NC LIFE INSURANCE EXAM
PREP
An employee requested that the balance of her 401(k) account be sent
directly to her in one lump sum. Upon receipt of the distribution, she
immediately has the funds rolled over into an IRA. What is the tax
consequence of the distribution sent to this employee? - ANSWERS-
A participant must complete a rollover to another qualified plan
within 60 days or the distribution is considered a nonqualified
distribution and is subject to taxes and penalties. A plan sponsor must
withhold 20% of the distribution for federal taxes on a rollover. Once
the rollover takes place to the new custodian, the remainder of the
distribution is released.
What percent of personal life insurance premiums is usually
deductible for federal income tax purposes? - ANSWERS-0%
N purchases an annuity by making payments in an amount no less
than $100 quarterly. This describes which of the following annuities?
- ANSWERS-Flexible Installment Deferred
Which provision is not a requirement in a group life policy? -
ANSWERS-Accidental
The rules and regulations of the Life and Health Insurance Guaranty
Association in NC apply to - ANSWERS-Life and Health policies
issued by companies authorized in NC
,K is the insured and P is the sole beneficiary on a life insurance
policy. Both are involved in a fatal accident where K dies before P.
Under the Common Disaster provision, which of these statements is
true? - ANSWERS-Proceeds will be paid to P's estate
What action should a producer take if the initial premium is NOT
submitted with the application? - ANSWERS-Forward the application
to the insurer without the initial premium
A Limited-Pay Life policy has - ANSWERS-Premium payments
limited to a specified number of years
Which of these statements is INCORRECT regarding the federal
income tax treatment of life insurance? - ANSWERS-Entire cash
surrender value is taxable
D is the policyowner and insured for a $50,000 life insurance policy.
The beneficiary is D's wife. D and his wife divorced and D remarries,
transferring ownership of his policy to his new wife. If D dies without
making any further changes, to whom will the policy proceeds be paid
to? - ANSWERS-Ex-wife
What does the insuring agreement in a life insurance contract
establish? - ANSWERS-An insurer's basic promise
,Which of the following factors affect the amount of monthly disability
benefits payable under social security? - ANSWERS-The amount of
the benefits available from other sources
A warranty - ANSWERS-Is a statement guaranteed to be true
What does a 401(k) plan generally provide its participants? -
ANSWERS-Salary-deferral contributions
When does a Guaranteed Insurability Rider allow the insured to buy
additional coverage? - ANSWERS-At future dates specified in the
contract without evidence of insurability required
All of the following statements are true regarding a policy's grace
period EXCEPT - ANSWERS-Past due premiums are waived
Variable Whole Life insurance can be described as - ANSWERS-Both
an insurance and securities product
Every insurance agent or broke MUST maintain all records, books,
and documents for insurance transactions for a period of not less than
- ANSWERS-5 years
Which of the following statements is CORRECT regarding the tax
treatment of a lump-sum payment paid to a life insurance policy's
primary beneficiary? - ANSWERS-All proceeds are income tax free
in the year they are received
, The type of annuity that can be purchased with one monetary deposit
is called a(n) - ANSWERS-Immediate annuity
N is covered by a Term Life policy and does not make the required
premium payment which was due August 1. N dies September 15.
What action will the insurer take? - ANSWERS-Claim will be denied;
the insurance company will deny the claim, as the policy would have
lapsed due to nonpayment by September 15th.
Which of the following statements is CORRECT about an agent who
is taking an insurance application? - ANSWERS-The agent should
have the applicant initial any changes made on the application
Post-tax dollars contributions are found in - ANSWERS-Roth IRA
investments; No income tax deductions can be taken for contributions
made to a Roth, but the earnings on those contributions are entirely
tax-free when they are withdrawn
What kind of insurance policy supplies an income stream over a set
period of time that starts when the insured dies? - ANSWERS-Family
maintenance policy
A level premium indicates - ANSWERS-The premium is fixed for the
entire duration of the contract
Additional coverage can be added to a Whole Life policy by adding -
ANSWERS-Decreasing term rider
PREP
An employee requested that the balance of her 401(k) account be sent
directly to her in one lump sum. Upon receipt of the distribution, she
immediately has the funds rolled over into an IRA. What is the tax
consequence of the distribution sent to this employee? - ANSWERS-
A participant must complete a rollover to another qualified plan
within 60 days or the distribution is considered a nonqualified
distribution and is subject to taxes and penalties. A plan sponsor must
withhold 20% of the distribution for federal taxes on a rollover. Once
the rollover takes place to the new custodian, the remainder of the
distribution is released.
What percent of personal life insurance premiums is usually
deductible for federal income tax purposes? - ANSWERS-0%
N purchases an annuity by making payments in an amount no less
than $100 quarterly. This describes which of the following annuities?
- ANSWERS-Flexible Installment Deferred
Which provision is not a requirement in a group life policy? -
ANSWERS-Accidental
The rules and regulations of the Life and Health Insurance Guaranty
Association in NC apply to - ANSWERS-Life and Health policies
issued by companies authorized in NC
,K is the insured and P is the sole beneficiary on a life insurance
policy. Both are involved in a fatal accident where K dies before P.
Under the Common Disaster provision, which of these statements is
true? - ANSWERS-Proceeds will be paid to P's estate
What action should a producer take if the initial premium is NOT
submitted with the application? - ANSWERS-Forward the application
to the insurer without the initial premium
A Limited-Pay Life policy has - ANSWERS-Premium payments
limited to a specified number of years
Which of these statements is INCORRECT regarding the federal
income tax treatment of life insurance? - ANSWERS-Entire cash
surrender value is taxable
D is the policyowner and insured for a $50,000 life insurance policy.
The beneficiary is D's wife. D and his wife divorced and D remarries,
transferring ownership of his policy to his new wife. If D dies without
making any further changes, to whom will the policy proceeds be paid
to? - ANSWERS-Ex-wife
What does the insuring agreement in a life insurance contract
establish? - ANSWERS-An insurer's basic promise
,Which of the following factors affect the amount of monthly disability
benefits payable under social security? - ANSWERS-The amount of
the benefits available from other sources
A warranty - ANSWERS-Is a statement guaranteed to be true
What does a 401(k) plan generally provide its participants? -
ANSWERS-Salary-deferral contributions
When does a Guaranteed Insurability Rider allow the insured to buy
additional coverage? - ANSWERS-At future dates specified in the
contract without evidence of insurability required
All of the following statements are true regarding a policy's grace
period EXCEPT - ANSWERS-Past due premiums are waived
Variable Whole Life insurance can be described as - ANSWERS-Both
an insurance and securities product
Every insurance agent or broke MUST maintain all records, books,
and documents for insurance transactions for a period of not less than
- ANSWERS-5 years
Which of the following statements is CORRECT regarding the tax
treatment of a lump-sum payment paid to a life insurance policy's
primary beneficiary? - ANSWERS-All proceeds are income tax free
in the year they are received
, The type of annuity that can be purchased with one monetary deposit
is called a(n) - ANSWERS-Immediate annuity
N is covered by a Term Life policy and does not make the required
premium payment which was due August 1. N dies September 15.
What action will the insurer take? - ANSWERS-Claim will be denied;
the insurance company will deny the claim, as the policy would have
lapsed due to nonpayment by September 15th.
Which of the following statements is CORRECT about an agent who
is taking an insurance application? - ANSWERS-The agent should
have the applicant initial any changes made on the application
Post-tax dollars contributions are found in - ANSWERS-Roth IRA
investments; No income tax deductions can be taken for contributions
made to a Roth, but the earnings on those contributions are entirely
tax-free when they are withdrawn
What kind of insurance policy supplies an income stream over a set
period of time that starts when the insured dies? - ANSWERS-Family
maintenance policy
A level premium indicates - ANSWERS-The premium is fixed for the
entire duration of the contract
Additional coverage can be added to a Whole Life policy by adding -
ANSWERS-Decreasing term rider
