Insurance Final

How are annuities guaranteed?

-In the sense of a risk pool - Not by the federal government

Which of the following statements concerning property insurance is or are correct: i. Broad named peril policies cover all losses to covered property unless the loss is excludible ii. Insurance policies fall into two categories with respect to covered perils; named peril policy and all risk or open peril policy

2 only

Which of the following statements concerning a personal auto policy part A liability are/is correct: a. Part A provides for bodily injury and property damage liability protection for any insured that is responsible for an automobile accident. b. Provides payment for the reasonable and necessary medical expense of an insured as the result of an automobile accident.

A only

Which of the following individuals should consider purchasing an HO8 policy: i. Vick owns a classic home with a functional replacement cost that is less than the actual replacement cost ii. Nick owns a condo, in a resort community... iii. Charlie owns a home in a development... iv. Craig rents a home for some dumb reason...

i. Vick owns a classic home with a functional replacement cost that is less than the actual replacement cost

Dan who has a large collection of rare jewelry value at 250,000 and has standard home owners policy. This should provide adequate protection for the jewelry. t/f

false

Jason trades in his buick for a honda, if he doesn't inform his insurance company of the switch within 10 days he will not have insurance on the vehicle. t/f

false

Kerry is a gastroenterologist who is thriving, and has a sizeable net worth and income. Buying a POEP of 1 million dollars is unnecessary. t/f

false

Mike is an avid fisherman, and has a midsized boat. His boat should be covered by his homeowners policy. t/f

false

Most annuities are annuitized. t/f

false

Qualified Longevity annuities are subject to the minimum distribution rules t/f

false

Rodger is hired by a prestigious firm, and signed a lease to a new apartment. He needs to get the correct insurance policy, so we should recommend HO8. t/f

false

Section A of a homeowner's policy addresses personal property. t/f

false

There have only been a handful of annuity contract benefits that have not been fully paid, which are due to the bankruptcy of the issuing insurance company. t/f

false

There is an income tax deduction available for estate taxes attributable to IRD assets, this deduction is above the line deduction. t/f

false

Due to the recent economic down turn, Mike keeps all his money under his bed. Over time he has racked up 50,000 in cash. The house burns down along with all the cash, if he has a typical insurance policy how much will they cover of the cash? i. 0 ii. 200 iii. 500 iv. 5,000

ii. 200

What are three basic types of annuities?

-Fixed -Variable -Index

All of the following statements concerning annuities are correct EXCEPT: A. The pure life annuity is ideal for the person who needs maximum income spread out over a lifetime and has several living dependents to whom he or she wishes to leave assets. B. A life annuity with guaranteed minimum payments ensures that the annuitant either receives the minimum number of payments, or will have lifetime income; whichever is greater. C. In an installment refund annuity, the insurer promises to continue periodic payments after the annuitant has died until the sum of all annuity rent payments equals the purchase price of the annuity. D. A joint and survivor annuity is an annuity based on the lives of two or more annuitants, usually husband and wife.

A. The pure life annuity is ideal for the person who needs maximum income spread out over a lifetime and has several living dependents to whom he or she wishes to leave assets.

Which of the following statements are true? i. A flexible premium annuity allows the insured the option to very premium deposits; where as an annuity purchased with a single lump sum is known as a single premium annuity. ii. An immediate annuity is one whose first payment is due one payment interval from its purchase date; whereas, a deferred annuity provides income at some date in the future.

Both

Which of the following statements concerning annuities is/are correct? 1. A flexible premium annuity allows the insured the option to vary premium deposits, whereas an annuity purchased with a single lump sum is known as a single premium annuity. 2. An immediate annuity is one whose first payment is due one payment interval from its purchase date, whereas a deferred annuity provides income at some date in the future.

Both 1 and 2

Annuities have many features and characteristics. Which of the following statements is correct? A. The initial rate on a fixed annuity will last until the death of the first annuitant. B. Variable annuities and equity indexed annuities both use equity sub-accounts as an investment option. C. Variable annuities are generally no riskier than equity indexed annuities. D. Earnings from variable annuities are deferred from taxation unless withdrawals or annuitization occur.

D. Earnings from variable annuities are deferred from taxation unless withdrawals or annuitization occur.

The three parties to an annuity contract are the annuitant, the beneficiary, and the agent. t/f

False - annuitant, beneficiary, and the owner

Which of the following statements concerning the personal auto policy Part A liability coverage is/are correct: I. Provides payment for the reasonable and necessary medical expense of an insured as the result of an automobile accident. II. The insureds under part A include the named insured, the spouse, and any family members while occupying either a motor vehicle, or a trail or struck by a trail/motor vehicle

Neither are correct

Which of the following statements concerning the personal auto policy's Part C uninsured motorist coverage is/are correct: i. Under C, the insurer agrees to pay compensatory damages the legally insured is entitled to recover from an uninsured motorist because of bodily injury and property damage in some states, sustained by an insured and caused by an accident. ii. The uninsured motorist coverage applies to claims of medical expenses, loss wages, pain and suffering, and punitive or exemplary damages.

Number 1 is correct

Brad buys a variable annuity, with a 7 year surrender period, with a 7% for year one and so on, if he surrenders in the third year he will pay a contingent deferred sales charge of approximately 5%. t/f

True

Avery does not want to miss out on the expected growth of the stock market, however he wants to have protection against loss of principle. He expects to contribute to an annuity for the next 12 years. What annuity is best fit for Avery? a. Index annuity b. S n P 500 annuity c. Single premium preferred annuity d. Variable annuity

a. Index annuity

Which of the following property is covered under the personal property coverage of HO3? a. A bird b. A skateboard owned by a step child living at the home c. CD's in the car d. Jewelry insured under a separate floater

b. A skateboard owned by a step child living at the home

Coverage on an attached structure such as a garage is generally insured up to 30% of the dwelling. t/f

false

Annuities are complex. Which of the following statements is correct regarding annuities? a. All annuities must be annuitized or exchanged. b. Annuities that are not annuitized do not mitigate the risk of superannuation. c. One of the advantages of investing in annuities is that they are not subject to minimum distribution rules. d. Annuities are included in the gross estate of the estate of the decedent at the death of the owners.

b. Annuities that are not annuitized do not mitigate the risk of superannuation.

Which of the following statements concerning a personal auto policy part A liability are/is correct: i. Part A provides for bodily injury and property damage liability protection for any insured that is responsible for an automobile accident. ii. An insurer agrees to pay defense costs till the limit of liability has been exhausted by payment of judgements or settlements

both are true

Julian who is now 75 years old accumulated 60,000 by age 60. He used his saving to purchase a single premium annuity, which pays 500 a month. If his life expectancy was 25 years at the time he purchased the annuity, how much of each payment is subject to tax? a. 500 b. 350 c. 300 d. 200

c. 300

Vikie's house was destroyed by a tornado that passed thru her town. She was covered by a standard HO policy. She must follow all of the following standard duties except: a. Give notice immediately to the insurance company/agent b. Protect the property from further damage c. Get estimates of the damage from reliable sources d. Prepare an inventory of losses

c. Get estimates of the damage from reliable sources

Ginger purchased a single-premium deferred annuity ten years ago at age 45. She used 60,000 of after-tax funds she had accumulated over fifteen years. At age 65, she decides to annuitize over her single life expectancy (which is 20 years). Her annuity payment equals 750$ per month. Her expected total payments are for 240 months. Which of the following statements is correct? a. One-third of her payments will be treated as taxable. b. If she lives beyond 240 months, she will continue to have a portion of her payments consist of non-taxed benefits. c. In the event that she dies prior to 20 years, she can claim a miscellaneous itemized income tax deduction for the unrecovered basis. d. If she dies before her full 20 years of payments, her gross estate will include the present value of the payments for the remaining period of time up to 20 years.

c. In the event that she dies prior to 20 years, she can claim a miscellaneous itemized income tax deduction for the unrecovered basis.

Ashley who is nearing retirement understands the stock market can provide higher returns than her failing fixed income securities. She would like to have the value of her investment increase if the equity markets increase, although she is worried about losing the value of her investment. In addition she is concerned about running out of money. Which of the following is the best fit for Ashley based on her concerns? a. Exchange traded fund b. Fixed incime annuity c. Index annuity d. Variable annuity

c. Index annuity

Annuities are used for a variety of reasons. Which of the following statements is correct regarding annuities? a. Most annuities are annuitized. b. Annuities are the most cost-efficient way to access tax deferred growth for most people. c. Withdrawals from an annuity before age 59.5 results in an early withdrawal penalty on the entire amount of the withdrawal. d. Withdrawals from a non-qualified annuity consist of a portion of earnings and a return of basis.

c. Withdrawals from an annuity before age 59.5 results in an early withdrawal penalty on the entire amount of the withdrawal.

Annuities have many advantages, including mitigating a variety of risks. Which of the following risks could be mitigated with an annuity? 1. Market risk 2. Superannuation risk 3. Purchasing power risk a. Superannuation and purchasing power risk only b. Only superannuation c. Market risk and purchasing power risk d. All of these listed

d. All of these listed

Ralph is a 70- year old retired fireman with NO dependents. He wants to invest in an annuity that will produce a steady stream of income that begins now and continues throughout his life. He has 175,000$ to invest and wants to receive the most income he can every month. Which of the following is the most suitable annuity for Ralph based on his objectives? a. A fixed income annuity with a 10 year term certain. b. A variable annuity with a guaranteed death benefit. c. A longevity annuity. d. An immediate, single-premium life annuity.

d. An immediate, single-premium life annuity.

Which of the following statements concerning uninsured motorist coverage for Part C of auto policy is correct: a. Uninsured motorist coverage is mandatory in all states b. The coverage may make allowances for punitive and exemplary damages c. The coverage is available for the automobiles of the insured's business d. For the coverage to pay, the uninsured/underinsured driver must be at fault.

d. For the coverage to pay, the uninsured/underinsured driver must be at fault.

Ginger purchased a single-premium deferred annuity ten years ago at age 45. She used 40,000 of after-tax funds she had accumulated over fifteen years. She decides to surrender the annuity for a lump-sum distribution of its 90,000 value. Which of the following statements is correct? a. Ginger will owe income taxes on 50,000. b. Ginger will owe income taxes on 90,000. c. Ginger will owe income taxes and a 10% penalty on 90,000. d. Ginger will owe income taxes and 10% penalty on 30,000.

d. Ginger will owe income taxes and 10% penalty on 30,000.

Jack is 65 and about to retire and is expected to live 20 years. He has 100,000 in the pension plan with annuity options but not lump sum distribution options. He has 4 daughters and wants to make sure they receive the 100,000 and all other assets to his grandchildren. He wants to participate in equity returns. Which is the right fit for jack? a. Single life annuity b. Joint life annuity with kids c. Single life fixed annuity with term certain 20 years d. Single life variable annuity with term certain of 20 years

d. Single life variable annuity with term certain of 20 years

Adriana has spent most of his after school, hard earned job money on the performance of his imported car. Even though he was drag racing when the accident occurred, his auto policy should cover the damage after the deductible is met. t/f

false

Alex owns a Bentley with 100/300/50 coverage, this means he has 300,000$ in property damage. t/f

false

Bill has annuitized his annuity and is receiving monthly payments, his distribution is there for subject to the LIFO method for the purposes of taxation t/f

false

Comprehensive and collision coverage is mandatory in most states. t/f

false

The following statements about an HO6 policy are correct except: i. It includes personal liability coverage ii. It provides coverage for the detached structures iii. It covers personal property on an actual cash basis iv. It provides limited coverage for the loss of...

ii. It provides coverage for the detached structures

General excluded losses contained in all HO policies are as followed except: i. Intentional acts ii. Malicious mischief iii. Negligence iv. Power failure

ii. Malicious mischief

Tom, Dick, and Harry lost their personal residence due to a forest fire that swept thru their town. Tom and Harry owned houses, and Dick owned a Condo. Tom had a standard HO policy, equal to the value of the home. Which of the following concerning loss of use coverage is correct: i. All home owners policy provide benefits and cover temporarily living expenses as along as needs to repair and replace the lost homes ii. Tom's insurance company will pay a maximum of 90,000 to cover temp living expenses iii. Dicks will pay 90,000 to cover temp living expenses iv. Harrys will pay 60,000 for temp living expenses

ii. Tom's insurance company will pay a maximum of 90,000 to cover temp living expenses

A resident of LA carries the minimum requirement policy of 10/25/10 (10 per person/25 per occurrence/10 property damage). While in Mass. The person strikes a person with his car and it results in 45,000 in medical damages. Mass.'s numbers 20,40,15. Which of the following is the correct. i. The person's company will only pay 10,000 towards medical costs ii. The person is subject to arrest or situation for failure to maintain proper insurance under Mss. Law. iii. The person may be personally responsible for 25,000 medical expense cost. iv. The person will pay 40,000 of the medical expense cost.

iii. The person may be personally responsible for 25,000 medical expense cost.

Which of the following statements concerning homeowner's insurance supplementary coverage, personal liability, and medical payments to others is correct: i. Claims for personal liability of medical payments are paid no matter who is at fault ii. Peter slips and breaks arm during business meeting at David's' home, David's home owners insurance will cover David's liability for accident iii. When fire breaks out in Peter's garage, he called fire department, his HO policy will cover the service charge of the fire department iv. In order to receive benefits under the HO policy...

iii. When fire breaks out in Peter's garage, he called fire department, his HO policy will cover the service charge of the fire department

Section 2 of the HO3 policy provide coverage for which of the following? i. Loss of use ii. Personal property iii. other structures iv. Medical payments

iv. Medical payments

All of the following perils are covered under a homeowner's policy except: i. Windstorm ii. Riot/civil commotion iii. Vandalism iv. Mudslide/sinkhole

iv. Mudslide/sinkhole

Adding a term certain feature to annuity with a single life term will cause the benefit payment to decrease. t/f

true

Automobile premiums are dependent on age, sex, use of the automobile, and the record of the automobile. t/f

true

Can annuities be used to accumulate retirement income? t/f

true

Dishonesty by the insured has the potential of voiding the policy t/f

true

Distributions from annuities are taxed in a similar manner as distributions for MEC's t/f

true

Donald owns a home with a replacement cost of 300,000. He has 200,000 of property insurance with an 80% coinsurance requirement. Donald suffers a loss of 60,000$. Insurance will pay approximately 50,000 less the deductible. t/f

true

Equity index annuities are beneficial because their earnings can be positively impacted by increases in the equity market, but without market risk. However, these annuities will have cap rates that limit participation t/f

true

Nuclear Hazard is a general exclusion in most homeowners policies. t/f

true

One of the duties of the insurer/insured after the loss of property is to mitigate further loss to the property t/f

true

Personal liability umbrella policy is designed to provide a catastrophic layer of liability coverage on top of the homeowners and automobile coverages. t/f

true

The annuitized payments from a qualified annuity will generally be fully taxable as ordinary income. t/f

true

The annuitized payments from a qualified annuity, will generally be fully taxable as ordinary income. t/f

true

The term of annuity benefits can be based on single or joint life. t/f

true

Equity index annuities promise to pay a minimum guaranteed interest rate. t/f

true, rate could be zero