Free South Dakota Life Practice Exam — 20 Questions, No Signup

1. The rider waiving a child's policy premiums if the paying adult dies or is disabled is
Child term riderWaiver of premiumPayor benefitFamily income
2. An insured chooses the paid-up additions dividend option. What does this option do?
Buys small single-premium blocks of additional whole life that increase both cash value and death benefitPays the dividend in cash to the owner, with no effect on the cash value or face amount of the policyApplies the dividend to reduce the next contract-year premium dollar-for-dollar on the base policyHolds the dividend on deposit and credits interest under the accumulate-at-interest dividend option
3. An insurer discovers that a permanent policy issued five years ago has failed the §7702 definitional tests every year since issue. What is the federal income-tax consequence to the policyowner?
Nothing, §7702 only governs the issuing insurer's product-design rules; the individual policyowner is unaffected by the contract's failure of the definitional tests under §7702(g) for federal income tax purposesThe income on the contract is taxable to the owner each year as ordinary income, and the death benefit in excess of net premiums is also taxable when paid.The policy automatically converts to a Modified Endowment Contract under IRC §7702A, but otherwise nothing changes about its federal income-tax or estate-tax treatment going forwardOnly the death benefit ultimately paid to the named beneficiary becomes taxable for federal income tax purposes, and only when actually distributed by the insurer to the named beneficiary on death of the insured
4. The nonprofit that shares coded medical information among member insurers is the
CLUEFCRAMIBNAIC
5. Surrendering a policy for its cash value is the
Cash surrender optionAutomatic premium loanExtended term optionReduced paid-up option
6. The earliest age to start reduced Social Security retirement benefits is
6259 1/26065
7. An annuity whose income starts at a later date is
QualifiedDeferredFixedImmediate
8. With no premium paid at application, the policy offer is made by the
AgentInsurerBeneficiaryApplicant
9. Life insurance death benefits paid in a lump sum to a beneficiary are generally
Fully taxableTaxed after five yearsIncome tax freeTaxed as capital gains
10. The three main factors in setting life premiums are mortality, interest and
PersistencyCommissionExpenseDividends
11. The Insuring Clause of a life insurance policy:
Defines how participating-policy dividends will be paid each year and which of the five standard dividend options is in effect by default upon issueAuthorizes the producer to bind permanent coverage on the spot when an applicant initials the application and remits the first modal premium with the formSets out the insurer's basic promise to pay the face amount upon death of the insured, identifies the parties, and is generally signed by an officer of the companyItemizes the policy's standard and specially endorsed exclusions, including the war, suicide, aviation, and hazardous-occupation provisions required by state code
12. An applicant with higher than average expected mortality who is still accepted is
PreferredStandardDeclinedSubstandard
13. Surrendering a life policy for more than premiums paid creates
Taxable gainTax-free incomeA deductible lossA capital loss
14. Under a joint and 50% survivor annuity, what happens after the first annuitant dies?
The surviving annuitant receives 50% of the original payment for lifePayments stop entirelyThe surviving annuitant receives 100% of the original payment for lifeThe contract pays a lump sum and terminates
15. When the insured dies with a loan outstanding, the beneficiary receives the
Loan amount onlyFace amount minus the loanCash value onlyFace amount plus the loan
16. The maximum rate an indexed annuity can credit is its
Participation rateCap rateFloor rateSpread
17. Which of the following is a valid tax-free exchange under IRC §1035?
A life-insurance policy exchanged for an annuity contract.A non-qualified annuity exchanged for a Roth IRA.A life-insurance policy exchanged for shares of mutual-fund stock.An annuity contract exchanged for a life-insurance policy.
18. In which type of qualified plan does the EMPLOYER bear the investment risk of the plan's assets?
Defined contribution (DC) plan, such as a 401(k).Defined benefit (DB) pension plan.SEP IRA.Roth IRA.
19. In an annuity contract, who is the natural person whose life expectancy is used to determine the amount and duration of benefit payments?
The beneficiaryThe ownerThe contingent payeeThe annuitant
20. Whole life with premiums paid for a set number of years, such as 20, is
Straight lifeTerm to 65Modified lifeLimited pay life