COLORADO LIFE QUESTIONS AND ANSWERS
Which of the following is INCORRECT concerning a noncontributory group plan?
a) The employees receive individual policies.
b) They help to reduce adverse selection against the insurer.
c) They require 100% employee participation.
d) The employer pays 100% of the premiums. - Answers - a) The employees receive
individual policies.
The following is CORRECT concerning a ___
- They help to reduce adverse selection against the insurer.
- They require 100% employee participation.
- The employer pays 100% of the premiums. - Answers - noncontributory group plan
The policyowner of an adjustable life policy wants to increase the death benefit. Which
of the following statements is correct regarding this change?
a) The death benefit can be increased only by exchanging the existing policy for a new
one.
b) The death benefit can be increased by providing evidence of insurability.
c) The death benefit cannot be increased.
d) The death benefit can be increased only when the policy has developed a cash
value. - Answers - b) The death benefit can be increased by providing evidence of
insurability.
A corporation is the owner and beneficiary of the key person life policy. If the corporation
collects the policy benefit, then
a) IRS has no jurisdiction.
b) The benefit is received as taxable income.
c) The benefit is received tax free.
d) The benefit is subject to the exclusionary rule. - Answers - c) The benefit is received
tax free.
Which of the following statements is TRUE concerning irrevocable beneficiaries?
a) They can be changed only with the written consent of that beneficiary.
b) They may be changed at any time.
c) They can never be changed.
d) They may be changed only on the anniversary date of the policy. - Answers - a) They
can be changed only with the written consent of that beneficiary.
Under an employer-sponsored group plan, if the insurance on a person covered under
the policy ceases because of termination of employment, which of the following is true?
a) The certificate owner has no further rights for coverage.
b) The certificate owner is entitled to convert coverage to an individual policy without
evidence of insurability.
c) The group sponsor is entitled to policy's cash value.
,d) The insurer has the right to require evidence of insurability during the conversion
period. - Answers - b) The certificate owner is entitled to convert coverage to an
individual policy without evidence of insurability.
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity,
and now wants to select the benefit option that will pay the largest monthly amount for
as long as she lives. As her agent, you should recommend
a) Installment refund.
b) Joint and survivor.
c) Straight life.
d) Life income with period certain. - Answers - c) Straight life.
If a company has a Simplified Employee Pension plan, what type of plan is it?
a) A qualified plan for a small business
b) The same as a 401(k) plan
c) The same as an IRA, with the same contribution limits
d) An undefined contribution plan for large businesses - Answers - a) A qualified plan for
a small business
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA
within 60 days. Which of the following is true?
a) No taxes are due since the plan participant is over age 59 1/2.
b) There is a 10% early withdrawal penalty.
c) The amount distributed is subject to ordinary income tax.
d) The amount of the distribution is reduced by the amount of a 20% withholding tax. -
Answers - d) The amount of the distribution is reduced by the amount of a 20%
withholding tax.
Under what circumstance will the proceeds payable under an employee's group life be
taken to pay to a creditor of the employee?
a) When the proceeds are paid to the employee's estate
b) When the proceeds are paid to the employee
c) When the creditor is named as the beneficiary of the proceeds by the insured
employee
d) When no other person or entity is named as beneficiary of the proceeds - Answers -
c) When the creditor is named as the beneficiary of the proceeds by the insured
employee
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000
straight life annuity. He was also the insured under a $50,000 paid-up whole life policy
that named his wife as primary beneficiary. Considering both contracts, how much will
the annuitant's spouse receive in benefits?
a) $50,000
b) $62,500
c) $75,000
d) Nothing - Answers - a) $50,000
, An insured has had a life insurance policy that he purchased 3 years ago when he was
40 years old. He is killed in an automobile accident, and it is discovered that he is
actually 45 years old, and not 43, as stated on the application. What will the company
do?
a) Pay a reduced death benefit
b) Pay the full death benefit
c) Pay nothing; there was a misrepresentation on the application
d) Pay the full death benefit and refund excess premium - Answers - a) Pay a reduced
death benefit
What is the other term for the cash payment settlement option?
a) Proceeds
b) Lump sum
c) Principal amount
d) Face amount - Answers - b) Lump sum
A policyowner who is also the insured wants to name her husband as the beneficiary of
her life policy. She also wishes to retain all of the rights of ownership. The policyowner
should have her husband named as the
a) Contingent beneficiary.
b) Irrevocable beneficiary.
c) Revocable beneficiary.
d) Secondary beneficiary. - Answers - c) Revocable beneficiary.
Which of the following best describes fixed-period settlement option?
a) Only the principal amount will be paid out within a specified period of time.
b) The death benefit must be paid out in a lump sum within a certain time period.
c) Income is guaranteed for the life of the beneficiary.
d) Both the principal and interest will be liquidated over a selected period of time. -
Answers - d) Both the principal and interest will be liquidated over a selected period of
time.
Which of the following best describes what the annuity period is?
a) The period of time from the effective date of the contract to the date of its termination
b) The period of time during which accumulated money is converted into income
payments
c) The period of time from the accumulation period to the annuitization period
d) The period of time during which money is accumulated in an annuity - Answers - b)
The period of time during which accumulated money is converted into income payments
All of the following are true of an annuity owner EXCEPT
a) The owner is the party who may surrender the annuity.
b) The owner must be the party to receive benefits.
c) The owner pays the premiums on the annuity.
Which of the following is INCORRECT concerning a noncontributory group plan?
a) The employees receive individual policies.
b) They help to reduce adverse selection against the insurer.
c) They require 100% employee participation.
d) The employer pays 100% of the premiums. - Answers - a) The employees receive
individual policies.
The following is CORRECT concerning a ___
- They help to reduce adverse selection against the insurer.
- They require 100% employee participation.
- The employer pays 100% of the premiums. - Answers - noncontributory group plan
The policyowner of an adjustable life policy wants to increase the death benefit. Which
of the following statements is correct regarding this change?
a) The death benefit can be increased only by exchanging the existing policy for a new
one.
b) The death benefit can be increased by providing evidence of insurability.
c) The death benefit cannot be increased.
d) The death benefit can be increased only when the policy has developed a cash
value. - Answers - b) The death benefit can be increased by providing evidence of
insurability.
A corporation is the owner and beneficiary of the key person life policy. If the corporation
collects the policy benefit, then
a) IRS has no jurisdiction.
b) The benefit is received as taxable income.
c) The benefit is received tax free.
d) The benefit is subject to the exclusionary rule. - Answers - c) The benefit is received
tax free.
Which of the following statements is TRUE concerning irrevocable beneficiaries?
a) They can be changed only with the written consent of that beneficiary.
b) They may be changed at any time.
c) They can never be changed.
d) They may be changed only on the anniversary date of the policy. - Answers - a) They
can be changed only with the written consent of that beneficiary.
Under an employer-sponsored group plan, if the insurance on a person covered under
the policy ceases because of termination of employment, which of the following is true?
a) The certificate owner has no further rights for coverage.
b) The certificate owner is entitled to convert coverage to an individual policy without
evidence of insurability.
c) The group sponsor is entitled to policy's cash value.
,d) The insurer has the right to require evidence of insurability during the conversion
period. - Answers - b) The certificate owner is entitled to convert coverage to an
individual policy without evidence of insurability.
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity,
and now wants to select the benefit option that will pay the largest monthly amount for
as long as she lives. As her agent, you should recommend
a) Installment refund.
b) Joint and survivor.
c) Straight life.
d) Life income with period certain. - Answers - c) Straight life.
If a company has a Simplified Employee Pension plan, what type of plan is it?
a) A qualified plan for a small business
b) The same as a 401(k) plan
c) The same as an IRA, with the same contribution limits
d) An undefined contribution plan for large businesses - Answers - a) A qualified plan for
a small business
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA
within 60 days. Which of the following is true?
a) No taxes are due since the plan participant is over age 59 1/2.
b) There is a 10% early withdrawal penalty.
c) The amount distributed is subject to ordinary income tax.
d) The amount of the distribution is reduced by the amount of a 20% withholding tax. -
Answers - d) The amount of the distribution is reduced by the amount of a 20%
withholding tax.
Under what circumstance will the proceeds payable under an employee's group life be
taken to pay to a creditor of the employee?
a) When the proceeds are paid to the employee's estate
b) When the proceeds are paid to the employee
c) When the creditor is named as the beneficiary of the proceeds by the insured
employee
d) When no other person or entity is named as beneficiary of the proceeds - Answers -
c) When the creditor is named as the beneficiary of the proceeds by the insured
employee
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000
straight life annuity. He was also the insured under a $50,000 paid-up whole life policy
that named his wife as primary beneficiary. Considering both contracts, how much will
the annuitant's spouse receive in benefits?
a) $50,000
b) $62,500
c) $75,000
d) Nothing - Answers - a) $50,000
, An insured has had a life insurance policy that he purchased 3 years ago when he was
40 years old. He is killed in an automobile accident, and it is discovered that he is
actually 45 years old, and not 43, as stated on the application. What will the company
do?
a) Pay a reduced death benefit
b) Pay the full death benefit
c) Pay nothing; there was a misrepresentation on the application
d) Pay the full death benefit and refund excess premium - Answers - a) Pay a reduced
death benefit
What is the other term for the cash payment settlement option?
a) Proceeds
b) Lump sum
c) Principal amount
d) Face amount - Answers - b) Lump sum
A policyowner who is also the insured wants to name her husband as the beneficiary of
her life policy. She also wishes to retain all of the rights of ownership. The policyowner
should have her husband named as the
a) Contingent beneficiary.
b) Irrevocable beneficiary.
c) Revocable beneficiary.
d) Secondary beneficiary. - Answers - c) Revocable beneficiary.
Which of the following best describes fixed-period settlement option?
a) Only the principal amount will be paid out within a specified period of time.
b) The death benefit must be paid out in a lump sum within a certain time period.
c) Income is guaranteed for the life of the beneficiary.
d) Both the principal and interest will be liquidated over a selected period of time. -
Answers - d) Both the principal and interest will be liquidated over a selected period of
time.
Which of the following best describes what the annuity period is?
a) The period of time from the effective date of the contract to the date of its termination
b) The period of time during which accumulated money is converted into income
payments
c) The period of time from the accumulation period to the annuitization period
d) The period of time during which money is accumulated in an annuity - Answers - b)
The period of time during which accumulated money is converted into income payments
All of the following are true of an annuity owner EXCEPT
a) The owner is the party who may surrender the annuity.
b) The owner must be the party to receive benefits.
c) The owner pays the premiums on the annuity.
