ALABAMA LIFE HEALTH INSURANCE EXAMS SCRIPT
QUESTIONS AND ANSWERS SURE A+
✔✔Why should a policyowner be especially careful when deciding to increase the
amount of an outstanding policy loan? - ✔✔If the outstanding loan balance, plus
interest, equals or exceeds the cash value of the policy, the company could cancel the
insurance
✔✔The main purpose of the spendthrift clause contained in a settlement option is to
prevent the beneficiary from doing all of the following, except: - ✔✔Purchasing a new
car once the claim has been settled and proceeds have been paid out according to the
beneficiary designations
✔✔Collateral for a policy loan is: - ✔✔The cash value of the policy itself
✔✔If an insured has an outstanding loan of $5,000 on a policy with a face amount of
$25,000, at death the company will: - ✔✔Pay the beneficiary $20,000, after subtracting
the amount of the outstanding loan
✔✔The nonforfeiture option that provides the most life insurance protection is the: -
✔✔Extended Term Option
,The extended term option provides the most life insurance protection of the available
nonforfeiture options. Paid up additions are considered dividend options and are not
considered a nonforfeiture option.
✔✔The settlement option that provides for the proceeds plus interest to be paid in
installments for a specified period of time is called the: - ✔✔Fixed Period Option
✔✔All of the following are situations in which the insurer is obligated to pay out a death
benefit after the insured has died, except: - ✔✔The premiums have not been paid and
have been overdue for 3 years
✔✔A client purchases an individual disability income policy and receives the policy from
the insurer 45 days after application. Upon receipt of the policy, the client typically has
______days to review and return the policy to receive a full refund for any reason. -
✔✔10
✔✔An annuitant has a temporary annuity certain, and dies shortly after the payments
start but before the certain period of 10 years has elapsed. Any money remaining is: -
✔✔Paid to the beneficiary for the rest of the certain period
✔✔The type of annuity that guarantees to pay total income at least equal to the
purchase price of the contract is a: - ✔✔Refund life annuity
✔✔'Annuity Period' refers to which of the following? - ✔✔The time during which
payments are made to the annuitant
The annuity period begins when the annuitant starts to receive payments from the
accumulated funds in the annuity policy. This is also referred to as 'the Annuitization
period'.
✔✔An annuity owner can change all of the following in an annuity, except: -
✔✔Mortality Table
✔✔Which of the following will receive the smallest monthly income benefit check if an
annuity is annuitized? - ✔✔50 year old female
✔✔Which of the following Annuities is generally not backed by the insurer's general
account assets? - ✔✔Variable
✔✔When converting a group life policy to an individual policy, the departing group
member's new policy must be a: - ✔✔Permanent or whole life policy
, ✔✔When underwriting group life insurance: - ✔✔The underwriter generally focuses on
the group as a whole, rather than on individual members
✔✔Which of the following statements is NOT true about the tax treatment of Social
Security? - ✔✔Employee paid payroll deductions for Social Security are tax deductible
to the employee
✔✔Split-dollar plan - ✔✔Divides the cost of additional insurance for an employee
between that employee and the company
✔✔George, who has a group policy, may upon leaving his place of employment: -
✔✔Convert it to permanent insurance without proof of insurability, within a specified
period
✔✔The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who
served as senior executives. This benefit is not available to other retirees of the
company. This is an example of a: - ✔✔Non-qualified plan
✔✔Incidental limitations refer to which of the following? - ✔✔The amount of life
insurance that may be included in a qualified retirement plan
✔✔If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000,
how much of the policy's cash surrender value would be subject to federal income tax? -
✔✔$3,000
Any proceeds from a surrendered or matured life insurance policy that exceed policy
costs are subject to federal income tax. This is referred to as the cost recovery rule.
✔✔Distributions from a qualified retirement plan: - ✔✔Are received tax-free only if they
result from previously taxed contributions
✔✔A group deferred annuity or an individual deferred annuity would be most likely
used: - ✔✔To fund a defined benefit plan
When a group deferred annuity is used to fund a defined benefit plan, specified
amounts of deferred annuity are bought by the employer each year to provide the
'defined benefit' for the employee at retirement, thus providing a guaranteed defined
benefit at retirement.
✔✔Defined Contribution Plan - ✔✔
✔✔Which of the following would NOT be permitted as a Section 1035 policy exchange?
- ✔✔An annuity contract exchanged for a life contract
QUESTIONS AND ANSWERS SURE A+
✔✔Why should a policyowner be especially careful when deciding to increase the
amount of an outstanding policy loan? - ✔✔If the outstanding loan balance, plus
interest, equals or exceeds the cash value of the policy, the company could cancel the
insurance
✔✔The main purpose of the spendthrift clause contained in a settlement option is to
prevent the beneficiary from doing all of the following, except: - ✔✔Purchasing a new
car once the claim has been settled and proceeds have been paid out according to the
beneficiary designations
✔✔Collateral for a policy loan is: - ✔✔The cash value of the policy itself
✔✔If an insured has an outstanding loan of $5,000 on a policy with a face amount of
$25,000, at death the company will: - ✔✔Pay the beneficiary $20,000, after subtracting
the amount of the outstanding loan
✔✔The nonforfeiture option that provides the most life insurance protection is the: -
✔✔Extended Term Option
,The extended term option provides the most life insurance protection of the available
nonforfeiture options. Paid up additions are considered dividend options and are not
considered a nonforfeiture option.
✔✔The settlement option that provides for the proceeds plus interest to be paid in
installments for a specified period of time is called the: - ✔✔Fixed Period Option
✔✔All of the following are situations in which the insurer is obligated to pay out a death
benefit after the insured has died, except: - ✔✔The premiums have not been paid and
have been overdue for 3 years
✔✔A client purchases an individual disability income policy and receives the policy from
the insurer 45 days after application. Upon receipt of the policy, the client typically has
______days to review and return the policy to receive a full refund for any reason. -
✔✔10
✔✔An annuitant has a temporary annuity certain, and dies shortly after the payments
start but before the certain period of 10 years has elapsed. Any money remaining is: -
✔✔Paid to the beneficiary for the rest of the certain period
✔✔The type of annuity that guarantees to pay total income at least equal to the
purchase price of the contract is a: - ✔✔Refund life annuity
✔✔'Annuity Period' refers to which of the following? - ✔✔The time during which
payments are made to the annuitant
The annuity period begins when the annuitant starts to receive payments from the
accumulated funds in the annuity policy. This is also referred to as 'the Annuitization
period'.
✔✔An annuity owner can change all of the following in an annuity, except: -
✔✔Mortality Table
✔✔Which of the following will receive the smallest monthly income benefit check if an
annuity is annuitized? - ✔✔50 year old female
✔✔Which of the following Annuities is generally not backed by the insurer's general
account assets? - ✔✔Variable
✔✔When converting a group life policy to an individual policy, the departing group
member's new policy must be a: - ✔✔Permanent or whole life policy
, ✔✔When underwriting group life insurance: - ✔✔The underwriter generally focuses on
the group as a whole, rather than on individual members
✔✔Which of the following statements is NOT true about the tax treatment of Social
Security? - ✔✔Employee paid payroll deductions for Social Security are tax deductible
to the employee
✔✔Split-dollar plan - ✔✔Divides the cost of additional insurance for an employee
between that employee and the company
✔✔George, who has a group policy, may upon leaving his place of employment: -
✔✔Convert it to permanent insurance without proof of insurability, within a specified
period
✔✔The Lucrative Lozenge Company provides a $5,000 monthly income to retirees who
served as senior executives. This benefit is not available to other retirees of the
company. This is an example of a: - ✔✔Non-qualified plan
✔✔Incidental limitations refer to which of the following? - ✔✔The amount of life
insurance that may be included in a qualified retirement plan
✔✔If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000,
how much of the policy's cash surrender value would be subject to federal income tax? -
✔✔$3,000
Any proceeds from a surrendered or matured life insurance policy that exceed policy
costs are subject to federal income tax. This is referred to as the cost recovery rule.
✔✔Distributions from a qualified retirement plan: - ✔✔Are received tax-free only if they
result from previously taxed contributions
✔✔A group deferred annuity or an individual deferred annuity would be most likely
used: - ✔✔To fund a defined benefit plan
When a group deferred annuity is used to fund a defined benefit plan, specified
amounts of deferred annuity are bought by the employer each year to provide the
'defined benefit' for the employee at retirement, thus providing a guaranteed defined
benefit at retirement.
✔✔Defined Contribution Plan - ✔✔
✔✔Which of the following would NOT be permitted as a Section 1035 policy exchange?
- ✔✔An annuity contract exchanged for a life contract
