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Under a traditional IRA, interest is taxed: Only if withdrawn prior to age 59 1/2 According to the capital gains rate Upon distribution During the accumulation phase - CORRECT ANSWERS>Upon distribution Which of these statements concerning Traditional IRAs is CORRECT? Earnings are not taxable when withdrawn Earnings are taxable when withdrawn Contribution are never tax deductible Contributions are always made by the employer - CORRECT ANSWER>>Earnings are taxable when withdrawn Which of these describes the result of a modified endowment contract that failed to meet the seven- pay test? Policy loans are disallowed The premium payments will be tax deductible Pre- death distributions are typically taxable Withdrawals will be prohibited - CORRECT ANSWERS>Pre- death distributions are typically taxable In order for a contract to be valid, it must be filled with the state be signing and witnessed by an attorney be in writing contain offer and acceptance - CORRECT ANSWER>>Contain RE “riance Which of the following actions is by a producer who is replacing an existing life insurance policy? Keep replacement records on file for at least 10 years Notify the existing insurer of the proposed replacement Submit to the replacing insurer a list of the policies to be replaced Risk reduction Risk Transference Risk avoidance Risk retention - CORRECT ANSWER®=SRisk avoidance A type of group that has a constitution and has been organized for purposes other than obtaining insurance is called a(n) employer group employee group association or labor group multiple coalition - CORRECT ANSWER=Sa8sociation or labor group Which of the following is NOT a federal requirement of a qualified plan? Must benefit a broad cross-section of employees Employee must be able to make unlimited contributions Vesting schedule must be defined Employer establishes the plan - CORRECT ANSWERS>Employee must be able to make unlimited contributions The acceptance of a credit life application requires the submission of a certificate of insurance to the insured within days. 10 20 30 40 - CORRECTANSWER>>30 What does the Group Life underwriting risk selection process help protect insurance companies from? Risk aversion Natural selection Adverse selection Risk Management - CORRECT ANSWER>>Adverse Selection A guaranteed issue insurance policy has no initial premium requirement In Michigan, legal action may be taken against an insurer for up to ____ Years for failing to pay a life insurance claim after proof of loss was submitted NO F - CORRECT ANSWER>>6 Level premium permanent insurance accumulates a reserve that will eventually equal the face amount of the policy pay a dividend to the policyowner require the policyowner to make periodic withdrawals become larger than the face amount - CORRECT ANSWER$>equal the face amount of the policy Under a life insurance policy, what does the insuring clause state? The agents obligation to provide the proper amount of coverage The insurers obligation to return all premiums upon an approved death claim The Insurers obligation to pay a death benefit upon an approved death claim The agents obligation to pay a death benefit upon an approved death claim - CORRECT Insurers obligation to pay a death benefit upon an approved death claim Term insurance is appropriate for someone who seeks living benefits for themselves seeks a policy that builds cash value seeks temporary protection and lower premiums seeks permanent protection and higher premiums - CORRECT ANSWER>>seeks temporary protection and lower premiums Bob and Tom start a business. Since each partner contributes an important element to the success of the business, they decide to take life insurance policies out on each other, and name each other as beneficiaries. Eventually, they retire and dissolve the business. Bob dies 12 months later. The policies continue in force with no change. Both partners are still married at the time of Bob's death. In this situation, who will receive Bob's policy proceeds? Toms estate Bobs estate Bobs spouse Tom - CORRECTANSWER>>Tom U.S. Census Average mortality incidents Experience of morbidity - CORRECT ANSWER®>=Law of large numbers Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because the MEC has tax deductible premiums the MEC is considered an illegal product the MEC tends to be an investment vehicle the MEC does not accumulate cash value - CORRECT ANSWER=>>the MEC tends to be an investment vehicle Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this? Modified Endowment Contract Current assumptive whole life Credit life insurance Equity index whole life - CORRECT ANSWERSSEquity index whole life A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability is called a(n) guaranteed term rider guaranteed insurability rider accelerated benefit rider cost of living rider - CORRECT ANSWER=SQ@Uaranteed insurability rider Which type of policy combines the flexibility of a universal life policy with investment choices Adjustable universal life policy Flexible universal life policy Variable universal life policy Modified universal life policy - CORRECT ANSWERS> Variable universal life policy Which of the following is an annuity that is linked to a market related index? Market related annuity Equity indexed annuity Deferred risk annuity All of these are valid policy dividend options for a life insurance policyowner EXCEPT Cash outlay to the policy owner accumulate without interest reduction in policy premium buy additional insurance coverage - CORRECT ANSWER$>accumulate without interest The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority? discreet apparent implied express - CORRECTIANSWERSSimplied The period in which there are no Social Security benefits for the surviving spouse is called the blackout period elimination period ineligible period dependency period - CORRECT ANSWER=SBlackout period All of the following statements correctly describe the purpose of social security EXCEPT It provides a source of meaningful standard of living during retirement It provides basic protection against financial problems accompanying death, disability and retirement It augments a sound personal insurance plan It provides retirement and survivor benefits to a worker and the workers family - CORRECT\ANSWER>slt providesta source of meaningful standard of living during retirement All of the following are characteristics of a Group Life Insurance Plan EXCEPT Group underwriting Master Contract Individual Underwriting Probationary period - CORRECT ANSWERS=Sindividual All of these are common exclusions to a life insurance policy EXCEPT accidental death military service aviation Hazardous occupations - CORRECT ANSWER$>accidental death What is the automatic continuance of insurance coverage referred to as? Renewal Reinstatement resumption renovation - CORRECT ANSWER=SRenewal A nonparticipating company is sometimes called a(n) alien insurer mutual insurer reinsurer stock insurer - CORRECT ANSWER>>Stock insurer Insurance companies determine risk exposure by which of the following? Insurable interest insurance exchanges law of large numbers and risk pooling population table data - CORRECT ANSWER>>law of large numbers and risk pooling The act of using misrepresentation to induce an insured person to terminate an existing policy and purchase a new policy is referred to as twisting subrogation defamation intimidation - CORRECT ANSWER=STwisting Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true? The policy may be paid up early by using accumulated cash values Which of the following is considered to be an act of misrepresentation? Sharing commissions with other licensed producers Replacing an existing policy with a new one Giving back part of a producers commission as an incentive for a sale Falsifying the terms, benefits, advantages, or conditions of an insurance policy - OR the terms, benefits, advantages, or conditions of an insurance policy A life insurance policy that is subject to a contract interest rate is referred to as adjustable life group life term life universal life - CORRECT ANSWER=SUniversal life What happens to the coverage under a children's term rider when that child reaches a certain specified age? Coverage decreases automatically Coverage increases automatically Coverage remains as long as proof of insurability is provided Coverage is eliminated - CORRECT ANSWERS>Coverage is eliminated Which annuity payout option allows the policyowner to choose a pre-determined number of benefit payments? Period certain straight life installment refund amount certain -{(CORRECTANSWER>>Period certain An annuitant is guaranteed to NOT outlive their benefits with a(n) Survivorship clause Guaranteed lifetime withdrawal benefit period certain provision Guaranteed minimum accumulation benefit - CORRECT ANSWER=>Guaranteed lifetime withdrawal benefit 
