PRIMERICA LIFE INSURANCE EXAM
WITH 100% CORRECT ANSWERS
All of the following statements concerning the use of life insurance as an Executive
Bonus are correct EXCEPT:
a. the employer pays a bonus to a selected employee to fund to policy
b. it is considered a non qualified employee benefit.
c. the policy is owned by the company
d. any type of insurance policy may be used. - ANSWER-c. the policy is owned by the
company.
An insured receives a monthly summary for his life insurance policy. He notices that the
cash value of the policy is significantly lower this month than it was last month. What
type of policy does the insured have?
a. variable
b. term
c. securities
d. stock - ANSWER-a. variable- life policies vary in value, as the name suggests,
because the value is based on the stocks that support the policy. If a policyholder wants
a more stable, reliable value, he/she should invest in a fixed policy.
When an employer offers to give an employee a wage increase in the amount of the
premium on a new life insurance policy, this is called
a. aleatory contract
b. executive bonus
c. key person
d. a fraternal association - ANSWER-b. executive bonus
In terms of Social Security, what is the interval spanning between the day when the
youngest child of a family turns 16 and before the surviving spouse may receive
retirement benefits? - ANSWER-Blackout period- begins when the youngest child
reaches the age of 16, and ends when the surviving spouse qualifies for retirement
benefits, as early as age 60. No benefits are paid during this time.
Life insurance may be used to pay state inheritance taxes and federal estate taxes so
that it is not necessary to sell off assets from the estate to pay these costs. This is
called
a. estate conservation
b. estate creation
c. survivor protection
d. survivorship insurnce - ANSWER-a. estate conservation- life insurance may be used
to pay state inheritance taxes and federal estate taxes so that it is not necessary to sell
off assets from the estate to pay these costs. This is called estate conservation.
,Stranger-oriented life insurance policies are in direct opposition to the principle of
a. law of large numbers
b. good faith
c. indemnity
d. insurable interest - ANSWER-d. insurable interest-STOLI purchaser doesn't know the
insured, or have any interest in the insured's longevity, so it violates the principle of
insurable interest
Which is generally true regarding insureds who have earned preferred status?
a. they keep a higher percentage of any interest earned on their policies
b. their premiums are lower
c. they can barrow higher amounts off of their policies
d. they can decide when to pay their monthly premiums - ANSWER-b. their premiums
are lower- the insured is in excellent physical condition and employs healthy lifestyles
and habits
Which of the following applicants could the insurer charge a higher rate and not be
charge with unfair discrimination?
a. an applicant that was born in another country
b. an applicant who is legally blind
c. an applicant who has been a victim of domestic abuse
d. an applicant that smokes cigarettes as opposed to one that does not - ANSWER-d.
an applicant that smokes cigarettes as opposed to one that does not
Partner A in a business buys a life insurance policy on Partner B to protect herself
against a financial loss if he should die. Two years after the partnership is dissolved
Partner B dies. Who will receive the death benefit? - ANSWER-Partner A
Which of the following is NOT a type of information that needs to be gathered in order to
determine the value of someone's life when using the needs approach?
a. mortgages
b. expenses
c. estimated longevity
d. outstanding debt - ANSWER-c. estimated longevity
An employee will be taxed on the cost of group life insurance paid by the employer if the
amount of coverage exceeds
a. $10,000
b. $15,000
c. $25,000
d. $50,000 - ANSWER-d. $50,000
Which of the following would NOT fall into the category of costs associated with death?
a. final medical expenses of the insured
b. day to day expenses of maintaining the family
, c. the expense of a vacation for surviving family members
d. funeral expenses - ANSWER-c. the expense of a vacation for surviving family
members
Based on Human Life Value Approach, which of the following is NOT used to calculate
an individual's life value?
a. effect of inflation on income over time
b. predicted needs of the family after the insured's death
c. insured's current and future income
d. insured's annual expenses. - ANSWER-b. predicted needs of the family after the
insured's death- are used in the needs approach. The Human Life Value Approach
requires the calculation of probable future earnings of the insured, which involves
wages, expenses, inflation, amount of time until retirement, and the time value of
money.
Who makes up the Medical Information Bureau? - ANSWER-Insurers
Upon policy delivery, the agent may be required to obtain any of the following EXCEPT
a. payment of premium
b. corrected and resigned application
c. signed waiver of premium
d. statement of good health - ANSWER-c. signed waiver of premium
Amy's insurance premium has decreased slightly, despite the fact that her level of
health has remained the same. Which of the following most likely caused the premium
decrease?
a. she has a Steadily Decreasing Premium policy
b. the insurer's customer base is expanding, which allows for lower premiums
c. her insurer used interest earned on premiums to lower premium amounts
d. her increased age allows for lower premiums - ANSWER-c. her insurer used interest
earned on premiums to lower premium amounts
Who is the owner of the policy and who pays the premium in and Executive Bonus
plan?
a. company is the owner, but the executive pays the premium
b. board of directors is the owner, and the board of directors pays the premium
c. company is the owner, and the company pays the premium
d. executive is the owner, and the executive pays the premium - ANSWER-d. executive
is the owner, and the executive pays the premium- the employer reimburses the
executive for cost (or pays a bonus in the amount of the premium). Since the executive
is receiving compensation, the amount paid by the employer would be considered
taxable income.
What is the major difference between a Stock Redemption Plan and a Cross Purchase
Plan? - ANSWER-In a Stock Redemption Plan, the policies are owned by an entity, and
in a Cross Purchase Plan, the policies are owned by individuals- If the business owns
WITH 100% CORRECT ANSWERS
All of the following statements concerning the use of life insurance as an Executive
Bonus are correct EXCEPT:
a. the employer pays a bonus to a selected employee to fund to policy
b. it is considered a non qualified employee benefit.
c. the policy is owned by the company
d. any type of insurance policy may be used. - ANSWER-c. the policy is owned by the
company.
An insured receives a monthly summary for his life insurance policy. He notices that the
cash value of the policy is significantly lower this month than it was last month. What
type of policy does the insured have?
a. variable
b. term
c. securities
d. stock - ANSWER-a. variable- life policies vary in value, as the name suggests,
because the value is based on the stocks that support the policy. If a policyholder wants
a more stable, reliable value, he/she should invest in a fixed policy.
When an employer offers to give an employee a wage increase in the amount of the
premium on a new life insurance policy, this is called
a. aleatory contract
b. executive bonus
c. key person
d. a fraternal association - ANSWER-b. executive bonus
In terms of Social Security, what is the interval spanning between the day when the
youngest child of a family turns 16 and before the surviving spouse may receive
retirement benefits? - ANSWER-Blackout period- begins when the youngest child
reaches the age of 16, and ends when the surviving spouse qualifies for retirement
benefits, as early as age 60. No benefits are paid during this time.
Life insurance may be used to pay state inheritance taxes and federal estate taxes so
that it is not necessary to sell off assets from the estate to pay these costs. This is
called
a. estate conservation
b. estate creation
c. survivor protection
d. survivorship insurnce - ANSWER-a. estate conservation- life insurance may be used
to pay state inheritance taxes and federal estate taxes so that it is not necessary to sell
off assets from the estate to pay these costs. This is called estate conservation.
,Stranger-oriented life insurance policies are in direct opposition to the principle of
a. law of large numbers
b. good faith
c. indemnity
d. insurable interest - ANSWER-d. insurable interest-STOLI purchaser doesn't know the
insured, or have any interest in the insured's longevity, so it violates the principle of
insurable interest
Which is generally true regarding insureds who have earned preferred status?
a. they keep a higher percentage of any interest earned on their policies
b. their premiums are lower
c. they can barrow higher amounts off of their policies
d. they can decide when to pay their monthly premiums - ANSWER-b. their premiums
are lower- the insured is in excellent physical condition and employs healthy lifestyles
and habits
Which of the following applicants could the insurer charge a higher rate and not be
charge with unfair discrimination?
a. an applicant that was born in another country
b. an applicant who is legally blind
c. an applicant who has been a victim of domestic abuse
d. an applicant that smokes cigarettes as opposed to one that does not - ANSWER-d.
an applicant that smokes cigarettes as opposed to one that does not
Partner A in a business buys a life insurance policy on Partner B to protect herself
against a financial loss if he should die. Two years after the partnership is dissolved
Partner B dies. Who will receive the death benefit? - ANSWER-Partner A
Which of the following is NOT a type of information that needs to be gathered in order to
determine the value of someone's life when using the needs approach?
a. mortgages
b. expenses
c. estimated longevity
d. outstanding debt - ANSWER-c. estimated longevity
An employee will be taxed on the cost of group life insurance paid by the employer if the
amount of coverage exceeds
a. $10,000
b. $15,000
c. $25,000
d. $50,000 - ANSWER-d. $50,000
Which of the following would NOT fall into the category of costs associated with death?
a. final medical expenses of the insured
b. day to day expenses of maintaining the family
, c. the expense of a vacation for surviving family members
d. funeral expenses - ANSWER-c. the expense of a vacation for surviving family
members
Based on Human Life Value Approach, which of the following is NOT used to calculate
an individual's life value?
a. effect of inflation on income over time
b. predicted needs of the family after the insured's death
c. insured's current and future income
d. insured's annual expenses. - ANSWER-b. predicted needs of the family after the
insured's death- are used in the needs approach. The Human Life Value Approach
requires the calculation of probable future earnings of the insured, which involves
wages, expenses, inflation, amount of time until retirement, and the time value of
money.
Who makes up the Medical Information Bureau? - ANSWER-Insurers
Upon policy delivery, the agent may be required to obtain any of the following EXCEPT
a. payment of premium
b. corrected and resigned application
c. signed waiver of premium
d. statement of good health - ANSWER-c. signed waiver of premium
Amy's insurance premium has decreased slightly, despite the fact that her level of
health has remained the same. Which of the following most likely caused the premium
decrease?
a. she has a Steadily Decreasing Premium policy
b. the insurer's customer base is expanding, which allows for lower premiums
c. her insurer used interest earned on premiums to lower premium amounts
d. her increased age allows for lower premiums - ANSWER-c. her insurer used interest
earned on premiums to lower premium amounts
Who is the owner of the policy and who pays the premium in and Executive Bonus
plan?
a. company is the owner, but the executive pays the premium
b. board of directors is the owner, and the board of directors pays the premium
c. company is the owner, and the company pays the premium
d. executive is the owner, and the executive pays the premium - ANSWER-d. executive
is the owner, and the executive pays the premium- the employer reimburses the
executive for cost (or pays a bonus in the amount of the premium). Since the executive
is receiving compensation, the amount paid by the employer would be considered
taxable income.
What is the major difference between a Stock Redemption Plan and a Cross Purchase
Plan? - ANSWER-In a Stock Redemption Plan, the policies are owned by an entity, and
in a Cross Purchase Plan, the policies are owned by individuals- If the business owns
