Arizona Life Insurance Exam | Questions and answers with 100% correct solutions | Graded A+

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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 guarante... ed 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 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 insured`s creditors ✔✔are paid directly to the beneficiary without interference from the insured`s creditorsWhat determines how much an annuitant is paid for a variable annuity 1. 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 daysRick 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 ✔✔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 soowner 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 accurateevidence of insurability is required coverage remains until death of the insured the premium to purchase the coverage comes from the policy`s cash value cash value will continue to grow ✔✔the premium to purchase the coverage comes from the policy`s 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 neededpromptly 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 premiumreview 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 beneficiarytrustee 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 transferredwhat 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 trueage 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 increasedpremiums 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 outautomatic 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 lifedecreasing 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 1/2 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 indexthe 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 rolloveras 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 taxesa 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 taxes20% 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 permittedPremiums 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? [Show More]

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