Which of the following statements is (are) true with respect to the cash annuity settlement option? I. The taxable portion of the distribution is subject to federal and state income taxes. II. The option results in adverse selection against the insurer as those in poor health are more likely to take cash than to annuitize […]
Insurers offering variable annuities charge a number of expenses. One category of expenses is to pay the fund manager and to pay brokerage fees. This expense is the A) investment management charge. B) administrative charge. C) surrender charge. D) front-end load. ANSWER Answer: A
Insurers offering variable annuities charge a number of fees and expenses. One category of fees and expenses is charged to cover the cost of record keeping, paperwork, and periodic reports to annuity owners. This expense is the A) investment management charge. B) surrender charge. C) administrative charge. D) front-end load. ANSWER Answer: C
Which of the following statements is (are) true with respect to an equity-indexed annuity? I. The maximum percentage gain is usually capped. II. There is no downside protection against loss of principal if the annuity is held to term. A) I only B) II only C) both I and II D) neither I nor II […]
Which of the following statements is (are) true about the federal estate tax? I. The gross estate can be reduced by a number of deductions. II. If the person who died had any ownership interest in a life insurance policy at the time of death, the proceeds are included in the gross estate for federal […]
The policy reserve at the end of any given policy year is called the A) terminal reserve. B) unearned premium reserve. C) mean reserve. D) initial reserve. ANSWER Answer: A
To level a net single premium (NSP), the NSP is divided by A) the maximum number of years the premium could be paid. B) the ordinary life annuity factor for the premium payment period. C) the present value of a life annuity due of $1 for the premium payment period. D) the deferred life annuity […]
The gross premium is defined as A) the net premium plus the loading allowance. B) the terminal reserve plus the commission. C) the net premium minus expenses. D) the sum of all acquisition expenses. ANSWER Answer: A
The difference between the present value of future benefits payable under a life insurance policy and the present value of net premiums for the policy is the policy’s A) retrospective reserve. B) policyholders surplus. C) prospective reserve. D) admitted assets. ANSWER Answer: C
Purposes of life insurance policy reserves include which of the following? I. Legal test of the insurer’s solvency II. Formal recognition of the obligation to pay future claims A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
