Arizona Life Insurance Exam
Questions and Answers54
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The
total premiums paid had totaled $16,000. What were the federal income tax consequences to
the policyowner on receipt of the cash value?
$16,000 was received as ordinary income and $4,000 as tax-free
$20,000 was received as a capital gain
$20,000 was received as ordinary income
$16,000 was received tax-free and $4,000 as ordinary income - ANSWERS -$16,000 was
received tax-free and $4,000 as ordinary income
The surrender charge on many deferred annuity contracts are waived when the
annuitant becomes unemployed
annuitant dies or becomes disabled
contract's interest rate falls below a stated percentage
contract is canceled within the first year - ANSWERS -annuitant dies or becomes disabled
,Which of these would NOT be a valid reason to add the waiver of premium rider to a life
insurance policy?
Prevents a policy from lapsing in the event of total disability
Premiums waived by the insurer do not have to be repaid by the policyowner
Policy's cash value would still increase as policy premiums are being waived
It allows a policy loan to cover premium payments if the policyowner becomes totally disabled -
ANSWERS -It allows a policy loan to cover premium payments if the policyowner becomes
totally disabled
a whole life policy that provides a choice of dividend options include the following statement
about dividends
they accrue at a guaranteed rate
they are deferred for one year
they are not guaranteed
they are guaranteed after the first year - ANSWERS -they are not guaranteed
When there is a named beneficiary on a life insurance policy, the death benefits
1. are directed to a trustee if the insured has any outstanding debts
,2. are paid directly to the insured`s creditors, with any remaining balance forwarded to the
beneficiary
3. are paid directly to the beneficiary, minus any debt claims by the insured`s creditors
4. are paid directly to the beneficiary without interference from the insured`s creditors -
ANSWERS -are paid directly to the beneficiary without interference from the insured`s creditors
What determines how much an annuitant is paid for a variable annuity
1. varies according to how many outstanding annuitant is paid for a variable annuity
2. payments fluctuate as annuitant gets older
3. the market value variations of the securities backing it
4. varies according to the insurers investments in its general account - ANSWERS -the market
value variations of the securities backing it
a terminated employee has how many days upon termination to convert group life insurance
coverage to an individual policy
10 days
15 days
, 30 days
31 days - ANSWERS -31 days
Rick owns a variable universal life insurance policy and chooses a variable death benefit option.
what will typically happen to the death benefit as a result of this section
1. remain the same
2 decrease but never increase
3 increase but never decrease
4 fluctuate with changes in the cash amount - ANSWERS -fluctuate with changes in the cash
amount
the policy provision that permits an employee to change from group life insurance to an
individual policy is called
1 assignment provision
2 conversion provision
3 certificate provision
4 modification provision - ANSWERS -conversion provision
Questions and Answers54
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The
total premiums paid had totaled $16,000. What were the federal income tax consequences to
the policyowner on receipt of the cash value?
$16,000 was received as ordinary income and $4,000 as tax-free
$20,000 was received as a capital gain
$20,000 was received as ordinary income
$16,000 was received tax-free and $4,000 as ordinary income - ANSWERS -$16,000 was
received tax-free and $4,000 as ordinary income
The surrender charge on many deferred annuity contracts are waived when the
annuitant becomes unemployed
annuitant dies or becomes disabled
contract's interest rate falls below a stated percentage
contract is canceled within the first year - ANSWERS -annuitant dies or becomes disabled
,Which of these would NOT be a valid reason to add the waiver of premium rider to a life
insurance policy?
Prevents a policy from lapsing in the event of total disability
Premiums waived by the insurer do not have to be repaid by the policyowner
Policy's cash value would still increase as policy premiums are being waived
It allows a policy loan to cover premium payments if the policyowner becomes totally disabled -
ANSWERS -It allows a policy loan to cover premium payments if the policyowner becomes
totally disabled
a whole life policy that provides a choice of dividend options include the following statement
about dividends
they accrue at a guaranteed rate
they are deferred for one year
they are not guaranteed
they are guaranteed after the first year - ANSWERS -they are not guaranteed
When there is a named beneficiary on a life insurance policy, the death benefits
1. are directed to a trustee if the insured has any outstanding debts
,2. are paid directly to the insured`s creditors, with any remaining balance forwarded to the
beneficiary
3. are paid directly to the beneficiary, minus any debt claims by the insured`s creditors
4. are paid directly to the beneficiary without interference from the insured`s creditors -
ANSWERS -are paid directly to the beneficiary without interference from the insured`s creditors
What determines how much an annuitant is paid for a variable annuity
1. varies according to how many outstanding annuitant is paid for a variable annuity
2. payments fluctuate as annuitant gets older
3. the market value variations of the securities backing it
4. varies according to the insurers investments in its general account - ANSWERS -the market
value variations of the securities backing it
a terminated employee has how many days upon termination to convert group life insurance
coverage to an individual policy
10 days
15 days
, 30 days
31 days - ANSWERS -31 days
Rick owns a variable universal life insurance policy and chooses a variable death benefit option.
what will typically happen to the death benefit as a result of this section
1. remain the same
2 decrease but never increase
3 increase but never decrease
4 fluctuate with changes in the cash amount - ANSWERS -fluctuate with changes in the cash
amount
the policy provision that permits an employee to change from group life insurance to an
individual policy is called
1 assignment provision
2 conversion provision
3 certificate provision
4 modification provision - ANSWERS -conversion provision
