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35 Cards in this Set

  • Front
  • Back

What are the personal uses of life insurance?

Survivor protection, estate creation and conservation, cash accumulation and liquidity

What type of policy is typically issued without proof of insurability from the insured?

Group policy

In what firm or payment must the contributions to a traditional IRA be made?

In cash (or cash equivalents)

It's the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?

No, lump sum benefits are received tax free

What is required to qualify an individual to contribute to a traditional IRA?

Earned income

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage

Whole life

What does liquidity mean in a life insurance policy?

Availability of cash value

Who may contribute to an HR-10 plan?

A style employed individual

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?

Death benefits are generally not subjects to income taxes

What is the name for an overfunded life insurance policy?

MEC - a Modified Endowment Contract

If a retirement plan is qualified, what does that mean?

The plan has favorable tax treatment

Who owns a group life insurance contract?

The employer (also known as the sponsor of the group)

SIMPLE plans are available to groups of how many employees

No more than 100

What qualified plan is suitable for the self employed?

HR-10 or Keogh

Who qualifies for tax-sheltered annuities, or 403(b) plans?

Employees of nonprofit organizations under Section 501(c)(3) and employees of public school systems

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

Interest only

What is the primary purpose of a 401(k)?

Provide retirement income

Why are dividends in life insurance policies not taxable

Dividends are not considered income for tax purposes ; they are a return of unused premiums

Group life insurance policies are written as what type of insurance?

Annually renewable term

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Cash value growth is tax deferred

Who would be considered a 3rd party owner?

An individual or an entity who is not the insured

What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59.5?

10% penalty

What type of policy issues certificates of insurance to the insureds?

Group policy

When would life insurance policy proceeds be included in the insured'S taxable estate?

When there is an incident of ownership at the time of death

What are the 3 types of social security benefits?

Retirement, disability, and survivors

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

Estate conservation

What is the main purpose of the 7-Pay Test?

To determine if a life insurance policy is a Modified Endowment Contract

For a retirement plan to be qualified, it must be designed for whose benefit?

Employees

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

Only the portion in excess of the premium paid

What is the penalty for excessive contributions to a traditional IRA?

6%

Is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?

No, lump sum benefits are tax free

What is the main advantage of converting from group life insurance to individual coverage?

Evidence of insurability is not required

What are the characteristics of the group that underwriters will consider before using a group life policy?

Group's purpose, size, financial strength, and turnover

When planning for survivor protection in life insurance, what needs to be considered?

The insured's current assets, liabilities, and survivor's needs

What are some examples of qualified plans?

IRA, 401(k), HR10 (Keogh), SEP, SIMPLE