Exam #2 (CH. 8-11) Flashcards

(119 cards)

1
Q

T or F: The longer the retirement life expectancy, the greater the risk that a retiree will exhaust his or her retirement needs.

A

True

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2
Q

T or F: The average life expectancy for a 65-year-old male is approximately 18 years.

A

True

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3
Q

T or F: Defined contribution plans pay a fixed annuity for the life of the annuitant.

A

False

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4
Q

T or F: The four parties to an annuity contract include the annuitant, the owner, the insurance company issuing the contract, and the beneficiary.

A

True

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5
Q

T or F: Deferred annuities are always purchased with one, single, lump sum payment.

A

False

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6
Q

T or F: Annuity benefits are taxed as capital gains.

A

False

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7
Q

T or F: The term for annuity is always over a single life or a joint life.

A

False

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8
Q

T or F: A joint and survivor annuity always continues to pay 100% after the death of the first annuitant.

A

False

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9
Q

T or F: A single life annuity can be combined with a fixed term guarantee.

A

True

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10
Q

T or F: The amount of a life annuity benefit with a guaranteed term will be less than that without a term guarantee.

A

True

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11
Q

T or F: Mortality and expense charges for a variable annuity may exceed one percent.

A

True

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12
Q

T or F: Surrender charges are not used for variable annuities.

A

False

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13
Q

T or F: The annual reset (ratcheting) method is a common index method for equity-indexed annuities.

A

True

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14
Q

T or F: Variable annuities permit the owner to invest in traditional closed-end mutual funds.

A

False

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15
Q

T or F: Variable annuities have many fees and costs associated with them.

A

True

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16
Q

T or F: Fixed annuities, generally have significant cost and fees associated with them.

A

False

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17
Q

T or F: Variable annuities are more complex than fixed annuities.

A

True

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18
Q

T or F: Annuities provide an opportunity to defer income taxation on investment earnings.

A

True

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19
Q

T or F: Advantages of annuities include simplicity, low costs, tax advantages.

A

False

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20
Q

T or F: All deferred annuity contracts or subject to the Medicare surtax tax of 3.8%.

A

False

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21
Q

T or F: A non-qualified annuity is an annuity purchased with pre-tax dollars.

A

False

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22
Q

T or F: The exclusion ratio equals the portion of the payment that is subject to income tax.

A

False

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23
Q

T or F: A single premium deferred annuity purchased with after-tax funds will be subject to the minimum distribution rules.

A

False

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24
Q

T or F: Annuities are considered IRD assets.

A

True

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25
T or F: Annuity contracts can provide a study cash flow to retire, but the retiring must give up ownership of the assets used to purchase the annuity in exchange.
True
26
T or F: Longevity insurance is an immediate annuity.
False
27
T or F: An annuitant cannot sell or transfer the annuity to someone else.
False
28
T or F: Replacement cost is generally higher than actual cash value.
True
29
T or F: In an open perils coverage policy, the burden lies within the insured to prove that the damages were caused by an insured-against event.
False
30
T or F: It is possible to obtain an endorsement for liability insurance against unintentional damage to another’s reputation.
True
31
T or F: Well, you could insure a small sailboat (under 26 feet long) under a homeowners policy, it is wiser to purchase a separate boat owners policy.
True
32
T or F: The three types of insurance most commonly purchased to protect against liability and risks to personal property are: homeowners insurance, automobile insurance, and personal liability umbrella insurance.
True
33
T or F: Section 1 of the homeowners insurance contract covers: the dwelling, other structures, personal property, and loss of use.
True
34
T or F: Both coverage E (personal liability) and coverage F (medical payments to others) pay claims regardless of fault.
False
35
T or F: In a partial loss scenario, an insured could be paid less than the full loss amount due to coinsurance requirements.
True
36
T or F: Coverage of a homeowners policy pays medical expenses relating to bodily injury suffered by someone who lives in the home.
False
37
T or F: A homeowner has two HO policies on the home and suffers a loss, the formula for determining the payout by each insurer is to put the total amount of all insurance as the denominator in each insurer’s policy’s limits in the numerator.
True
38
T or F: The insurer may owe a duty to the mortgage of the home.
True
39
T or F: Generally, the insurer has one year to pay the insured for a loss suffered.
False
40
T or F: Generally, the insurer may cancel the policy at any time by notifying the insured.
False
41
T or F: An automobile owner/operator should only insure against risks to persons inside the vehicle.
False
42
T or F: In a standard PAP, “your covered vehicle” includes a new automobile for no more than the first 30 days of ownership or until the insurer is notified.
True
43
T or F: There may be three separate liability coverage limits.
True
44
T or F: If you drive “your covered vehicle” into Mexico, your PAP coverage is effective.
False
45
T or F: Courts generally use the “prudent man” standard to determine whether one acted with the appropriate amount of care in a given situation.
True
46
T or F: PLUP forms are considered standard forms, and thus it is easy to generalize about PLUP coverage.
False
47
T or F: Only doctors need malpractice insurance.
False
48
T or F: The commercial package policy (CPP) is business property and business liability coverage combined in one policy.
True
49
T or F: A credit report includes information about a person’s income.
False
50
T or F: A credit report includes moving vehicle citations.
False
51
T or F: A credit report can be used to determine the risk of a person filing an automobile insurance claim.
True
52
T or F: A credit report can be used to determine the risk of a person filing a homeowner’s insurance claim.
True
53
T or F: Payment history is the most heavily weighted variable in a FICO score.
True
54
T or F: Opening new lines of credit in a short period of time can have a negative impact on a credit score.
True
55
T or F: Credit for a mix of lenders is considered superior to a single source of credit (e.g. credit card) for credit score purposes.
True
56
T or F: A secured credit card requires only 50% of the card limit as security.
False
57
T or F: An auto loan is one of the easiest loans to obtain.
True
58
T or F: A good credit score will always assure credit approval.
False
59
T or F: Victims of identity theft should act immediately to protect themselves.
True
60
T or F: When a doctor or another “official” asks for your Social Security number, you should generally give it to them.
False
61
T or F: The justice department’s acronym, SCAM stands for sensitive, careful, alert, monitor.
False
62
T or F: Social Security benefits are not payable until an individual reaches full retirement age.
False
63
T or F: Social Security contributions are placed in the following trust funds: OASI, DI, and SMI.
False
64
T or F: “Fully insured” means that a worker has earned a certain number of quarters (generally 40) of coverage under the Social Security system.
True
65
T or F: Social Security benefits can be paid to the dependent parents of a deceased insured worker at age 62.
True
66
T or F: Social Security benefits are based on the average of the three highest paid years for a covered worker.
False
67
T or F: Up to 85% of an individual’s Social Security benefits may be included in their taxable income.
True
68
T or F: Full retirement age for Social Security is decreasing because of the trend of individuals retiring early.
False
69
T or F: Up to 85% of an individual’s Social Security benefits may be included in their taxable income.
True
70
T or F: Once divorced, non-working ex-spouses will not receive Social Security benefits.
False
71
T or F: The maximum family benefit establishes a limit on the benefits that can be received by one family.
True
72
T or F: Delaying benefits to age 70 may be beneficial, even if a person does not live beyond age 80.
True
73
T or F: A worker, who reaches retirement age at age 67, can increase their benefit, without regard to a COLA, by 32% by delaying benefits until age 70.
False
74
T or F: Surviving spouses are entitled to 100% of the deceased worker’s benefits after the worker dies.
True
75
T or F: Medicare Part A generally pays for “places” while Part B pays for “services”.
True
76
T or F: Medicare Part C is optional and provides prescription drug coverage when purchased with Parts A and B.
False
77
T or F: A healthy individual need not enroll in Medicare Part B upon reaching age 65 since enrollment is permitted at any time without an increase in premium.
False
78
T or F: Traditional Medicare coverage includes deductibles, coinsurance payments, and a maximum out-of-pocket provision.
False
79
T or F: In order to obtain supplemental Social Security benefits, the individual must be 62, disabled, or blind.
False
80
T or F: Social Security beneficiaries who are United States citizens may live in most foreign countries without affecting their eligibility for Social Security benefits.
True
81
T or F: Annuities can be used to accumulate wealth and to provide an income stream during retirement.
True
82
T or F: The three main parties to the annuity contract are the annuitant, the beneficiary and the agent.
False
83
T or F: Annuities can be either immediate or deferred.
True
84
T or F: An annuity with a joint term will provide a higher monthly benefit compared to one with a single life term, all else equal.
False
85
T or F: Adding a term certain feature to an annuity with a single life term will cause the benefit payment to decrease.
True
86
T or F: Fixed annuities have a guaranteed minimum rate of return for the life of the contract, called the initial rate.
False
87
T or F: There are several methods used to measure the increase in an equity-indexed annuity, the annual reset method, the high water mark method, and the point to point method.
True
88
T or F: Longevity annuities are subject to the minimum distribution rules.
False
89
T or F: Two of the major disadvantages of annuities are costs and complexity.
True
90
T or F: An insureds personal property will be covered by either the auto policy or the homeowners policy depending on where the property is located at the time of the loss.
False
91
T or F: Donald owns a home with a replacement cost of $300,000. He has $200,000 of property insurance with an 80% coinsurance requirement. Donald suffers a loss of $60,000. The insurance company will pay approximately $50,000 less the deductible.
True
92
T or F: Coverage on a detached structure, such as a garage, is generally insured up to 30 percent of the dwelling.
False
93
T or F: Kyle is a physician who was advised by his financial planner to consider an umbrella policy for added liability protection. To purchase the umbrella policy, Kyle may be required to increase his limits of coverage in the underlying home and auto policies.
True
94
T or F: Under a homeowner's policy, Coverage F pays regardless of fault, while Coverage E pays only when the insured is legally liable.
True
95
T or F: Roger just graduated from law school and was hired by a prestigious law firm. He signed a lease for a new apartment and want to obtain the correct homeowner's insurance policy. He should get an HO-8 policy.
False
96
T or F: One of the duties of an insured after a loss to property is to mitigate further damage to the property.
True
97
T or F: Automobile premiums are dependent on factors such as age of the operator, use of the automobile, and the driving record of the operator.
True
98
T or F: Ryan, who owns a Bentley, has Part A coverage for 100/300/50 on his personal auto policy. This means that Ryan has $100,000 of property damage coverage if his Bentley is damaged in an accident.
False
99
T or F: Comprehensive and collision coverages are mandatory in most states.
False
100
T or F: As a lender, it is better to have an unsecured loan than a secured loan.
False
101
T or F: The FICO score and the VantageScore are calculated differently.
True
102
T or F: Lisa just received a 10 percent raise. This increase will be reflected in her credit score within six months.
False
103
T or F: A credit report is an in-depth report on an individual that compiles credit information from credit card companies, banks, mortgage companies, and other creditors.
True
104
T or F: Having a credit utilization of zero is a positive factor on a person's credit score.
False
105
T or F: A credit score alone will impact whether or not a person acquires credit, and the cost of credit.
False
106
T or F: The most important factor influencing both a person's FICO score and VantageScore is a person's payment history.
False
107
T or F: Cancelling a credit card will increase a person's credit score.
False
108
T or F: Life insurance companies may use credit score to determine premiums for a policy.
True
109
T or F: Jenny decided to purchase a piece of furniture from a company she found online. She has some concern about the company since they have such a low price. She has both a debit card and a credit card. She would be better off by using the debit card to make the purchase.
False
110
T or F: Employees, employers, and self-employed individuals pay Social Security taxes, known as FICA taxes, during their working years.
True
111
T or F: Medicare Part B covers charges for preventative medical care including routine physical examinations.
False
112
T or F: To be eligible for Social Security disability benefits, a worker must have an inability to engage in any kind of substantially gainful work by reason of a physical or mental impairment expected to last at least 12 months or result in death.
True
113
T or F: Social Security retirement benefits may be limited in three different circumstances: 1) early retirement, 2) by the retirement earnings limitations test, and/or 3) taxation of Social Security benefits.
True
114
T or F: Russ elected to begin his Social Security retirement benefit at age 62. His benefit will be permanently reduced for the remainder of his life expectancy.
True
115
T or F: The averaged indexed monthly earnings (AIME) from the most recent 35 years is used to determine the workers primary insurance amount (PIA).
False
116
T or F: Misti has reached her full retirement age (FRA) during the current year. She is currently insured and therefore she is eligible for Social Security retirement benefits.
False
117
T or F: Leo earned $6,000 working part-time duing the summer of his junior year of high school. Leo earned two quarters of coverage for Social Security since his summer job was performed during two different calendar quarters.
False
118
T or F: Lauren Pauley, a single taxpayer, has earnings as an employee of $264,800 for the current tax year. She will be required to pay FICA taxes for $10,534.05 on the first $137,700 and $1,842.95 on the remaining $127,100 of her earnings. She will also owe $583.20 in additional Medicare tax due to income in excess of the threshold for single filers.
False
119
T or F: There are three different tax rates for Medicare that could apply depending on a person's income.
True