TEXAS LIFE AND HEALTH: TAXES, RETIREMENT, AND

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TEXAS LIFE AND HEALTH: TAXES, RETIREMENT, AND

OTHER INSURANCE CONCEPTS EXAM QUESTIONS

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -53 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: What is the main purpose of the Seven-pay Test?

Answer:

It determines if the insurance policy is a MEC

Question 2: Life insurance death proceeds are

Answer:

generally not taxed as income Question 3: All of the following are chracteristics of group life insurance EXCEPT

Answer:

Premiums are determined by the age, sex, and occupation of each individual certificate holder Question 4: All of the following statements concerning the use of life insurance as an Executive bonus are correct EXCEPT

Answer:

The policy is owned by the company

Question 5: All of the following are business uses of life insurance EXCEPT

Answer:

Funding against general company financial loss Question 6: a corporation is the owner and benficiary of the key person life policy. If the corporation collects the policy benefit, then

Answer:

The benefit is received tax free Question 7: A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Answer:

Survivor protection Question 8: When an employee terminates coverage under a group insurance policy, coverage continues in force

Answer:

for 31 days Question 9: All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT

Answer:

The employer can receive a current tax deduction for any contributions made to the plan Question 10: When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)

Answer:

Executive bonus

Question 11: What is the official name for the Social Security program?

Answer:

Old Age Survicors Disability Insurance

Question 12: Social Security was created to protect against all of the following EXCEPT

Answer:

Bad investment choices Question 13: how are contributions to a tax-sheltered annuity treated with regards to taxation?

Answer:

The are not included as income for the employee, but are taxable upon distribution Question 14: All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

Answer:

The policy is owned by the company

Question 15: Which of the following is TRUE of a qualified plan?

Answer:

It has a tax benefit for both employer and employee - a qualified plan is approved by the IRS, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth Question 16: If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is

Answer:

Fully Insured - A worker is fully insured under Social Security if the worker has accumulated the required number of credits based on his/her age Question 17: All of the following are examples of third-party ownership of a life insurance policy

EXCEPT

Answer:

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan Question 18: Which of the following describes the tax advantage of a qualified retirement plan?

Answer:

The earnings in the plan accumulate tax deferred

Question 19: In a life settlement contract, whom does the life settlement broker represent?

Answer:

The owner

Question 20: A key person insurance policy can pay for which of the following?

Answer:

Costs of training a replacement Question 21: Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Answer:

Premiums are not tax deductible as a business expense - the business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.Question 22: Which of the following is an eligibility requirement for all Social Security Disability Income benefits?

Answer:

Have attained fully insured status Question 23: A tax-sheltered annuity is a special tax-favored retirement plan available to

Answer:

Certain groups of employees only - a tax-sheltered annuity is a special tax-favored retirement plan available only to ceratin groups of employees (nonprofit, charitable, educational, religious, and other 501c(3) organizations, including all employees in public education.Question 24: Which of the following is NOT an example of a business use of Life Insurance

Answer:

Workers compensation Question 25: All of the following are TRUE of the federal tax advantages of a qualified plan

EXFCEPT

Answer:

At distribution, all amounts received by the employee are tax free