Insurance Planning Exam

Question 1

A life insurance policy in which the insured has the right to direct how the cash value will be invested is called

Answer 1

variable life insurance policy

Question 2

May is self-employed and had interest income of $3,000 and self-employment income of $4,000 for the current tax year.

If she paid $6,000 of health insurance premiums, what can be deducted on arriving at her adjusted gross income?

Answer 2

$4,000

Question 3

True or False: With a major medical policy, the higher the policyholder’s co-insurance percentage, the lower the premium.

Answer 3

True

Question 4

Abigale’s car is covered by comprehensive auto coverage with a $250 deductible and collision with a $500 deductible. If the car is parked in her garage when a flood totally destroys it, what will she be reimbursed if the car is worth $25,000 before the flood occurred?

Answer 4

$24,750

Question 5

Assume upon the death of the breadwinner that a family needs $7,500 a quarter for the next 10 years under the capital liquidation approach.

What is the death benefit needed today at a 5% rate of return assuming that the payment occurs at the end of each period?

Answer 5

$235,000

Question 6

True or False: Contributory negligence can relieve a gross negligent defendant of responsibility for an accident.

Answer 6

True

Question 7

If Juan is presented an annuity that will allow for only 80% of the stock market gains but no chance of having a loss, this is called:

Answer 7

Index Annuity

Question 8

Maximum Probable Loss is…

Answer 8

Maximum Probable Loss is the maximum damage a peril might cause under average circumstances.

Question 9

Maximum Possible Loss is…

Answer 9

Maximum Possible Loss is the total financial harm a loss could cause under the worst circumstances.

Question 10

What time period does the viator have to rescind their decision of a viatical / life settlement?

Answer 10

15-day cooling off period

Question 11

The portion of the premium paid by the employee for disability benefits is the same ratio used for determining…

Answer 11

Determining the portion of benefits that are received tax-free.

Question 12

Many years ago, Brad purchased $300,000 of coverage on his dwelling under a HO-3 policy. On July 4th, his house caught fire and he suffered damages of $120,000. The replacement cost, excluding the land, is $400,000. If he has a $500 deductible, how much will the insurance company reimburse him for this loss?

Answer 12

$112,000

Question 13

True or False: Medigap policies will typically not cover expenses for intermediate or long-term custodial care

Answer 13

True

Question 14

What is the residual disability formula?

Answer 14

(Loss of Income / Prior Income) x Monthly Indemnity Benefit = Residual Indemnity

Question 15

Kevin owns a $100,000 medical insurance policy that has a $500 deductible and a 25% coinsurance. If he has $35,000 of medical expenses, what will Kevin pay?

Answer 15

$9,125

Question 16

What is a strict liability tort?

Answer 16

Strict liability torts are damages that result from dangerous activities.

Question 17

Peter, age 70, has a health savings account (HSA) with a balance of $10,000. He withdrew $4,000 for a down payment on his new car. If his marginal tax bracket is 22%, how much is subject to taxation?

Answer 17

$4,000 is subject to the 22% marginal tax bracket and no penalty applies.

Question 18

Dan, age 80, has been paying a $6,900 yearly premium for his long-term care policy. What amount qualifies as a medical expense deduction for 2024?

Answer 18

$5,880

Question 19

With key employee life insurance, who owns the policy and pays the premiums?

Answer 19

The business is the owner and the beneficiary of the policy, and it pays the premiums.

Question 20

Joan has a whole life policy with a $300,000 death benefit and a $55,000 cash value. If she borrows $24,000 and there is $1,000 of interest on the loan when Joan dies, the beneficiary will receive:

Answer 20

$275,000

Question 21

Assume that a company self-insures for the first $200,000 of losses to its manufacturing facility. By doing so, they save $40,000 in insurance premiums and put this money into a reserve account for future losses.

In addition, they purchase a policy that costs $65,000 to insure loss from $200,001 - $2,000,000. What amount can the company deduct in the current year?

Answer 21

$65,000 premium paid to the insurance company.

Question 22

Assume that Chris, age 52, becomes residually disabled. He is receiving current income of $3,000 per month but previously had $7,000 of income per month. If the monthly indemnity amount is $5,000, how much can he collect under the residual benefit rule?

Answer 22

$2,857

Question 23

Is Volcanic activity one of the following perils are ordinarily covered in an open-perils HO-3 policy?

Answer 23

Yes

Question 24

Under HIPAA, a chronically ill person is unable to perform ______ activities of daily living for a period of at least ______ days.

Answer 24

two; ninety

Question 25

Is coverage for Alzheimer's included in a long-term care policy?

Answer 25

Yes it must be

Question 26

What are the general requirements to obtain Social Security Disability Benefits?

Answer 26

Generally, a person must be under age 65 and have at least 20 credits during a 40-quarter period, ending with the quarter the individual is found disabled.

Question 27

Regarding Medicare Part A benefits, what do they cover for a skilled nursing facility stay?

Answer 27

Medicare will pay 100 days of care with no deductible for the first 20 days and a deductible for the next 80 days

Question 28

Kathy works at a company that provides 70% disability policy on her $100,000 salary. The total premium is $4,000 of which Kathy pays $1,000 and the employer pays the remainder. The elimination period is 90 days. If Kathy becomes disabled on Sept 1st, what is the tax paid if her marginal tax rate is 30%?

Answer 28

$1,313

Question 29

A tort predicated on negligence alone carries certain defenses that may negate legal liability in spite of the negligent behavior. Which defense is generally not available against negligence?

Answer 29

Gross negligence.

Question 30

Under the definition of an own occupation disability policy, you will collect benefits if you...

Answer 30

Cannot perform the major duties in your regular occupation.

Question 31

Assume a partnership worth $1,600,000 has 3 partners. Partner A owns 51%, partner B owns 39%, and partner C owns 10%. What is the proper amount of cross-purchase insurance that each partner will purchase?

Answer 31

Partner B will purchase a $408,000 policy on Partner A and an $80,000 policy on partner C.

Question 32

Janet owns a participating Universal life policy with a $175,000 death benefit and her daughter is the beneficiary. The yearly premium is $5,000 and after 9 years, the cash value is $58,000. If Janet takes a loan for $10,000 from the cash value today and dies a few days later, what is included in her gross estate?

Answer 32

$165,000

Question 33

Under Medicaid, property transferred to individuals, charities or a trust within ____ years of application for Medicaid is considered as owned by the applicant and must be disclosed.

Answer 33

Five