,MI Life Producer Final Exam QUESTIONS
AND ANSWERS 100% CORRECT!
Jane works for a company that allows employee contributions under a 401(k) plan.
When will Jane become fully vested in her plan contributions? - ANSWER
immediately//While employer contributions to a qualified plan can be subject to a vesting
schedule, participants are always fully vested in their own contributions.
Agents must act in the best interests of applicants and insureds. What does this require
them to do? - ANSWER give all important information about a proposed policy//Agents
must act in the applicant's or insured's best interests at all times. This means that
agents must give all important information about a proposed policy. Also, they cannot
misrepresent the terms or conditions of a proposed policy.
What does a viatical settlement allow? - ANSWER It allows a chronically or terminally ill
insured to gain a sum of money that is needed to pay medical expenses or to enhance
the quality of life.//A viatical settlement allows a chronically or terminally ill insured to
gain a sum of money that might be needed to pay medical expenses or to enhance
quality of life.
If an employer/employee group offers group life insurance on a contributory basis, what
percentage of the group must enroll? - ANSWER At least 75 percent of the group must
enroll in the plan//If an employer/employee group life insurance plan is contributory, 75
percent of the group must enroll in the plan. If the plan is non-contributory, 100 percent
of the group must enroll.
Which of the following is NOT a life insurance premium? - ANSWER competitors'
rates//Actuaries base life insurance premiums on three basic factors: mortality (a
charge), interest (a credit), and expenses (a charge).
In calculating their mortality charges, life insurers today generally use: - ANSWER the
2001 CSO table//The mortality factor is drawn from mortality statistics compiled by the
National Association of Insurance Commissioners (NAIC) into a set of rates called the
Commissioners Standard Ordinary (CSO) table. Policies issued since 2009 are required
to base their mortality charges on the 2001 CSO table.
All of the following are standard life insurance policy nonforfeiture options EXCEPT: -
ANSWER accumulate at interest option//This is a policy dividend option in which
,declared dividends are left with the insurer to accumulate interest on the policyowner's
behalf.
Under variable life insurance plans, policy loans can be as high as what percent of the
cash value? - ANSWER 75 to 90 percent//Policy loans under traditional whole life
insurance plans can be as high as 100 percent of the cash value, but with variable life
insurance the maximum loan amount is something less than the full cash value (e.g., 75
to 90 percent of the cash value), less any debt currently outstanding against the policy.
Under which nonforfeiture option does permanent life insurance continue in force with
no further need for premiums? - ANSWER reduced paid-up option//A paid-up policy
under the reduced paid-up option requires no further premiums (nor can any be paid).
The paid-up policy retains a cash value that will continue to grow throughout the life of
the policy. However, it will grow much more slowly than during the period that premiums
were being paid.
Which of the following can be funded with a single premium payment, a series of fixed
premium payments, or flexible premium payments? - ANSWER deferred
annuities//Deferred annuities can be funded with a single premium payment, a series of
fixed premium payments, or with flexible premium payments. Moreover, the owner can
make these payments whenever and in whatever amount he or she wants.
How does the cost of group life insurance generally compare to the cost of individual
life insurance? - ANSWER Group life is less expensive.//Per unit of benefits or
coverage, group life insurance is less expensive than individual life insurance because it
has lower administrative and operational costs.
Which of the following statements about the 'accumulate at interest' policy dividend
option is correct? - ANSWER The insurer credits a rate of interest to the dividends as
they remain on deposit with the insurer.//The insurer credits a rate of interest to the
dividends as they remain on deposit with the insurer.
When it comes to choosing a financial instrument to fund a qualified retirement
account, which of the following features makes an annuity the most suitable product? -
ANSWER retirement income that is guaranteed for life//All qualified retirement plan
assets enjoy tax-deferred growth and tax-deductible deposits, and many offer a variety
of investment choices, but only a deferred annuity can be converted to an income
stream that is guaranteed for life.
Which of the following most correctly describes the nonforfeiture option(s) available
with universal life insurance? - ANSWER surrender the policy for its cash value or stop
, paying premiums and continue coverage as long as the cash value will support
it//Universal life policies do not contain the standard nonforfeiture options. Instead, the
policyowner can either surrender the policy for its cash value or continue coverage with
no further premium payments, in which case coverage will last for as long as the cash
value is able to support the policy's monthly mortality and expense charge deductions.
James wants to convert his $150,000 traditional IRA to a Roth IRA. What best
describes the tax treatment for the Roth conversion? - ANSWER The converted funds
are taxed, but Roth IRA earnings and distribution will be tax free.//The $150,000 from
the traditional IRA has been deferred so it will be taxed upon conversion. However, as
long as James holds the new Roth IRA for at least five years and is older than 59',
distributions from the Roth IRA will be tax free.
The term used to describe the voluntarily surrender of a known right is: - ANSWER
waiver//Waiver is voluntarily giving up a known right. If an insurer voluntarily gives up a
legal right that it has under an insurance contract, it cannot deny a claim based on a
violation of that right. Estoppel involves giving up a right without intending to do so. A
party surrenders a right that it failed to preserve.
Social Security benefit amounts are most directly based on a worker's: - ANSWER
average indexed monthly earnings//The amount of Social Security OASDI benefits that
a covered worker is entitled to is based on the person's average indexed monthly
earnings, which are the average of a worker's lifetime earnings on which FICA taxes
were imposed.
Actuaries calculate net single premiums based on which of the following? - ANSWER
mortality and interest assumptions//The net premium, which is the insurer's estimated
cost to provide the policy's benefits without accounting for its expenses, uses the factors
of mortality and interest but excludes the expense load factor.
Which of the following statements is true for variable life insurance policies? -
ANSWER The insurer does not guarantee the policy's cash value.//The insurer does not
guarantee amounts invested in separate subaccounts, so the whole value of the policy
is not guaranteed.
Life insurance policies are generally prohibited from including provisions that would do
any of the following EXCEPT: - ANSWER require the policyowner to notify the insurer if
he or she assigns the policy to a third party//The only provision among these options
that could be included in a policy is one requiring the policyowner to notify the insurer if
he or she assigns the policy to a third party. The other provisions are typically prohibited
by state law.
AND ANSWERS 100% CORRECT!
Jane works for a company that allows employee contributions under a 401(k) plan.
When will Jane become fully vested in her plan contributions? - ANSWER
immediately//While employer contributions to a qualified plan can be subject to a vesting
schedule, participants are always fully vested in their own contributions.
Agents must act in the best interests of applicants and insureds. What does this require
them to do? - ANSWER give all important information about a proposed policy//Agents
must act in the applicant's or insured's best interests at all times. This means that
agents must give all important information about a proposed policy. Also, they cannot
misrepresent the terms or conditions of a proposed policy.
What does a viatical settlement allow? - ANSWER It allows a chronically or terminally ill
insured to gain a sum of money that is needed to pay medical expenses or to enhance
the quality of life.//A viatical settlement allows a chronically or terminally ill insured to
gain a sum of money that might be needed to pay medical expenses or to enhance
quality of life.
If an employer/employee group offers group life insurance on a contributory basis, what
percentage of the group must enroll? - ANSWER At least 75 percent of the group must
enroll in the plan//If an employer/employee group life insurance plan is contributory, 75
percent of the group must enroll in the plan. If the plan is non-contributory, 100 percent
of the group must enroll.
Which of the following is NOT a life insurance premium? - ANSWER competitors'
rates//Actuaries base life insurance premiums on three basic factors: mortality (a
charge), interest (a credit), and expenses (a charge).
In calculating their mortality charges, life insurers today generally use: - ANSWER the
2001 CSO table//The mortality factor is drawn from mortality statistics compiled by the
National Association of Insurance Commissioners (NAIC) into a set of rates called the
Commissioners Standard Ordinary (CSO) table. Policies issued since 2009 are required
to base their mortality charges on the 2001 CSO table.
All of the following are standard life insurance policy nonforfeiture options EXCEPT: -
ANSWER accumulate at interest option//This is a policy dividend option in which
,declared dividends are left with the insurer to accumulate interest on the policyowner's
behalf.
Under variable life insurance plans, policy loans can be as high as what percent of the
cash value? - ANSWER 75 to 90 percent//Policy loans under traditional whole life
insurance plans can be as high as 100 percent of the cash value, but with variable life
insurance the maximum loan amount is something less than the full cash value (e.g., 75
to 90 percent of the cash value), less any debt currently outstanding against the policy.
Under which nonforfeiture option does permanent life insurance continue in force with
no further need for premiums? - ANSWER reduced paid-up option//A paid-up policy
under the reduced paid-up option requires no further premiums (nor can any be paid).
The paid-up policy retains a cash value that will continue to grow throughout the life of
the policy. However, it will grow much more slowly than during the period that premiums
were being paid.
Which of the following can be funded with a single premium payment, a series of fixed
premium payments, or flexible premium payments? - ANSWER deferred
annuities//Deferred annuities can be funded with a single premium payment, a series of
fixed premium payments, or with flexible premium payments. Moreover, the owner can
make these payments whenever and in whatever amount he or she wants.
How does the cost of group life insurance generally compare to the cost of individual
life insurance? - ANSWER Group life is less expensive.//Per unit of benefits or
coverage, group life insurance is less expensive than individual life insurance because it
has lower administrative and operational costs.
Which of the following statements about the 'accumulate at interest' policy dividend
option is correct? - ANSWER The insurer credits a rate of interest to the dividends as
they remain on deposit with the insurer.//The insurer credits a rate of interest to the
dividends as they remain on deposit with the insurer.
When it comes to choosing a financial instrument to fund a qualified retirement
account, which of the following features makes an annuity the most suitable product? -
ANSWER retirement income that is guaranteed for life//All qualified retirement plan
assets enjoy tax-deferred growth and tax-deductible deposits, and many offer a variety
of investment choices, but only a deferred annuity can be converted to an income
stream that is guaranteed for life.
Which of the following most correctly describes the nonforfeiture option(s) available
with universal life insurance? - ANSWER surrender the policy for its cash value or stop
, paying premiums and continue coverage as long as the cash value will support
it//Universal life policies do not contain the standard nonforfeiture options. Instead, the
policyowner can either surrender the policy for its cash value or continue coverage with
no further premium payments, in which case coverage will last for as long as the cash
value is able to support the policy's monthly mortality and expense charge deductions.
James wants to convert his $150,000 traditional IRA to a Roth IRA. What best
describes the tax treatment for the Roth conversion? - ANSWER The converted funds
are taxed, but Roth IRA earnings and distribution will be tax free.//The $150,000 from
the traditional IRA has been deferred so it will be taxed upon conversion. However, as
long as James holds the new Roth IRA for at least five years and is older than 59',
distributions from the Roth IRA will be tax free.
The term used to describe the voluntarily surrender of a known right is: - ANSWER
waiver//Waiver is voluntarily giving up a known right. If an insurer voluntarily gives up a
legal right that it has under an insurance contract, it cannot deny a claim based on a
violation of that right. Estoppel involves giving up a right without intending to do so. A
party surrenders a right that it failed to preserve.
Social Security benefit amounts are most directly based on a worker's: - ANSWER
average indexed monthly earnings//The amount of Social Security OASDI benefits that
a covered worker is entitled to is based on the person's average indexed monthly
earnings, which are the average of a worker's lifetime earnings on which FICA taxes
were imposed.
Actuaries calculate net single premiums based on which of the following? - ANSWER
mortality and interest assumptions//The net premium, which is the insurer's estimated
cost to provide the policy's benefits without accounting for its expenses, uses the factors
of mortality and interest but excludes the expense load factor.
Which of the following statements is true for variable life insurance policies? -
ANSWER The insurer does not guarantee the policy's cash value.//The insurer does not
guarantee amounts invested in separate subaccounts, so the whole value of the policy
is not guaranteed.
Life insurance policies are generally prohibited from including provisions that would do
any of the following EXCEPT: - ANSWER require the policyowner to notify the insurer if
he or she assigns the policy to a third party//The only provision among these options
that could be included in a policy is one requiring the policyowner to notify the insurer if
he or she assigns the policy to a third party. The other provisions are typically prohibited
by state law.
