered annuity treated with regards to taxation?
Funds contributed are excluded from the employees current taxable income, but are taxable upon withdrawal
True or false
nonforfeiture values are required by state law to be included in the policy.
True. Nonforfeiture values are required by state law to be included in the policy, and cannot be altered by the policy owner. A table showing the nonforfeiture values for the next 20 years must be included in the policy
Who bears the risk in a fixed annuity
Insurance company
Who bears the risk of a variable insurance policy
Policy owner
True or false.
Surplus lines agent do not have to have a certificate of authority
True
Cash value guarantees =
Nonforfeiture options
Taxation on lump sum payments
None
The originating company that procures insurance on itself and another insurer is called?
What is the other insurer called?
Ceding insurer
The other insure is called assuming insurer = reinsurance
What Is key person insurance?
Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person
Who regulates consumer reports?
The federal fair credit reporting act regulates consumer reports, also known as consumer investigative reports, or credit reports
How do you cancel a life insurance license?
A license can be canceled at any time, simply by returning the license to the insurance department and requesting cancellation. A license can be reinstated by completing an application and paying a fee.
In credit life insurance:
who is the policy owner,?
Who is the beneficiary?
And who is the insured?
The creditor is the policy owner and the beneficiary
The debtor is the insured
Reinstatement provision
Allows the policy owner and opportunity to put a lapsed policy back in force, subject to providing continued insurability. The policy owner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status
What kind of insurance maybe used to fund a buy-sell agreement?
Any form of life insurance
Reduced paid up nonforfeiture option
Provides Provides coverage for the longest period of time.
a life insurance policy nonforfeiture benefit option to use the cash surrender value of the policy to purchase a fully paid-up life permanent insurance policy for a lesser amount of coverage. The new policy coverage amount is based on the insured’s age and the policy cash surrender value. Also known as reduced paid-up insurance.
Provides protection until the insured reaches 100, but the face amount is reduced to what the cash would buy
How are annuities characterized?
By how they can be paid for:
Either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time.

Periodic payment annuities can be level in which the annuitant pays a _______ installment, or the payments can be __________, in which the amount and frequency of each installment varies
Fixed
Flexible
Who owns a mutual insurer?
Policy owners
Are accelerated benefits paid to a chronically ill insured tax free?
They are tax-free up to a certain limit. Any amount received an excess of this dollar amount must be included in the insured gross income.
True or false:
New Jersey requires a bond as a condition for licensure in surplus lines
False. New Jersey does not require a bond as a condition for licensure in surplus lines 
If an insurer and insured have a dispute about whether a particular loss is covered under a policy what system is asked to interpret the contract
Court system
Under which law does it assume that the beneficiary dies first in a common disaster?
Under the uniform simultaneous death
The law will assume that beneficiary dies first in a common disaster. This provides that the proceeds will be paid to the contingent beneficiary or to the insurance to see if none is designated
Any cash value life insurance policy that develops cash value faster than a 7- pay whole life contract is called what??
Modified endowment contract.
It loses the benefits of a standard life contract.
All withdrawls for a modified endowment contract are subject to taxation and if withdrawals are made earlier than age of 59 1/2 a ___% penalty is imposed
10%
By how many days does the discontinuance of a group insurance policy reduce the time limit for providing notice of claim or proof of loss?
0 days
Discontinuance of the group policy or contract does not reduce the required time limit for providing notice of claim or proof of loss
The Supreme Court stated that insurance is interstate commerce and is therefore subject to regulation by federal government in the decision of what case?
That U.S vs. the south eastern underwriters association
If a credit life policy lapses for nonpayment before the debt is satisfied within how many days must the creditor either refund the premium paid or applied against the debt?
60 days
What universal life option has a gradually increasing cash value and a level death benefit?
Option a
Whose life expectancy is taking into consideration for annuity
The annuitant
What does the term “level” refer to in a level term insurance?
Face amount or death benefit
What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only as long as annuitant lives?
Straight life
What type of insurance policy offers pure death benefit protection?
Term
In an annuity, the accumulated money is converted into a stream of income during which phase?
Annuitization period
In variable universal life insurance, to what policy component does the term “variable” refer to?
Cash value and death benefit
What type of annuity requires an agent to have a securities license
Variable annuity
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantee payment for specified number of years?
Life income with period certain 
Under a 20 pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period?
For 20 years or until the insured death whichever occurs first
What are the death benefit options in universal life policies?
Option A- level death benefit
Option B - increasing death benefit (death benefit includes annual increase in cash value so death benefit increases by cash value amount)
During partial withdrawal from a universal life policy, what portion, if any, will be taxed?
Interest earned on the withdrawn cash value
What is the main reason for purchasing an annuity?
To provide an income that the annuitant cannot outlive
When does an adjustable life policy accommodate cash value?
When the premiums paid or more than the cost of the policy
What type of life insurance policy is life paid up at age 65?
Limited pay whole life
A whole life policy that requires of the policy owner to only pay premiums for specified number of years is known as what kind of policy?
Limited pay whole life
What are the two classifications of annuities according to the time when annuity payments begin?
Immediate and deferred
Interest sensitive insurance
Universal life
What type of insurance is a level fixed premium investment based product?
Variable whole life
A policy that can be modified to accommodate life changes
Adjustable life
(must provide proof of insurability)
How is the premium determined in a joint life insurance policy?
The premium is based on the average age of the insureds
How soon can income payments begin in an immediate annuity?
No later than one year from the time of the annuity purchase
Who bears the investment risk in a fixed annuity?
The insurer
The death protection component of a universal life policy is expressed as what type of coverage?
Annually renewable term
An individual has a contract that will provide him with a certain amount of income for the rest of his life. However this is not an insurance policy. What type of contract does this person have?
Annuity
Under option B in a universal life policy, what happens to the death benefit?
The death benefit increases each year by the amount of the cash value increase 
When would a 20 pay whole life policy endow?
When insured reaches 100
An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity?
Flexible premium deferred annuity
With a single premium deferred annuity, when will the annuity payments become available?
No sooner than one year after the annuity purchase
What type of whole life insurance policy only requires a payment of premium at inception, and in addition to providing insurance protection for the life of the insured, and endows at age 100
Single premium whole life
How long will a life annuity with a 15 year period Certain pay?
For the life of the annuitant unless he or she dies within the first 15 years of the new association.; Then the payments will last for 15 years
What type of annuity credit is interest based upon an index such as S & P 500?
Equity indexed annuity
(earn higher interest rates than fixed annuities, both guarantee specific minimum interest rate)
In what type of life insurance policy can the policy owner skip premium payments without the policy lapsing?
Universal life
What is the difference between a single premium and a flexible premium payment option and deferred annuity?
The number of payments that purchase the annuity
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
What type of annuity can be purchased with a single premium?
Immediate annuity
What type of whole life insurance policy generates immediate cash value?
Single premium whole life
If the annuitant dies before the annuitization period starts what will the beneficiary receive?
Either the amount paid in the annuity or the cash value, which ever is greater
Insurance department can issue a certificate of license status of any producer within how many years?
4 years
Applicants license has lapsed, late renewal within how many months of expiration?
12 months
If an insurer cancels an agency contract, it must notify the commissioner and writing within how many days?
15 days
Producer must notify the commissioner within how many days of conviction of a crime?
30 days Of a conviction of a crime
How long is a temporary work Authority valid?
It expires no more than 60 days after it is issued
Closing of any branch office, they must advise the department in writing and how many days?
30 calendar days
Individual who willfully violate the act enough to constitute a general pattern will pay up to?
Up to $2500
How many days to notify about change of address?
30 days
How many hours of continuing education credits are needed?
24 hours
How long can credit insurance coverage last?
Term of coverage cannot extend more than 15 days beyond the scheduled maturity date of the loan
When must loan requests for payment be paid?
Immediately
How many days notice must the insurer provide to insured regarding a lapse of policy due to loans?
7 days
Policy loan request can be deferred for how many months?
6 months
The incontestibility clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for how many years?
Two years. Even if there has been a material misstatement of fax or concealent of a material fact
The replacing insurer must provide how many days for insured to return policy and receive a refund?
 30 days
How many days does the consumer have to be advised in writing after request for investigative consumer report?
Within three days of request
Credit life insurance term of coverage
Seven years
Premiums must be remitted to insurer within how many days after receipt of funds?
5 business days
All premiums due to the insured must be paid or credited within how many days?
5 business days
Permissible hours for telemarketers
8 AM to 9 PM
Policies, certificates, or other evidence of insurance that are received by producer must be delivered or mailed to insured within how many days of the receipt by producer?
10 calendar days
Insurer must supply reinstatement application within how many days upon the insurance request?
30 days
Claims must be reported to insurer no later than how many days after the receipt of the notice of claim by producer?
Five business days
Insurer must either refund or apply the premium against debt within how many days of the date the policy terminate?
Within 60 days of the date the policy terminates
IRA withdrawal penalty
10%
During policy replacement, the replacing insurer must notify existing insurers within how many days?
5 Business days
Under what nonforfeiture option does the company pay the surrender value and have no further obligations to the policy owner?
Once the cash surrender value is paid the contract is over
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
(Under this option the insurer user the policy cast value to convert to term insurance for the same face amount as a former permanent policy. The duration of the new term coverage last for as long as Long a period as the amount of cash value will purchase)
What is the waiting period on a waiver of premium in life insurance policies?
Six months
When a reduced paid up nonforfeiture option is chosen, what happened to the face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium. 
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified number of time is known as what?
Incontestability clause. If an insurer wishes to contest any statements on an application, they must do so within the first two years
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest on a settlement option, what does this mean?
The beneficiary will only receive payments on the interest earned on the death benefit
Which rider is often used in business life insurance policies when the policy owner needs to change the insured under the policy?
Substitute insured rider
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed time period . During which, if you original recipient dies the payments will continue to a designated beneficiary?
Life income with period certain
What type of insurance is to be used for a return of premium rider?
Increasing term
A rider attached to a life insurance policy that provides coverage on the insured family members is called what?
Other insured rider
If a settlement option is not chosen by the policy owner or beneficiary what option will be used?
Lump sum
Which policy component contains the companies promise to pay?
Insuring clause
Which settlement option in Life Insurance is also known as straight life
Life income
This option provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payment stop at the beneficiaries death
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used to determine premium
An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option would she choose?
Paid up option
With the paid up option, the insurer can accumulate dividends at interest and then use them, in addition to interest in the policies cash value, to pay the policy earlier than planned
If a life insurance policy allows the policy owner to make periodic additions to the face amount at standard rates without providing insurability, the policy includes what?
Guaranteed insurability rider
The dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as the?
One year term option
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called?
Joint and survivor
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase
The commissioner may waive the prelicensing education and examination requirement if the applicant holds a professional designation or a license in:
The kind of insurance for which the applicant seeks authority.
True or false
Property and casualty producers applying for life insurance license would be waived from taking Prelicensing education and examination
FALSE
Property and casualty producers applying for a life insurance license would not qualify for the exam
True or False
 Surplus lines is not considered a limited line insurance
True
True or false
Surplus lines is not considered a limited line insurance
True
Applicants for a surplus lines authority must be ________ residence and hold a _______________ license 
New Jersey
Property and casualty license
Allowed to write business in New Jersey for insurance companies that are not authorize New Jersey and chores. No authorized insurer in New Jersey can offer the specific type of insurance in question

Surplus lines
True or false
When settling claims negotiation can come in to play
True
Stock insurance companies are owned and controlled by?
Stockholders
Who can write Bail bonds, car rental insurance, credit insurance, ticket insurance, travel insurance, group mortgage cancellation, legal insurance, and self storage personal property insurance?
Limited lines agent
What is required in order to transact insurance in the state
A certificate of authority
If a producer dies or is rendered disabled, a family member, associate, can enter an agreement with another producer to continue the business. This agreement can last no longer than how many days?
180 days
An insurance producer negotiates for an insurance contract on behalf of a client
Broker
If the master contract is terminated for group life, every individual who has been on the plan for at least how many years will be allowed to convert to an individual insurance of the same coverage?
5 years
Group insurance is written as what kind of insurance?
Annually renewable term
SIMPLE plans are for:
Groups no larger than 100
What portion is taxed upon surrender of life insurance policy?
Only the portion in excess of the premiums paid of the cash value is tax upon surrender of life insurance policy
Personal uses of life insurance
Survivor protection, estate creation and conservation, cash accumulation and liquidity 
Liquidity
Availability of cash value
Used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate

Estate creation and conservation
What part of life insurance is taxable?
Only interest is taxable
Who qualifies for tax-sheltered annuity‘s or 403(b) plans?
Employees of nonprofit organizations under section 501(c) and employees of public school systems
What are dividends
Return of unused premium
Are The premiums that an employer pays for life insurance on an employee, whereby the policy is for the employees benefit tax deductible?
Yes
True or false
Cash value increases are tax deferred
True
True or false
Contributions are tax deferred and earnings on the money in the plan accrue on a tax deferred basis
True
What is the penalty for excessive contributions to a traditional IRA?
6%
What is a direct transfer?
The distribution is made directly from the trustee of the first plan to the trustee or administrator of the new IRA plan
Can individuals who are not covered by an employer sponsored plan deduct the amount of their IRA contributions regardless of their income level?
Yes
How are traditional IRA contributions taxed?
Traditional IRA contributions are tax deductible, but may be limited if the owners income exceeds a certain level and must be made in cash
During an IRA direct transfer or direct rollover how much gets reinvested?
The full amount gets reinvested from one plan to the other
How are distributions from 401(k) plans taxed?
Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution.
However if the distribution is rolled over to a traditional IRA, taxes are deferred until the required minimum IRA distribution begin. Since the client actually took a distribution instead of making a trustee to trustee rollover, the distribution is subject to a 20% withholding tax
What is a qualified plan?
Approved by the IRS, which then gives the employer and employee benefits and deductibility of contributions and tax referral of growth
Examples of qualified plans
HR 10, 401(k), IRA, SEP, SIMPLE
Which qualified plan can a self-employed and individual contribute?
HR-10
Which qualified plan provides retirement income?
401(k)
Which qualified plan is designed to be provided by a small employer for the benefit of the employees?
SEP
Which qualified plan is available to small businesses that employ not more than 100 employees receiving at least $5000 in compensation from the employer during the previous year
SIMPLE
If a retirement plan is qualified it has what kind of tax treatment and who was it designed for?
It has favorable tax treatment and is designed for the employees benefit
Funds and a qualified plan accumulate on what tax basis?
Tax deferred basis; however at distribution any amount received by the employee will be treated as ordinary income for tax purposes
How are funds taxed in a qualified plan at distribution?
At distribution any amount received by the employee will be treated as ordinary income
Qualified plans for self-employed
HR-10 Keogh
What must qualified plans have?
Vesting requirement
How are employer contributions taxed to qualified plans?
Employer contributions are not taxed as income to employees
Non-qualified retirement plan
Do not meet the IRS requirements for favorable tax treatment of deductions and and contributions; therefore they do not need to be approved by the IRS
Individual annuities and deferred compensation plans for highly paid executives, split dollar insurance arrangements, and section 162 executive bonus plans
Non qualified plans
Employers do not receive a current tax deduction for any contributions
Non-qualified retirement plan
What is the seven pay test used for?
Used to determine if a life insurance policy is a modified endowment contract
What is a modified endowment contract?
Any cash value life insurance policy that develops cash value faster than a seven pay whole life contract
How are modified endowment contracts taxed?
Any distributions from MECs are taxable, including withdrawals and policy loans
Three types of Social Security benefits
Retirement, survivors, disability
The term fully employed versus someone who is not is how many quarters of coverage?
40
To be considered partially insured, an individual must have earned how many credits?
Six credits during the last 13 quarter period 
The waiting, or elimination period for Social Security disability benefits is how many months?
5 months
The transfer of some or all of the death benefits of the policy to a creditor of security for a loan, but does not give the creditor the rights of ownership.
Collateral assignment
In the event of the enjoyed stuff the creditor would only be able to recover that portion of the policies proceeds equal to the creditors remaining interest on a loan
Buy sell agreement
Legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled
How many days does an employee have under the conversion privilege to convert to an individual policy?
31 days
The employer will contribute monies into an employees retirement plan when the company shows a profit.
Profit sharing plan
A participating insurance policy will pay dividends to the owner based upon what?
Actual mortality cost, interest earned and costs
Created to protect policy owners, insurance, and beneficiaries under life insurance policies, health insurance policies, annuity contracts, and supplemental contracts when ensures fail to perform contractual obligations due to financial impairment
The New Jersey life and health Guaranty association
If a resident license producer wants to conduct insurance business under a name other than its actual name what must they do?
File with the department
All premiums collected on insurance policies must be held by a producer in what capacity? And must not be misappropriated, illegally withheld or improperly converted to the producers owns funds
Fiduciary capacity
Insurers who meet the states financial requirements and are approved to transact business in the state are considered what?
Authorized or admitted
If a person violates a cease and desist order, the commissioner may assess a fine of up to how much for each violation?
$5000
Issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends,. This includes oral statements
Misrepresentation
Funds not paid out after paying claims and other operating cost I return to the policy owners in the form of?
Dividends
The insurance guaranty association will not pay more than how much for life insurance stuff benefits?
$500,000
a specified period of years is selected, and equal installments are paid to the recipient. Their payments will continue for the specified. Even if the recipient dies before the end of that.
Fixed - period Installments option or period certain
Interest only option
Policy proceeds are retained by the insurance company; only the interest is paid to beneficiary
Allows the policyholder to apply policy dividends towards next year‘s premium

 Reduction of premium
The dividend option that can increase the death benefit.
The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy
Paid up additions 
If policy owner does not choose a dividend option which option will be chosen by the company?
Paid up additions
The dividend option in which the policy owner uses dividends to purchase a term policy for one year
One year term option
If policy owner does not choose a non-forfeiter option, what option will be chosen by insurer?
Extended term
Guarantees payments for the lifetime of the recipient, but also specifies a guarantee amount. During which, if the original recipient dies, the payments will continue to the designated beneficiary
 Life income with period Certain
What happens to a policies cash value under an extended term nonforfeiture option?
Cash value is converted to the same face amount as a whole life policy
