CURRENTLY TESTING SOLUTIONS OF MI Life Producer
Final Exam QUESTIONS WITH ACTUAL CORRECT
DETAILED ANSWERS
Jane works for a company that allows employee contributions under a 401(k) plan. When will Jane
become fully vested in her plan contributions? - ANSWER-immediately//While employer contributions to
a qualified plan can be subject to a vesting schedule, participants are always fully vested in their own
contributions.
Agents must act in the best interests of applicants and insureds. What does this require them to do? -
ANSWER-give all important information about a proposed policy//Agents must act in the applicant's or
insured's best interests at all times. This means that agents must give all important information about a
proposed policy. Also, they cannot misrepresent the terms or conditions of a proposed policy.
What does a viatical settlement allow? - ANSWER-It allows a chronically or terminally ill insured to gain a
sum of money that is needed to pay medical expenses or to enhance the quality of life.//A viatical
settlement allows a chronically or terminally ill insured to gain a sum of money that might be needed to
pay medical expenses or to enhance quality of life.
If an employer/employee group offers group life insurance on a contributory basis, what percentage of
the group must enroll? - ANSWER-At least 75 percent of the group must enroll in the plan//If an
employer/employee group life insurance plan is contributory, 75 percent of the group must enroll in the
plan. If the plan is non-contributory, 100 percent of the group must enroll.
Which of the following is NOT a life insurance premium? - ANSWER-competitors' rates//Actuaries base
life insurance premiums on three basic factors: mortality (a charge), interest (a credit), and expenses (a
charge).
,In calculating their mortality charges, life insurers today generally use: - ANSWER-the 2001 CSO
table//The mortality factor is drawn from mortality statistics compiled by the National Association of
Insurance Commissioners (NAIC) into a set of rates called the Commissioners Standard Ordinary (CSO)
table. Policies issued since 2009 are required to base their mortality charges on the 2001 CSO table.
All of the following are standard life insurance policy nonforfeiture options EXCEPT: - ANSWER-
accumulate at interest option//This is a policy dividend option in which declared dividends are left with
the insurer to accumulate interest on the policyowner's behalf.
Which of the following most correctly describes the nonforfeiture option(s) available with universal life
insurance? - ANSWER-surrender the policy for its cash value or stop paying premiums and continue
coverage as long as the cash value will support it//Universal life policies do not contain the standard
nonforfeiture options. Instead, the policyowner can either surrender the policy for its cash value or
continue coverage with no further premium payments, in which case coverage will last for as long as the
cash value is able to support the policy's monthly mortality and expense charge deductions.
James wants to convert his $150,000 traditional IRA to a Roth IRA. What best describes the tax
treatment for the Roth conversion? - ANSWER-The converted funds are taxed, but Roth IRA earnings and
distribution will be tax free.//The $150,000 from the traditional IRA has been deferred so it will be taxed
upon conversion. However, as long as James holds the new Roth IRA for at least five years and is older
than 59', distributions from the Roth IRA will be tax free.
Under variable life insurance plans, policy loans can be as high as what percent of the cash value? -
ANSWER-75 to 90 percent//Policy loans under traditional whole life insurance plans can be as high as
100 percent of the cash value, but with variable life insurance the maximum loan amount is something
less than the full cash value (e.g., 75 to 90 percent of the cash value), less any debt currently outstanding
against the policy.
Under which nonforfeiture option does permanent life insurance continue in force with no further need
for premiums? - ANSWER-reduced paid-up option//A paid-up policy under the reduced paid-up option
requires no further premiums (nor can any be paid). The paid-up policy retains a cash value that will
continue to grow throughout the life of the policy. However, it will grow much more slowly than during
the period that premiums were being paid.
Which of the following can be funded with a single premium payment, a series of fixed premium
payments, or flexible premium payments? - ANSWER-deferred annuities//Deferred annuities can be
,funded with a single premium payment, a series of fixed premium payments, or with flexible premium
payments. Moreover, the owner can make these payments whenever and in whatever amount he or she
wants.
How does the cost of group life insurance generally compare to the cost of individual life insurance? -
ANSWER-Group life is less expensive.//Per unit of benefits or coverage, group life insurance is less
expensive than individual life insurance because it has lower administrative and operational costs.
Which of the following statements about the 'accumulate at interest' policy dividend option is correct? -
ANSWER-The insurer credits a rate of interest to the dividends as they remain on deposit with the
insurer.//The insurer credits a rate of interest to the dividends as they remain on deposit with the
insurer.
When it comes to choosing a financial instrument to fund a qualified retirement account, which of the
following features makes an annuity the most suitable product? - ANSWER-retirement income that is
guaranteed for life//All qualified retirement plan assets enjoy tax-deferred growth and tax-deductible
deposits, and many offer a variety of investment choices, but only a deferred annuity can be converted
to an income stream that is guaranteed for life.
The term used to describe the voluntarily surrender of a known right is: - ANSWER-waiver//Waiver is
voluntarily giving up a known right. If an insurer voluntarily gives up a legal right that it has under an
insurance contract, it cannot deny a claim based on a violation of that right. Estoppel involves giving up a
right without intending to do so. A party surrenders a right that it failed to preserve.
Social Security benefit amounts are most directly based on a worker's: - ANSWER-average indexed
monthly earnings//The amount of Social Security OASDI benefits that a covered worker is entitled to is
based on the person's average indexed monthly earnings, which are the average of a worker's lifetime
earnings on which FICA taxes were imposed.
Producers must inform consumers about the practices that insurance companies will use in their review
and underwriting processes. Typically, these processes include all of the following, EXCEPT: - ANSWER-
using phone taps//For information about their applicants, insurance companies look to such sources as
an attending physician's statement (APS), investigative agencies, credit agencies, and the MIB ' but not
phone taps.
, Insurance agents are often called: - ANSWER-producers//Insurance companies sell their products
through agents or producers who either represent one insurance company exclusively or are
independent and represent several insurers.
Actuaries calculate net single premiums based on which of the following? - ANSWER-mortality and
interest assumptions//The net premium, which is the insurer's estimated cost to provide the policy's
benefits without accounting for its expenses, uses the factors of mortality and interest but excludes the
expense load factor.
Which of the following statements is true for variable life insurance policies? - ANSWER-The insurer does
not guarantee the policy's cash value.//The insurer does not guarantee amounts invested in separate
subaccounts, so the whole value of the policy is not guaranteed.
Life insurance policies are generally prohibited from including provisions that would do any of the
following EXCEPT: - ANSWER-require the policyowner to notify the insurer if he or she assigns the policy
to a third party//The only provision among these options that could be included in a policy is one
requiring the policyowner to notify the insurer if he or she assigns the policy to a third party. The other
provisions are typically prohibited by state law.
Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work? -
ANSWER-The insurer pays the death benefit to the trustee who manages the assets for the trust's
beneficiaries, named by Jerry when the trust was formed.//A trust can be the beneficiary of a life
insurance policy. The insurer pays the trustee, who manages the assets for the trust's beneficiaries.
Which of the following statements regarding Keogh (HR-10) qualified plans is correct? - ANSWER-The
plan must comply with the same maximum contribution and benefit limits applicable to other qualified
plans.//Keogh plans today are treated the same way as corporate plans with respect to maximum
contribution and benefit limits, participation and coverage requirements, and nondiscrimination
requirements.
When calculating the surviving family's ongoing cash needs at the death of the prospective customer, the
agent must consider all of the following expenses EXCEPT: - ANSWER-the insured's funeral
expenses//Paying for the insured's funeral is an immediate lump-sum cash need, not an ongoing cash
need.
Life insurance is commonly used for all the following purposes, EXCEPT: - ANSWER-Life insurance is used
to make up for the financial losses that might occur with the death of an important customer.//While life
