ARIZONA LIFE AND HEALTH INSURANCE EXAMS 2024, Exams of Nursing

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ARIZONA LIFE AND HEALTH INSURANCE EXAMS 2024 | 3

DIFFERENT VERSIONS OF THE CURRENT EXAM |

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CONTAINS A STUDY GUIDE AT THE END | LATEST UPDATE

How are qualified Roth IRA distributions normally treated for tax purposes? 10% penalty tax is applied Taxed as ordinary income Capital gains tax is applied Received income tax-free Received income tax-free What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old? Greater than the policy's face amount Less than the policy's face amount Depends on the performance of the separate underlying investment account Equal to the policy's face amount Less than the policy's face amount In an individual retirement account (IRA), rollover contributions are subject to capital gains tax subject to ordinary income tax partially limited by dollar amount unlimited by dollar amount unlimited by dollar amount

When does the owner's contractual rights begin under an individual annuity contract? Time of purchase When the benefit period begins When the accumulation period ends After free-look period expires Time of purchase Where is the difference between a standard risk and a substandard risk reflected? Backdating Coverage is not offered Premium charges Back-end charges Premium charges Which of these factors does NOT influence an individual's need for life insurance? Lifestyle of the applicant Number of dependents Future educational costs of the dependents Self-maintenance expenses Self-maintenance expenses An appointed producer's implied authority is derived from the NAIC express authority the insurer's Certificate of Authority

evident authority express authority What could be the potential result of taking out a cash value loan under a life insurance policy? Death benefit will be subject to income taxes if insured dies with an outstanding loan balance Interest that accrues on policy loan is tax-deductible to the policyowner Loan amount will be added to the policyowner's gross income Reduces the amount receivable upon surrender of the contract Reduces the amount receivable upon surrender of the contract The death proceeds of a credit life insurance policy are typically paid to the borrower lender annuitant borrower's dependents lender Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The transfer of Rick's IRA account balance to his surviving spouse qualifies for the marital deduction death benefits Section 1035 exchange capital gains taxation the marital deduction

Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner? Estate taxes Unemployment tax expenses Funeral expense Living expenses Unemployment tax expenses Tim is confined to a nursing home but doesn't have a terminal illness. Which life insurance rideris designed to help pay for this type of expense?

Cash value rider Viatical rider Accelerated (living) benefit rider Long-term care benefit rider Long-term care benefit rider Which benefit can be found in an equity indexed annuity, but not in a fixed annuity? Protection against living too long Equity loans A fixed rate of return Protection against long-term inflation Protection against long-term inflation What type of premiums are associated with individual mortgage protection life insurance policies? Level premiums

Flexible premiums Modified premiums Decreasing premiums Level premiums Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions? Qualified plan waiver Trustee-to-trustee transfer Conduit IRA 1035 exchange Conduit IRA A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen? Paid-up additions Accumulation at interest 1-year term

Reduction of premium payment Reduction of premium payment Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)? policy loans claim on a death benefit extended term settlement option

policyowner reaching the age of 70 1/ policy loans Which of the following would NOT be a reason for purchasing life insurance on a child's life? Provide benefits for the child if the parents die Pay for the child's funeral expenses Provide a start on the child's personal insurance Help provide funds for the child's education Provide benefits for the child if the parents die A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policyowner on receipt of the cash value? $16,000 was received as ordinary income and $4,000 as tax-free $20,000 was received as a capital gain $20,000 was received as ordinary income $16,000 was received tax-free and $4,000 as ordinary income $16,000 was received tax-free and $4,000 as ordinary income The surrender charge on many deferred annuity contracts are waived when the annuitant becomes unemployed annuitant dies or becomes disabled contract's interest rate falls below a stated percentage contract is canceled within the first year annuitant dies or becomes disabled

Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy? Prevents a policy from lapsing in the event of total disability Premiums waived by the insurer do not have to be repaid by the policyowner Policy's cash value would still increase as policy premiums are being waived It allows a policy loan to cover premium payments if the policyowner becomes totally disabled It allows a policy loan to cover premium payments if the policyowner becomes totally disabled a whole life policy that provides a choice of dividend options include the following statementabout dividends

they accrue at a guaranteed rate they are deferred for one year they are not guaranteed they are guaranteed after the first year they are not guaranteed When there is a named beneficiary on a life insurance policy, the death benefits

1. are directed to a trustee if the insured has any outstanding debts
2. are paid directly to the insured`s creditors, with any remaining balance forwarded to thebeneficiary
3. are paid directly to the beneficiary, minus any debt claims by the insured`s creditors
4. are paid directly to the beneficiary without interference from the insureds creditors are paid directly to the beneficiary without interference from the insureds creditors What determines how much an annuitant is paid for a variable annuity
5. varies according to how many outstanding annuitant is paid for a variable annuity

2. payments fluctuate as annuitant gets older
3. the market value variations of the securities backing it
4. varies according to the insurers investments in its general account the market value variations of the securities backing it a terminated employee has how many days upon termination to convert group life insurance coverage to an individual policy 10 days 15 days 30 days 31 days 31 days Rick owns a variable universal life insurance policy and chooses a variable death benefit option. what will typically happen to the death benefit as a result of this section
5. remain the same 2 decrease but never increase 3 increase but never decrease 4 fluctuate with changes in the cash amount fluctuate with changes in the cash amount the policy provision that permits an employee to change from group life insurance to an individual policy is called 1 assignment provision 2 conversion provision 3 certificate provision

4 modification provision conversion provision when the deferred annuity is surrendered, who must sign the authorization to do so owner annuitant and beneficiary annuitant all parties involved owner Which of the following is NOT a valid contract exchange?

1. an annuity exchanged for a life insurance policy 2 an annuity exchanged for another annuity 3 a life insurance policy exchanged for another life insurance policy 4 a life insurance policy exchanged for another annuity an annuity exchanged for a life insurance policy which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate evidence of insurability is required coverage remains until death of the insured the premium to purchase the coverage comes from the policys cash value cash value will continue to grow the premium to purchase the coverage comes from the policys cash value a life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured death

total premiums paid plus the policy face amount face amount plus interest interest acquired plus total premiums paid face amount minus any outstanding loan balances total premiums paid plus the policy face amount which of these is NOT considered the responsibility of a producer during the underwriting process collecting additional medical information if needed promptly sending the completed application to the insurance company forwarding any material personal observations to the insurer selecting the final approval date selecting the final approval date which of the following is NOT guaranteed in a whole life policy settlement options nonforfeiture options dividend scale policy loan values dividend scale all of these duties that a producer may be required to perform when delivering an insurance policy EXCEPT acquire a statement of good health signature gather the initial premium

review policy with applicant leave a conditional receipt with client leave a conditional receipt with client laura added a children`s rider to her life insurance policy. what type of coverage was added level term increasing term decreasing term juvenile term level term what would be the disadvantage of naming a trust as a beneficiary of a life insurance policy trusts cannot be formed for life insurance purposes trust administrations fees would reduce policy proceeds trusts cannot be used if a minor is the beneficiary trustee must be a bank or brokerage trust administrations fees would reduce policy proceeds what does a fixed life annuity offer protection against inflation premature death inadequate retirement planning savings depletion due to longevity savings depletion due to longevity a trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

mandatory income tax withholding on the amount transferred paying transfer fees paying trustee fees ever paying income taxes on the distributions mandatory income tax withholding on the amount transferred what happens when a policy owner borrows against the cash value of his life insurance policy the policy proceeds would be reduced by the outstanding loan balance no additional loans can be taken out in the future the amount borrowed is added to the policy owners gross income for tax purposes the interest on the loan is tax deductible the policy proceeds would be reduced by the outstanding loan balance straight whole life insurance can be accurately described in all of these statements EXCEPT policy protection normally expires at age 65 nonforfeiture values are available to the policy owner provides level protection with level premiums cash value loans are permitted policy protection normally expires at age 65 which statement regarding the joint and survivor life insurance settlement options is NOT true age of beneficiaries plays a factor when determining the payment amounts income continues until the last beneficiary dies two or more beneficiaries can be paid the amount of each installment is larger than the single life income option

the amount of each installment is larger than the single life income option which statement regarding universal life insurance in correct cash value accumulations have a guaranteed minimum interest rate policy owner can change the face amount but not the premium policy owner can change the premium but not the face amount partial withdrawals cannot be made from the policy`s cash value cash value accumulations have a guaranteed minimum interest rate which of the following statements about universal life insurance in NOT true death benefit can be increased premiums are flexible universal life insurance normally has a minimum guaranteed cash value for duration of the policy the cash value interest rate must equal or exceed a guaranteed minimum value universal life insurance normally has a minimum guaranteed cash value for duration of the policy contributions made by an employee to a qualified retirement plan are required to be subject to income taxes fully refundable nonforfeitable subject to a vesting schedule subject to a vesting schedule taxable income may be the result from all of these modified endowment contract (MEC) tranasactions except for a cash value loan is taken out automatic premium loan provision is utilized

the policy is surrendered for less than what was paid into it dividend is issued the policy is surrendered for less than what was paid into it which statement regarding the life insurance premium for a childrens rider is true decreasing premium as each child becomes an adult premium remains the same no matter how many children increasing premium as additional children are born no premium is normally charged for a childrens rider premium remains the same no matter how many children which of the life insurance policies does NOT contain a cash value provision modified whole life universal life decreasing term life adjustable life decreasing term life what is the tax treatment of benefit payments for a non-qualified annuity benefit payments are always fully taxable benefit payments are subject to taxes only prior to age 70 1/ benefit payments must begin at age 59 1/2 to void a penalty benefit payments received after 70 1/2 are always tax-exempt benefit payment are always fully taxable

the insurance coverage in a variable life insurance policy may vary based on the value of the AM best rating the company has received its underlying investments the consumer price index the total premiums paid its underlying investments a life insurance policys waiver of premium rider has the ability to waive the premium payments in the event the insured becomes financially insolvent relieve the insured of preimum payments following an initial waiting period after the insured becomes totally disabled provide a policy loan to cover the premium payments in the event the insured becomes totally disabled waive the premiums on this policy as well as any other insurance policy belonging to the insured i the event of total disability relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled kevin has an existing life insurance policy and assigns it to another insurer for a new contract. how would this transaction be treated for tax purposes as section 1035 exchange as a transfer as a rollover as a section 1040 exchange as a section 1035 exchange when would evidence of insurability be required for a person already covered with a variable universal life policy

when the premium is increased when the policy has renewed when the death benefit is increased when policy is being converted to permanent coverage when the death benefit is increased which of these may NOT be deducted from premium payments or the cash value of a variable life insurance policy mortality costs administrative charges investment management fees federal premium taxes federal premium taxes a material change in a modified endowment contract (MEC) results in the contract becoming void a new contestable period the seven pay test, adjustable for cash value, applies again a tax penalty the seven pay test, adjustable for cash value, applies again which event triggers a deferred annuity to start making benefit payments to the annuitant when he owner dies when the contracts cash value exceeds the cost basis when the contract is annuitized

cash surrender of the annuity when the contract is annuitized A business becoming incorporated is an example of risk ____. eduction severance retention transfer transfer A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct? If the interest rate falls below a specified level, the surrender charge is waived If the interest rate rises above a certain level, the surrender charge is waived It allows the Life and Health Guaranty Association to bailout the insolvent insurer A reinsurer will make the remainder of the annuity payments if the original insurance company becomes insolvent If the interest rate falls below a specified level, the surrender charge is waived An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction? 10% is withheld for income taxes 20% is withheld for income taxes 30% is withheld for income taxes Nothing is withheld 20% is withheld for income taxes

Which of these is NOT an advantage of term life insurance? The greatest amount of coverage can be provided for the initial premium paid It can be provided as a rider to another policy A cash benefit will be provided if the insured is alive at the end of the policy period Temporary insurance needs can be met A cash benefit will be provided if the insured is alive at the end of the policy period Which of the following is a TRUE statement regarding universal life insurance? Death benefits are normally taxable Policy loans are not permitted Premiums or face amount cannot be changed Policy indicates how much of each premium is used toward company expenses Policy indicates how much of each premium is used toward company expenses Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments? Variable universal life Modified endowment contract Adjustable life Graded premium whole life Variable universal life How long does protection normally extend to under a limited pay whole life policy? It depends on the performance of the underlying investment account When premiums are no longer required as stated in the contract

Until age 65 Until age 100 until age 100 A life policy that has premiums that are lower than normal during the early years is called Decreasing term Modified life Variable life Limited-pay life Modified life The annuitant in a single premium deferred annuity (SPDA) receives immediate benefit payments makes only one premium payment can make tax-free withdrawals until the principal is recovered is also the beneficiary receives immediate benefit payments How can an insurance company minimize exposure to loss? Risk concealing Reinsuring risks Reissuance Risk assumption Reinsuring risks

What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured? Joint and survivorship Survivorship life Universal life Joint life joint life What happens to the cash value of a market value adjusted annuity if it's surrendered prior to theend of the stated guarantee period?

Subject to market value adjustment Subject to no adjustments Subject to a surrender charge only Cash value is forfeited Subject to market value adjustment What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract? All actions by the producer Not responsible for any acts by the producer Responsible for acts that involve misrepresentation only Responsible for acts by the producer that are authority only Responsible for acts by the producer that are authority only A life insurance producer's underwriting duties may include approving or declining a life insurance application

seeking additional information requested by the insurance company ordering an MIB report determining the rate classification of the applicant seeking additional information requested by the insurance company Which of these annuity contract features is meant to discourage withdrawals and exchanges? Annuitization Annual fees Withdrawal penalty Surrender charges Surrender charges A Keogh plan is a(n) unqualified retirement plan for large corporations qualified retirement plan for the self employed tax-exempt annuity for government workers split dollar plan for key employees qualified retirement plan for the self employed A qualified profit-sharing plan is designed to allow key employees to participate in the profits of the company distribute a portion of company earnings to its employees keep key employees from leaving the company allow employees to elect company officers distribute a portion of company earnings to its employees

What effect can a long-term care benefit rider have on a life insurance policy? Increased cash value Decreased cash value Increased death benefit Reduced death benefit Reduced death benefit ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk transference retention reduction avoidance reduction Which of the following is NOT a reason for a business to buy key person life insurance? The reduction in sales as a direct result from death of the key employee A void in leadership if the key person were to die The loss of company revenues while a replacement is being sought An increased pension liability if the key employee dies An increased pension liability if the key employee dies The insurance coverage in a variable life insurance policy may vary based on the value of the AM Best rating the company has received its underlying investments

the consumer price index the total premiums paid its underlying investments Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy? Convert the cash value to a paid-up term policy Gives policyowner ability to borrow against funds within two years Increases the policy's face amount Provide supplemental income in 35 years Provide supplemental income in 35 years An agent's authority to bind an insurer to an insurance contract may be granted in the agent's contract and the insurance company's appointment agent's license and insurance company's certificate of authority buyer's guide and policy summary state guaranty association agent's contract and the insurance company's appointment An annuity's accumulation period may continue after the purchase payments stop continue after the benefit payments start continue after the annuitant dies continue after the annuity has been surrendered continue after the purchase payments stop

When would evidence of insurability be required for a person already covered with a variable universal life policy? When the premium is increased When the policy has renewed When the death benefit is increased When policy is being converted to permanent coverage When the death benefit is increased What is considered the collateral on a life insurance policy loan? No collateral is needed The policy's cash value The policy's face value The equity in a policyowner's home The policy's cash value What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued? $0 $50,000 Under $50,000 initially, but decreases annually over time Under $50,000 initially, but increases over time Under $50,000 initially, but increases over time Under the Law of Agency, the principal is considered to be the producer the insurer

the plan administrator the insured the insurer Which would be described as a beneficiary designation by class? Children of the insured Estate of the insured Tertiary beneficiary A specific named beneficiary Children of the insured Which of these policies is considered a whole life policy? Credit life Single premium life Renewable life Convertible life Single premium life An insurance policy that can also be classified as a securities product is called variable life modified life universal life a Modified Endowment Contract variable life