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A key person is typically all of the following, except: - Correct Answers ✅-Not directly involved in sales, production, or service Key persons are employees whose contributions have a significant impact on the revenue and profitability of the company, especially in small businesses. They are typically: part of the management team, more highly paid, respected by customers, creditors, suppliers, and vendors, and have direct responsibilities for sales, production, or service. Which one of the following is not a reason why premium for the individual policy issued to an insured exercising a group conversion right is higher than the group life rate previously charged? - Correct Answers ✅-The conversion policy has a higher death benefit The premium of an individual policy issued due to a group life insurance plan conversion will be at a higher than normal rate to include the insurer's guaranteed convertible surcharge because the majority of all conversions involve persons that would otherwise be uninsurable, because the conversion policy will be issued at the attained (current) age of the insured, and the policy will build cash values. The type of life insurance used to provide funds for a Buy-Sell Agreement is: - Correct Answers ✅-Any type of life insurance
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Any type of life insurance may be used to provide funds for a Buy-Sell Agreement. Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except: - Correct Answers ✅-She will be converting her group term benefit to an individual term benefit She will be converting her group term life to an individual permanent policy. To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor. - Correct Answers ✅-Probationary A probationary period is set up to help reduce the chance of facing immediate claims.
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There is a conversion period of how many days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy? - Correct Answers ✅ 31 There is a conversion period of 31 days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy. The proceeds from a _________ plan provide the necessary funds to recruit, hire, and train a replacement employee. - Correct Answers ✅Key employee Key employee life insurance plans provide the funds to recruit, hire, and train a replacement employee. Which of the following is a disadvantage of being covered under a group insurance plan? - Correct Answers ✅The group sponsor can elect to discontinue the plan, and the insurance company can increase the rates it charges
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The advantage of an insurance funded buy-sell agreement is: - Correct Answers ✅It is a legally enforceable agreement, which pre- establishes the value of the business, and provides the funds for an efficient method of transferring the deceased's business interest Some of the advantages of having such an agreement: it is legally enforceable, the value of the business is previously agreed upon, it is an immediate and automatic method of transferring the deceased's interest due to readily available funds. An agreement by an employer to continue a key employee's salary upon retirement, death or disability as long as the employee continues employment during the term of the agreement is called a: - Correct Answers ✅Salary continuation plan An agreement by an employer to continue a key employee's salary upon retirement, death or disability as long as the employee continues employment during the term of the agreement is called a salary continuation plan. Which of the following is not one of the most common methods of determining group insurance benefits? - Correct Answers ✅Tax bracket
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Every group policy containing a life insurance benefit must contain a reasonable extension of benefits upon discontinuance of the policy with respect to employees who become totally disabled while insured under the policy and who continue to be totally disabled at the date of discontinuance of the policy. L is no longer eligible for the employer's $50,000 group life insurance plan. L dies 28 days later without sending in the required conversion paperwork. What will their beneficiaries receive? - Correct Answers ✅50,000, less any premium due The conversion period is also a grace period. In the event a terminated or ineligible employee dies during the conversion period, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit. Which of the following meets the criterion for being a natural group for group life insurance purposes? - Correct Answers ✅The group was formed for a purpose other than for procuring or reducing the cost of insurance
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To be eligible for a group plan, the group must be a natural group, meaning it was formed for a purpose other than for procuring or reducing the cost of insurance. All of the following regarding credit life are true, except: - Correct Answers ✅Usually the creditor pays the premium Usually the individual debtor pays the premium. The __________ allows an insurer to pay death benefits to anyone it deems to be entitled in the absence of a designated beneficiary. - Correct Answers ✅Facility of Payment Clause A Facility of Payment Clause allows the insurer to pay the death benefit to a relative or anyone it deems is entitled in the absence of a designated beneficiary. An employee who becomes entitled under the terms of the group policy to have an individual policy issued without evidence of insurability must: - Correct Answers ✅Submit an application along with the initial premium
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A(n)__________ plan is when business partners buy life insurance policies on one another. - Correct Answers ✅Cross Purchase A cross purchase plan calls for the partners to buy life insurance policies on one another. An entity plan has the business entity buy life insurance plans on the business owners. In the event a terminated or ineligible employee dies during the conversion period from a group life plan, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit, which means that the conversion period is really: - Correct Answers ✅Grace period In the event a terminated or ineligible employee dies during the conversion period from a group life plan, whether they were going to elect individual coverage or not, a death claim will be paid by the group policy, less the premium due for the benefit, which means that the conversion period is really a grace period. In the event a terminated or ineligible employee dies during the conversion period from a group life plan, whether they were going to elect individual coverage or not, a death claim will be paid by the group
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policy, less the premium due for the benefit, which means that the conversion period is really: - Correct Answers ✅Grace period The Social Security blackout period for surviving spouses begins when the youngest child reaches age ______, and ends when the surviving spouse reaches age ______ - Correct Answers ✅16/ When the youngest child reaches age 16, the widow's/widower's blackout period begins. It continues until a surviving (non-remarried) spouse reaches age 60. An individual can make changes to their group life insurance plan at any time for any one of the following reasons, except: - Correct Answers ✅Changing health insurance carriers and deductibles An individual can make changes at any time if they have a change in status, such as adding an eligible dependent or change in employment status such as going to or from full time to part time employment. The continuation of coverage under a particular benefit provided under a group policy following discontinuance with respect to an employee or
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can be held, referred to as the 'incidental benefits' limitation, which the IRS developed standards, or rules, to determine the allowable limits. If an annuity is annuitized, then the _________ investment is recovered income tax-free over the income benefit payment period. - Correct Answers ✅After-tax Only the after-tax investment is recovered income tax-free from an annuity that is annuitized. It represents a return of the cost basis. If no beneficiary is living at the time of the insured's death, the benefit will automatically be paid __________. - Correct Answers ✅Into the insured's estate The policyowner may name the estate as a beneficiary, or by default, if no beneficiary is living at the time of the insured's death, the benefit will automatically be paid into the insured's estate. All of the following statements about Group Life Insurance are true, except: - Correct Answers ✅Employees receive a tax deduction for employer paid premiums
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Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable income. In which of the following circumstances is an annuity's tax-deferral benefit lost? - Correct Answers ✅The annuity is owned by a corporation If a corporation owns an annuity, the tax-deferral benefit is lost. Tax- deferral of annuity earnings is only for natural persons. All employer-paid premiums for amounts above $_________ of group life insurance are reported as taxable income to the employee. - Correct Answers ✅$50, All employer-paid premiums for amounts above $50,000 are reported as taxable income to the employee. Which of the following establishes a cost basis in an annuity? - Correct Answers ✅After-tax contributions
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The withdrawal that represents earnings will be taxed along with a 10% tax penalty. Life insurance will be considered 'incidental' to a qualified plan if the insurance amount is not more than ________ times the expected monthly benefit amount. - Correct Answers ✅ 100 Generally, life insurance will be considered 'incidental' to a qualified plan if no more than 50% of the contributions are used to pay insurance premiums, and the insurance amount is not more than 100 times the expected monthly benefit amount. H has an annuity funded with after-tax contributions. So far, H has placed $10,000 into the policy and it is now worth $25,000. If H cashes out the annuity, what is H's cost basis? - Correct Answers ✅$10, The amount contributed is after tax dollars and is considered the cost basis.
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Why are dividends not taxable as income when paid out to a participating policyholder? - Correct Answers ✅They represent a return of a portion of the premium paid A participating insurance company's dividend consists of the amount of premium that is returned to the policyowner if the insurance company achieves lower mortality and expense costs than expected. Qualified pension and profit-sharing plans were created by Congress to:
- Correct Answers ✅Help employees accumulate assets for retirement and provide tax advantages for contributions made by employers Qualified pension and profit-sharing plans were created by Congress to help employees accumulate assets for retirement and provide tax advantages for contributions made by employers. The Commissioner of Insurance has some general duties, which include all of the following, except: - Correct Answers ✅Interpreting and amending state laws relating to insurance While the
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All CA resident insurance licenses renew every _____ years on the last day of the month in which the license was originally issued. - Correct Answers ✅ 2 Under the California Insurance Code, all licenses renew every 2 years on the last day of the month in which the license was originally issued. Under the California Insurance Code, original (or certified copies) of records must be delivered to the Commissioner within _____ days of request. - Correct Answers ✅Under the California Insurance Code, original (or certified copies) must be delivered to the Commissioner within 30 days of request. 30 days Upon receiving a request for records, insurers and/or agents must deliver the records to the Commissioner within 30 days. If the requested files cannot be immediately furnished, on request the agent will be given an additional 60 days to provide the information.
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Any notice required to be given to an insured by the insurer may be mailed, postage paid, and addressed to the policyowner, insured, claimant, or beneficiary to be notified at the: - Correct Answers ✅Last known address of record Under the California insurance code any notice required to be given to an insured may be mailed, postage paid, and addressed to the policyowner, insured, claimant, or beneficiary to be notified at his/her last known address of record. When are Errors and Omissions claims filed? - Correct Answers ✅When clients file a report or a complaint Claims are filed due to client reports (complaints) and for a number of reasons, including negligence or inadequacy. Regarding Proof of Notice under the California insurance code, the __________ is responsible for notifying the insurer of address changes including any change of email address. - Correct Answers ✅Policyowner
