Life Insurance Exam Flashcards IDAHO

Questions and Answers

Which of the following statements describes one of the reasons individuals purchase life insurance?

It creates an immediate estate. (correct)

It is required by law.

It provides cash for college.

It grows cash value quickly.

How long is the grace period for an individual life insurance policy?

1 month

In this state, the owner gets a 'free look' of a specified number of days from delivery of the policy.

Delivery of the policy

Which of the following would be likely to establish a SEP?

Small employers Signup and view all the answers

If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do?

Inform the insurance company Signup and view all the answers

Cash Value guarantees in a whole life policy are called?

Nonforfeiture values Signup and view all the answers

Which of the following statements concerning the Medical Information Bureau is correct?

It assists underwriters in evaluating and classifying risks. Signup and view all the answers

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insured's death was caused by an accident as defined in the policy?

Accidental Death Rider Signup and view all the answers

If a retirement plan or annuity is qualified, this means?

It satisfies IRS requirements for favorable tax treatment. Signup and view all the answers

Which of the following is NOT a personal use of life insurance?

Funding a buy-sell agreement Signup and view all the answers

Which of the following is true of the taxation of cash values in a business life insurance policy?

Cash values grow tax-deferred. Signup and view all the answers

Which of the following statements is INCORRECT concerning Modified Endowment Contracts (MECs)?

MECs do not accumulate cash value. Signup and view all the answers

For an insurance contract, the principle of utmost good faith means?

Each party relies upon the truthfulness of the other. Signup and view all the answers

All of the following statements are true regarding an Ordinary (Straight) Life policy EXCEPT?

It does not have a guaranteed death benefit. Signup and view all the answers

An individual has a $200,000 convertible term life insurance policy. If he chooses, he can?

Convert to a whole life policy for the same face amount without proof of insurability. Signup and view all the answers

All of the following are true regarding a producer's fiduciary responsibilities EXCEPT?

Producers may commingle personal funds with company funds. Signup and view all the answers

An annuity has accumulated a cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive?

70,000 Signup and view all the answers

If an insured dies, and it is discovered that the insured misstated his/her age or gender, the life insurance company will?

Adjust the death benefit to what the premium would have purchased at the actual age or gender. Signup and view all the answers

An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered?

Delivered Signup and view all the answers

Which of the following will be eligible for a tax-sheltered annuity?

Public school teachers Signup and view all the answers

Study Notes

Life Insurance Key Concepts

Individuals purchase life insurance to create an immediate estate, providing financial security to beneficiaries upon death.
A grace period for individual life insurance policies is typically one month, allowing time for premium payments.
In Idaho, policyholders receive a "free look" period starting from the delivery date of the policy, allowing them to review it before committing.

Specific Insurance Policies and Provisions

Small employers commonly establish Simplified Employee Pension (SEP) plans to provide retirement benefits.
Producers suspecting misrepresentation by the applicant must inform the insurance company to uphold ethical practices.
Whole life policies offer cash value guarantees known as nonforfeiture values, which are protected by state law and cannot be surrendered by the policyholder.

Medical Information and Riders

The Medical Information Bureau assists underwriters by evaluating and classifying risks to ensure informed underwriting decisions.
The Accidental Death Rider provides a death benefit that is twice or thrice the face amount if death results from an accident as defined in the policy.

Retirement and Tax Implications

Qualified retirement plans or annuities must meet IRS criteria for favorable tax treatment, giving them certain tax benefits.
Life insurance policies accumulate cash values on a tax-deferred basis, applying to both business and individually owned policies.

Modified Endowment Contracts (MECs)

Modified Endowment Contracts must pass the 7-pay test; failing results in taxation on policy loans or withdrawals, especially if taken before age 59½, incurring a 10% penalty.

Good Faith and Responsibilities

The principle of utmost good faith requires both parties in an insurance contract to trust each other's truthfulness.
Ordinary (Straight) Life policies provide guaranteed death benefits, contrary to some misunderstandings about their nature.

Conversions and Fiduciary Duties

Policyholders with a convertible term life insurance policy can switch to a whole life policy for the same face amount without proving insurability.
Producers must not commingle personal funds with company funds, maintaining separation for ethical fiduciary responsibility.

Benefits Upon Death

In the event of an annuitant's death during the accumulation phase, beneficiaries receive the full accumulated cash value of the annuity.
If an insured’s age or gender is misrepresented, the life insurance company adjusts the death benefit based on what the premium would have purchased at the correct age/gender.

Delivery of Policies and Annuities

When an insurer sends an insurance policy to a policyholder, it is considered legally delivered once control is relinquished.
Public school teachers are eligible for tax-sheltered annuities, providing additional retirement savings options.

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Description

Test your knowledge of life insurance concepts with these flashcards tailored for Idaho's regulations. Covering topics like grace periods and immediate estates, this quiz helps reinforce essential life insurance information for both students and professionals.