CA LIFE INSURANCE EXAM QUESTIONS WITH COMPLETE
SOLUTION
A key person is typically all of the following, except:
-Not directly involved in sales, production, or service
Key persons are employees whose contributions have a significant impact
on the revenue and profitability of the company, especially in small
businesses. They are typically: part of the management team, more highly
paid, respected by customers, creditors, suppliers, and vendors, and have
direct responsibilities for sales, production, or service.
Which one of the following is not a reason why premium for the
individual policy issued to an insured exercising a group conversion
right is higher than the group life rate previously charged?
-The conversion policy has a higher death benefit
The premium of an individual policy issued due to a group life insurance
plan conversion will be at a higher than normal rate to include the insurer's
guaranteed convertible surcharge because the majority of all conversions
involve persons that would otherwise be uninsurable, because the
conversion policy will be issued at the attained (current) age of the insured,
and the policy will build cash values.
The type of life insurance used to provide funds for a Buy-Sell
Agreement is:
-Any type of life insurance
Any type of life insurance may be used to provide funds for a Buy-Sell
Agreement.
Lorraine's position has been terminated, and she is interested in
converting her group life coverage to an individual policy. In the
process, she will find all of the following to be TRUE, except:
-She will be converting her group term benefit to an individual term benefit
She will be converting her group term life to an individual permanent policy.
,To help protect against experiencing immediate claims, group plans
have a(n) _______ period set up by the group sponsor.
-Probationary
A probationary period is set up to help reduce the chance of facing
immediate claims.
How is the funding for Social Security provided?
-Through FICA taxes that are paid by both employers and employees
Both the employer and employee fund Social Security through paying FICA
taxes. Self-employed persons pay the entire amount.
The premium for optional dependent group insurance can be payable
by:
The employer, the employee or both
Optional dependent coverage may be paid for by the employer, the
employee, or both.
When an insurer wishes to implement changes to a group life policy,
whom must it notify?
The group sponsor
Just as in individual contracts, the owner controls the policy. In this case,
only the plan sponsor has a policy (i.e. the Master Policy). As such, the
insurer must notify the group sponsor of the changes.
There is a conversion period of how many days in which the
employee may, upon termination of eligibility and without evidence of
insurability, convert his/her group life insurance benefit to an
individual permanent policy?
31
There is a conversion period of 31 days in which the employee may, upon
termination of eligibility and without evidence of insurability, convert his/her
group life insurance benefit to an individual permanent policy.
The proceeds from a _________ plan provide the necessary funds to
recruit, hire, and train a replacement employee.
, Key employee
Key employee life insurance plans provide the funds to recruit, hire, and
train a replacement employee.
Which of the following is a disadvantage of being covered under a
group insurance plan?
The group sponsor can elect to discontinue the plan, and the insurance
company can increase the rates it charges
The advantage of an insurance funded buy-sell agreement is:
It is a legally enforceable agreement, which pre-establishes the value of the
business, and provides the funds for an efficient method of transferring the
deceased's business interest
Some of the advantages of having such an agreement: it is legally
enforceable, the value of the business is previously agreed upon, it is an
immediate and automatic method of transferring the deceased's interest
due to readily available funds.
An agreement by an employer to continue a key employee's salary
upon retirement, death or disability as long as the employee
continues employment during the term of the agreement is called a:
Salary continuation plan
An agreement by an employer to continue a key employee's salary upon
retirement, death or disability as long as the employee continues
employment during the term of the agreement is called a salary
continuation plan.
Which of the following is not one of the most common methods of
determining group insurance benefits?
Tax bracket
The most common methods of determining group insurance benefits are
flat benefit (all employees receive the same insurance amounts),
percentage of income (employees receive 100%, 150%, or 200% of their
annual base wage, subject to imputed income), and position in the
company (the employer may establish different benefits for specific classes
SOLUTION
A key person is typically all of the following, except:
-Not directly involved in sales, production, or service
Key persons are employees whose contributions have a significant impact
on the revenue and profitability of the company, especially in small
businesses. They are typically: part of the management team, more highly
paid, respected by customers, creditors, suppliers, and vendors, and have
direct responsibilities for sales, production, or service.
Which one of the following is not a reason why premium for the
individual policy issued to an insured exercising a group conversion
right is higher than the group life rate previously charged?
-The conversion policy has a higher death benefit
The premium of an individual policy issued due to a group life insurance
plan conversion will be at a higher than normal rate to include the insurer's
guaranteed convertible surcharge because the majority of all conversions
involve persons that would otherwise be uninsurable, because the
conversion policy will be issued at the attained (current) age of the insured,
and the policy will build cash values.
The type of life insurance used to provide funds for a Buy-Sell
Agreement is:
-Any type of life insurance
Any type of life insurance may be used to provide funds for a Buy-Sell
Agreement.
Lorraine's position has been terminated, and she is interested in
converting her group life coverage to an individual policy. In the
process, she will find all of the following to be TRUE, except:
-She will be converting her group term benefit to an individual term benefit
She will be converting her group term life to an individual permanent policy.
,To help protect against experiencing immediate claims, group plans
have a(n) _______ period set up by the group sponsor.
-Probationary
A probationary period is set up to help reduce the chance of facing
immediate claims.
How is the funding for Social Security provided?
-Through FICA taxes that are paid by both employers and employees
Both the employer and employee fund Social Security through paying FICA
taxes. Self-employed persons pay the entire amount.
The premium for optional dependent group insurance can be payable
by:
The employer, the employee or both
Optional dependent coverage may be paid for by the employer, the
employee, or both.
When an insurer wishes to implement changes to a group life policy,
whom must it notify?
The group sponsor
Just as in individual contracts, the owner controls the policy. In this case,
only the plan sponsor has a policy (i.e. the Master Policy). As such, the
insurer must notify the group sponsor of the changes.
There is a conversion period of how many days in which the
employee may, upon termination of eligibility and without evidence of
insurability, convert his/her group life insurance benefit to an
individual permanent policy?
31
There is a conversion period of 31 days in which the employee may, upon
termination of eligibility and without evidence of insurability, convert his/her
group life insurance benefit to an individual permanent policy.
The proceeds from a _________ plan provide the necessary funds to
recruit, hire, and train a replacement employee.
, Key employee
Key employee life insurance plans provide the funds to recruit, hire, and
train a replacement employee.
Which of the following is a disadvantage of being covered under a
group insurance plan?
The group sponsor can elect to discontinue the plan, and the insurance
company can increase the rates it charges
The advantage of an insurance funded buy-sell agreement is:
It is a legally enforceable agreement, which pre-establishes the value of the
business, and provides the funds for an efficient method of transferring the
deceased's business interest
Some of the advantages of having such an agreement: it is legally
enforceable, the value of the business is previously agreed upon, it is an
immediate and automatic method of transferring the deceased's interest
due to readily available funds.
An agreement by an employer to continue a key employee's salary
upon retirement, death or disability as long as the employee
continues employment during the term of the agreement is called a:
Salary continuation plan
An agreement by an employer to continue a key employee's salary upon
retirement, death or disability as long as the employee continues
employment during the term of the agreement is called a salary
continuation plan.
Which of the following is not one of the most common methods of
determining group insurance benefits?
Tax bracket
The most common methods of determining group insurance benefits are
flat benefit (all employees receive the same insurance amounts),
percentage of income (employees receive 100%, 150%, or 200% of their
annual base wage, subject to imputed income), and position in the
company (the employer may establish different benefits for specific classes
