Life and Annuity Insurance Concepts

Life/Health Insurance Question Answer It is a period during which the payments What is TRUE regarding the accumulation period of an annuity into the annuity grow taxed deferred Why is an equity indexed annuity considered to be a fixed annuity? It has a garanteed minimum interest rate They earn lower interest rates than fixed What is NOT true regarding Equity Indexed Annuities rates The current interest rate on an equity indexed annuity is often based on An index like Standard & Poor's 500 What is NOT true about an annuity certain Benefits stop at the annuitant's death Under which installment options does the annuitant select the amount of each payment and the insurer determines how long they will pay the Fixed amount benefits? An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years Payments for 15 years after beginning the annuity phase? What is a short term annuity that limits the amounts paid to a specific Annuity certain fixed period or until a specific fixed amount is liquidated Under a pure life annuity, an income is payable by the company Only for the life of the annuiant Under a straight life annuity, if the annuitant dies before the principal Nothing; the payments will cease. amount is paid out, the beneficiary will receive Which of the following is NOT true regarding the Life with Guaranteed It does not guarantee that the entire Minimum annuity settlement option? principal amount will be paid out. If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called Joint life annuity. a Which of the following best describes a pure life annuity settlement Pure life provides payments for as long option? as the annuitant is alive. All of the following statements are true regarding installments for a It is a life contingency option. fixed period annuity settlement option EXCEPT A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Cost of living rider. Price Index, is called Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits Insuring clause will be paid? A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance Cost of Living Rider policy has been raised 7% as a result. Which policy rider caused this change? The interest earned on policy dividends is Taxable Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and Paid-up option the policy cash value to pay the policy up early? They are required by state law to be Which of the following is TRUE about nonforfeiture values? included in the policy. Which nonforfeiture option provides coverage for the longest period of Reduced paid-up time? For how long is an insurance company allowed to defer policy loan 6 months requests? What is the benefit of choosing extended term as a nonforfeiture It has the highest amount of insurance option? protection. The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been 2 years in force for at least how many years? Which of the following settlement options in life insurance is known as Life income straight life? An insured receives an annual life insurance dividend check. What term best describes this arrangement? When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy? Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? What is the advantage of reinstating a policy instead of applying for a new one? If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? Nonforfeiture values guarantee which of the following for the policyowner? Which of the following best describes fixed-period settlement option? Which of the following is TRUE about nonforfeiture values? The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the All of the following are Nonforfeiture options EXCEPT What does “liquidity” refer to in a life insurance policy? In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then In life insurance policies, cash value increases Employer contributions made to a qualified plan All of the following would be different between qualified and nonqualified retirement plans EXCEPT All of the following are characteristics of group life insurance EXCEPT In which of the following instances would the premium be tax deductible? All of the following employees may use a 403(b) plan for their retirement EXCEPT All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT All of the following would be different between qualified and nonqualified retirement plans EXCEPT Which of the following applicants would NOT qualify for a Keogh Plan? Which of the following is the required number of participants in a contributory group plan? If an insured worker has earned 40 quarters of coverage, the worker’s status under Social Security disability is Employer contributions made to a qualified plan An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable? A$50,000 Cash option Return of premium Automatic premium loan The original age is used for premium determination. Lump sum Reduction of premium That the cash value will not be lost Both the principal and interest will be liquidated over a selected period of time. They are required by state law to be included in the policy. One-year term option. Interest only Cash values can be borrowed at any time. 5 The insured may choose to convert to term or permanent individual coverage. The benefit is received tax free. Grow tax deferred. Are subject to vesting requirements. Taxation on accumulation Premiums are determined by the age, sex and occupation of each individual certificate holder. Premiums paid by an employer on a $30,000 group term life insurance plan for employees The CEO of a private corporation. Being age 65. Taxation on accumulation Someone who works 400 hours per year 75% Fully insured. Are subject to vesting requirements. $3,000 Which of the following is the best reason to purchase life insurance rather than an annuity? An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his Death benefits payable to a beneficiary under a life insurance policy are generally In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called? All of the following would be eligible to establish a Keogh retirement plan EXCEPT Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? Employer contributions made to a qualified plan If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy? All of the following are examples of third-party ownership of a life insurance policy EXCEPT To create an estate Attained age. Not subject to income taxation by the Federal Government. Blackout Period The president and employee of a family corporation. Withdrawals are not taxable. Life expectancy Are subject to vesting requirements. It is only taxable if the cash value exceeds the amount paid for premiums. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. To comply with Fair Credit Reporting Act, when must a producer notify At the time of application an applicant that a credit report may be requested? Underwriting is a major consideration when an insured wishes to Premiums always stay the same. replace her current policy for all of the following reasons EXCEPT What document describes an insured’s medical history, including Attending Physician’s Statement diagnoses and treatments? The applicant must be informed of the Which is true regarding obtaining underwriting sources? sources contacted and how the information is being gathered. An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's Ask her to sign a statement of good premium check, answers any questions the applicant may have, and health then leaves. What did he forget to do? Who must pay for the cost of a medical examination required in the Insurer process of underwriting? Which of the following entities can legally bind coverage? Insurer An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's Ask her to sign a statement of good premium check, answers any questions the applicant may have, and health then leaves. What did he forget to do? Underwriting is a major consideration when an insured wishes to Premiums always stay the same. replace her current policy for all of the following reasons EXCEPT Individual insurance does not require All of the following are differences between individual and group health medical examinations, while group insurance EXCEPT insurance does require medical examinations. Who determines the eligibility and contribution limits of an HRA? The employer Regarding long-term care policies, which of the following would NOT be Sleeping included in activities of daily living? The account allows roll-over of unused Which of the following statements about HRAs is TRUE? balances at the end of the year at the employer's discretion Employers can reduce health plan costs by coupling a Health A high deductible health plan. Reimbursement Account (HRA) with What are the three basic coverages for medical expense insurance? Hospital, Surgical, Medical Which of the following is NOT an activity of daily living (ADL)? Talking The period of time immediately following a disability during which The elimination period benefits are not payable is What is necessary in order to be eligible to receive benefits from a long The insured must be unable to perform term care policy some activat Is renewable at the insured's option to a A guaranteed renewable disability insurance policy specified age. Which of the following riders would NOT increase the premium for a Impairment rider policyowner? The insuring clause of a disability policy usually states all of the The method of premium payment. following EXCEPT In the event a policy lapses due to nonpayment of premium, within how many days would the policy be automatically reinstated once the 45 days outstanding premium is paid? Under an individual disability policy, the MINIMUM schedule of time in Monthly. which claim payments must be made to an insured i According to the rights of renewability rider for cancellable policies, all Unearned premiums are retained by the of the following are correct about the cancellation of an individual insurance company. insurance policy EXCEPT How soon following the occurrence of a covered loss must an insured Within 90 days or as soon as reasonably submit written proof of such loss to the insurance company? possible, but not to exceed 1 year An insured pays her Major Medical Insurance premium annually on March 1. Last March she forgot to mail her premium to the company. On Pay the claim. March 19, she had an accident and broke her leg. The insurance company would Under the mandatory uniform provision Notice of Claim, the first notice A statement that is sufficiently clear to of injury or sickness covered under an accident and health policy must identify the insured and the nature of contain the claim. Which of the following is NOT a feature of a guaranteed renewable The insurer can increase the policy provision? premium on an individual basis. An insured pays a monthly premium of $100 for her health insurance. 10 days What would be the duration of the grace period under her policy? Which of the following is NOT an exclusion in medical expense Coverage for dependents insurance policies?