State: New York | Category: Life Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. At the end of the grace period, if the premium remains unpaid, what usually happens to the policy?
If the premium is not paid by the end of the grace period, the policy typically lapses according to the policy terms.
2. In underwriting, credit reports are most closely associated with assessing:
Credit reports provide information about an applicant's financial responsibility and stability, relevant to financial underwriting.
3. What is the difference between a master policy and a certificate in NY group life?
The master policy is the contract with the employer; the certificate evidences coverage for individual employees under that policy.
4. When does group life coverage typically terminate in NY?
Coverage ends when the employee loses eligibility or the employer's policy terminates; changes in job status can also affect eligibility.
5. Distributions from a qualified annuity (funded with pre-tax dollars) are generally taxed as?
Qualified annuity distributions are taxed as ordinary income because contributions were made with pre-tax dollars.
6. Which of the following statements is true about the tax treatment of life insurance premiums when used to fund a buy-sell agreement?
Typically, premiums paid by a business for life insurance on the lives of owners under a buy-sell are not deductible as a business expense.
7. Which of the following is a physical hazard example?
Faulty electrical wiring is a physical hazard because it physically increases the risk of a peril, such as fire.
8. Which principle allows insurers to predict losses more accurately by pooling many similar exposures?
The law of large numbers states that as the sample size grows, the actual results approach the expected results, improving predictability of losses for pricing and reserves.
9. A policy illustration is typically used to show:
Policy illustrations display non-guaranteed elements like dividends or rate projections where applicable; actual results may differ.
10. If a named beneficiary is a minor, how are the proceeds most commonly paid?
Because minors cannot generally receive funds directly, proceeds are typically paid to a custodian under UGMA/UTMA or to a court-appointed guardian.
11. The Government Pension Offset (GPO) reduces Social Security spousal or survivor benefits by what amount related to the government pension?
GPO reduces Social Security spousal or survivor benefits by two-thirds of the government pension amount for individuals receiving a government pension from non-covered work.
12. Who pays premiums in a contributory NY group life plan?
In contributory plans, both employer and employee share the premium; the employee's portion is typically withheld from payroll.
13. Churning is best described as
Churning refers to inducing policyholders to replace existing policies to generate additional commissions, often without real benefit to the insured, which is an unfair trade practice.
14. If both the insured and the designated beneficiary die before settlement, the death benefit may be paid to
If both die before settlement, the death benefit may go to the insured's estate or to the contingent beneficiary, depending on policy terms and designations.
15. In insurance, which term describes a specific cause of loss?
A peril is the actual event or circumstance that causes a loss (e.g., fire, theft).
16. Under the state's conditional receipt provisions, when does temporary coverage typically begin if the premium is paid with the application?
A conditional receipt provides temporary coverage from the date of the application/receipt, subject to underwriting and policy approval.
17. Which statement best describes a Safe Harbor 401(k) plan?
A Safe Harbor 401(k) plan provides specific employer contributions (matching or non-elective) to satisfy nondiscrimination tests and avoid complex testing.
18. A spendthrift clause in a life insurance policy primarily serves to
A spendthrift clause protects the beneficiary's proceeds from creditors and restricts improper assignments or transfers.
19. Premium payments are typically applied to which premium due first?
Premiums are normally allocated to the oldest due premium first to satisfy outstanding obligations and prevent compounding overdue amounts.
20. If a critical illness policy lapses and is later reinstated, what is commonly required?
Lapsed policies may be reinstated, but typical terms require evidence of insurability and payment of any back premiums; a new waiting period may apply.
21. During the contestability period, misstatements of age or sex discovered can lead to which of the following?
Most policies have a contestability period (commonly two years); misstatements found can lead to rescission or adjustment of benefits.
22. How long is the typical grace period for a life insurance premium?
Most life insurance policies provide a 30-day grace period for late premiums; death benefits may be paid minus overdue premium if death occurs during the grace period.
23. Death benefits paid to a beneficiary are generally tax-free, with exceptions such as transfers of value.
In most cases, life insurance death benefits are income-tax-free to the beneficiary; exceptions include transfers of value (e.g., sale of the policy).
24. Which statement best describes the liquidity purpose of life insurance in estate planning for a business owner?
Life insurance can provide liquidity to cover estate taxes and buy out the business owner's stake so the business can continue without forced sales.
25. To be a qualified retirement plan, the plan must:
Qualified plans are designed to meet ERISA standards (except for certain government or church plans) and IRS qualification requirements to receive favorable tax treatment.
26. Under the state's contract law, which statement correctly describes concealment versus misrepresentation in terms of impact on a policy?
Both concealment and misrepresentation can affect validity or claims if the facts were material to risk assessment; the remedy depends on severity and timing under state law.