MI LIFE PRODUCER FINAL EXAM QUESTIONS BANK NEWEST SOLUTION ACTUAL EXAM COMPLETE
Jane works for a company that allows employee contributions under a 401(k) plan. When will
Jane become fully vested in her plan contributions? - correct 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? - correct 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? - correct 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? - correct 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? - correct 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: - correct 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: - correct
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? - correct 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,
,MI LIFE PRODUCER FINAL EXAM QUESTIONS BANK NEWEST SOLUTION ACTUAL EXAM COMPLETE
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? - correct 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? - correct 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? - correct 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? - correct 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? - correct 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? - 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? - correct 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.
,MI LIFE PRODUCER FINAL EXAM QUESTIONS BANK NEWEST SOLUTION ACTUAL EXAM COMPLETE
The term used to describe the voluntarily surrender of a known right is: - correct 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: - correct 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: - correct 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: - correct 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? - correct 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? - correct 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: - correct 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? - correct 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.
, MI LIFE PRODUCER FINAL EXAM QUESTIONS BANK NEWEST SOLUTION ACTUAL EXAM COMPLETE
Which of the following statements regarding Keogh (HR-10) qualified plans is correct? - 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: - correct 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: - correct answer Life
insurance is used to make up for the financial losses that might occur with the death of an
important customer.//While life insurance serves a number of important purposes in the
business market, making up for the death of a big customer is not one of them.
Assuming no relation other than that stated, in which of the following situations does insurable
interest exist? - correct answer Al would like to take out a life insurance policy on his
wife.//Insurable interest in personal relationships is generally limited to the applicant and a
member of the applicant's family.
John buys a $1 million life insurance policy. He dies two years later and the insurer pays the $1
million benefit. Even though the premiums never came close to the benefit amount, the insurer
pays the full benefit because the insurance policy is type of contract? - correct answer a valued
contract//Life insurance policies are valued contracts, which means they pay a stated amount in
the event of a loss. Life insurance contracts, unlike contracts of indemnity, do not try to judge
the actual amount of the loss. Because John bought a life insurance policy insuring his life for $1
million, that is the amount the policy paid when he died, regardless of the amount he paid in
premiums. A contract of indemnity, on the other hand, limits the benefit to the amount of the
insured's actual loss.
At age 49, Caleb took a $20,000 distribution from his deferred annuity, of which $9,000
represents interest earnings. In addition to paying income tax, what else will Caleb probably
have to pay? - correct answer a penalty tax of $900//To discourage early withdrawals, a 10
percent penalty tax is imposed on nonannuitized withdrawals before age 59'. This tax is
assessed to the taxable portion of the withdrawal (in this case, $9,000).
If a labor union sponsors a group life insurance plan for its members, which of the following
statements is correct? - correct answer Premiums must be paid entirely from union funds or
from a combination of union funds and member funds.//If a labor union buys a group policy to
insure its members, the union is the policyowner.
