Primerica Ch. 4 - Retirement and other insurance concepts

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free

Personal uses of life insurance

-survivor protection -mortgage payoff -estate creation -estate conservation -liquidity -cash accumulation - NOT buy-sell agreement, this is for business uses

What is the number of credits required for fully insured status for social security benefits?

40

What is the main purpose of the seven-pay test?

Determines if the insurance policy is an MEC (the seven pay test determines whether an insurance policy is "overfunded" or if it's a modified endowment contract)- In other words the cumulative premiums paid during the first seven years of policy must not exceed the total amount of net level premiums that would be required to pay the policy of using guaranteed mortality cost/interest

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable