Life Insurance and Financial Security Exam - CFP
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1. A disability income benefit:
A. May be provided as a "waiver of premium with disability income" B. May be attached as a separate benefit C. Pays a monthly income to the insured if he/she becomes totally disabled D. All of the above
ABCD
2. A binding receipt is:
A. An unconditional receipt that makes a life insurance company liable for the risk for the time period the binding receipt is effective B. A conditional receipt that makes a life insurance company liable for the risk, providing the proposed insured is found to be a standard risk C. An unconditional receipt that makes a life insurance company liable for the risk, providing the proposed insured is found to be a standard risk D. A conditional receipt confirming the applicant is insured as of the date of application until the policy is issued
3. The face value of a cash value policy is:
A. The total of the amount of protection and the cash accumulation, where the amount of protection shrinks and the cash accumulation is growing B. The death benefit paid to the beneficiary upon the insured's death, irrespective of the cash accumulation C. The sum specified in the contract, which does not depend on cash value or the death benefit D. All of the above
4. One of the advantages of a Whole Life insurance policy is that it:
A. Provides pure protection against the risk of premature death B. Provides a death benefit for life C. Provides cash accumulation on top of a minimum guaranteed death benefit D. Provides a death benefit that depends on the fluctuating rate of cash accumulation
5. In Universal Life policies, the accumulation account reflects:
A. The money that can be withdrawn B. The amount that can be borrowed as a loan C. The total amount earned on the UL policy D. The total of premiums paid into the account
6. Which type of policy does not guarantee the investment risk?
A. Whole Life B. Variable Life C. Traditional Whole Life D. Universal
7. A Period Certain Annuity is:
A. A type of annuity that is in effect for a specific length of time B. A type of annuity that pays the primary beneficiary a monthly income for life and the secondary beneficiary a monthly income for a certain period of time C. A type of annuity that will pay an income for as long as the annuity holder lives and the balance of the annuity will be paid to the beneficiary if the annuitant dies before the period expires D. A type of annuity that pays until the annuity holder reaches a certain age
8. The Participation Rate in Equity Indexed Annuities is:
A. The percentage rate the EIA holder earns and may change from year to year B. The premium rate that is flexible and can be changed C. The percentage rate the insurance company earns D. A non-guaranteed amount that varies in accordance with the investment performance
9. Withdrawals from an IRA before age 59-1/2 are subject to a Federal income tax penalty. However, there are certain circumstances in which money can be withdrawn before 59-1/2 without a tax penalty. This can be done in the following cases, EXCEPT:
A. The withdrawal is due to death or disability B. The withdrawal is made in the form of certain periodic payments C. The withdrawal is used to pay medical expenses in excess of 10.5% of AGI D. The withdrawal is used for qualified higher education purposes
10. A Profit Sharing Keogh Plan entitles contributions on earnings:
A. Up to 10% of net income with an upper current limit of $12,000 B. Up to 20% of net income with an upper current limit of $24,000 C. Up to 15% of net income with an upper current limit of $24,000 D. Up to 12% of net income with an upper current limit of $18,000
11. If a pension plan does not permit loans, the law provides for financial hardship withdrawals if a plan participant is unable to borrow from any other source and the money is needed for the following:
A. A down payment on a house irrespective of whether or not it is a primary residence B. College tuition for the plan participant or dependents C. Any medical expenses D. For a loan to purchase a car
12. Retirement distribution options include the following EXCEPT:
A. Receiving a single lump sum B. Receiving a reduced monthly annuity C. Receiving a monthly annuity D. Receiving a reduced monthly annuity for life or for joint life with an added guaranteed minimum payment period specified in the contract
13. A Variable Annuity should be recommended only if the prospect is interested in the annuity's following benefits, EXCEPT:
A. Lifetime income payments B. Family protection through the death benefit C. Guaranteed fees D. The tax-deferral accrual feature for a prospect with a tax-qualified retirement plan
14. The main difference between Simplified Employee Pension (SEP) and other pension plans is:
A. The annual maximum is the largest and is up to 20% of the earnings B. The withdrawal rules are less restrictive C. It can be provided by an employer or established by a self-employed person D. Access to pension funds is not limited as in IRA