Life Insurance Exam - Comprehensive Test Questions
with Solutions
1. what is a change of ownership of life insurance in exchange for compensa- tion to
take advantage of the tax-free status of the policy's death benefits? What type of
assignment is it?: Transfer for value
Because it requires a transfer to a new owner, it is made through an absolute
assignment (a permanent transfer),
2. are transfer for value taxable?: The rule states that the amount of the death
benefit that exceeds the value of consideration and any additional premium paid
will be taxed as ordinary income.
3. The allows an insurer to pay death benefits anyone it deems to be
entitled in the absence of a designated beneficiary.
Next of Kin Clause
Facility of Payment Clause Creditor
Collection Clause
Policy's Settlement Option: Facility of Payment Clause
4. Facility of Payment Clause: A Facility of Payment Clause allows the insurer to pay
the death benefit to a relative or anyone it deems is entitled in the absence of a
designated beneficiary.
5. modified endowment contract: When a contract does not pass the 7-pay test, it is
deemed a MEC.
,It compares premiums paid for the policy during the first 7 years with the net level
premiums that would have been paid on a 7-year pay whole life policy providing th
same death benefit.
single life premium, universal (because flexible premiums)
6. Do the below all sign life insurance application?
Producer
Beneficiary Insured
Policyowner: not beneficiary
7. medicare supplement / medigap: is a private health insurance policy designed to
cover certain costs not covered by Original Medicare (Parts A and B)
Eligibility: You must be enrolled in Medicare Part A and Part B. Medigap policies
are sold by private insurers and can help reduce out-of-pocket costs for those on
Medicare.
8. are allowed as a way to access annuity values without having
to elect a settlement option or surrender the contract.
A
Systematic withdrawals B
Contract waivers C
Loans
,D
Premium deferrals: A
9. J has had individual health and disability income policies for many years. While
intoxicated, J was injured as the driver in a one-car accident. Who covers J's medical
expenses?: J is liable
10.Indexed Annuities
separate account?
upside? downside?: they offer a portion of the potential upside of the index
selected to determine the policy's interest credits, but in no case will the policy
values or benefits go down if the index chosen falls in value.
11.Indexed Annuities:
12.Elimination Period (Waiting Period): the time between an injury or illness and
benefit payments from an insurer
13.what type of account is variable annuity supported by?: seperate
14.Which of the following is incorrect regarding an insurer's responsibility with
cyber regulations in New York?
A
A written statement must be submitted to the Superintendent each year B
A cybersecurity program designed to protect the confidentiality, integrity, and
availability of the covered entity's information systems must be maintained C
Each covered entity must maintain records for 3 years D
, Each covered entity must have documentation available for inspection by the
Superintendent: C - 5 years is the correct #
15.When gathering information about an applicant from third parties, an
insurance company must adhere to the:
A
Truth in Underwriting Regulations B
Medical Information Bureau Rules C
Federal Trade Commission Act (FTCA) D
Fair Credit Reporting Act (FCRA): D
16.does term ever have cash value?: no
17.Whenever an employer pays for an employee's LTC insurance premiums, the
premium is XXX, regardless of whether it is a group or individual policy.
The benefits received by employees are XXX: deductible taxable
(unless they paid for a portion or it is qualified)
18.An employee's share of premiums paid for group health insurance are
deductible only to the extent that all premiums, as well as unreimbursed medical
expenses, exceed 7.5% of their AGI: reminder slide
19.Benefits received under any medical expense and dental plan, regardless of the
premium payer, are not taxable
True or False: true
they are only taxable on LTC
with Solutions
1. what is a change of ownership of life insurance in exchange for compensa- tion to
take advantage of the tax-free status of the policy's death benefits? What type of
assignment is it?: Transfer for value
Because it requires a transfer to a new owner, it is made through an absolute
assignment (a permanent transfer),
2. are transfer for value taxable?: The rule states that the amount of the death
benefit that exceeds the value of consideration and any additional premium paid
will be taxed as ordinary income.
3. The allows an insurer to pay death benefits anyone it deems to be
entitled in the absence of a designated beneficiary.
Next of Kin Clause
Facility of Payment Clause Creditor
Collection Clause
Policy's Settlement Option: Facility of Payment Clause
4. Facility of Payment Clause: A Facility of Payment Clause allows the insurer to pay
the death benefit to a relative or anyone it deems is entitled in the absence of a
designated beneficiary.
5. modified endowment contract: When a contract does not pass the 7-pay test, it is
deemed a MEC.
,It compares premiums paid for the policy during the first 7 years with the net level
premiums that would have been paid on a 7-year pay whole life policy providing th
same death benefit.
single life premium, universal (because flexible premiums)
6. Do the below all sign life insurance application?
Producer
Beneficiary Insured
Policyowner: not beneficiary
7. medicare supplement / medigap: is a private health insurance policy designed to
cover certain costs not covered by Original Medicare (Parts A and B)
Eligibility: You must be enrolled in Medicare Part A and Part B. Medigap policies
are sold by private insurers and can help reduce out-of-pocket costs for those on
Medicare.
8. are allowed as a way to access annuity values without having
to elect a settlement option or surrender the contract.
A
Systematic withdrawals B
Contract waivers C
Loans
,D
Premium deferrals: A
9. J has had individual health and disability income policies for many years. While
intoxicated, J was injured as the driver in a one-car accident. Who covers J's medical
expenses?: J is liable
10.Indexed Annuities
separate account?
upside? downside?: they offer a portion of the potential upside of the index
selected to determine the policy's interest credits, but in no case will the policy
values or benefits go down if the index chosen falls in value.
11.Indexed Annuities:
12.Elimination Period (Waiting Period): the time between an injury or illness and
benefit payments from an insurer
13.what type of account is variable annuity supported by?: seperate
14.Which of the following is incorrect regarding an insurer's responsibility with
cyber regulations in New York?
A
A written statement must be submitted to the Superintendent each year B
A cybersecurity program designed to protect the confidentiality, integrity, and
availability of the covered entity's information systems must be maintained C
Each covered entity must maintain records for 3 years D
, Each covered entity must have documentation available for inspection by the
Superintendent: C - 5 years is the correct #
15.When gathering information about an applicant from third parties, an
insurance company must adhere to the:
A
Truth in Underwriting Regulations B
Medical Information Bureau Rules C
Federal Trade Commission Act (FTCA) D
Fair Credit Reporting Act (FCRA): D
16.does term ever have cash value?: no
17.Whenever an employer pays for an employee's LTC insurance premiums, the
premium is XXX, regardless of whether it is a group or individual policy.
The benefits received by employees are XXX: deductible taxable
(unless they paid for a portion or it is qualified)
18.An employee's share of premiums paid for group health insurance are
deductible only to the extent that all premiums, as well as unreimbursed medical
expenses, exceed 7.5% of their AGI: reminder slide
19.Benefits received under any medical expense and dental plan, regardless of the
premium payer, are not taxable
True or False: true
they are only taxable on LTC
