A) subject to a 10% penalty unless annuitized.
B) subject to the required minimum distribution rules.
C) taxed as ordinary income.
D) taxed as capital gain.
Answer: C) taxed as ordinary income.
A) a product very similar to a mutual fund, but with lower costs and expenses.
B) the insurance company's backing of the annuity' performance.
C) the opportunity to invest in equity securities on a tax-deferred basis.
D) lifetime income guaranteed never to drop below the initial rate.
Answer: C) the opportunity to invest in equity securities on a tax-deferred basis.
A) lower overall expenses than a mutual fund with similar investment objectives.
B) tax deferral on earnings until withdrawn from the account.
C) the choice of a large number different sub-accounts with varying objectives.
D) the ability to transfer funds between sub-accounts without incurring a tax liability under IRS Code section 1035.
Answer: A) lower overall expenses than a mutual fund with similar investment objectives.
A) The principal amount at death is the greater of the total of premium payments or the current market value.
B) Upon death, the beneficiary has a choice of settlement options.
C) If death should occur prior to age 59½, the 10% early withdrawal penalty does not apply.
D) Upon death, the proceeds pass to the beneficiary free of federal income tax.
Answer: A) The principal amount at death is the greater of the total of premium payments or the current market value.
he will not be able to exercise any options to purchase additional insurance as his health has deteriorated to such a severe level.
the new policy will bear the same issue date and age as the original policy.
the face amount must remain the same.
the premium will be rated as his health has taken a marked turn for the worse.
A) II and III.
B) I and IV.
C) I, II, III and IV.
D) II, III and IV.
Answer: A) II and III.
A) the policy owner has the right to change the selection of sub-accounts.
B) premiums are determined based upon age and sex of the insured.
C) once selected, the policy owner may change payment modes.
D) better than anticipated results in the separate account could lead to a reduction in annual premium.
Answer: D) better than anticipated results in the separate account could lead to a reduction in annual premium.
A) Ordinary income tax is due on $21,000.
B) There is a long-term capital gain of $1,000.
C) Ordinary income tax is due on the $1,000. that exceeds the original cost.
D) No tax is due.
Answer: D) No tax is due.
A) The universal life policy will generally outperform the variable life policy during a period of falling interest rates and rising stock prices.
B) There is a greater choice of separate account sub-accounts in the variable life policy.
C) There is a minimum guaranteed return on the universal life while there is no guaranteed return on the variable.
D) There is a minimum guaranteed death benefit in the variable life while no such minimum applies to a universal life policy.
Answer: D) There is a minimum guaranteed death benefit in the variable life while no such minimum applies to a universal life policy.
A) I and IV.
B) II and IV.
C) II and III.
D) I and III.
Answer: C) II and III.
A) 125%
B) 75%
C) 90%
D) 100%
Answer: B
A) 45 days.
B) 12 months.
C) 18 months.
D) 24 months.
Answer: D) 24 months.
A) variable annuity.
B) mutual fund shares.
C) term insurance policy.
D) whole life policy.
Answer: D) whole life policy.
A) Within the first 18 months, the insured may exchange the VLI policy for either a whole life or universal variable policy, issued by the same company, with no additional evidence of insurability.
B) The insured may request that the insurance company exchange the VLI policy for a traditional whole life policy, issued by the same company, within two years. The insurance company retains the right to have medical examinations for underwriting purposes.
C) Federal law requires the insurance company to allow the insured to exchange the VLI policy for a traditional whole life policy, issued by the same company, for two years, with no additional evidence of insurability.
D) The insurance company will allow the insured to exchange the VLI policy for a traditional whole life policy within 45 days from the date of the application or 10 days from policy delivery, whichever is longer.
Answer: C) Federal law requires the insurance company to allow the insured to exchange the VLI policy for a traditional whole life policy, issued by the same company, for two years, with no additional evidence of insurability.
a minimum cash value is guaranteed.
a minimum death benefit is guaranteed.
all sales charges must be addressed in the prospectus.
the money must only be invested in investment grade debt securities.
A) II and III.
B) I and III.
C) I and IV.
D) II and IV.
Answer: A) II and III.
Income earned in the separate account is tax deferred.
Separate account performance below the AIR causes a reduction in cash value.
Fixed contributions are required.
Contract owners have voting rights.
A) III and IV.
B) I and IV.
C) I and II.
D) II and III.
Answer: B) I and IV.
A) Unit values are computed daily and cash values are computed monthly.
B) Unit values are computed monthly and cash values are computed daily.
C) Unit values are computed weekly and cash values are computed monthly.
D) Unit values are computed monthly and cash values are computed weekly.
Answer: A) Unit values are computed daily and cash values are computed monthly.
A) annually.
B) weekly.
C) monthly.
D) semiannually.
Answer: A) annually.
A) There are no guarantees.
B) The death benefit.
C) The cash value.
D) The maturity value.
Answer: B) The death benefit.
A) to 50% of the original face value.
B) to the original face value.
C) to 0.
D) to 25% of the original face value.
Answer: B) to the original face value.
A) exchange life.
B) variable life.
C) installment life.
D) equity life.
Answer: B) variable life.