,QUESTION: Which of the following retirement plans is tax-qualified?
A. Key-person
B. Defined contribution
C. Section 457 deferred compensation
D. Split dollar life insurance
ANSWER: B. Defined contribution
Rationale: Defined contribution plans (such as 401(k)s) meet IRS requirements and receive
favorable tax treatment, making them tax-qualified plans.
QUESTION: Which of the following statements is CORRECT about the Paid-Up Additions in a
participating Whole Life policy?
A. They are subject to underwriting approval.
B. They do not generate dividends.
C. They are considered term policies.
D. They are purchased on an attained age basis.
ANSWER: D. They are purchased on an attained age basis.
Rationale: Paid-up additions are bought using the insured’s current (attained) age and increase
both the policy’s cash value and death benefit.
QUESTION: Which of the following provisions in a life policy specifies the manner in which
proceeds will be paid to a beneficiary on the death of the insured?
A. Nonforfeiture Options
B. Settlement Options
,C. Conditions
D. Modes of Payment
ANSWER: B. Settlement Options
Rationale: Settlement options determine how death benefits are paid, such as lump sum, interest
only, or fixed installments.
QUESTION: If a life insurance policy applicant is classified as a substandard risk, the insurance
company will MOST likely:
A. Issue the policy with riders
B. Charge an extra premium
C. Require an annual medical examination
D. Lower the rate per thousand charged
ANSWER: B. Charge an extra premium
Rationale: Substandard risks are typically insured at a higher premium due to increased
mortality risk.
QUESTION: If a policy contains a Guaranteed Insurability rider, the insured has the right to
purchase:
A. Additional coverage when the insured reaches retirement age
B. Additional coverage whenever the insured changes jobs
C. Additional coverage at specified ages
D. Coverage on the insured's children within thirty-one days after they are born
ANSWER: C. Additional coverage at specified ages
Rationale: Guaranteed insurability allows the insured to buy more coverage at predetermined
ages without evidence of insurability.
, QUESTION: A policyowner names his wife as the primary beneficiary of his Universal Life
policy on a revocable basis. He also names his three children as secondary beneficiaries and his
estate as his tertiary beneficiary. If the policyowner's wife predeceases him, and then he dies,
who will receive the policy proceeds?
A. The children
B. The policyowner's estate
C. The primary beneficiary's estate
D. The tertiary beneficiary
ANSWER: A. The children
Rationale: If the primary beneficiary is deceased, proceeds pass to the secondary beneficiaries.
QUESTION: Which of the following terms refers to the transfer of some or all of the ownership
rights of a life insurance policy from one individual to another?
A. Nonforfeiture
B. Endorsement
C. Transfer for value
D. Assignment
ANSWER: D. Assignment
Rationale: Assignment transfers ownership rights either partially or fully to another party.
QUESTION: The PRIMARY reason for selecting a Variable Whole Life policy instead of a
traditional Whole Life policy is that the Variable Whole Life policy:
A. Provides flexible premium payments
B. Allows the policyowner to borrow a larger percentage of the cash value
C. Has the potential to earn a higher rate of return on the cash value
D. Allows the policyowner more flexibility in naming and changing beneficiaries
ANSWER: C. Has the potential to earn a higher rate of return on the cash value
A. Key-person
B. Defined contribution
C. Section 457 deferred compensation
D. Split dollar life insurance
ANSWER: B. Defined contribution
Rationale: Defined contribution plans (such as 401(k)s) meet IRS requirements and receive
favorable tax treatment, making them tax-qualified plans.
QUESTION: Which of the following statements is CORRECT about the Paid-Up Additions in a
participating Whole Life policy?
A. They are subject to underwriting approval.
B. They do not generate dividends.
C. They are considered term policies.
D. They are purchased on an attained age basis.
ANSWER: D. They are purchased on an attained age basis.
Rationale: Paid-up additions are bought using the insured’s current (attained) age and increase
both the policy’s cash value and death benefit.
QUESTION: Which of the following provisions in a life policy specifies the manner in which
proceeds will be paid to a beneficiary on the death of the insured?
A. Nonforfeiture Options
B. Settlement Options
,C. Conditions
D. Modes of Payment
ANSWER: B. Settlement Options
Rationale: Settlement options determine how death benefits are paid, such as lump sum, interest
only, or fixed installments.
QUESTION: If a life insurance policy applicant is classified as a substandard risk, the insurance
company will MOST likely:
A. Issue the policy with riders
B. Charge an extra premium
C. Require an annual medical examination
D. Lower the rate per thousand charged
ANSWER: B. Charge an extra premium
Rationale: Substandard risks are typically insured at a higher premium due to increased
mortality risk.
QUESTION: If a policy contains a Guaranteed Insurability rider, the insured has the right to
purchase:
A. Additional coverage when the insured reaches retirement age
B. Additional coverage whenever the insured changes jobs
C. Additional coverage at specified ages
D. Coverage on the insured's children within thirty-one days after they are born
ANSWER: C. Additional coverage at specified ages
Rationale: Guaranteed insurability allows the insured to buy more coverage at predetermined
ages without evidence of insurability.
, QUESTION: A policyowner names his wife as the primary beneficiary of his Universal Life
policy on a revocable basis. He also names his three children as secondary beneficiaries and his
estate as his tertiary beneficiary. If the policyowner's wife predeceases him, and then he dies,
who will receive the policy proceeds?
A. The children
B. The policyowner's estate
C. The primary beneficiary's estate
D. The tertiary beneficiary
ANSWER: A. The children
Rationale: If the primary beneficiary is deceased, proceeds pass to the secondary beneficiaries.
QUESTION: Which of the following terms refers to the transfer of some or all of the ownership
rights of a life insurance policy from one individual to another?
A. Nonforfeiture
B. Endorsement
C. Transfer for value
D. Assignment
ANSWER: D. Assignment
Rationale: Assignment transfers ownership rights either partially or fully to another party.
QUESTION: The PRIMARY reason for selecting a Variable Whole Life policy instead of a
traditional Whole Life policy is that the Variable Whole Life policy:
A. Provides flexible premium payments
B. Allows the policyowner to borrow a larger percentage of the cash value
C. Has the potential to earn a higher rate of return on the cash value
D. Allows the policyowner more flexibility in naming and changing beneficiaries
ANSWER: C. Has the potential to earn a higher rate of return on the cash value
