MI Life Producer Final Exam Questions
and Answers
Jane works for a company that allows employee contributions under a 401(k) plan.
When will Jane become fully vested in her plan contributions? -
immediately//While employer contributions to a qualified plan can be subject to a
vesting schedule, participants are always fully vested in their own contributions.
Agents must act in the best interests of applicants and insureds. What does this
require them to do? - give all important information about a proposed
policy//Agents must act in the applicant's or insured's best interests at all times.
This means that agents must give all important information about a proposed
policy. Also, they cannot misrepresent the terms or conditions of a proposed policy.
What does a viatical settlement allow? - It allows a chronically or terminally ill
insured to gain a sum of money that is needed to pay medical expenses or to
enhance the quality of life.//A viatical settlement allows a chronically or terminally
ill insured to gain a sum of money that might be needed to pay medical expenses or
to enhance quality of life.
If an employer/employee group offers group life insurance on a contributory basis,
what percentage of the group must enroll? - At least 75 percent of the group must
enroll in the plan//If an employer/employee group life insurance plan is
contributory, 75 percent of the group must enroll in the plan. If the plan is non-
contributory, 100 percent of the group must enroll.
Which of the following is NOT a life insurance premium? - competitors'
rates//Actuaries base life insurance premiums on three basic factors: mortality (a
charge), interest (a credit), and expenses (a charge).
,In calculating their mortality charges, life insurers today generally use: - the 2001
CSO table//The mortality factor is drawn from mortality statistics compiled by the
National Association of Insurance Commissioners (NAIC) into a set of rates called
the Commissioners Standard Ordinary (CSO) table. Policies issued since 2009 are
required to base their mortality charges on the 2001 CSO table.
All of the following are standard life insurance policy nonforfeiture options
EXCEPT: - accumulate at interest option//This is a policy dividend option in which
declared dividends are left with the insurer to accumulate interest on the
policyowner's behalf.
Which of the following most correctly describes the nonforfeiture option(s)
available with universal life insurance? - surrender the policy for its cash value or
stop paying premiums and continue coverage as long as the cash value will support
it//Universal life policies do not contain the standard nonforfeiture options. Instead,
the policyowner can either surrender the policy for its cash value or continue
coverage with no further premium payments, in which case coverage will last for
as long as the cash value is able to support the policy's monthly mortality and
expense charge deductions.
James wants to convert his $150,000 traditional IRA to a Roth IRA. What best
describes the tax treatment for the Roth conversion? - The converted funds are
taxed, but Roth IRA earnings and distribution will be tax free.//The $150,000 from
the traditional IRA has been deferred so it will be taxed upon conversion. However,
as long as James holds the new Roth IRA for at least five years and is older than
59', distributions from the Roth IRA will be tax free.
Under variable life insurance plans, policy loans can be as high as what percent of
the cash value? - 75 to 90 percent//Policy loans under traditional whole life
insurance plans can be as high as 100 percent of the cash value, but with variable
life insurance the maximum loan amount is something less than the full cash value
(e.g., 75 to 90 percent of the cash value), less any debt currently outstanding
against the policy.
,Under which nonforfeiture option does permanent life insurance continue in force
with no further need for premiums? - reduced paid-up option//A paid-up policy
under the reduced paid-up option requires no further premiums (nor can any be
paid). The paid-up policy retains a cash value that will continue to grow throughout
the life of the policy. However, it will grow much more slowly than during the
period that premiums were being paid.
Which of the following can be funded with a single premium payment, a series of
fixed premium payments, or flexible premium payments? - deferred
annuities//Deferred annuities can be funded with a single premium payment, a
series of fixed premium payments, or with flexible premium payments. Moreover,
the owner can make these payments whenever and in whatever amount he or she
wants.
How does the cost of group life insurance generally compare to the cost of
individual life insurance? - Group life is less expensive.//Per unit of benefits or
coverage, group life insurance is less expensive than individual life insurance
because it has lower administrative and operational costs.
Which of the following statements about the 'accumulate at interest' policy
dividend option is correct? - The insurer credits a rate of interest to the dividends
as they remain on deposit with the insurer.//The insurer credits a rate of interest to
the dividends as they remain on deposit with the insurer.
When it comes to choosing a financial instrument to fund a qualified retirement
account, which of the following features makes an annuity the most suitable
product? - retirement income that is guaranteed for life//All qualified retirement
plan assets enjoy tax-deferred growth and tax-deductible deposits, and many offer
a variety of investment choices, but only a deferred annuity can be converted to an
income stream that is guaranteed for life.
, The term used to describe the voluntarily surrender of a known right is: -
waiver//Waiver is voluntarily giving up a known right. If an insurer voluntarily
gives up a legal right that it has under an insurance contract, it cannot deny a claim
based on a violation of that right. Estoppel involves giving up a right without
intending to do so. A party surrenders a right that it failed to preserve.
Social Security benefit amounts are most directly based on a worker's: - average
indexed monthly earnings//The amount of Social Security OASDI benefits that a
covered worker is entitled to is based on the person's average indexed monthly
earnings, which are the average of a worker's lifetime earnings on which FICA
taxes were imposed.
Producers must inform consumers about the practices that insurance companies
will use in their review and underwriting processes. Typically, these processes
include all of the following, EXCEPT: - using phone taps//For information about
their applicants, insurance companies look to such sources as an attending
physician's statement (APS), investigative agencies, credit agencies, and the MIB '
but not phone taps.
Insurance agents are often called: - producers//Insurance companies sell their
products through agents or producers who either represent one insurance company
exclusively or are independent and represent several insurers.
Actuaries calculate net single premiums based on which of the following? -
mortality and interest assumptions//The net premium, which is the insurer's
estimated cost to provide the policy's benefits without accounting for its expenses,
uses the factors of mortality and interest but excludes the expense load factor.
Which of the following statements is true for variable life insurance policies? - The
insurer does not guarantee the policy's cash value.//The insurer does not guarantee
amounts invested in separate subaccounts, so the whole value of the policy is not
guaranteed.
and Answers
Jane works for a company that allows employee contributions under a 401(k) plan.
When will Jane become fully vested in her plan contributions? -
immediately//While employer contributions to a qualified plan can be subject to a
vesting schedule, participants are always fully vested in their own contributions.
Agents must act in the best interests of applicants and insureds. What does this
require them to do? - give all important information about a proposed
policy//Agents must act in the applicant's or insured's best interests at all times.
This means that agents must give all important information about a proposed
policy. Also, they cannot misrepresent the terms or conditions of a proposed policy.
What does a viatical settlement allow? - It allows a chronically or terminally ill
insured to gain a sum of money that is needed to pay medical expenses or to
enhance the quality of life.//A viatical settlement allows a chronically or terminally
ill insured to gain a sum of money that might be needed to pay medical expenses or
to enhance quality of life.
If an employer/employee group offers group life insurance on a contributory basis,
what percentage of the group must enroll? - At least 75 percent of the group must
enroll in the plan//If an employer/employee group life insurance plan is
contributory, 75 percent of the group must enroll in the plan. If the plan is non-
contributory, 100 percent of the group must enroll.
Which of the following is NOT a life insurance premium? - competitors'
rates//Actuaries base life insurance premiums on three basic factors: mortality (a
charge), interest (a credit), and expenses (a charge).
,In calculating their mortality charges, life insurers today generally use: - the 2001
CSO table//The mortality factor is drawn from mortality statistics compiled by the
National Association of Insurance Commissioners (NAIC) into a set of rates called
the Commissioners Standard Ordinary (CSO) table. Policies issued since 2009 are
required to base their mortality charges on the 2001 CSO table.
All of the following are standard life insurance policy nonforfeiture options
EXCEPT: - accumulate at interest option//This is a policy dividend option in which
declared dividends are left with the insurer to accumulate interest on the
policyowner's behalf.
Which of the following most correctly describes the nonforfeiture option(s)
available with universal life insurance? - surrender the policy for its cash value or
stop paying premiums and continue coverage as long as the cash value will support
it//Universal life policies do not contain the standard nonforfeiture options. Instead,
the policyowner can either surrender the policy for its cash value or continue
coverage with no further premium payments, in which case coverage will last for
as long as the cash value is able to support the policy's monthly mortality and
expense charge deductions.
James wants to convert his $150,000 traditional IRA to a Roth IRA. What best
describes the tax treatment for the Roth conversion? - The converted funds are
taxed, but Roth IRA earnings and distribution will be tax free.//The $150,000 from
the traditional IRA has been deferred so it will be taxed upon conversion. However,
as long as James holds the new Roth IRA for at least five years and is older than
59', distributions from the Roth IRA will be tax free.
Under variable life insurance plans, policy loans can be as high as what percent of
the cash value? - 75 to 90 percent//Policy loans under traditional whole life
insurance plans can be as high as 100 percent of the cash value, but with variable
life insurance the maximum loan amount is something less than the full cash value
(e.g., 75 to 90 percent of the cash value), less any debt currently outstanding
against the policy.
,Under which nonforfeiture option does permanent life insurance continue in force
with no further need for premiums? - reduced paid-up option//A paid-up policy
under the reduced paid-up option requires no further premiums (nor can any be
paid). The paid-up policy retains a cash value that will continue to grow throughout
the life of the policy. However, it will grow much more slowly than during the
period that premiums were being paid.
Which of the following can be funded with a single premium payment, a series of
fixed premium payments, or flexible premium payments? - deferred
annuities//Deferred annuities can be funded with a single premium payment, a
series of fixed premium payments, or with flexible premium payments. Moreover,
the owner can make these payments whenever and in whatever amount he or she
wants.
How does the cost of group life insurance generally compare to the cost of
individual life insurance? - Group life is less expensive.//Per unit of benefits or
coverage, group life insurance is less expensive than individual life insurance
because it has lower administrative and operational costs.
Which of the following statements about the 'accumulate at interest' policy
dividend option is correct? - The insurer credits a rate of interest to the dividends
as they remain on deposit with the insurer.//The insurer credits a rate of interest to
the dividends as they remain on deposit with the insurer.
When it comes to choosing a financial instrument to fund a qualified retirement
account, which of the following features makes an annuity the most suitable
product? - retirement income that is guaranteed for life//All qualified retirement
plan assets enjoy tax-deferred growth and tax-deductible deposits, and many offer
a variety of investment choices, but only a deferred annuity can be converted to an
income stream that is guaranteed for life.
, The term used to describe the voluntarily surrender of a known right is: -
waiver//Waiver is voluntarily giving up a known right. If an insurer voluntarily
gives up a legal right that it has under an insurance contract, it cannot deny a claim
based on a violation of that right. Estoppel involves giving up a right without
intending to do so. A party surrenders a right that it failed to preserve.
Social Security benefit amounts are most directly based on a worker's: - average
indexed monthly earnings//The amount of Social Security OASDI benefits that a
covered worker is entitled to is based on the person's average indexed monthly
earnings, which are the average of a worker's lifetime earnings on which FICA
taxes were imposed.
Producers must inform consumers about the practices that insurance companies
will use in their review and underwriting processes. Typically, these processes
include all of the following, EXCEPT: - using phone taps//For information about
their applicants, insurance companies look to such sources as an attending
physician's statement (APS), investigative agencies, credit agencies, and the MIB '
but not phone taps.
Insurance agents are often called: - producers//Insurance companies sell their
products through agents or producers who either represent one insurance company
exclusively or are independent and represent several insurers.
Actuaries calculate net single premiums based on which of the following? -
mortality and interest assumptions//The net premium, which is the insurer's
estimated cost to provide the policy's benefits without accounting for its expenses,
uses the factors of mortality and interest but excludes the expense load factor.
Which of the following statements is true for variable life insurance policies? - The
insurer does not guarantee the policy's cash value.//The insurer does not guarantee
amounts invested in separate subaccounts, so the whole value of the policy is not
guaranteed.
