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& Answers ( Latest 2025 )
A key person is typically all of the following, except: - CORRECT ANSWERS ✔✔-Not directly involved in sales, production, or service Key persons are employees whose contributions have a significant impact on the revenue and profitability of the company, especially in small businesses. They are typically: part of the management team, more highly paid, respected by customers, creditors, suppliers, and vendors, and have direct responsibilities for sales, production, or service. Which one of the following is not a reason why premium for the individual policy issued to an insured exercising a group conversion right is higher than the group life rate previously charged? - CORRECT ANSWERS ✔✔-The conversion policy has a higher death benefit The premium of an individual policy issued due to a group life insurance plan conversion will be at a higher than normal rate to include the insurer's guaranteed convertible surcharge because the majority of all conversions involve persons that would otherwise be uninsurable, because the conversion policy will be issued at the attained (current) age of the insured, and the policy will build cash values.
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The type of life insurance used to provide funds for a Buy-Sell Agreement is: - CORRECT ANSWERS ✔✔-Any type of life insurance Any type of life insurance may be used to provide funds for a Buy- Sell Agreement. Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except: - CORRECT ANSWERS ✔✔-She will be converting her group term benefit to an individual term benefit She will be converting her group term life to an individual permanent policy. To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor. - CORRECT ANSWERS ✔✔-Probationary
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Just as in individual contracts, the owner controls the policy. In this case, only the plan sponsor has a policy (i.e. the Master Policy). As such, the insurer must notify the group sponsor of the changes. There is a conversion period of how many days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy? - CORRECT ANSWERS ✔✔ 31 There is a conversion period of 31 days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy. The proceeds from a _________ plan provide the necessary funds to recruit, hire, and train a replacement employee. - CORRECT ANSWERS ✔✔Key employee
& Answers ( Latest 2025 )
Key employee life insurance plans provide the funds to recruit, hire, and train a replacement employee. Which of the following is a disadvantage of being covered under a group insurance plan? - CORRECT ANSWERS ✔✔The group sponsor can elect to discontinue the plan, and the insurance company can increase the rates it charges The advantage of an insurance funded buy-sell agreement is: - CORRECT ANSWERS ✔✔It is a legally enforceable agreement, which pre-establishes the value of the business, and provides the funds for an efficient method of transferring the deceased's business interest Some of the advantages of having such an agreement: it is legally enforceable, the value of the business is previously agreed upon, it is an immediate and automatic method of transferring the deceased's interest due to readily available funds. An agreement by an employer to continue a key employee's salary upon retirement, death or disability as long as the employee continues employment during the term of the agreement is called a: - CORRECT ANSWERS ✔✔Salary continuation plan
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To be fully insured for Social Security, the requirement is to accumulate 40 credits or 10 years of work paying social security taxes. A maximum of four credits may be earned in one calendar year of employment. Every group policy containing a life insurance benefit must contain a reasonable extension of benefits upon discontinuance of the policy for employees who, while insured under the policy, become: - CORRECT ANSWERS ✔✔Totally disabled Every group policy containing a life insurance benefit must contain a reasonable extension of benefits upon discontinuance of the policy with respect to employees who become totally disabled while insured under the policy and who continue to be totally disabled at the date of discontinuance of the policy. L is no longer eligible for the employer's $50,000 group life insurance plan. L dies 28 days later without sending in the required conversion paperwork. What will their beneficiaries receive? - CORRECT ANSWERS ✔✔50,000, less any premium due
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The conversion period is also a grace period. In the event a terminated or ineligible employee dies during the conversion period, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit. Which of the following meets the criterion for being a natural group for group life insurance purposes? - CORRECT ANSWERS ✔✔The group was formed for a purpose other than for procuring or reducing the cost of insurance To be eligible for a group plan, the group must be a natural group, meaning it was formed for a purpose other than for procuring or reducing the cost of insurance. All of the following regarding credit life are true, except: - CORRECT ANSWERS ✔✔Usually the creditor pays the premium Usually the individual debtor pays the premium.
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Open enrollment periods are offered on an annual basis that allows individuals to enroll without evidence of insurability or to make changes. For those individuals who have health issues, which of the following would be an insurance plan to consider? - CORRECT ANSWERS ✔✔Group If an individual has health issues, then a group insurance plan could be a valuable consideration. It offers the opportunity to obtain coverage without providing evidence of insurability. A(n)__________ plan is when business partners buy life insurance policies on one another. - CORRECT ANSWERS ✔✔Cross Purchase A cross purchase plan calls for the partners to buy life insurance policies on one another. An entity plan has the business entity buy life insurance plans on the business owners.
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In the event a terminated or ineligible employee dies during the conversion period from a group life plan, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit, which means that the conversion period is really: - CORRECT ANSWERS ✔✔Grace period In the event a terminated or ineligible employee dies during the conversion period from a group life plan, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit, which means that the conversion period is really a grace period. In the event a terminated or ineligible employee dies during the conversion period from a group life plan, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit, which means that the conversion period is really: - CORRECT ANSWERS ✔✔Grace period The Social Security blackout period for surviving spouses begins when the youngest child reaches age ______, and ends when the
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Extension of Benefits is the continuation of coverage under a particular benefit provided under a group policy following discontinuance with respect to an employee or dependent who is totally disabled on the date of discontinuance. Generally, life insurance death proceeds are income tax free to the policy beneficiary, except: - CORRECT ANSWERS ✔✔When a transfer of ownership has taken place Life insurance proceeds are generally income tax free except when a transfer of ownership has taken place. The restrictions on the amount of life insurance that can be held in a qualified plan are known as: - CORRECT ANSWERS ✔✔Incidental benefits limitation There are limitations on the types of benefits that may be included in a qualified plan, such as a restriction on the amount of life insurance that can be held, referred to as the 'incidental benefits'
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limitation, which the IRS developed standards, or rules, to determine the allowable limits. If an annuity is annuitized, then the _________ investment is recovered income tax-free over the income benefit payment period. - CORRECT ANSWERS ✔✔After-tax Only the after-tax investment is recovered income tax-free from an annuity that is annuitized. It represents a return of the cost basis. If no beneficiary is living at the time of the insured's death, the benefit will automatically be paid __________. - CORRECT ANSWERS ✔✔Into the insured's estate The policyowner may name the estate as a beneficiary, or by default, if no beneficiary is living at the time of the insured's death, the benefit will automatically be paid into the insured's estate. All of the following statements about Group Life Insurance are true, except: - CORRECT ANSWERS ✔✔Employees receive a tax deduction for employer paid premiums
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Which of the following establishes a cost basis in an annuity? - CORRECT ANSWERS ✔✔After-tax contributions Cost basis is established with any after-tax premiums deposited into the annuity. If a non-qualified variable annuity owned for 15 years is surrendered, what is the income tax consequence? - CORRECT ANSWERS ✔✔Any amount received in excess of its cost basis is taxable as ordinary income The same tax rules apply to both fixed and variable annuities. The funds received in excess of the cost basis are taxable as ordinary income. A qualified pension plan must meet ___________ requirements. - CORRECT ANSWERS ✔✔ERISA A qualified plan must meet the requirements of the Employee Retirement Income Security Act (ERISA).
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If an annuitant withdraws funds from their annuity prior to age 59 1/2 what is the tax consequence? - CORRECT ANSWERS ✔✔Tax and 10% penalty tax on the withdrawal that represents earnings The withdrawal that represents earnings will be taxed along with a 10% tax penalty. Life insurance will be considered 'incidental' to a qualified plan if the insurance amount is not more than ________ times the expected monthly benefit amount. - CORRECT ANSWERS ✔✔ 100 Generally, life insurance will be considered 'incidental' to a qualified plan if no more than 50% of the contributions are used to pay insurance premiums, and the insurance amount is not more than 100 times the expected monthly benefit amount. H has an annuity funded with after-tax contributions. So far, H has placed $10,000 into the policy and it is now worth $25,000. If H
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Qualified pension and profit-sharing plans were created by Congress to help employees accumulate assets for retirement and provide tax advantages for contributions made by employers. The Commissioner of Insurance has some general duties, which include all of the following, except: - CORRECT ANSWERS ✔✔Interpreting and amending state laws relating to insurance While the Commissioner has the responsibility to interpret state insurance laws, they do not have the authority to amend them. Laws are written and amended by the state legislature. A person will be deemed to be transacting insurance when the person advertises on the internet, and does any of the following, except: - CORRECT ANSWERS ✔✔Communicates an invitation to inquire Under the California Insurance Code, a person will be deemed to be transacting insurance when the person advertises on the internet, and provides an insurance premium quote to a California resident, accepts an application for coverage from a California
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resident, or communicates with a California resident regarding one or more terms of an agreement to provide insurance on an insurance policy. All of the following are allowed or true regarding a producer or agent, except: - CORRECT ANSWERS ✔✔As an incentive to close a sale, they may offer discounts of premium to a prospective client Discounts of premium are considered rebates and are prohibited by law. All CA resident insurance licenses renew every _____ years on the last day of the month in which the license was originally issued. - CORRECT ANSWERS ✔✔ 2 Under the California Insurance Code, all licenses renew every 2 years on the last day of the month in which the license was originally issued. Under the California Insurance Code, original (or certified copies) of records must be delivered to the Commissioner within _____
