XCEL STUDY EXAM GUIDE UPDATED QUESTIONS AND
ANSWERS GRADED A+
✔✔An annuity which is backed by a life insurer's separate account is called a(n) -
✔✔variable annuity; An annuity which is backed by a life insurer's separate account is
called a variable annuity.
✔✔The interest credited to an equity indexed annuity is tied to increases in - ✔✔a
specific equity or stock index; Equity indexed annuities (EIA's) are tied to increases in a
specific equity or stock index. Most EIAs are tied to the Standard & Poor's 500
Composite Stock Price Index.
✔✔In a straight life income option, if the annuitant dies before the annuity fund is
depleted, where does the balance go? - ✔✔Insurer; When an annuitant dies in a
straight life income option, no further payments are made. The balance is forfeited to
the insurer.
✔✔All of the following under a 1035 Exchange are allowable EXCEPT - ✔✔Fixed
annuity exchanged for a whole life policy; An annuity contract cannot be exchanged tax-
free for a life insurance contract under a 1035 Exchange. However, you can exchange
any life policy or endowment for an annuity.
✔✔Which one of the following is not characteristic of an annuity? - ✔✔Life insurance is
concerned with how soon one will die, while life annuities are concerned with how long
one will live.
✔✔An insured bought an annuity for $80,000. The insured died after receiving only
$50,000. The balance is paid in a lump sum to the insured's beneficiary. This is known
as the - ✔✔Cash Refund option; The Cash Refund option provides a guaranteed
income to the annuitant for life. if the annuitant dies before the annuity is depleted, a
lump sum cash payment of the remaining amount will be paid to the beneficiary.
✔✔Albert has purchased an annuity that will pay him a monthly income for the rest of
his life. If Albert dies before the annuity has paid back as much as he put into it, the
insurance company has agreed to pay the difference to Albert's daughter. What annuity
payout option did Albert select? - ✔✔A cash refund; cash refund option provides a
guaranteed income to the annuitant for life and, if the annuitant dies before the annuity
fund is depleted, a lump-sum cash payment of the reamaining balance is made to the
beneficiary.
✔✔All of the following are true of an accumulation period of an annuity EXCEPT - ✔✔It
does not occur in a deferred annuity; The accumulation period is the time over which
payments are made by an annuitant into an annuity. The payments in a deferred
annuity earn interest and grow tax deferred during the accumulation period.
,✔✔The dollar value of an annuity unit is based on - ✔✔the return on the equity portfolio
supporting the annuity
✔✔At what age is a surviving spouse without dependents eligible for Social Security
survivor benefits? - ✔✔60; Reduced widow or widower benefits can be received as
early as age 60.
✔✔Which Social Security status does a worker with 6 quarters of coverage during the
last 13-quarter period have? - ✔✔Currently insured; To be considered "currently
insured" you must have 6 quarters of coverage during the last 13-quarter period.
✔✔A worker is entitled to Social Security disability benefits if all of the following are true
EXCEPT for - ✔✔worker cannot perform his or her current job, but is actively seeking
other employment;
✔✔Who is eligible for retirement benefits under Social Security? - ✔✔Fully insured
workers; Social Security retirement benefits are only available to covered workers who
are fully insured upon retirement.
✔✔Who is NOT eligible for Social Security survivor benefits? - ✔✔A deceased worker's
dependent parents of any age; Only dependent parents age 62 or older can receive
survivorship benefits if they were dependent upon the deceased worker for at least half
of their support.
✔✔Which of these factors affects the Social Security normal retirement age? - ✔✔Year
in which worker was born; The Social Security normal retirement age depends upon the
worker's year of birth.
✔✔In order to be considered "currently insured" under Social Security, an individual
must be credited with - ✔✔6 quarters of coverage during the last 13-quarter period; To
reach currently insured status under the Social Security system, an individual must be
credited with a MINIMUM 6 quarters of coverage during the last 13-quarter period.
✔✔What is considered to be the definition of disability, according to Social Security? -
✔✔Unable to engage in any substantial gainful activity; As part of its definition of
disability, Social Security requires that a disability claimant (applicant) be unable to
perform what it calls substantial gainful activity (SGA).
✔✔According to Social Security, an individual with 6 credits of coverage during the
previous 13-quarter period is considered to be - ✔✔currently insured; you must have 6
quarters of coverage during the last 13-quarter period.
, ✔✔An individual that has 40 quarters of coverage, for Social Security purposes, is
considered to be - ✔✔fully insured; An individual that has 40 quarters of coverage, for
Social Security purposes, is considered to be fully insured.
✔✔How long is a person expected to be disabled in order to receive Social Security
disability benefits? - ✔✔12 months; Social Security disability benefits are paid to
persons expected to die or be disabled for AT LEAST 12 months.
✔✔Which type of worker has Social Security benefits available to them? - ✔✔Benefits
under Social Security are available only for workers who are fully insured.
✔✔ESOPs are typically invested in - ✔✔employer stock
✔✔What area of group health insurance is regulated under the Employee Retirement
Security Act of 1974 (ERISA)? - ✔✔Disclosure and reporting
✔✔How are Roth IRA's treated for tax purposes? - ✔✔Non-deductible contributions and
tax-free distributions
✔✔What does ESOP stand for? - ✔✔Employee Stock Ownership Plan
✔✔Retirement plans are prevented from favoring highly compensated employees under
which government regulation? - ✔✔Nondiscrimination
✔✔With three partners in a business, how many life insurance policies would be
required to insure a cross-purchase buy-sell plan? - ✔✔6
✔✔Under a partnership cross-purchase plan, when there are 4 partners how many
policies are needed? - ✔✔12; With a partnership cross purchase plan, each partner
owns, is the beneficiary of, and pays the premiums for life insurance on the other
partner or partners in an amount equal to his or her share of the purchase price.
✔✔"Life insurance creates an immediate estate". This phrase means - ✔✔when the
insured dies, a death benefit is paid
✔✔Key person insurance is intended to - ✔✔cover business losses due to the death of
a key employee; Key person insurance is designed to cover business losses due to the
death of a key employee.
✔✔Which of the following pieces of information is NOT gathered during the personal
financial planning process? - ✔✔An individual's civic organization memberships; All of
these pieces of information are normally gathered during the personal financial planning
process
ANSWERS GRADED A+
✔✔An annuity which is backed by a life insurer's separate account is called a(n) -
✔✔variable annuity; An annuity which is backed by a life insurer's separate account is
called a variable annuity.
✔✔The interest credited to an equity indexed annuity is tied to increases in - ✔✔a
specific equity or stock index; Equity indexed annuities (EIA's) are tied to increases in a
specific equity or stock index. Most EIAs are tied to the Standard & Poor's 500
Composite Stock Price Index.
✔✔In a straight life income option, if the annuitant dies before the annuity fund is
depleted, where does the balance go? - ✔✔Insurer; When an annuitant dies in a
straight life income option, no further payments are made. The balance is forfeited to
the insurer.
✔✔All of the following under a 1035 Exchange are allowable EXCEPT - ✔✔Fixed
annuity exchanged for a whole life policy; An annuity contract cannot be exchanged tax-
free for a life insurance contract under a 1035 Exchange. However, you can exchange
any life policy or endowment for an annuity.
✔✔Which one of the following is not characteristic of an annuity? - ✔✔Life insurance is
concerned with how soon one will die, while life annuities are concerned with how long
one will live.
✔✔An insured bought an annuity for $80,000. The insured died after receiving only
$50,000. The balance is paid in a lump sum to the insured's beneficiary. This is known
as the - ✔✔Cash Refund option; The Cash Refund option provides a guaranteed
income to the annuitant for life. if the annuitant dies before the annuity is depleted, a
lump sum cash payment of the remaining amount will be paid to the beneficiary.
✔✔Albert has purchased an annuity that will pay him a monthly income for the rest of
his life. If Albert dies before the annuity has paid back as much as he put into it, the
insurance company has agreed to pay the difference to Albert's daughter. What annuity
payout option did Albert select? - ✔✔A cash refund; cash refund option provides a
guaranteed income to the annuitant for life and, if the annuitant dies before the annuity
fund is depleted, a lump-sum cash payment of the reamaining balance is made to the
beneficiary.
✔✔All of the following are true of an accumulation period of an annuity EXCEPT - ✔✔It
does not occur in a deferred annuity; The accumulation period is the time over which
payments are made by an annuitant into an annuity. The payments in a deferred
annuity earn interest and grow tax deferred during the accumulation period.
,✔✔The dollar value of an annuity unit is based on - ✔✔the return on the equity portfolio
supporting the annuity
✔✔At what age is a surviving spouse without dependents eligible for Social Security
survivor benefits? - ✔✔60; Reduced widow or widower benefits can be received as
early as age 60.
✔✔Which Social Security status does a worker with 6 quarters of coverage during the
last 13-quarter period have? - ✔✔Currently insured; To be considered "currently
insured" you must have 6 quarters of coverage during the last 13-quarter period.
✔✔A worker is entitled to Social Security disability benefits if all of the following are true
EXCEPT for - ✔✔worker cannot perform his or her current job, but is actively seeking
other employment;
✔✔Who is eligible for retirement benefits under Social Security? - ✔✔Fully insured
workers; Social Security retirement benefits are only available to covered workers who
are fully insured upon retirement.
✔✔Who is NOT eligible for Social Security survivor benefits? - ✔✔A deceased worker's
dependent parents of any age; Only dependent parents age 62 or older can receive
survivorship benefits if they were dependent upon the deceased worker for at least half
of their support.
✔✔Which of these factors affects the Social Security normal retirement age? - ✔✔Year
in which worker was born; The Social Security normal retirement age depends upon the
worker's year of birth.
✔✔In order to be considered "currently insured" under Social Security, an individual
must be credited with - ✔✔6 quarters of coverage during the last 13-quarter period; To
reach currently insured status under the Social Security system, an individual must be
credited with a MINIMUM 6 quarters of coverage during the last 13-quarter period.
✔✔What is considered to be the definition of disability, according to Social Security? -
✔✔Unable to engage in any substantial gainful activity; As part of its definition of
disability, Social Security requires that a disability claimant (applicant) be unable to
perform what it calls substantial gainful activity (SGA).
✔✔According to Social Security, an individual with 6 credits of coverage during the
previous 13-quarter period is considered to be - ✔✔currently insured; you must have 6
quarters of coverage during the last 13-quarter period.
, ✔✔An individual that has 40 quarters of coverage, for Social Security purposes, is
considered to be - ✔✔fully insured; An individual that has 40 quarters of coverage, for
Social Security purposes, is considered to be fully insured.
✔✔How long is a person expected to be disabled in order to receive Social Security
disability benefits? - ✔✔12 months; Social Security disability benefits are paid to
persons expected to die or be disabled for AT LEAST 12 months.
✔✔Which type of worker has Social Security benefits available to them? - ✔✔Benefits
under Social Security are available only for workers who are fully insured.
✔✔ESOPs are typically invested in - ✔✔employer stock
✔✔What area of group health insurance is regulated under the Employee Retirement
Security Act of 1974 (ERISA)? - ✔✔Disclosure and reporting
✔✔How are Roth IRA's treated for tax purposes? - ✔✔Non-deductible contributions and
tax-free distributions
✔✔What does ESOP stand for? - ✔✔Employee Stock Ownership Plan
✔✔Retirement plans are prevented from favoring highly compensated employees under
which government regulation? - ✔✔Nondiscrimination
✔✔With three partners in a business, how many life insurance policies would be
required to insure a cross-purchase buy-sell plan? - ✔✔6
✔✔Under a partnership cross-purchase plan, when there are 4 partners how many
policies are needed? - ✔✔12; With a partnership cross purchase plan, each partner
owns, is the beneficiary of, and pays the premiums for life insurance on the other
partner or partners in an amount equal to his or her share of the purchase price.
✔✔"Life insurance creates an immediate estate". This phrase means - ✔✔when the
insured dies, a death benefit is paid
✔✔Key person insurance is intended to - ✔✔cover business losses due to the death of
a key employee; Key person insurance is designed to cover business losses due to the
death of a key employee.
✔✔Which of the following pieces of information is NOT gathered during the personal
financial planning process? - ✔✔An individual's civic organization memberships; All of
these pieces of information are normally gathered during the personal financial planning
process
