Retirement And Other Insurance Concepts

Question 1

What are the consequences of withdrawing funds from a traditional IRA prior to the age 59 1/2

Answer 1

10% penalty

Question 2

What are the characteristics of the group that underwrites will consider before issuing a group life policy

Answer 2

Groups purpose, size, financial strength and turn over

Question 3

Who qualifies for tax-sheltered annuities, or 403(b) plans?

Answer 3

Employees of nonprofit organizations and employees of public school systems

Question 4

What does liquidity mean in a life insurance policy?

Answer 4

Available cash value

Question 5

What is the name for an overfund life insurance policy?

Answer 5

Modified Endowment Contract (MEC)

Question 6

In what form of payment must the contributions to a traditional IRA be made?

Answer 6

In cash

Question 7

SIMPLE plans are available to groups of how many employees?

Answer 7

No more than 100

Question 8

What are the personal uses of life insurance?

Answer 8

Survivor protection, estate creation and conservation, cash accumulation and liquidity

Question 9

What is the main purpose of the 7-pay test?

Answer 9

Determine if a life policy is a MEC

Question 10

What are some examples of qualified plans?

Answer 10

IRA, 401(k), HR10 (Keogh), SEP, SIMPLE

Question 11

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

Answer 11

Interest only

Question 12

What is the primary purpose of a 401(k) plan?

Answer 12

Retirement income

Question 13

What are the most common types of business life insurance?

Answer 13

Key person, buy-sell agreements and executive bonuses arrangements

Question 14

What is the main advantage of converting from group life insurance to individual coverage?

Answer 14

Evidence of insurability is not required

Question 14

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?

Answer 14

Death benefits are generally not subject to income taxes

Question 15

What type of policy is typically issued without proof of insurability from the insured?

Answer 15

Group policy

Question 16

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

Answer 16

Whole life

Question 17

Who would be considered a third-party owner?

Answer 17

Individual or an entity who is not the insured

Question 18

Group life insurance policies are written as what type of insurance?

Answer 18

Annually renewable term

Question 19

When planning for survivor protection in life insurance, what needs to be considered?

Answer 19

The insured’s current assets, liabilities and survivors needs

Question 20

What is required to qualify an individual to contribute to a traditional IRA?

Answer 20

Earned income

Question 21

For a retirement plan to be qualified, it must be designated for whose benefit?

Answer 21

Employees

Question 22

If a retirement plan qualified, what does that mean?

Answer 22

The plan has favorable tax treatment

Question 22

What type of policy issues certificates of insurance to the insureds?

Answer 22

Group policy

Question 23

Who may contribute to an HR-10 plan?

Answer 23

Self-employed individual

Question 24

What qualified plan is suitable for the self-employed?

Answer 24

HR-10 or Keogh

Question 24

Is the death benefit of a life insurance policy taxed to the beneficiary if its received as a lump sum?

Answer 24

No, lump-sum benefits are received tax fee

Question 25

Who owns a group life insurance contracts?

Answer 25

Employer

Question 26

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

Answer 26

Only the portion in excess of the premium paid

Question 27

In qualified plans, are employer contributions taxed as income to the employees?

Answer 27

No, employer contributions are not taxed as income to the employees

Question 28

What are the three types of social securities benefits

Answer 28

Retirement, disability and survivors

Question 28

What is the penalty for excessive contributions to a traditional IRA?

Answer 28

6%

Question 29

Life insurance may be used to pay state insurance inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

Answer 29

Estate conservation

Question 30

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Answer 30

Cash value growth is tax deferred

Question 31

Why are dividends in life insurance policies not taxable?

Answer 31

Dividends are not considered income for tax purposes; they are a return of unused premium