Team AF Quiz Life Insurance--General

1.

The primary purpose of Life Insurance is to provide a death benefit.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The primary purpose of life insurance is to provide a death benefit, meaning that if the insured person were to pass away, their beneficiaries would receive a payout from the insurance company. This death benefit is typically intended to provide financial support to the deceased person's loved ones, helping them cover expenses such as funeral costs, outstanding debts, or ongoing living expenses. While there may be additional benefits or features associated with certain life insurance policies, the main objective is to provide financial protection to the insured person's family or dependents in the event of their death.

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2.

Which of the following are tax advantages of permanent Life Insurance?
- A.
  
  Tax Deferred Growth
- B.
  
  Basis out First (FIFO)
- C.
  
  Tax Free loans
- D.
  
  All of the above
Correct Answer
D. All of the above

Explanation
Permanent life insurance offers several tax advantages, including tax-deferred growth, basis out first (FIFO), and tax-free loans. Tax-deferred growth means that the policy's cash value can grow without being subject to income taxes. Basis out first (FIFO) allows policyholders to withdraw their basis (the amount they have paid in premiums) before any gains, which can help minimize taxes. Additionally, policyholders can take out tax-free loans against the cash value of their policy, providing them with a source of tax-free funds. Therefore, all of the options listed - tax-deferred growth, basis out first (FIFO), and tax-free loans - are tax advantages of permanent life insurance.

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3.

All Life Insurance should be sold using some type of Needs Analysis to determine the face amount of the policy.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
A needs analysis is a crucial step in determining the appropriate face amount of a life insurance policy. It involves assessing the financial needs and obligations of the insured and their dependents, such as income replacement, debt repayment, education expenses, and funeral costs. By conducting a needs analysis, insurance agents can ensure that the policy adequately covers these financial needs and provides sufficient protection for the insured and their loved ones. Therefore, it is important for all life insurance policies to be sold using some type of needs analysis.

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4.

MEC stands for Modified Endowment Contract.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The statement is true because MEC stands for Modified Endowment Contract. This type of contract is a life insurance policy that has been funded with more money than allowed by federal tax laws. MECs have different tax implications compared to regular life insurance policies, such as penalties for early withdrawals and the loss of certain tax benefits. Therefore, it is important for individuals to be aware of the MEC status of their life insurance policies.

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5.

Which of the following tax advantages are lost when a Life Insurance Policy becomes a MEC? A. Death Benefit is Generally Tax Free B. Tax Deferred Growth C. Basis Out First (FIFO) D. Tax Free Loans
- A.
  
  A & B
- B.
  
  A
- C.
  
  C & D
- D.
  
  D
Correct Answer
C. C & D

Explanation
When a Life Insurance Policy becomes a MEC (Modified Endowment Contract), the tax advantages of Basis Out First (FIFO) and Tax Free Loans are lost. Basis Out First refers to the ability to withdraw any contributions made to the policy before any earnings, which is no longer available once the policy becomes a MEC. Tax Free Loans allow policyholders to borrow against the cash value of the policy without incurring any tax consequences, which is also lost when the policy becomes a MEC. Therefore, the correct answer is C & D.

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6.

How many different Death Benefit Options are available on our Ultra Index Universal Life Policy?
- A.
  
  1
- B.
  
  2
- C.
  
  3
- D.
  
  4
Correct Answer
C. 3

Explanation
The correct answer is 3 because there are three different Death Benefit Options available on the Ultra Index Universal Life Policy.

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7.

How many Primary Term Rider layers are available on a True Term policy?
- A.
  
  1
- B.
  
  3
- C.
  
  4
- D.
  
  5
Correct Answer
D. 5

Explanation
There are 5 Primary Term Rider layers available on a True Term policy.

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8.

An Allstate Whole Life Advantage Policy pays dividends.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
Allstate Whole Life Advantage Policy does not pay dividends.

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9.

the Following are three ways to be taxed on your Retirement Savings/Growth. Which category do most people have their retirement savings in?
- A.
  
  Taxable
- B.
  
  Tax deferred growth, taxable distributions
- C.
  
  Tax deferred growth, tax free distributions
- D.
  
  Tax free
Correct Answer
B. Tax deferred growth, taxable distributions

Explanation
Most people have their retirement savings in the category of tax deferred growth, taxable distributions. This means that their retirement savings are allowed to grow tax-deferred until they are withdrawn, at which point they are subject to taxation. This is a common way for individuals to save for retirement as it allows them to benefit from the growth of their investments without immediately paying taxes on them. However, when they eventually withdraw the funds, they will be required to pay taxes on the distributions.

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10.

Life Insurance is a "love letter" that tells those that are left behind that we cared enough to make sure that they were taken care of after we are gone.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
This statement suggests that life insurance is a way for individuals to show their love and care for their loved ones by ensuring their financial security after their death. It implies that life insurance is a form of protection and support for those left behind, indicating that the statement is true.

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Team Af Quiz Life Insurance--general

The primary purpose of Life Insurance is to provide a death benefit.

Which of the following are tax advantages of permanent Life Insurance?

All Life Insurance should be sold using some type of Needs Analysis to determine the face amount of the policy.

MEC stands for Modified Endowment Contract.

Which of the following tax advantages are lost when a Life Insurance Policy becomes a MEC? A. Death Benefit is Generally Tax Free B. Tax Deferred Growth C. Basis Out First (FIFO) D. Tax Free Loans

How many different Death Benefit Options are available on our Ultra Index Universal Life Policy?

How many Primary Term Rider layers are available on a True Term policy?

An Allstate Whole Life Advantage Policy pays dividends.

the Following are three ways to be taxed on your Retirement Savings/Growth. Which category do most people have their retirement savings in?

Life Insurance is a "love letter" that tells those that are left behind that we cared enough to make sure that they were taken care of after we are gone.