Arizona Life Insurance Exam: Multiple Choice Questions and Answers, Exams of Advanced Education

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ARIZONA LIFE INSURANCE Exam With

Correct Questions And Answers 2024

a whole life policy that provides a choice of dividend options include the following statement about dividends they accrue at a guaranteed rate they are deferred for one year they are not guaranteed they are guaranteed after the first year - Correct Answer-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 the beneficiary
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 - Correct Answer-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
6. payments fluctuate as annuitant gets older
7. the market value variations of the securities backing it
8. varies according to the insurers investments in its general account - Correct Answer- 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 - Correct Answer-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

1. remain the same 2 decrease but never increase 3 increase but never decrease 4 fluctuate with changes in the cash amount - Correct Answer-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 - Correct Answer-conversion provision when the deferred annuity is surrendered, who must sign the authorization to do so owner annuitant and beneficiary annuitant all parties involved - Correct Answer-owner Which of the following is NOT a valid contract exchange?
2. 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

policy loan values - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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

dividend is issued - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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

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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-receives immediate benefit payments How can an insurance company minimize exposure to loss? Risk concealing Reinsuring risks Reissuance Risk assumption - Correct Answer-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

Annual fees Withdrawal penalty Surrender charges - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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 - Correct Answer-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

Under $50,000 initially, but increases over time - Correct Answer-Under $50, 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 - Correct Answer-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 - Correct Answer-Children of the insured Which of these policies is considered a whole life policy? Credit life Single premium life Renewable life Convertible life - Correct Answer-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 - Correct Answer-variable life How does a continuous premium whole life policy differ from a limited payment whole life policy?

The time period in which premiums will be paid The availability of cash value loans The availability of nonforfeiture options The settlement options - Correct Answer-The time period in which premiums will be paid Which statement is INCORRECT about the interest-only settlement option in a life insurance policy? Interest rate is guaranteed with a minimum rate Interest on proceeds must be paid by the beneficiary Interest is payable to a stated beneficiary Interest must be paid at least annually - Correct Answer-Interest on proceeds must be paid by the beneficiary All of these are considered features of whole life insurance EXCEPT Cash value accumulation Permanent coverage Initial premium is lower than for an equivalent amount of term insurance Policy loans are allowed - Correct Answer-Initial premium is lower than for an equivalent amount of term insurance Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited? Reduced paid-up option Accelerated (living) benefit Return of Premium benefit Extended term option - Correct Answer-Accelerated (living) benefit Who normally pays the premiums for group credit life insurance? Creditor and borrower share the cost equally

A beneficiary collecting the face amount of a life insurance policy Someone who just won a large settlement - Correct Answer-A parent saving for a child's college A life insurance guaranteed insurability rider gives the insured the right, without proving insurability, to purchase life insurance policies on his children as they are born purchase life insurance on a spouse after becoming married purchase additional life insurance at anytime periodically purchase additional insurance - Correct Answer-periodically purchase additional insurance Which of the co-annuitants listed below would receive the largest monthly benefit payments in a joint and 100% survivor annuity? Ages 70 and 72 Ages 60 and 80 Ages 71 and 73 Ages 69 and 71 - Correct Answer-Ages 71 and 73 How is a collateral assignment used in a life insurance contract? Transfers permanent ownership rights to a creditor Assigns complete ownership rights to a creditor Transfers specific ownership rights to a creditor Assigns ownership rights to the primary beneficiary - Correct Answer-Transfers specific ownership rights to a creditor 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 - Correct Answer- Reduces the amount receivable upon surrender of the contract Which statement regarding the cash value of a whole life insurance policy is correct? Can be borrowed against, starting in the policy's fifth year Cash value accumulation is based on the performance of a separate investment account Available to the policyowner when policy has been surrendered Starts growing with the initial premium - Correct Answer-Available to the policyowner when policy has been surrendered During the liquidation phase of an annuity contract, to whom are the income benefits normally payable to? Trustee Beneficiary Policyowner Annuitant - Correct Answer-Annuitant Which of these statements is NOT true regarding a cash value loan against a life insurance policy? Interest normally accrues on unpaid balances Loan cannot exceed the policy's cash value Policy contract terms dictate the interest rate Interest payments made by policyowner are deductible - Correct Answer-Interest payments made by policyowner are deductible Which of these is NOT considered to be a cost connected with an individual's death? Funeral expense