BAO BOARD EXAMS QUESTIONS & ANSWERS
Funeral Preneed and Death Benefit
What are *two* common funding vehicles? - Answer -- Trust
- Insurance
What are *four* different types of *trust*? - Answer -- Individual accounts
- GIC term accounts
- Fraternal organizations
- Pooled funds
What are *two* types of *insurance*? - Answer -- Group annuities (insured and
uninsured)
- Final expense policies (direct to consumer agents)
What are *two* facts about *individual accounts*? - Answer -- Often at credit unions or
banks
- Typically low interest
What is a *GIC*? - Answer -A term investment at a bank, credit union or investment
company. They receive posted interest rate which is stated at the beginning of the term
investment
How are you *protected* if you deposit money and *how much* is protected? - Answer -
- Protected by CDIC (banks) or DICO (credit unions)
- Up to $100,000
How do *fraternal organizations* work as a trust? - Answer -- Offer individual
certificates
- Interest rates fluctuate, usually change every 1 or 2 years
What can a funeral home receive on the *original investment amount*? - Answer -
Marketing allowance (commission)
Are *trust* products *transferable*? - Answer -Yes
What happens to *excessive funds* in *trust accounts*? - Answer -Funds must be
returned to state and anything over $50 is taxable
What happens if you *cancel a trust*? - Answer -You get back 100% of the funds plus
interest, minus 10% up to $350
Are there *cancellation fees* for trusts? - Answer -Some smaller banks may charge a
fee if it has been cancelled before maturity
, What *payment type* is a *trust*? - Answer -Flexible - not fixed
What happens if someone dies *before* the *payment plan* is *complete* for a *trust or
annunity*? - Answer -Family owes the difference at-need
How do *pooled trusts* work? - Answer -- Requires a third party trustee who may
charge fees
- Individual account tracking still required
How are *trustee fees* paid out for *pooled trust*? - Answer -Paid out of income
Do *third party trustees* get paid *commission*? - Answer -No
How are funds in an *uninsured group annuity* protected? - Answer -By ASSURIS,
which is a reinsurer
What type of *payment options* does *uninsured group annuity* have? - Answer -
Flexible fixed payment options
Is *uninsured group annuity* guaranteed? - Answer -No, family will owe the difference
at time of need
How does *commission* work for *uninsured group annuity*? - Answer -Higher
commission = lower interest rate
Lower commission = higher interest rate
Front load commission is paid at a % of cash value
What is the *death benefit* of *uninsured group annuity*? - Answer -Typically face
value plus growth
How does *cancellation* of *uninsured group annuity* work? - Answer -Typically cash
surrender value and it can very WIDELY!
Can *uninsured group annuity* be converted to another person? - Answer -Yes
What can you do with *excessive funds* in *uninsured group annuity*? - Answer -
Beneficiary can be named for excess funds to be returned tax free. If no beneficiary is
named, then money goes to estate and becomes taxable
How do you calculate premiums? - Answer -Use the guide on the back of the insurance
application!
How does an *insured group annuity* work? - Answer -Fixed simple interest growth
rate which may or may not change
Funeral Preneed and Death Benefit
What are *two* common funding vehicles? - Answer -- Trust
- Insurance
What are *four* different types of *trust*? - Answer -- Individual accounts
- GIC term accounts
- Fraternal organizations
- Pooled funds
What are *two* types of *insurance*? - Answer -- Group annuities (insured and
uninsured)
- Final expense policies (direct to consumer agents)
What are *two* facts about *individual accounts*? - Answer -- Often at credit unions or
banks
- Typically low interest
What is a *GIC*? - Answer -A term investment at a bank, credit union or investment
company. They receive posted interest rate which is stated at the beginning of the term
investment
How are you *protected* if you deposit money and *how much* is protected? - Answer -
- Protected by CDIC (banks) or DICO (credit unions)
- Up to $100,000
How do *fraternal organizations* work as a trust? - Answer -- Offer individual
certificates
- Interest rates fluctuate, usually change every 1 or 2 years
What can a funeral home receive on the *original investment amount*? - Answer -
Marketing allowance (commission)
Are *trust* products *transferable*? - Answer -Yes
What happens to *excessive funds* in *trust accounts*? - Answer -Funds must be
returned to state and anything over $50 is taxable
What happens if you *cancel a trust*? - Answer -You get back 100% of the funds plus
interest, minus 10% up to $350
Are there *cancellation fees* for trusts? - Answer -Some smaller banks may charge a
fee if it has been cancelled before maturity
, What *payment type* is a *trust*? - Answer -Flexible - not fixed
What happens if someone dies *before* the *payment plan* is *complete* for a *trust or
annunity*? - Answer -Family owes the difference at-need
How do *pooled trusts* work? - Answer -- Requires a third party trustee who may
charge fees
- Individual account tracking still required
How are *trustee fees* paid out for *pooled trust*? - Answer -Paid out of income
Do *third party trustees* get paid *commission*? - Answer -No
How are funds in an *uninsured group annuity* protected? - Answer -By ASSURIS,
which is a reinsurer
What type of *payment options* does *uninsured group annuity* have? - Answer -
Flexible fixed payment options
Is *uninsured group annuity* guaranteed? - Answer -No, family will owe the difference
at time of need
How does *commission* work for *uninsured group annuity*? - Answer -Higher
commission = lower interest rate
Lower commission = higher interest rate
Front load commission is paid at a % of cash value
What is the *death benefit* of *uninsured group annuity*? - Answer -Typically face
value plus growth
How does *cancellation* of *uninsured group annuity* work? - Answer -Typically cash
surrender value and it can very WIDELY!
Can *uninsured group annuity* be converted to another person? - Answer -Yes
What can you do with *excessive funds* in *uninsured group annuity*? - Answer -
Beneficiary can be named for excess funds to be returned tax free. If no beneficiary is
named, then money goes to estate and becomes taxable
How do you calculate premiums? - Answer -Use the guide on the back of the insurance
application!
How does an *insured group annuity* work? - Answer -Fixed simple interest growth
rate which may or may not change
