LIFE INSURANCE PRACTICE- EXAM GUIDE 2025
|MOST COMMON QUESTIONS WITH CORRECTLY
VERIFIED ANSWERS|ALREADY A+
GRADED|GUARANTEED PASS
Section 529 Plans - - state provided
- can be funded by after tax dollars
- can pay prepaid tuition
- All earnings exempt from federal taxes
- If withdrawn for unqualified withdrawl, 10% penalty
Roth IRA - private retirement plan that taxes income before it is saved, but which does
not tax interest on that income when funds are used upon retirement
Distributions don't have to start before 70.5
401(k) plan - Elective deferral plan that allows employee to reduce compensation by a
stated percentage on a tax deductible/ tax differed basis; often the employer matches the
employee contributions
Simplified Employee Pension (SEP) - A qualified plan in which a smaller employer
contributes specified amounts directly into IRA accounts on behalf of eligible employees
403(b) plan - An elective deferral plan for employees of organizations such as school
systems, churches, and hospitals
Keogh Plan - Retirement plan for self-employed individual and their qualified employees
Rollover - Tax free withdrawal of cash or other assets from one retirement program and
its reinvestment in another program. It is not considered income and it is not taxable until a
later withdrawal. Has to be completed in 60 days
Transfer - When amounts of a qualified plan are transferred to another qualified plan
,Employee Retirement Income Security Act (ERISA) - Federal law that increased the
responsibility of pension plan trustees to protect retirees, established certain rights related to
vesting and portability, and created the Pension Benefit Guarantee Corporation
profit-sharing plan - a benefit whereby employees may share in the profits of the
business
Catch-up Contributions - -for those aged 50 or older
-additional $1,000 annually
**Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) - established the catch
up provisions**
Rollover time frame - 60 days
Keogh Plan - A federally-approved, tax-deferred savings program for self-employed
people, allowing them to set money aside for their retirement.
Annuity Period - the payout period of an annuity
Flexible Premium Annuity - allows the owner to vary the premium payments
Deferred Annuity - An annuity that starts sometime in the future.
Variable Annuity - Annuity that has a varying rate of return based on the mutual funds in
which one has invested
Gramm-Leach-Bliley Act - requires financial institutions to ensure the security and
confidentiality of customer data
Certificate of Insurance (COI) - proof that the insured has insurance
Market conduct - refers to the marketing practices of insurers and agents that involve
interaction with insureds, claimants, or consumers
expense loading - the amount needed to pay all expenses, including commissions,
general administrative expenses, state premium taxes, acquisition expenses, and an allowance
for contingencies and profit
Straight Life Annuity - The payout option that will guarantee an annuity payment for the
remainder of an individual's life. This option typically provides the largest monthly payment.
,Refund Life Annuity - Provides annuity payments for the annuitant's lifetime with the
guarantee that in no event will total income be less than the purchase price of the contract. If
the annuitant dies before receiving this amount, the difference is paid to a named beneficiary
either as a cash refund or in installments.
convertible term policy -
Aleatory Contract - a contract where the values exchanged may not be equal but depend
on an uncertain event
Insurance Dividends - Considered to be a return of overpaid premiums and is not taxable.
You can get the dividend in the form of CRAPPO
- Cash
- reduction of premium
- allow the dividends to accumulate at interest (the money earned on the returned dividend is
taxable as ordinary income
- Paid up permament addition - you can purchase additional whole life policy and the price will
change depending on dividend and age
-paid up option - pay up policy earlier than expected
- one year term - use dividends to purchase additional term insurance for 1 year (after 1 year,
the term expires)
insurance benefit - Advantage, privilege, right, or financial reimbursement
Insurance Considerations - The easiest way to protect yourself and your organization
from the legal liability and financial loss associated with environmental safety risks is through
insurance. Coverage by insurance allows the facility to transfer the potentially devastating
financial risk of a future loss for the cost certainty of a monthly or yearly payment (i.e.,
premium).
Adverse Selection - A high-risk person benefits more from insurance, so is more likely to
purchase it.
qualified retirement plan - A retirement savings plan approved by the Internal Revenue
Service that provides individuals with a tax benefit
Unilateral Contract - promise in exchange for an act
Elements of a Contract - offer, acceptance, consideration
, Section 1035 (Policy Exchanges) - Due to the fact that life insurance, annuities and
endowments are all similar in nature (though they have their differences), the IRS, under certain
circumstances, allows for the exchange of one policy for another without taxation to the
individual, as long as funds are not distributed to the individual in the process.
limited pay life insurance - A form of whole life insurance characterized by premium
payments only being made for a specified or limited number of years.
annuity - payment received every year
Mutual Insurance Company - A type of insurance company owned by its policyholders.
Whole Life Insurance Policy - the cash value is greatest at the end of the policy period,
and the insurance protection is greatest at the start of the policy
class beneficiary - a member of a group, e.g., children of the insured
Tertiary Beneficiary - The third in line to receive the benefits of a life insurance policy.
State Guaranty Association - protect policy owners in the event of any insurance
company going out of business, becoming insolvent, or the in ability to pay claims
What effects the amount of the person premium? - If it does not effect their life span it
does not effect their premium
Credit Life Insurance - A special type of coverage written to pay off the balance of a loan
in the event of the death of the debtor.
Individual Life Insurance - purchased by individuals; usually greater face value
Has 10 day return policy upon delivery
Insurance twisting - When a person knowingly makes misleading statements about the
policy, to make a sale
Policy Replacement - if a policy is to be replaced then you must provide in writing the
information about the policy that is going to be submitted with the application
Pure Risk - a risk that presents the chance of loss but no opportunity for gain
Speculative Risk - A chance of loss, no loss, or gain.
Dread Disease Policy - Provides coverage for specific disease(s), such as cancer or
leukemia.
|MOST COMMON QUESTIONS WITH CORRECTLY
VERIFIED ANSWERS|ALREADY A+
GRADED|GUARANTEED PASS
Section 529 Plans - - state provided
- can be funded by after tax dollars
- can pay prepaid tuition
- All earnings exempt from federal taxes
- If withdrawn for unqualified withdrawl, 10% penalty
Roth IRA - private retirement plan that taxes income before it is saved, but which does
not tax interest on that income when funds are used upon retirement
Distributions don't have to start before 70.5
401(k) plan - Elective deferral plan that allows employee to reduce compensation by a
stated percentage on a tax deductible/ tax differed basis; often the employer matches the
employee contributions
Simplified Employee Pension (SEP) - A qualified plan in which a smaller employer
contributes specified amounts directly into IRA accounts on behalf of eligible employees
403(b) plan - An elective deferral plan for employees of organizations such as school
systems, churches, and hospitals
Keogh Plan - Retirement plan for self-employed individual and their qualified employees
Rollover - Tax free withdrawal of cash or other assets from one retirement program and
its reinvestment in another program. It is not considered income and it is not taxable until a
later withdrawal. Has to be completed in 60 days
Transfer - When amounts of a qualified plan are transferred to another qualified plan
,Employee Retirement Income Security Act (ERISA) - Federal law that increased the
responsibility of pension plan trustees to protect retirees, established certain rights related to
vesting and portability, and created the Pension Benefit Guarantee Corporation
profit-sharing plan - a benefit whereby employees may share in the profits of the
business
Catch-up Contributions - -for those aged 50 or older
-additional $1,000 annually
**Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) - established the catch
up provisions**
Rollover time frame - 60 days
Keogh Plan - A federally-approved, tax-deferred savings program for self-employed
people, allowing them to set money aside for their retirement.
Annuity Period - the payout period of an annuity
Flexible Premium Annuity - allows the owner to vary the premium payments
Deferred Annuity - An annuity that starts sometime in the future.
Variable Annuity - Annuity that has a varying rate of return based on the mutual funds in
which one has invested
Gramm-Leach-Bliley Act - requires financial institutions to ensure the security and
confidentiality of customer data
Certificate of Insurance (COI) - proof that the insured has insurance
Market conduct - refers to the marketing practices of insurers and agents that involve
interaction with insureds, claimants, or consumers
expense loading - the amount needed to pay all expenses, including commissions,
general administrative expenses, state premium taxes, acquisition expenses, and an allowance
for contingencies and profit
Straight Life Annuity - The payout option that will guarantee an annuity payment for the
remainder of an individual's life. This option typically provides the largest monthly payment.
,Refund Life Annuity - Provides annuity payments for the annuitant's lifetime with the
guarantee that in no event will total income be less than the purchase price of the contract. If
the annuitant dies before receiving this amount, the difference is paid to a named beneficiary
either as a cash refund or in installments.
convertible term policy -
Aleatory Contract - a contract where the values exchanged may not be equal but depend
on an uncertain event
Insurance Dividends - Considered to be a return of overpaid premiums and is not taxable.
You can get the dividend in the form of CRAPPO
- Cash
- reduction of premium
- allow the dividends to accumulate at interest (the money earned on the returned dividend is
taxable as ordinary income
- Paid up permament addition - you can purchase additional whole life policy and the price will
change depending on dividend and age
-paid up option - pay up policy earlier than expected
- one year term - use dividends to purchase additional term insurance for 1 year (after 1 year,
the term expires)
insurance benefit - Advantage, privilege, right, or financial reimbursement
Insurance Considerations - The easiest way to protect yourself and your organization
from the legal liability and financial loss associated with environmental safety risks is through
insurance. Coverage by insurance allows the facility to transfer the potentially devastating
financial risk of a future loss for the cost certainty of a monthly or yearly payment (i.e.,
premium).
Adverse Selection - A high-risk person benefits more from insurance, so is more likely to
purchase it.
qualified retirement plan - A retirement savings plan approved by the Internal Revenue
Service that provides individuals with a tax benefit
Unilateral Contract - promise in exchange for an act
Elements of a Contract - offer, acceptance, consideration
, Section 1035 (Policy Exchanges) - Due to the fact that life insurance, annuities and
endowments are all similar in nature (though they have their differences), the IRS, under certain
circumstances, allows for the exchange of one policy for another without taxation to the
individual, as long as funds are not distributed to the individual in the process.
limited pay life insurance - A form of whole life insurance characterized by premium
payments only being made for a specified or limited number of years.
annuity - payment received every year
Mutual Insurance Company - A type of insurance company owned by its policyholders.
Whole Life Insurance Policy - the cash value is greatest at the end of the policy period,
and the insurance protection is greatest at the start of the policy
class beneficiary - a member of a group, e.g., children of the insured
Tertiary Beneficiary - The third in line to receive the benefits of a life insurance policy.
State Guaranty Association - protect policy owners in the event of any insurance
company going out of business, becoming insolvent, or the in ability to pay claims
What effects the amount of the person premium? - If it does not effect their life span it
does not effect their premium
Credit Life Insurance - A special type of coverage written to pay off the balance of a loan
in the event of the death of the debtor.
Individual Life Insurance - purchased by individuals; usually greater face value
Has 10 day return policy upon delivery
Insurance twisting - When a person knowingly makes misleading statements about the
policy, to make a sale
Policy Replacement - if a policy is to be replaced then you must provide in writing the
information about the policy that is going to be submitted with the application
Pure Risk - a risk that presents the chance of loss but no opportunity for gain
Speculative Risk - A chance of loss, no loss, or gain.
Dread Disease Policy - Provides coverage for specific disease(s), such as cancer or
leukemia.
