life 4 answers

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Life 4 Score: 56% You answered 34 out of 60 questions correctly. You appear to have some knowledge of the material. Keep trying. Click here to return to your Classroom 1. In a typical split dollar policy the employer and the employee split the cost of the insurance. On an annual basis, the employer's outlay is equal to the: Correct Answer: increase in cash value Explanation: The employer's part of the premium is equal to the increase in cash value. The employee pays the balance. This is not really the way it is done, but the book says so. So be it! Concept: None No further information available. 2. Correct! 3. All of the following statements concerning group credit life are true except: Correct Answer: Premiums are paid entirely by the creditor. Explanation: The insurance is paid by the debtor. The creditor may insist that coverage be required but they can not force the debtor to obtain coverage from their institution. Concept: None No further information available. 4. Lightning Joe died leaving behind a wife, Thunderhead, age 35, and their 12 year son, Cumulonimbus. Thunderhead's blackout period will be for how long? Correct Answer: 21 year Explanation: The blackout period begins when the youngest child reaches age 16, making Thunderhead 39. This continues until she is first eligible for Social Security benefits, age 60. Do not confuse the Survivor benefits with the Retirement benefits, which are ages 65 and 62. Survivor benefits are ages 65 and 60. Remember, the child receives a benefit until age 18. Concept: None No further information available. 5. Correct! 6. Correct! 7. Correct! 8. Which of the following statements concerning social security benefits is true? Correct Answer: Michael retired at age 65. He has a 15 year old totally disabled daughter and a wife, age 45. The child will receive income for life. The wife also will receive a monthly benefit, even though she is under age 62. Explanation: DEATH BENEFITS: The child only receives a benefit until he/she is 18 (19 if in high school). They did away with college funding. RETIREMENT BENEFITS: The wife will receive a benefit, even though she is under age 62, because the child was disabled before age 22. The child will receive a benefit indefinately. DISABILITY BENEFITS: His disability benefit will be less because he had taken early retirement. TAXATION: S.S. benefits may be taxed up to 85%. Concept: None No further information available. 9. Correct! 10. Correct! 11. Correct! 12. All the following are examples of non-qualified plans except: Correct Answer: simple plans Explanation: Non-qualified plans receive no favorable treatment from the IRS. They are not tax deductible. Therefore, the business can discriminate and pick-and-choose which employees they want to reward. Concept: None No further information available. 13. For a group life plan to receive favorable tax treatment, the government imposes certain requirements to ensure that the rank-and-file employees are not discriminated against. Which of the following statements regarding eligibility requirements is not correct? Correct Answer: The life insurance must be the same amount for all. Explanation: The insurance does not have to be the same dollar amount. However, the amount of insurance provided to all employees must bear a uniform relationship to their level of compensation or position. In other words, a manager would receive more insurance than a supervisor. The cost for any amount of insurance above $50,000 would be included in the employee's salary for tax purposes. Concept: None No further information available. 14. All of the following statements concerning Deferred Compensation plans are correct except: Correct Answer: Contributions may be tax deducted. Explanation: Deferred Compensation contributions are not tax deductible (non-qualified), therefore, the plans may be used to discriminate in favor of the highly paid employees. Concept: None No further information available. 15. Correct! 16. All the following statements concerning deferred compensation plans are correct except: Correct Answer: They receive favorable tax treatment from the IRS. Explanation: If someone were in a high tax bracket and receiving a bonus, taxes could eat the bonus. The bonus would be deferred, applying the bonus to a cash value policy on the life of anyone the company chooses. If the person died before retirement the proceeds of the policy would be paid to the person's beneficiary. If the person lived to retirement, the cash would be used to supplement retirement. Can discriminate with a deferred comp. plan. Concept: None No further information available. 17. Correct! 18. The following types of GROUP LIFE plans are available EXCEPT: Correct Answer: Group deferred life plans Explanation: none Concept: None No further information available. 19. Correct! 20. Correct! 21. Social Security dependent survivor benefits are: Correct Answer: a type of government life insurance. Explanation: none Concept: None No further information available. 22. Which of the following describes the favored tax treatment to the business of Key Employee life insurance Correct Answer: Death proceeds are received by the business tax free. Explanation: The premiums are not tax deductible, therefore the benefit will be tax free. The insurance is payable to the business, not the employee's family. Concept: None No further information available. 23. Correct! 24. The period of time following the death of a breadwinner during which the children are living at home is a/an: Correct Answer: Dependency period Explanation: The greatest need for income is when a breadwinner dies and there are children living at home. This is the dependency period. The blackout period refers to the period from when a breadwinner dies and the youngest child reaches age 16. Income would stop at this time and not begin again until at the earliest age 60. Concept: None No further information available. 25. Correct! 26. Karen is 30 years old. She has a daughter age 10. If Karen's husband were to die, the blackout period would last how long? Correct Answer: 24 years Explanation: The blackout period begins when the youngest child reaches the age of 16. In this example Karen would be 36. No more money would be paid to Karen from Social Security until she reaches, at the earliest, age 60 (24 years). Keep in mind, that the child's benefit would pay the child until age 18. Concept: None No further information available. 27. Correct! 28. Correct! 29. The human life value tried to measure what a life was worth in economic value to a family. Which of the following statements would be true of this approach? Correct Answer: Inflation was not taken into account. Explanation: This approach has been replaced by the needs approach. There are too many factors left untouched with this system. Inflation, pay raises, and other sources of income were not calculated in this approach. Concept: None No further information available. 30. In a three-person partnership, a buy/sell Cross-Purchase plan requires how many different life insurance policies? Correct Answer: six policies Explanation: (N-1)n where n is the total number of owners. Ex (3-1)3= 6 Concept: None No further information available. 31. Correct! 32. Correct! 33. For whom is the entity plan best suited? Correct Answer: a partnership with many partners Explanation: The word "entity" tells you the question is referring to a partnership. The business purchases "one" policy on each of the partners. Had it been a corporation, the "stock-redemption" would have been used. Corporations-stock-redemption....Partnerships-Entity Concept: None No further information available. 34. Correct! 35. Correct! 36. Which of the following concerning deferred compensation plans are correct? 1. Life insurance may be used as a funding vehicle. 2. They are qualified plans. 3. They are non-qualified plans. 4. They are regulated by ERISA. Correct Answer: 1 & 3 Explanation: Deferred Compensation plans are non-qualified. They receive no favorable tax treatment from the IRS. They are indeed used by businesses to discriminate in favor of the elite. Concept: None No further information available. 37. Correct! 38. An employer is paying $450 for $75,000 of group life insurance on it's employees, broken down as follows: The cost for the first $50,000 is $300, the cost for the next $25,000 is $150. Which of the following statements are true? Correct Answer: $150 will be included as compensation Explanation: The premium for the first $50,000 will not be included. The PREMIUM for any amount over $50,000 WILL be included. Page 187 Concept: None No further information available. 39. Correct! 40. Correct! 41. Correct! 42. Correct! 43. Correct! 44. Which of the following statements is true concerning split dollar insurance? Correct Answer: It is a method of purchasing insurance. Explanation: Split dollar is a method of purchasing insurance. It is used by the businees owner, who has the ability to pay for insurance in order to help the employee purchase insurance if the emplyee has the need, but not the ability to pay. Concept: None No further information available. 45. All of the following are covered under the social security system except: Correct Answer: certain railroad workers Explanation: Railroad workers covered under the railroad retirement system are not covered under social security. They have their own. Concept: None No further information available. 46. Ways in which employees may be classified for group life insurance include all of the following EXCEPT: Correct Answer: By sex or age Explanation: none Concept: None No further information available. 47. Correct! 48. Correct! 49. Which of the following best describes the normal conversion benefit available to terminated employees under a group life insurance policy? Correct Answer: The employee may convert to an individual whole life policy within 31 days without submitting evidence of insurability. Explanation: none Concept: None No further information available. 50. Correct! 51. Correct! 52. Life insurance can be used in businesses for all the following ways except: Correct Answer: as tax deductible savings plans Explanation: Premiums paid for business life insurance are not tax deductible except in the case of group term life, which is not any form of savings plans. Concept: None No further information available. 53. What is/was the maximum age the earnings test for social security retirement benefits can be applied? Correct Answer: 70 Explanation: This question may appear. The state is slow. The earnings test was repealed in the year 2000. Concept: None No further information available. 54. Correct! 55. Correct! 56. Correct! 57. Once upon a time there was a $300,000 partnership with 3 equal partners. A buy/sell agreement was established. Assuming a cross-purchase agreement, which of the following statements is true? Correct Answer: The partners purchases 6 policies for $50,000. Explanation: The partnership itself is not a "party" to the agreement. The partners purchase the policies with the amount being equal to the purchase price. "(n-1)n" where "n" equals the number of partners. Ex. (3-1)x 3 = 6 Concept: None No further information available. 58. Which of the following is true concerning key person life insurance? Correct Answer: The cash values are listed as an asset on the company's balance sheet. Explanation: The policy is acually a liability. But, the cash value is a tangible amount that adds to the balance sheet. The premiums are not tax dedcutible. As for split dollar, there is no such beast as a split dollar policy, split dollar is a METHOD of buying insurance, not a particular policy. Concept: None No further information available. 59. Correct! 60. Correct!

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