Term
To purchase the greatest amount of coverage for the least amount of premium, a client would purchase which of the following?
Choose one answer.
a. An ordinary life policy
b. A participating policy
c. A term policy
d. A variable life policy
A person at any given age, for a specified dollar amount spent (premium), can always own more term insurance than any other class of life insurance, because all they are purchasing is a death benefit (protection) for a temporary period of time. |
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Definition
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Term
The method of purchasing insurance for a Buy-Sell Agreement in which each party involved purchases insurance on the life of his/her partner(s) or employer is called:
Choose one answer.
a. Cross Purchase Plan
b. Entity Purchase Plan
c. Sell-Purchase Plan
d. Split-Dollar Plan
A Cross Purchase Plan is used when each party to a Buy-Sell Agreement purchases life insurance on each other or the employer. |
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Definition
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Term
Under an Entity Plan funding of a Buy-Sell Agreement, the business is all of the following, except:
Choose one answer.
a. Premium payor
b. Beneficiary
c. Policyholder
d. Insured
Under an Entity Plan funding of a Buy-Sell Agreement, the business is the owner, premium payer, and beneficiary of a policy written upon each of the partners or shareholders who are the insureds. |
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Definition
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Term
The income earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as:
Choose one answer.
a. Human Life Value Approach
b. Family Values Approach
c. Needs Analysis Approach
d. Future Earning Value Approach
The objective of the Human Life Value Approach is to provide the proper amount of coverage as determined by the value of the insured individual to his/her dependents. |
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Definition
| Human Life Value Approach |
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Term
Which of the following statements is true regarding life insurance?
Choose one answer.
a. All life insurance is issued on a participating basis.
b. Life insurance eliminates risk.
c. There are many uses of life insurance in addition to survivor protection, such as cash accumulation, liquidity, estate creation and conservation.
d. Life insurance is only used for final expenses.
There are many uses of life insurance. |
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Definition
| There are many uses of life insurance in addition to survivor protection, such as cash accumulation, liquidity, estate creation and conservation. |
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Term
What is the purpose of determining the proper amount of insurance needed by a prospective buyer?
Choose one answer.
a. To only prevent over insuring.
b. To prevent both over and under insuring.
c. None of the answers listed are correct.
d. To only prevent under insuring.
The purpose in determining the proper amount of life insurance to own in the event of a premature death is to avoid both over and under insuring of the individual. |
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Definition
| To prevent both over and under insuring |
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Term
All of the following are correct regarding Key Person Insurance, except:
Choose one answer.
a. Policy is owned by the employer.
b. The policy is not related to group coverage.
c. The policy is the primary source of income to replace any lost revenue.
d. The policy insures the employee's retirement plan.
A Key Person Plan does not insure the employee's retirement. The employer is the owner and beneficiary, not the employee.Choose one answer.
a. Policy is owned by the employer.
b. The policy is not related to group coverage.
c. The policy is the primary source of income to replace any lost revenue.
d. The policy insures the employee's retirement plan. |
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Definition
| The policy insures the employee's retirement plan. |
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Term
Which of the following types of coverage is best used to protect the beneficiary, and to provide a living benefit for the policyowner?
Choose one answer.
a. Industrial
b. Variable
c. Permanent
d. Group
Permanent insurance is designed not only to provide the beneficiary a death benefit if the insured dies, but also to provide the insured/owner a build up of cash value from which they may borrow for emergency expenses. |
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Definition
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Term
Which of the following is true as regards a Deferred Compensation Plan?
Choose one answer.
a. Income taxes are deferred until the funds are received.
b. It is an incentive plan.
c. All of the statements listed are true.
d. It provides a certain amount of money at retirement.
All the statements are true of a Deferred Compensation Plan. |
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Definition
| All of the statements listed are true. |
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Term
The Needs Analysis Approach always assumes death of the client to be:
Choose one answer.
a. At age 100
b. Immediate
c. Within 10 years of the assessment
d. Within 20 years of the assessment
The Needs Analysis Approach always assumes the death of the individual to be immediate, and assesses various factors to calculate all financial needs caused by an immediate death. |
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Definition
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Term
In those instances in which the death of a valued employee could cause financial hardship for a company, the company might acquire additional funds through which type of coverage?
Choose one answer.
a. Key Person
b. Preferred Insured
c. Business Continuation
d. Employer-Employee
The business would likely purchase a Key Person (Key Employee) Policy on the life of the valued employee to offset the expenses and financial losses due to the death of that employee. |
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Definition
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Term
Which of the following is false regarding Split-Dollar plans?
Choose one answer.
a. When death occurs, the employer receives a portion of the death benefit equal to the cash value of the policy or the total of premiums paid.
b. The premium payments are split between the employee and employer.
c. The employee does not have to prove insurability.
d. Split-Dollar plans are not tax-qualified.
Since an individual life insurance policy is being issued, proof of insurability is required. |
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Definition
| The employee does not have to prove insurability. |
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Term
All of the following are disadvantages of not having a Buy-Sell Agreement, except:
Choose one answer.
a. Income to surviving family members stops.
b. Places a value on the business at a previously agreed price.
c. The assets of the business are reduced because of forced liquidation.";
d. The estate transfer may be delayed due to a forced liquidation of the business.
Placing a value on the business at a previously agreed upon price would be an advantage of having a Buy-Sell Agreement, not a disadvantage. |
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Definition
| Places a value on the business at a previously agreed price. |
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Term
All of the following are characteristics of a Deferred Compensation Plan, except:
Choose one answer.
a. An incentive plan in which an employer promises to pay key employees a certain amount of benefit at a specified future date.
b. The employer is both owner and beneficiary.
c. The employee does not pay income taxes on the benefit until it is received.
d. The employee may own the Deferred Compensation Plan.
The employer is both the policyowner and beneficiary of a Deferred Compensation Plan. The employee is the insured. |
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Definition
| The employee may own the Deferred Compensation Plan. |
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Term
Which of the following statements is false?
Choose one answer.
a. When using the Human Life Value approach, the amount of past earnings and debts must also be calculated.
b. When using the Needs Analysis Approach, all financial needs caused by an immediate death must be calculated.
c. The value of all personal assets is taken into account when using the Human Life Value Approach.
d. There is more than one approach to determine the amount of life insurance needed.
The Human Life Value Approach concerns itself with the replacement of future earnings and services of the insured in the event of a premature death, not past earnings. |
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Definition
| When using the Human Life Value approach, the amount of past earnings and debts must also be calculated. |
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Term
To determine one's Human Life Value, a producer would check all of the following, except:
Choose one answer.
a. The individual's annual income before taxation.
b. The number of years the individual expects to work.
c. The value of the individual's dollar as it depreciates over time.
d. The individual's annual expenses.
The individual's annual income before taxation is the exception, because it states the individual's annual income before taxation, as opposed to after-tax annual income. |
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Definition
| The individual's annual income before taxation. |
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Term
| If a policy owner cash surrenders a life insurance policy, the insurer could asses a surrender charge. T or F? |
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Definition
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