Health and life insurance 2022

Paula is married and has two children. She is the primary beneficiary of her father George's life insurance policy, while her two brothers are named as contingent beneficiaries. Paula dies, and then six months later George dies. How will the death benefit be paid?

The death benefit will be paid to Paula's brothers

Which type of agent works exclusively for an insurance company and normally does not solicit for other companies?

Captive agent

Antonio is covered under a group health insurance plan, and his employer pays for one-half of its $5,000 annual premium cost. How much of the employer-paid portion of the premium must Antonio include in his income each year?

$0

To boost her sales at the end of the year, Agent Judy started offering potential clients a $300 cash gift card in exchange for purchasing a life insurance policy. Which ethical sales practice has Agent Judy violated?

Rebating

What generally serves as the underlying basis for the ethical standards that agents must follow?

The golden rule

What is considered the main purpose of an annuity?

to provide a stream of income for the annuitant

Shirley incurred covered medical expenses of $6,000 and received $7,000 in reimbursement from her employer-provided health insurance. How much of the reimbursement, if any, must Shirley include in income?

$1000

Arthur, Barbara, and Peggy are general partners in Fabrics Unlimited. Each partner paid $25,000 into the partnership to start it. Unfortunately, the partnership finds itself in debt for $150,000, and Arthur and Barbara have no resources to pay the debt. What is the maximum amount of debt for which Peggy is liable?

$150,000

Phil, age 35, is single and earned $240,000 in compensation this year from his employer. Which statement is true?

Phil is eligible to contribute to a traditional IRA only.

What is the maximum number of eligible employees an employer establishing a SIMPLE plan may have?

100

In order for an individual to be fully insured for Social Security benefits, he or she must have earned at least how many quarters of coverage?

40

In general, what is the maximum period of time that an insurer may take to pay a death claim?

60 days

In which of the following plans, designed for small employers or self-employed individuals, is the maximum employer contribution limited to 25 percent of the participant's compensation?

A SEP

Under which of the following life insurance policies is an otherwise uninsurable individual more likely to be insured?

group term life insurance

Which of the following factors are considered in establishing the net premium for life insurance?

he mortality rate and the interest the insurer expects to earn on premiums

In which type of life insurance policy are policyowners eligible to receive dividends if and when declared by the insurer?

participating policies

Andy, age 20, has recently become unemployed. For how long may he remain covered under his parents' health insurance plan?

up to age 26

Aaron was the beneficiary of his father's $100,000 life insurance policy, and he chose a straight life income settlement option that provided annual periodic payments to him of $10,000. After receiving one periodic payment, Aaron died. How much, if any, benefit is paid to a beneficiary under the settlement option?

$0

Phil paid $25,000 in net premiums for his universal life insurance policy, which has a $35,000 cash value. He received no dividends and had not previously taken a cash value withdrawal when he decided to take an $11,000 cash value withdrawal. What amount of income must Phil recognize?

$0

Phyllis paid $5,000 in premiums for her disability income policy this year. After suffering a disabling injury, the policy paid her $80,000 in benefits during the year. How much of this benefit, if any, must Phyllis include in her income?

$0

Arthur paid total net premiums of $20,000 for his universal life insurance policy, which has a cash value of $24,000. Assuming the policy is not a modified endowment contract and Arthur has never previously received a cash value withdrawal or a dividend, how much income would he be required to recognize if he took a $5,000 cash value withdrawal?

$0. a withdrawal is considered a tax-free recovery of the policyowner's cost basis until the policyowner's entire cost basis has been fully withdrawn. At this point, any further withdrawals are deemed to consist of taxable gain. Since Arthur's cost basis is $20,000 at the time of his cash value withdrawal, he is not required to recognize any income as a result of the withdrawal. His cost basis is simply reduced by $5,000.

Ellen purchased a $100,000 life insurance policy, for which she paid $5,000 in premiums by the time she died three years later. The insurer determined that Ellen had made a material misrepresentation on her application for the policy. How much is the insurer required to pay?

$100,000

What is the maximum period of time a qualified plan participant may wait before rolling over a plan distribution received by the participant to another qualified plan or traditional IRA to avoid current taxation?

60 days

Which of the following companies is owned by its policyowners?

A Mutual company

Which of the following settlements involves the sale of a life insurance policy covering a terminally ill insured?

A Vatical settlement only

Patrick's insurer is domiciled in the Cayman Islands and transacts insurance in the United States. What type of insurer would it be considered in the United States?

Alien

Carla has written life insurance policies on the lives of her children. What type of business is this considered?

Controlled

How are lenders' costs paid in connection with a viatical loan?

Costs are paid out of the death benefits allocated to the decedents personal beneficiary at the time of the insureds death.

Jonah receives assistance in meeting some of his everyday needs, such as bathing, eating, dressing, etc. What type of care is he receiving?

Custodial care

Which of the following types of authority is specifically defined in an insurance agent's contract?

Express authority

BigBucks, Inc., has just installed a group term life insurance plan for its 50 eligible employees and is paying all the premiums. How many of the eligible employees must be covered under the plan?

Fifty eligible employees must be covered

Sharon, an applicant for life insurance, is interested in obtaining immediate coverage but wants the permanent insurance protection to begin four months from now. Which of the following types of term life insurance is likely to best meet her objectives?

Interim term insurance

Which statement correctly characterizes the "blackout period" that a surviving widow or widower experiences?

It begins when all Social Security survivor benefits for dependent children and the surviving spouse end and continues until a surviving widow or widower is eligible for Social Security retirement benefits.

What type of annuity covers two or more people and provides payments for as long as an annuitant lives?

Joint and survivor annuity

Bridget's life insurance policy provides $500,000 of coverage for a period of ten years, and she pays the same premium each year. At the end of the ten-year term, the policy will no longer provide any coverage, unless renewed or converted. Which type of policy does Bridget own?

Level term

Which program provides medical assistance for individuals and families with limited incomes and resources?

Medicaid

Bob and his daughter, Carol, died in an automobile accident, and it was impossible to determine who survived longer. Carol was the primary beneficiary under Bob's life insurance policy and her brother, Jim, was the contingent beneficiary. To whom would the death benefit proceeds be payable under the Uniform Simultaneous Death Act?

To Jim

Outstanding policy loans are deducted from any death benefits paid under a life insurance policy.

True

Agent John made an inaccurate comparison of coverage in order to induce his client to replace existing life insurance for a new policy John hoped to sell him. Which unlawful act has John committed?

Twisting

John knowingly made an inaccurate comparison of coverage in order to induce his client to replace existing life insurance for a new policy John hoped to sell him. Which unfair trade practice did John commit?

Twisting

In which type of annuity is the accumulated value generally based on the investment performance of a separate account?

Variable annuity

Which of the following types of life insurance involves a cash value whose accumulation depends, in part, on the investment performance of a portfolio of securities?

Variable life insurance

At a minimum, when should a person reevaluate his or her life insurance needs?

When certain significant life events occur, such as marriage, birth of a child, or retirement.

Which of the following is not a duty of a state's Insurance Commissioner?

Write the states insurance laws

Which type of health insurance coverage provides a pre-determined amount of benefits for each day the insured is in a hospital?

a hospital income insurance policy

Which of the following is not an acceptable beneficiary of an insured's group life insurance coverage?

an employer

Edna, age 42, purchased a universal life insurance policy and, after thinking about her purchase, subsequently decided she preferred the stronger guarantees she would receive under a whole life insurance policy. Within what period of time following the delivery of the policy can she return the policy for a premium refund?

10 days

John and Sarah formed a partnership to conduct their business. Their attorney drafted a cross purchase buy-sell agreement to ensure the continuation of the business upon the death of either partner. Which party would own the life insurance used to fund the purchase of the deceased partner's business interest?

Each partner on the life of the other partner

Shirley is the primary beneficiary of her father Bill's life insurance policy, and her two brothers are the contingent beneficiaries. If Bill dies while all the named beneficiaries are still alive, how will the death benefit be paid?

Entirely to shirley

In what type of system are insurance agency heads also employees of the insurance company?

A managerial system

MegaMutual has decided to insure itself against significant mortality losses. To which of the following would it turn to purchase such insurance?

A reinsurer

What is the maximum tax-free amount that can be paid under a viatical settlement involving a terminally ill insured?

No maximum limit

Which of the following renewal provisions guarantees that the policyowner may renew the policy and the insurer will not increase premiums?

Noncancelable

Which of the following is not considered an immediate lump-sum cash need after a breadwinner's death?

Retirement income

This year, 43-year-old Marion contributed the maximum amount to her personal retirement plan. The contribution was not deductible, but the earnings will be tax free when Marion withdraws them at retirement. What type of retirement plan does Marion have?

Roth IRA

Harry, Bob, and Shirley are partners who enter into a cross purchase buy-sell agreement. How many life insurance policies are required to fund the agreement?

Six n(n-1)

Alex has a disability income policy under which he is receiving a monthly disability benefit that is equal to the percentage of his lost income, multiplied by his policy's maximum monthly total disability benefit. Which type of benefit is Alex receiving?

residual disability benefit

How are annuity withdrawals taxed?

LIFO

What is the minimum age at which a life settlement is normally permitted?

65

Helen, age 30, participates in a health savings account. Last year she withdrew $10,000 from her HSA and incurred qualified medical expenses of $9,000. Assuming Helen is not disabled, what tax penalty, if any, will be imposed?

$200

Shirley named her two sons, Bill and Pete, as equal beneficiaries per stirpes of her $100,000 life insurance policy. Pete predeceased Shirley and left two children. How much of the death benefit, if any, will each of Pete's children receive upon Shirley's death?

$25,000

Lee has a terminal illness and has taken a $100,000 viatical loan under his $150,000 life insurance policy. The provider imposed $5,000 in fees for the loan. The loan also accrued interest of $8,000, and $12,000 in premiums were paid for the policy after the loan was made. How much of the death benefit, if any, will Lee's beneficiary receive upon his death?

$25,000 $100,000+$5,000+$8,000+$12,000=$125,000 $150,000 payout-$125,000 loan and fees/interest=$25,000 left over

Sharon is covered under Medicare Part A and Part B. Her doctor charged $500 for her outpatient treatment, and Medicare approved $400. How much will Medicare pay, assuming Sharon's deductible has already been satisfied?

$320

Jason paid $10,000 in net premiums for his $100,000 life insurance policy. He did not receive any dividends and took no withdrawals. How much income would he be required to recognize if he surrendered the policy when its cash surrender value was $14,000?

$4,000 He received more money that his cost basis

Allen was required to take a $20,000 minimum distribution from his traditional IRA last year but only took a $10,000 distribution. What amount of penalty tax will be imposed?

$5,000

John requested a partial surrender of his $100,000 whole life insurance policy in order to access funds in his policy's cash value. The cash value was $50,000 just prior to the partial surrender and John received $20,000 from the cash value. What would be the new face amount of the policy?

$60,000 $20,000 of $50,000 is 40%, therefore the payout decreases by 40%; $100,000 -40%=$60,000

Susan's universal life insurance policy is a modified endowment contract. She paid premiums amounting to $15,000, and never received a dividend or previously took a distribution. What amount of income would she be required to recognize if she took a $10,000 cash value withdrawal when the cash value was $23,000?

$8,000 Policy distributions from a life insurance policy that is deemed a MEC receive "last-in, first-out" (LIFO) tax treatment. Under LIFO tax treatment, the first element deemed to be distributed is the taxable gain under the life insurance policy. Since Susan's policy has an $8,000 gain, that gain is deemed to be distributed before any tax-free cost basis is distributed. Thus, Susan must recognize a taxable gain of $8,000.

Helen requested a $20,000 cash value withdrawal from her universal life insurance policy, which has a $100,000 death benefit. What would her death benefit be immediately following her cash value withdrawal?

$80,000 $100,000-$20,000=$80,000

After Harry got divorced, he no longer needed his $100,000 life insurance policy. Harry then sold the policy to his brother Seth for its $10,000 cash value. Seth named himself the beneficiary and made additional premium payments amounting to $8,000 until Harry's death. How much of the $100,000 death benefit proceeds that Seth received must be recognized as income?

$82,000 $100,000-$10,000-$8,000=$82,000

At the time of Susan's death, her policy's face amount was $100,000. Susan died during the grace period and her $100 monthly premium remained unpaid at the time of her death. Based only on these facts, how much death benefit would be paid at the time of her death?

$99,900

Under what type of plan does the employer pay the premiums on a life insurance policy owned by the employee?

An executive bonus plan

Which of the following death benefit options may be found on universal life insurance policies?

Both a level death Benefit and a generally increasing death benefit

Bridget is a participant in her employer's 403(b) tax-sheltered annuity plan. Under the plan, her contributions may be used to purchase which of the following?

Both an annuity and mutual funds

Which method of determining the amount of life insurance required to meet an individual's goals and objectives uses only the interest from the death benefit?

Capital conservation method

Hank died before annuitizing his contract and the annuity's death benefit was paid to his daughter, Cara. Which statement about payment of the death benefit is true?

Cara must pay tax on the interest portion of the death benefit

Which of the following is designed to fill the deductible and coinsurance gaps in traditional Medicare coverage?

Medigap policies

What assumed amounts does an insurer add to the net premium to derive the gross premium charged for life insurance coverage?

the insurer's anticipated expenses

When Paolo died, the insurer determined that he was actually eight years younger than he had indicated on his application for the life insurance policy. Which of the following is likely to occur with respect to the insurer's death benefit claim payment?

The insurer will pay a death benefit equal to the amount that would have been purchased by the premiums if the insurer had known the insured's correct age

Shirley's universal life insurance policy has a $100,000 death benefit. Her cash value is equal to $25,000. What term is used to describe the other $75,000?

The net amount at risk

Under which of the following whole life insurance policies does the policy's cash value equal the policy's face amount at the mortality table's limiting age?

level premium, modified premium, and graded premium whole life insurance

Arthur, a new participant in his employer's group health insurance plan, was diagnosed with cancer three months ago. For what maximum period may the plan exclude coverage for Arthur's treatment?

no pre-existing condition exclusion may be imposed