Insurance Licensing Updated Life-Producer Exam Questions and Answers by baxter

The beneficiary is the individual or entity named in the life insurance policy to receive the death benefit upon the insured’s death.

Designated recipient of proceeds (B): The policyholder nominates this party in the policy documents.

Ownership interest in the policy (A): Refers to the policyowner, who controls and funds the policy but may not be the beneficiary.

Insurer (C): Issues and administers the policy but is not a recipient.

Owner of the cash value fund (D): This pertains to cash value accumulation, separate from death benefit designation.

Qualified retirement plans, such as 401(k) and pension plans, offer significant tax advantages for employers:

Tax-deductible contributions (B): Employer contributions to qualified plans are deductible as business expenses, reducing taxable income.

Exclusive benefit for key employees (A): Not allowed under IRS rules, as qualified plans must follow non-discrimination requirements.

Funds available for business needs (C): Incorrect, as plan funds are held in trust and cannot be used for business operations.

Rewarding selected employees (D): Qualified plans must comply with anti-discrimination rules, so rewards must benefit all eligible employees.

Accelerated benefits allow a policyholder to receive a portion of the death benefit early, often due to terminal illness or specific qualifying conditions:

Decreases the death benefit (D): The accelerated amount reduces the death benefit available to beneficiaries.

Increases the cash value (A): Incorrect; accelerated benefits are drawn from the policy, reducing cash value and death benefits.

Increases the policy premium (B): Premiums generally remain unchanged.

Decreases the grace period (C): Not affected by accelerated benefits.

Basic contract law principles applied to insurance.

Maryland follows standard contract law elements: offer, acceptance, consideration, and legal purpose.

The first step in forming a contract is a clear and definite offer.

Evaluate each option.

A. Oral contract

A type of contract, not the proposal itself.

B. Binder

Temporary insurance coverage, not the proposal of terms.

C. Agreement

Occurs after an offer has been accepted.

D. Offer

Correct. An offer is a definite and unqualified proposal of contract terms.

Conclusion.

The correct legal term for such a proposal is an offer.