REP REVIEW EXAM- LIFE INSURANCE
BASICS – PSI EXAM QUESTIONS
PASSED 100%
What would be an expense factor in an insurance program?
Mortality costs
Opportunity costs
Premiums collected
Investment interest - Correct Answer ✔✔ Mortality costs
Where would policy proceeds be paid if both the insured and primary beneficiary were
killed in the same accident?
contingent beneficiary
insured's estate
children of the insured
primary beneficiary's estate - Correct Answer ✔✔ contingent beneficiary
Which of the following enables a life policy to be replaced with another life policy and
results in the postponement of the tax consequence?
Section 1035 exchange
Section 1040 exchange
Spendthrift Option
Nonforfeiture Option - Correct Answer ✔✔ Section 1035 exchange
A beneficiary change can occur
only on specified dates within the policy
at no time
normally at any time during the policy term
only upon the request of the revocable beneficiary - Correct Answer ✔✔ normally at any
time during the policy term
A beneficiary has just received a claim payment for a life insurance policy. Which of the
following is TRUE regarding the federal income tax liability owed?
Federal income tax is owed if proceeds exceed $250,000
A flat tax of 10% is owed on all proceeds
Tax liability owed depends on the type of life insurance policy
No federal income tax is owed on life insurance proceeds - Correct Answer ✔✔ No
federal income tax is owed on life insurance proceeds
A tax-free Section 1035 Exchange of a life insurance policy to a different policy is
permitted if it occurs
in the same state as the original transaction
, from agent to agent as long as the agents are licensed in the same line
from insurer to insurer and no cash is received by the policyowner
within a 12 month period - Correct Answer ✔✔ from insurer to insurer and no cash is
received by the policyowner
All of these are settlement options for life insurance policies EXCEPT
Extended term
Life income
Fixed period
Lump sum - Correct Answer ✔✔ Extended term
An example of naming a beneficiary by class would be
To the child born of my union with Ned Jackson: Scott Jackson
To the children born of my union with Ned Jackson
To the children born of my union with Ned Jackson: David Jackson, Jennifer Jackson,
and Scott Jackson
To Ned Jackson - Correct Answer ✔✔ To the children born of my union with Ned
Jackson
Naming a contingent beneficiary as "all surviving children" is described by which term?
Class designation
Contingent designation
Primary designation
Tertiary designation - Correct Answer ✔✔ Class designation
Proceeds from a life insurance policy are protected from the beneficiary's creditors by
which clause?
creditor clause
beneficiary trust clause
spendthrift trust clause
protection clause - Correct Answer ✔✔ spendthrift trust clause
What happens to the total amount of premium paid for an insurance policy when the
payment frequency increases?
Increases
No difference in cost
Depends on the type of coverage
Decreases - Correct Answer ✔✔ Increases
A life insurance claim which involves a per capita distribution of policy proceeds would
be payable to the
estate of the deceased beneficiaries only
named living primary beneficiaries
estate of the insured only
named contingent beneficiaries only - Correct Answer ✔✔ named living primary
beneficiaries
BASICS – PSI EXAM QUESTIONS
PASSED 100%
What would be an expense factor in an insurance program?
Mortality costs
Opportunity costs
Premiums collected
Investment interest - Correct Answer ✔✔ Mortality costs
Where would policy proceeds be paid if both the insured and primary beneficiary were
killed in the same accident?
contingent beneficiary
insured's estate
children of the insured
primary beneficiary's estate - Correct Answer ✔✔ contingent beneficiary
Which of the following enables a life policy to be replaced with another life policy and
results in the postponement of the tax consequence?
Section 1035 exchange
Section 1040 exchange
Spendthrift Option
Nonforfeiture Option - Correct Answer ✔✔ Section 1035 exchange
A beneficiary change can occur
only on specified dates within the policy
at no time
normally at any time during the policy term
only upon the request of the revocable beneficiary - Correct Answer ✔✔ normally at any
time during the policy term
A beneficiary has just received a claim payment for a life insurance policy. Which of the
following is TRUE regarding the federal income tax liability owed?
Federal income tax is owed if proceeds exceed $250,000
A flat tax of 10% is owed on all proceeds
Tax liability owed depends on the type of life insurance policy
No federal income tax is owed on life insurance proceeds - Correct Answer ✔✔ No
federal income tax is owed on life insurance proceeds
A tax-free Section 1035 Exchange of a life insurance policy to a different policy is
permitted if it occurs
in the same state as the original transaction
, from agent to agent as long as the agents are licensed in the same line
from insurer to insurer and no cash is received by the policyowner
within a 12 month period - Correct Answer ✔✔ from insurer to insurer and no cash is
received by the policyowner
All of these are settlement options for life insurance policies EXCEPT
Extended term
Life income
Fixed period
Lump sum - Correct Answer ✔✔ Extended term
An example of naming a beneficiary by class would be
To the child born of my union with Ned Jackson: Scott Jackson
To the children born of my union with Ned Jackson
To the children born of my union with Ned Jackson: David Jackson, Jennifer Jackson,
and Scott Jackson
To Ned Jackson - Correct Answer ✔✔ To the children born of my union with Ned
Jackson
Naming a contingent beneficiary as "all surviving children" is described by which term?
Class designation
Contingent designation
Primary designation
Tertiary designation - Correct Answer ✔✔ Class designation
Proceeds from a life insurance policy are protected from the beneficiary's creditors by
which clause?
creditor clause
beneficiary trust clause
spendthrift trust clause
protection clause - Correct Answer ✔✔ spendthrift trust clause
What happens to the total amount of premium paid for an insurance policy when the
payment frequency increases?
Increases
No difference in cost
Depends on the type of coverage
Decreases - Correct Answer ✔✔ Increases
A life insurance claim which involves a per capita distribution of policy proceeds would
be payable to the
estate of the deceased beneficiaries only
named living primary beneficiaries
estate of the insured only
named contingent beneficiaries only - Correct Answer ✔✔ named living primary
beneficiaries
