Insurance MCQ

An insured decided to surrender his Whole Life insurance policy which he purchased 30 years ago. The insured was paying annual premiums of $500 while the policy was in force (which added up t0 $15,000). When he surrendered the policy, the cash surrender value was $18,000. What part of the surrender value would be income taxable? A. $1,000 B. $3,000 C. $15,000 D. $18,000 Answer: B. $3,000

Which concept is associated with exclusion ratio? A. Annuities payments B. Dividends distribution C. How exclusion riders affect premiums D. Policy provision Answer: A. Annuities payments

A life insurance policy owner has an outstanding policy loan. What will the insurer most likely do? A. Cancel the policy B. Charge interest on the loan C. Require payment of additional premium D. Asses a fine Answer: B. Charge interest on the loan

Life insurance death benefits paid in a lump sum are generally A. Taxed as a capital gain B. Taxed as ordinary income C. Not taxed as income D. Taxable to the extent that they exceed 7.5% of the beneficiaries adjusted gross income Answer: C. Not taxed as income

Which type of retirement account allows contributors to continue beyond age 70.5 and does not force discrimination to start at age 70.5? A. Roth IRA B. Traditional IRA C. Spousal IRA D. Flexible IRA Answer: A. Roth IRA

Which of the following is TRUE regarding the IRS Section 457 plan? A. It is a deferred compensation plan B. Contributors to the plan re unlimited C. It is a plan for the public educators and nonprofit organizations D. Contributors and earnings are tax deductible Answer: A. It is a deferred compensation plan

In an traditional IRA plan, who would be allowed catch-up contributions? A. Anyone with earned income B. Individuals age 50 or older C. Individuals who have dependents D. Individuals who contribute less than the allowed maximum amount Answer: B. Individuals age 50 or older

A teacher may defer a portion of his earned income into an A. SIMPLE plan B. 529 plan C. 403(B) TSA D. HR-10 plan Answer: C. 403(B) TSA

In the state of NY, investors can contribute up to a lifetime maximum for the college expenses of a designated beneficiary. What is the name of this plan? A. Section 529 Plan B. Section 457 Plan C. Scholarship fund D. Roth IRA Answer: A. Section 529 Plan

Keogh plans are provided specifically for A. Public educators B. The self-employed C. Government employees D. Retired individuals Answer: B. The self-employed

What is the primary purpose for a 401K plan? A. Accumulating funds for retirement B. Accumulating education funds C. Receiving dividends over a certain period of time D. Receiving life insurance settlements Answer: A. Accumulating funds for retirement

What does an annuity protect the contact owner against? A. Estate taxes B. Living longer than expected C. Leaving beneficiaries without income D. The financial impact cause by the premature death of the owner Answer: B. Living longer than expected

An Equity Indexed Annuity will grow based upon A. A diversified portfolio of individual stocks and bonds B. Performance of a recognized index C. A moderate rate of interest D. A rate of interest determined by the banking system Answer: B. Performance of a recognized index

An agent selling variable annuities must be registered with A. FINRA B. SEC C. NAIC D. The Guaranty Association Answer: A. FINRA

Which of the following terms are associated with the way an annuity is funded? A. Increasing or decreasing B. Immediate or deferred C. Single life or multiple lives D. Single premium or periodic payments Answer: D. Single premium or periodic payments

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement option should he consider? A. Fixed annuity B. Refund annuity C. Annuity certain D. Variable annuity Answer: C. Annuity certain

What is the advantage of having a qualified annuity? A. Higher dividends B. Favorable tax treatment C. No filing with the IRS D. Receiving a lump sum benefit tax free Answer: B. Favorable tax treatment

Which of the following is NOT a term for the period of time during which annuitant of the beneficiary receives income? A. Pay-out period B. Liquidation period C. Accumulation period D. Annuitization period Answer: C. Accumulation period

In a deferred annuity, the difference between the accumulation value and the surrender value is the A. Front-end load B. Mortality charge C. Interest D. Surrender charge Answer: D. Surrender charge

Which of the following is NOT true regarding the annuitant? A. The annuitants life expectancy is taken into consideration for the annuity B. The annuitant receives the annuity benefits C. The annuitant must be a natural person D. The annuitant cannot be the same person as the annuity owner Answer: D. The annuitant cannot be the same person as the annuity owner