A contingency beneficiary in a life insurance policy has the right to - answer✔✔receive the
policy proceeds if the primary beneficiary dies before the insured
A legal reserve in life insurance is a result of - answer✔✔excess premiums in the early policy
years being invested at compound interest
All of the following are nonforfeiture options found in cash value life insurance policies
EXCEPT - answer✔✔reduction of premiums
All of the following are requirements that must be satisfied before premiums are waived under a
wave-of-premium provision EXCEPT - answer✔✔The insured must satisfy a 2-year waiting
period
All of the following statements about ordinary life insurance are true EXCEPT - answer✔✔The
face amount of the policy is paid if the insured lives to age 65
All of the following statements about the conversion of a term policy are true EXCEPT -
answer✔✔Evidence of insurability is required before a conversion is permitted
All of the following statements about the income tax treatment of individually-purchased life
insurance are true EXCEPT - answer✔✔premiums paid for the individual life insurance are a tax
deductible expense
An immediate life annuity offers all of the following benefits EXCEPT - answer✔✔immediate
annuity payments are entirely exempt from federal income tax
Ann is considering the purchase of a life insurance policy with these characteristics: flexible
premium payments, the insurance and savings components are separate, the interest rate credited
to the cash value is tied to a changing market interest rate but a minimum interest rate is
guaranteed, and a monthly administrative fee is charged. Ann is considering buying -
answer✔✔universal life insurance
Becky is considering the purchase of a whole life policy on her own life. She is concerned that if
she becomes disabled, paying premiums will become a burden. Which provision can Becky
attach to her life insurance policy to address this concern? - answer✔✔waiver-of-premium
provision
Brad owns a cash value life insurance policy. Last year, the cash value increased by $300. Brad
received $100 in policyholder dividends on the policy last year which remained in the policy.
Brad was the beneficiary named in his grandmother's $50,000 life insurance policy. When she
died this past year, Brad received $50,000. How much taxable income relating to life insurance
must Brad report for federal income tax purposes? - answer✔✔$0
Bridget started to fund a variable annuity. Three years later, she experienced financial difficulty.
She called her agent and cancelled the contract. The insurer returned all but 4 percent of the
account balance. The 4 percent kept by the insurer is a(n) - answer✔✔surrender charge
Consumer experts typically recommend all of the following rules when buying life insurance
EXCEPT - answer✔✔Ignore all factors other than cost
Daryl, age 42, quit his job. His employer offered a defined contribution pension plan, and the
balance in the account was $30,000 when Daryl quit. He can avoid immediate taxation of these
funds by - answer✔✔using an IRA rollover account
Disadvantages of life insurance settlement options include which of the following?
I. Higher yields can often be obtained elsewhere.
II. Life income options have limited usefulness at younger ages. - answer✔✔Both I and II
During the funding period, the premiums paid for a variable annuity are used to purchase -
answer✔✔accumulation units
Paul is shopping for a life insurance policy. An agent asked Paul if he would like to purchase a
participating policy. What is a "participating" policy? - answer✔✔a policy which pays dividends
Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs
are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the
following assets: $20,000 in bank accounts, $30,000 in retirement plans, and $40,000 in
investment accounts. Sarah owns no individual life insurance. She is covered by a $50,000 group
life insurance policy through her employer. Based on this information, how much additional life
insurance should Sarah purchase? - answer✔✔$130,000
Stan paid an insurance company $50,000 for a fixed annuity when he was 50 years old. At age
62, Stan plans to begin to receive payments from the insurer. There are no guarantees on the
number of payments he will receive. Based on the description provided, this annuity can be
described as a(n) - answer✔✔deferred annuity
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