Wrong answer study Flashcards
Under what circumstances will the contingent beneficiary receive the death benefit?
a. If designated by the insured
b. If designated by the primary beneficiary
c. If the primary beneficiary dies before the insured
d. If the tertiary beneficiary dies before the insured
c. If the primary beneficiary dies before the insured
The only way the contingent beneficiary will receive the death benefit is if the primary beneficiary dies before the insured.
When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?
a. Paid up additions
b. Cash surrender value
c. Reduced paid up
d. Extended term
d. Extended term
The automatic nonforfeiture option is extended term.
Life insurance creates an immediate estate. Which of the following best explains this statement?
a. The policy has cash values and nonforfeiture values
b. The policy generates immediate cash value
c. The death benefit will always be paid to the estate of the insured
d. The face value of the policy is payable to the beneficiary upon the death of the insured
d. The face value of the policy is payable to the beneficiary upon the death of the insured
Unlike a traditional estate where the value of personal wealth is usually built up over time, a life insurance policy’s face value is available immediately in one lump-sum upon the death of the insured.
With adjustable life, the owner can change all of the following EXCEPT
a. The insured
b. The death benefit
c. The premium
d. The length of time the coverage will last
a. The insured
The mortality charge is determined by the actuary in the home office. The owner of the policy has no control over this mortality cost.
If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions?
a. At any time within the incontestable period
b. Never, the insurer has waived its right to those answers by issuing the policy
c. Within 3 months of issuing the policy
d. Within 30 days of issuing the policy
b. Never, the insurer has waived its right to those answers by issuing the policy
If an insurer accepts an application with unanswered questions and issues the policy, it has waived its right to those answers.
Which of the following indicates the person upon whose life the annuity income amount is determined?
a. Owner
b. Insured
c. Annuitant
d. Beneficiary
c. Annuitant
The annuitant is the person upon whose life the annuity income amount is determined.
Because of an injury, an insured has been unable to work for 7 months. When his life insurance premium came due, he was unable to pay, yet the policy remained in force. The policy includes
a. Guaranteed insurability benefits
b. Facility of payment clause
c. Nonforfeiture options
d. Waiver of premium rider
d. Waiver of premium rider
The Waiver of Premium rider causes the insurer to waive future premiums if the premium payor is disabled for a period beyond 6 months or more.
Under which of the following conditions would life insurance proceeds be taxable by the federal government?
a. If collateral assigned to a lender
b. If taken as a lump sum
c. If paid to the policyowner
d. If there is a transfer for value
d. If there is a transfer for value
A life insurance policy qualifies a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid- up insurance in how many years?
a. 7 years
b. The life of the policy
c. 3 years
d. 5 years
a. 7 years
If the policy’s premium paid in its first 7 years exceed what would have been paid into a life policy with level annual premiums that would be paid- up in 7 years, the policy fails the 7- pay test and becomes a Modified Endowment Contract.
Which dividend option will increase the death benefit?
a. Reduced paid up
b. Paid- up additions
c. Accumulation
d. Extended term
b. Paid- up additions
Paid- up additions option uses the dividend to purchase small amounts of the same type of insurance as the original policy. The additional insurance is paid up by the dividend.
S set up an individual retirement account that her employer is now contributing to. Her employer’s contributions are not included in her gross income. What kind of retirement plan does S have?
a. HR-10 (Keogh)
b. SIMPLE
c. Simplified Employee Pension (SEP)
d. 401(k)
c. Simplified Employee Pension (SEP)
A SEP is a type of qualified plan suited for the small employer. In a SEP, an employee establishes and maintains an individual retirement account to which the employer contributes. Employer contributions are not included in the employee’s gross income.
All of the following are general requirements of a qualified plan EXCEPT
a. The plan’s benefit cannot discriminate in favor of the “prohibited group”
b. The plan must be temporary
c. The plan must be approved by the IRS
d. The plan must have a vesting requirement
b. The plan must be temporary
Qualified plans must be permanent. All the other characteristics above are also true.
Which of the following is true regarding taxation of accelerated benefits paid under a life insurance policy?
a. They are taxable to the insured’s estate
b. They are tax deductible
c. They are received tax free
d. They are considered taxable income
c. They are received tax free
When accelerated benefits are paid under a life insurance policy to a terminally ill insured, the benefits are received tax free.
According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT
a. It ensures that consumer reporting agencies are fair in their treatment of consumers
b. Investigative consumer reports can be used to obtain information on the applicant’s character and reputation
c. If an applicant is declined for an insurance policy, he or she has no right to know what was in the report
d. It protects consumers against circulation of inaccurate information
c. If an applicant is declined for an insurance policy, he or she has no right to know what was in the report
Where are premiums from fixed annuities invested?
a. a general account
b. a variable account
c. a hedge fund
d. a separate account
a. a general account
A fixed annuity is characterized by a general account into which the purchase payments (premiums) are invested.
Which of the following would NOT be eligible for coverage under key person?
a. The pharmacist in a drug store
b. The manager of a small store
c. The owner of a shop
d. The executive officer of a company
c. The owner of a shop
The owner is the principal, not a key person.