illinois life insurrance test

What is the excise tax rate the IRS imposes on individuals age 73 or older who do not take the required minimum distributions from their qualified retirement plan?

25%

Note: If the missed RMD is corrected in a timely manner, the penalty may be reduced to 10%, but the standard rate remains 25%.

What is Old Age and Survivors Disability Insurance (OASDI) also known as?

Social Security

Endowment policy

It pays the face amount at the end of a specified period (maturity) OR upon the insured's death—whichever happens FIRST.

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal Life

Universal Life is designed to provide flexible premiums and an adjustable death benefit.

Term life insurance

Temporary protection that only pays out if you die within a specific time frame.

Whole Life Insurance

Permanent protection designed to cover you for your entire life (up to age 100 or 121, depending on the policy).

Adjustable Life

A policy where the owner can change the premium, the face amount, or the period of protection.

Universal Life

A whole life policy unbundled into two parts: an insurance component (usually annually renewable term) and a cash account.

Variable Life

Invested in the SEPARATE ACCOUNT. The Death Benefit has a guaranteed minimum; the Cash Value does NOT.

Variable Universal Life

• Simple Definition: A mashup of Universal Life and Variable Life.

• Key Phrase to Memorize: Flexible premiums + Separate Account investments.

Joint Life

One policy that covers two or more people but pays out when the first person dies.

Survivorship Life

• One policy covering two or more people that only pays out when the last surviving person dies.

• Key Phrase to Memorize: Second-to-die.

Credit Life

Insurance issued to a creditor to cover the life of a debtor for an outstanding loan balance.

The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?

Amount of the benefits available from other sources

ANNUITY

you give an insurance company a lump sum or series of payments, and in return, they give you a guaranteed stream of income for life.

403(b) tax-sheltered annuity?

A retirement plan for employees of public schools and non-profit organizations.

Reduced Paid-Up

The policy is paid up for a reduced face amount. It continues to build cash value and earns dividends (if a participating policy).

Extended Term

Uses the cash value to buy a term policy with the SAME face amount for as long a period as the cash will buy.

Cash Surrender

The policy is terminated and the insurer pays out the cash value. No further coverage or growth.

Waiver of Premium

This is a Rider, not a Nonforfeiture Option. It keeps the policy in force if the insured is disabled, but is not a way to handle cash value upon surrender.

THE UNDERWRITING PROCESS

What are the steps of this proccess

• The Application: The primary source of underwriting info.

• Credit/Consumer Reports: Checks financial stability and moral risk.

• Medical Exams/MIB (Medical Information Bureau): Checks physical health history.

• Risk Classification: Assigning the applicant to a category (Preferred, Standard, Substandard, or Declined).

VARIABLE UNIVERSAL LIFE (VUL)

What two specific components make up a Variable Universal Life policy?

Monthly Mortality Charges + Self-Directed Investment Choices.

How long can an insurance company legally delay paying out a policy loan or cash surrender value?

Up to 6 MONTHS.

SETTLEMENT OPTIONS: WHO SELECTS?

Who can choose how the death benefit is paid out, and what else is true about settlement options?

• The Policyowner chooses the settlement option while they are alive. (If they choose one, it is locked in—the beneficiary cannot change it after the insured dies).

• If the policyowner fails to choose an option, then the Beneficiary gets to select how they want the money paid out when the insured dies.

• The insurance company can administer the proceeds (hold the money and pay it out over time).

• They prevent rapid depletion of the money (stops a beneficiary from blowing a lump sum all at once).

• They can increase total proceeds because any money held by the insurer accumulates taxable interest.

TRADITIONAL IRA: FIRST RMD DEADLINE

By what exact date must a participant take their very first Required Minimum Distribution (RMD) from a traditional IRA?

"April 1st following the year the participant attains age 73."

LIMITED-PAY LIFE INSURANCE (e.g., 20-Pay Life, Paid-Up at 65)

How long does the coverage last, and when do the premiums stop?

overage lasts until age 100 (or death)—even though you stop paying premiums early.

RA / QUALIFIED PLAN: ROLLOVER TIME LIMIT

How long does an individual have to complete an indirect rollover of retirement funds before facing taxes and penalties?

60 DAYS.

MISSTATEMENT OF AGE PROVISION

What does the insurer do if they discover the insured lied about their age after they die? Can they deny the claim?

They ADJUST THE DEATH BENEFIT to match what the premium should have bought at the correct age. They NEVER deny the claim.

GRADED PREMIUM WHOLE LIFE

How do the premiums change over time compared to the death benefit?

Increases each year during the early years of the contract and remains the same after that time.

DEATH DURING THE GRACE PERIOD

What happens if the insured dies after the premium due date but before paying the bill?

The insurer pays the full death benefit MINUS the past-due premium.

THE INCONTESTABILITY CLAUSE

What happens if an insurer discovers a major lie (material misrepresentation) on the application five years after the policy was bought?

The insurer MUST pay the full death benefit.

CONTINGENT BENEFICIARY (Secondary Beneficiary)

Who names this person, and exactly when do they receive the policy proceeds?

A person designated by the insured to receive the policy proceeds only if the primary beneficiary dies before the insured.

GROUNDS FOR LICENSE REVOCATION / SUSPENSION

The Director can revoke a license for any action demonstrating untrustworthiness, financial irresponsibility, or fraud

Application Fraud, Controlled Business, Misappropriation, Misrepresentation, Felony Conviction, Cheating on the Exam, Forging Signatures, Unlicensed Business, Child Support Delinquency, State Tax Delinquency,