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35 Cards in this Set
- Front
- Back
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What are the personal uses of life insurance? |
Survivor protection, estate creation and conservation, cash accumulation and liquidity |
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What type of policy is typically issued without proof of insurability from the insured? |
Group policy |
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In what firm or payment must the contributions to a traditional IRA be made? |
In cash (or cash equivalents) |
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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 |
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What is required to qualify an individual to contribute to a traditional IRA? |
Earned income |
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If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage |
Whole life |
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What does liquidity mean in a life insurance policy? |
Availability of cash value |
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Who may contribute to an HR-10 plan? |
A style employed individual |
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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 |
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What is the name for an overfunded life insurance policy? |
MEC - a Modified Endowment Contract |
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If a retirement plan is qualified, what does that mean? |
The plan has favorable tax treatment |
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Who owns a group life insurance contract? |
The employer (also known as the sponsor of the group) |
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SIMPLE plans are available to groups of how many employees |
No more than 100 |
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What qualified plan is suitable for the self employed? |
HR-10 or Keogh |
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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 |
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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 |
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What is the primary purpose of a 401(k)? |
Provide retirement income |
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Why are dividends in life insurance policies not taxable |
Dividends are not considered income for tax purposes ; they are a return of unused premiums |
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Group life insurance policies are written as what type of insurance? |
Annually renewable term |
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According to the taxation rules of life insurance policies, how are cash value increases taxed? |
Cash value growth is tax deferred |
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Who would be considered a 3rd party owner? |
An individual or an entity who is not the insured |
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What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59.5? |
10% penalty |
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What type of policy issues certificates of insurance to the insureds? |
Group policy |
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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 |
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What are the 3 types of social security benefits? |
Retirement, disability, and survivors |
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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 |
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What is the main purpose of the 7-Pay Test? |
To determine if a life insurance policy is a Modified Endowment Contract |
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For a retirement plan to be qualified, it must be designed for whose benefit? |
Employees |
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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 |
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What is the penalty for excessive contributions to a traditional IRA? |
6% |
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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 |
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What is the main advantage of converting from group life insurance to individual coverage? |
Evidence of insurability is not required |
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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 |
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When planning for survivor protection in life insurance, what needs to be considered? |
The insured's current assets, liabilities, and survivor's needs |
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What are some examples of qualified plans? |
IRA, 401(k), HR10 (Keogh), SEP, SIMPLE |
