Insurance final

Choose the standard amount of personal liability coverage provided by a personal liability umbrella policy (PLUP). - $100,000 - $500,000 - $1,000,000 - $2,000,000

$1,000,000

Kristen has a personal auto policy, and the liability coverage is displayed as 250/500/100. How much bodily injury liability coverage per accident does Kristen have? - $250,000 - $500,000 - $100,000 - $750,000

$500,000

Which of the following statements regarding the principles of risk and insurance are CORRECT? I. Risk is a condition in which there is a possibility of an adverse result from the expected desired outcome. II. A hazard is the cause of a financial loss and is the actual event for which the individual purchases insurance. III. A peril is a condition that increases the probability that a financial loss will occur in the future. IV. Pure risk involves only the chance of loss or no loss

I and IV

Restricted stock is I. a stock option granted by the employer to the employee/executive II. subject to substantial risk of forfeiture prior to vesting III. subject to income tax when the stock is no longer subject to a substantial risk of forfeiture IV. employer stock that is forfeited by the employee if his work performance is unsatisfactory or if he terminates employment before a certain period

II, III and IV

Select the items that are covered without a dollar limit under the personal property provision of a homeowners policy. - Furs - Jewelry - Coin collections - None of these

None of these

In the event of his death, Jim wants to provide funding for his daughter Lauren, 4, to attend four years of college, starting at age 18. The current annual cost of tuition is $25,000. Assume inflation of 6.5% and after-tax earnings of 6%. If Jim wants to have enough life insurance to assure adequate funds for Lauren when she begins college (should he die today), approximately how much insurance should he purchase for this need alone? (Round your answer to the nearest dollar.) - $108,076 - $107,568 - $100,710 - $103,417

$107,568

Ms. Johnson is 40 years old but appears much younger. She has applied for a life insurance policy that has a premium of $25 per $1,000 for age 40 and $15 per $1,000 for age 35. On the application, Ms. Johnson states her age as 35 and purchases a $20,000 life insurance policy, issued for someone of that age. She dies unexpectedly 1 year later at her actual age of 41. Calculate the death benefit that will be paid to Ms. Johnson's beneficiary assuming the insurance company discovers the misstatement of age on the application. - $0 - $10,000 - $12,000 - $20,000

$12,000

Robin is granted 1,500 shares of restricted stock from her employer when the stock is trading at a FMV of $25 per share. She is anticipating significant appreciation and wishes to minimize her future tax burden. As a result, she makes a Section 83(b) election. Assuming she is in the 35% marginal income tax bracket, calculate the income tax that will be due on this transaction in the year of election. - $13,125 - $24,375 - $37,500 - $50,625

$13,125

George has recently joined ABC company, a closely held corporation, and as part of his compensation program, he was offered stock appreciation rights (SARs) corresponding to 5,000 shares of the company's stock. The terms of the SARs entitle George to be paid the difference between the FMV of the stock at the time of exercise and the FMV of the stock at the time the SARs were granted. If the FMV of the stock is $2 on the date of the grant and $5 upon exercise, calculate the award will he receive from ABC. - $5,000 - $10,000 - $15,000 - $30,000

$15,000

Under the terms of an employee stock purchase plan (ESPP), Howard receives options to purchase 1,000 shares of his employer stock at $17.50 per share when the FMV of the stock was $20 per share. He exercises the options when the market price of the stock is $20 per share. Three years later, Howard sells the 1,000 shares for $85 per share. Based on the information provided, calculate the amount of ordinary income and capital gain recognized on the sale. - $0 ordinary income; $85,000 capital gain - $65,000 ordinary income; $2,500 capital gain - $17,500 ordinary income; $2,500 capital gain - $2,500 ordinary income; $65,000 capital gain

$2,500 ordinary income; $65,000 capital gain

Mr. Smith bought a $250,000 whole life, double indemnity policy on his own life on August 1 of the current year (premiums were $200 per month). On September 30 of the following year, Mr. Smith committed suicide. Premiums were paid as agreed up to September 1 of the following year. Assuming that Mr. Smith's policy included the common whole life policy provisions, calculate the amount that will be paid or refunded by the insurance company. - $0 - $2,800 - $250,000 - $500,000

$2,800

Gerry has a cost basis of $250,000 in his non-qualified fixed annuity. He will begin distributions from his annuity at age 65. His life expectancy at age 65 is 25 years, and his monthly payment is expected to be $1,500. Calculate the amount of each monthly payment that Gerry must include in his income, subject to taxation. - $0 - $666.67 - $833.33 - $1,500.00

$666.67

Mrs. Hopkins has a major medical insurance policy with a $500 deductible and an 80% coinsurance clause. She becomes ill and is admitted to the hospital for several days. When she is discharged, her hospital bill is $7,500 and her doctor bills are $3,250. Calculate the amount that will be paid by her insurance. - $7,000 - $8,200 - $9,250 - $10,250

$8,200

Stewart owns a home with a replacement cost of $300,000. He purchased $200,000 of property insurance on the house with a $1,000 deductible for all losses. The house caught on fire and sustained $100,000 worth of damage. The actual cash value of the damaged portion of the property was $80,000. Calculate the amount Stewart will receive as reimbursement for the loss. - $82,333 - $99,000 - $200,000 - $300,000

$82,333

Identify the number of days an employee has to make a Section 83(b) election after receiving restricted stock. - 30 days - 45 days - 90 days - 180 days

30 days

Mike, a former key employee of ABC company, has just left the company for another opportunity. He was entitled to a nonqualified benefit as a result of his status and tenure. Select the length of time he must wait before he can commence distributions from this plan. - 6 months - 12 months - 90 days - The plan does not have any restrictions.

6 months

Select the maximum time a long-term care policy may exclude coverage for a pre-existing condition under HIPAA guidelines. - 90 days - 12 months - 18 months - 6 months

6 months

Which of the following statements best describes a morale hazard? - A condition of carelessness or indifference on the part of an individual as to whether a loss occurs and/or the size of a loss if one does occur - An unintentional tort in the form of an action or omission that leads to the injury of another party - A false and material statement made by an applicant for insurance, providing a basis for the insurer to void the contract - An act or condition that increases the likelihood of the occurrence of a peril and/or increases the severity of a loss if a peril does occur

A condition of carelessness or indifference on the part of an individual as to whether a loss occurs and/or the size of a loss if one does occur

Identify the statement regarding stock options used as equity-based compensation that is NOT correct. - A nonqualified stock option is also known as a statutory, or incentive, stock option. - The bargain element of an NQSO is the difference between the market value of the stock and the option's exercise price. - The price at which the stock will be sold to the employee is either its FMV at the time the option is granted or a slightly lower value. - A stock option is a right granted by an employer to its employee allowing that employee the right to purchase the employer's stock at a fixed price for a stated period.

A nonqualified stock option is also known as a statutory, or incentive, stock option.

Which of the following is an insurance producer who has the authority to hire agents to work for them? - A captive agent - A producing general agent - A career agent - A broker

A producing general agent

Which of the following definitions best defines insurable interest? - The process of determining when, how much, and where to insure risks - A right or relationship with regard to the subject matter of an insurance contract, such that the insured will suffer financial loss from damage, loss, or destruction to that subject matter - Any right to the economic benefits of a piece of property, such as a life insurance policy - The increase in the cash value or investment fund of a permanent life insurance policy

A right or relationship with regard to the subject matter of an insurance contract, such that the insured will suffer financial loss from damage, loss, or destruction to that subject matter

Select the CORRECT statement regarding variable annuities owned by individuals. - A variable annuity has lower fees and expenses than a mutual fund. - A variable annuity is entitled to a step-up in basis at the owner's death. - A gain from a variable annuity may be taxed at favorable capital gains rates. - A variable annuity may avoid probate as long as an appropriate beneficiary has been designated.

A variable annuity may avoid probate as long as an appropriate beneficiary has been designated.

Choose the features that an equity-indexed annuity (EIA) may use to compute the interest rate. - Interest rate caps - Participation rates - Spread or administration fees - All of these

All of these

Identify the factors that should be analyzed when assessing the cost of a universal life insurance policy. - The actual interest rate credited to the policy - The actual mortality charge assessed to the policy - The guaranteed interest rate specified in the policy - All of these

All of these

Which of the following professionals would likely need errors and omissions insurance? - An insurance agent - A physician's assistant - A certified nursing assistant - An orthopedic surgeon

An insurance agent

Which of the following professionals would likely need malpractice insurance? - An attorney - A financial advisor - An oncologist - An accountant

An oncologist

Select the statement regarding the income tax implications of individual disability income insurance that is NOT correct. - Premiums paid are generally not tax deductible for federal income tax purposes. - If the insured pays the premiums, benefits are generally received income tax-free. - Because of the tax treatment of compensation income, something less than 100% of predisability income needs to be replaced. - Because this is a type of health insurance, the premiums paid are tax deductible if they exceed 10% of the policyholder's adjusted gross income (AGI).

Because this is a type of health insurance, the premiums paid are tax deductible if they exceed 10% of the policyholder's adjusted gross income (AGI).

Identify the CORRECT statement regarding tax-qualified, long-term care insurance (LTC). - Benefits are generally excludible from taxable income subject to a $360 per day limit (2018). - Premiums paid by the policyowner are not tax deductible. - Employer-paid premiums are taxable income to the employee/insured. - Benefits may be included in flexible spending accounts on a tax-advantaged basis.

Benefits are generally excludible from taxable income subject to a $360 per day limit (2018).

Identify the CORRECT statement(s) regarding business overhead expense (BOE) insurance. I. Benefits payable are taxable income to the business. II. BOE policies will not reimburse the owner for his salary during disability.

Both I and II

The state insurance department, headed by the state insurance Commissioner: I. administers compliance. II. sets regulations implementing legislation.

Both I and II

Which of the following is NOT a favorable tax feature of a whole life insurance policy? - The earnings are generally tax deferred. - The death benefit received by the beneficiary is typically income tax free. - Cash surrender value (CSV) proceeds in excess of investment in the contract are received income tax free. - If the policy is surrendered, premiums paid by the owner can reduce any taxable gain that may occur.

Cash surrender value (CSV) proceeds in excess of investment in the contract are received income tax free.

Choose the term life insurance policy that may be exchanged for a cash value policy without providing evidence of insurability. - Convertible term life insurance - Increasing term life insurance - Level term life insurance - Annual renewable term life insurance

Convertible term life insurance

Which of the following is NOT a method of handling risk? - Elimination - Retention - Reduction - Transfer

Elimination

Joe is an executive for XYZ corporation, where he has worked for the past 25 years. His current salary is $315,000, and XYZ's defined benefit plan promises all employees 80% of their salary at retirement. As a result, Joe would be entitled to a benefit of $252,000 per year under the plan. However, this amount is above the Section 415 benefit limitation. Choose the type of NQDC plan his company should install to fund the difference between his promised benefit and his limited benefit. - Carve-out plan - Over-the-limit plan - Section 83(b) plan - Excess benefit plan

Excess benefit plan

Identify the set of provisions that best describes the attributes of a whole life insurance policy. - Level death benefit, increasing premium, low cash value - Increasing death benefit, guaranteed minimum interest earnings, flexible premium - Fixed premium payments, lifetime life insurance protection, tax-deferred accumulation - High cash value, single premium, policy loans taxed as ordinary income on a last in, first out (LIFO) basis

Fixed premium payments, lifetime life insurance protection, tax-deferred accumulation

Choose the organization that provides a broad range of health services to a group of subscribers for a fixed monthly fee and involves a capitation fee. - HMO - Private health insurer - Third-party administrator - Commercial insurance company

HMO

Which of the following HO policy forms provides the highest level of building and personal property coverage? - HO-15 - HO-2 - HO-3 - HO-5

HO-5

Identify the homeowners insurance form used for condo unit owners. - HO-6 - HO-2 - HO-3 - HO-8

HO-6

In calculating life insurance needs, which of the following can be defined as the present value of the family's share of the decedent breadwinner's future earnings? - Human life value - Net present value - Portfolio value - Conversion value

Human life value

Identify the perils that are covered under basic coverage in a homeowner's policy. I. Smoke II. Theft III. Falling objects IV. Earthquake

I and II

Identify the CORRECT statements about partnership long-term care insurance. I. Partnership long-term care programs bring together state government and private insurance companies which sell long-term care insurance. II. The partnership aligns unique long-term care policies with Medicare for clients who continue to need coverage beyond their policies' limits. III. Partnership long-term care insurance provides a specific dollar amount of assets that would be protected if they exhausted all of the long-term care insurance benefits and had to apply for Medicaid.

I and III

Select the CORRECT statement(s) regarding the accelerated death benefit rider. I. Another source of funds for either a terminally or chronically ill individual is to access the accelerated death benefit rider on an existing policy. II. The receipt of the advance does not affect the face amount of the insured's life insurance policy. III. The main advantage of the accelerated death benefit rider is that terminally ill insureds may obtain advances of death benefits and use them for a variety of personal needs.

I and III

Which of the following statements regarding Coverage E and Coverage F within a standard homeowners insurance policy is CORRECT? I. Medical payments coverage (Coverage F: Medical Payments to Others) will automatically pay for bodily injuries, regardless of fault, typically up to $1,000 per occurrence on or off the premises. II. Personal liability coverage (Coverage E: Personal Liability) protects the insured homeowner and all resident family members against personal liability for bodily injury and property damage that may occur on or off the premises due to negligence, up to $300,000 per occurrence. III. Coverage E may cover the insured for injuries or property damage caused while playing golf.

I and III

Choose the condition(s) that would postpone the payment of income taxes on compensation in the form of restricted stock. I. The stock is subject to a substantial risk of forfeiture. II. The employee makes a Section 83(b) election.

I only

For life insurance to be underwritten, an insurable interest must exist I. when the policy is first issued. II. when a loss is claimed.

I only

Select the situation(s) in which informal funding of a nonqualified plan may create taxation to the sponsoring employer. I. If the type of asset used to fund the plan is an employer-owned annuity, the set-aside reserve may create an additional tax consequence to the employer. II. Any earnings generated from the underlying assets are always tax-deferred to the employer.

I only

Identify the items to consider when evaluating an existing life insurance policy for possible replacement. I. The client's risk tolerance level II. The existing policy's relative value III. The companies' A.M. Best and other ratings IV. Any possible changes in the client's insurability

I, II, III, and IV

Ken owns a hardware store that fills customers' propane tanks. You are Ken's insurance agent and are attempting to explain insurance terms to Ken. Which of the following statements is CORRECT? I. Fire is a peril. II. Leaving oily rags in a hardware store's repair shop area is a hazard. III. The handling of propane is a hazard. IV. A pure risk is one that involves only the chance of loss or no loss; in other words, there is no chance of gain

I, II, III, and IV

Point out the key factor(s) that may affect the overall health care costs of a retiree. I. Estimated health insurance premiums II. Age chosen to retire III. Life expectancy IV. Inflation

I, II, III, and IV

Select the persons for whom COBRA coverage is available. I. A child who ceases to be an eligible dependent II. A former spouse of a covered employee after divorce III. An employee who changes to part-time status IV. A dependent child of a deceased worker

I, II, III, and IV

Some of the more important provisions in health insurance plans required by the National Association of Insurance Commissioners (NAIC) model legislation include I. entire contract II. grace period III. payment of claims IV. reinstatement

I, II, III, and IV

Which of the following are methods of managing risk? I. Avoidance II. Retention III. Reduction IV. Transfer

I, II, III, and IV

Which of the following are types of automobile insurance coverage under a personal auto policy (PAP)? I. Uninsured motorists II. Liability insurance III. Medical payments IV. Property damage

I, II, III, and IV

Josie has had an exciting year. She passed her CPA exam, joined a small accounting firm as a public accountant, purchased her first car, and bought a home. Which of the following types of insurance should she have at this point? I. Automobile insurance II. Errors and omissions insurance III. Homeowners insurance IV. Malpractice insurance

I, II, and III

Universal life insurance gives policyowner's the ability to adjust the I. premiums II. death benefit III. cash values IV. mortality rates

I, II, and III

Which of the following might constitute a substantial risk of forfeiture that will keep the value of restricted stock from being subject to income tax? I. The employee does not meet certain performance goals. II. The employee goes to work for a competitor. III. The employee does not meet specified sales goals.

I, II, and III

Select the nonforfeiture options that are commonly included in a whole life insurance policy. I. Reduced paid-up whole life II. Term life insurance for the face value of the whole life policy III. A reduced term life insurance policy for life IV. Cash equal to the surrender value of the policy

I, II, and IV

Which of the following statements regarding insurance contracts are CORRECT? I. Insurance contracts are generally contracts of indemnity, meaning that the policyowner will be reimbursed by the insurer only up to the actual loss amount without the opportunity for profit. II. Insurance contracts are contracts of utmost good faith, meaning that both parties must disclose all facts truthfully, or the contract may be reformed or rescinded. III. Insurance contracts are unilateral contracts, in that all parties to the contract are legally bound to perform. IV. Insurance contracts are aleatory contracts, meaning that the outcome is affected by chance, and the dollars collected by the parties are usually unequal.

I, II, and IV

Annuities are normally classified according to I. benefit payments II. settlement options III. premium payments IV. annuity payments

I, III and IV

The personal liability umbrella policy (PLUP) is structured to provide a catastrophic layer of liability coverage on top of the current homeowners and automobile liability coverage. Select the exclusions that are found in this type of policy. I. Any act committed with the intent to cause bodily injury to another II. Liability arising out of any personal activity III. Director's and officer's liability IV. Workers' compensation obligations

I, III and IV

Comprehensive personal liability coverage (CPL) can be acquired in which of the following ways? I. as an endorsement to a personal auto policy (PAP). II. as an individual CPL policy. III. as part of a homeowners policy.

II and III

Identify situations when implementing a nonqualified plan is appropriate for an employer. I. When an employer wants to provide a deferred compensation benefit for all employees II. When an employer wants to provide additional deferred compensation benefits to an executive who is already receiving the maximum benefits/contributions under the employer's qualified plan III. When the employer wants to provide all employees with tax-deferred compensation benefits IV. When an executive wants the employer to help with meeting certain financial planning goals

II and IV

Which of the following characteristics of inland marine coverage are explained correctly? I. Personal property floater risks are not eligible for coverage under inland marine policies. II. Many of the same items may be covered under an inland marine policy or as an endorsement to a homeowners policy. III. If a fishing boat is too large to be covered under a homeowners policy, it can be covered under an inland marine form called a boat owners policy. IV. Silverware and golfing equipment may be covered under an inland marine policy.

II and IV

Which of the following limits an insurer's liability for covered losses? I. Misrepresentations by an agent acting within the agent's authority II. An insurable interest by the insured III. Other insurance coverage IV. The actual cash value of a loss

II, III, and IV

Once you have constructed a risk management plan for the client, what is the next step in the risk management process? - Identifying risk management goals - Monitoring the plan for any changes and/or updates - Implementing the recommendations - Gathering pertinent data to determine risk exposure

Implementing the recommendations

Contrast noncancelable disability income contracts and guaranteed renewable contracts. - Noncancelable policies are not guaranteed renewable, and their premiums are lower - In general, premiums for noncancelable policies are greater than those of guaranteed renewable policies, but the insurance company guarantees the renewal for a stated period without the increase in future premiums - A noncancelable policy premium may be increased as long as the increase is made for the entire class of insureds - The premium for a guaranteed renewable policy cannot be changed unless scheduled to do so as part of the initial contract, and it provides greater security than a noncancelable policy

In general, premiums for noncancelable policies are greater than those of guaranteed renewable policies, but the insurance company guarantees the renewal for a stated period without the increase in future premiums

Which of the following is a common property coverage that can be included in a business owner's policy (BOP)? - General liability - Workers' compensation - Professional liability - Inland marine

Inland marine

Jack purchased a $200,000 whole life insurance policy and designated his wife, Judy, as sole beneficiary. Several years ago, Jack surrendered his policy for the cash surrender value (CSV) of $100,000. Jack paid gross premiums of $90,000 and had received dividends of $20,000 at the time of surrender. Determine the tax consequences to Jack upon receipt of the cash proceeds from the policy. - Jack received $70,000 tax-free. - Jack received $70,000 tax-free and $20,000 as ordinary income. - Jack received $70,000 tax-free and $30,000 as ordinary income. - Jack received $90,000 tax-free and $10,000 as ordinary income.

Jack received $70,000 tax-free and $30,000 as ordinary income.

Choose the type of personal automobile insurance coverage that most states require a minimum amount by law. - Liability - Collision - Other than collision - Comprehensive

Liability

Samantha has a homeowners policy. Her dog bites the mailman, and he incurs emergency room expenses of $600. What is the consequence of this event? - Medical payments coverage is applicable, and liability coverage is applicable if Samantha is held legally liable. - Samantha needed a personal liability umbrella policy for coverage of this type of risk. - There is no coverage under this policy because pets are excluded. - Only medical payments coverage applies, not liability coverage

Medical payments coverage is applicable, and liability coverage is applicable if Samantha is held legally liable.

Identify the Part of Medicare that is designed to pay for hospital expenses, but not physicians expenses. - Medicare Part A - Medicare Part B - Medicare Part C - Medicare Advantage Plans

Medicare Part A

Choose the term that best describes the probability of an insured becoming disabled. - Morbidity rate - Mortality rate - Disability rate - Accident and sickness rate

Morbidity rate

Choose the CORRECT statement(s) regarding planning for long-term care expenses. I. Medicare is one of the best ways to pay for long-term care expenses because benefits may be used for up to 5 years. II. Medicaid planning (i.e., spending down assets to qualify for Medicaid) is an important tool that planners should use in helping their clients pursue long-term care financial goals.

Neither I nor II

Analyze the scenario. Mr. Aldridge recently turned 75 and has been blind for 2 years. He has trouble walking and is unable to cook for himself. His family told him that he needs to consider moving into an assisted living facility. Assuming Mr. Aldridge previously purchased a tax-qualified LTC insurance policy, is he considered chronically ill so as to trigger the benefits of the policy, and why or why not? - No, neither sight nor cooking is considered as an activity of daily living. - No, sight is not considered an activity of daily living, although cooking is. - Yes, he has been unable to perform two activities of daily living for over 90 days - Yes, so long as he can prove to the insurance company that he is blind and unable to cook for himself.

No, neither sight nor cooking is considered as an activity of daily living.

Choose the exchange transaction that will qualify under IRC Section 1035 to provide the postponement of taxes. - One cash value life insurance policy for another cash value life insurance policy - An annuity for a universal life insurance policy - An annuity for a variable life insurance policy - An annuity for a whole life insurance policy

One cash value life insurance policy for another cash value life insurance policy

Assume you have a client who has already purchased a whole life insurance policy. Determine the best dividend option selection if the client wants to use the dividend to purchase additional temporary insurance equal to the policy's current net cash value. - Interest only - Extended term life insurance - Accumulate at interest - One-year term life insurance (or fifth dividend option)

One-year term life insurance (or fifth dividend option)

Which of the following statements regarding malpractice insurance is CORRECT? - Only a limited number of companies issue professional liability insurance policies. - Malpractice insurance policies exclude intentional acts of the professional from coverage. - Professional liability insurance is a good alternative to an umbrella liability policy. - There is generally one standard form that is used for most professionals who need errors and omissions insurance.

Only a limited number of companies issue professional liability insurance policies.

If the beneficiary of a life insurance policy chooses the interest only settlement option, how is the interest taxed to the beneficiary? - Ordinary income - Tax-free income - Long-term capital gain - Deferred income

Ordinary income

Select the Part of Medicare that covers the cost of prescription drugs. - Part D - Part A - Part B - Medicare does not cover the cost of prescription drugs.

Part D

Which of the following is the role of the legislative branch in regulating the insurance industry within a state? - Passing laws relative to the insurance industry - Creating model legislation relative to the insurance industry - Enforcing the laws in place relative to the insurance industry - Interpreting and applying the laws in place relative to the insurance industry

Passing laws relative to the insurance industry

Identify the belief that led to the development of managed care plans. - The use of a gatekeeper could minimize health costs. - Capitation was a less expensive way to provide basic health care. - Preventive care was less expensive than treating a serious illness. - Limiting the number of health care providers to individuals provided economies of scale.

Preventive care was less expensive than treating a serious illness.

Identify the nonqualified deferred compensation arrangement in which an employer places assets into an irrevocable trust where they remain subject to the claims of the employer's general creditors. - Rabbi trust - Surety bond - Secular trust - Qualified plan

Rabbi trust

Which of the following is a disadvantage of a firm self-insuring? - Self-insurance raises the possibility that the business will have to pay higher income taxes - Self-insurance reduces costs by eliminating or reducing insurance company profit. - Self-insurance eliminates selling costs. - Self-insurance avoids state premium taxes.

Self-insurance raises the possibility that the business will have to pay higher income taxes

Which of the following gave states the authority to regulate the insurance industry? - The National Association of Insurance Commissioners (NAIC) - The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) - The McCarran-Ferguson Act of 1945 - The state insurance commissioners

The McCarran-Ferguson Act of 1945

Which section of an insurance contract includes information provided by the applicant? - The exclusions section - The insuring agreement - The declarations section - The conditions section

The declarations section

What is the stated amount of money the insured is required to pay on a loss before the insurer will make any payments under the policy? - The rider - The endorsement - The deductible - The Exclusion

The deductible

Identify the primary difference between the guaranteed lifetime withdrawal benefit (GLWB) and the guaranteed minimum withdrawal benefit (GMWB). - The key difference between a GMWB and a GLWB is that the GMWB is not guaranteed for the life of the contract owner. - The key difference between a GMWB and a GLWB is that the GMWB is guaranteed for a joint life. - The key difference between a GMWB and a GLWB is that the GMWB is guaranteed for up to three lives. - The key difference between a GMWB and a GLWB is that the GMWB is only guaranteed for the life of the contract owner.

The key difference between a GMWB and a GLWB is that the GMWB is not guaranteed for the life of the contract owner.

Select the CORRECT statement regarding COBRA rules for group health plans. - Continuation of coverage is automatic once a qualifying event occurs. - The rules apply to any employer with a health plan and more than 15 covered employees. - The rules allow an employer to charge up to 120% of the cost of an active employee to cover administrative costs. - The rules require the employee or dependent to notify the employer within 60 days of a qualifying event, such as a divorce.

The rules require the employee or dependent to notify the employer within 60 days of a qualifying event, such as a divorce.

Select the transaction that is considered a disqualifying disposition of an ISO. - The stock is sold 3 years after the grant date. - The stock is sold 3 years after the exercise date. - The stock is sold within 2 years of the grant date. - The stock is sold after 2 years of the grant date and 1 year of the exercise date.

The stock is sold within 2 years of the grant date.

Which one of the following statements describing a consequence or provision of a viatical settlement is CORRECT? - At the death of the insured, the beneficiary receives the death benefit income tax free. - If the terminally ill individual actually lives longer than one year, the payments received are no longer excluded from income. - Under a viatical settlement, the insured will typically receive a lump-sum payment of 50-80% of the policy's face value. - A terminally ill individual is one who has been certified by a physician as being reasonably expected to die within one year of the certification.

Under a viatical settlement, the insured will typically receive a lump-sum payment of 50-80% of the policy's face value.

Assume that a client has the following needs and objectives when purchasing a life insurance policy: - Flexible premium payments - Possibility of increasing death benefit - Investment options - Permanent protection Choose the type of policy that is most suitable for this client.

Variable universal life

Convertible term life insurance is a type of insurance policy that may be converted to - a cash value policy with evidence of insurability - another term life insurance policy with evidence of insurability - a cash value policy without evidence of insurability - another term life insurance policy without evidence of insurability

a cash value policy without evidence of insurability

When evaluating the appropriateness of long-term disability coverage for clients, planners should focus on - all of these - the definition of disability - an appropriate elimination period and benefit amount - whether the benefit term matches the client's work-life expectancy

all of these

Variable life insurance contracts - should be sold to individuals with low risk tolerances - are also referred to as security life insurance contracts - are considered life insurance and are exempt from securities regulation - are considered securities and may be sold only by properly licensed insurance agents who also maintain a current securities license

are considered securities and may be sold only by properly licensed insurance agents who also maintain a current securities license

All of the following are steps in the risk management process except - analyzing and evaluating the information to identify risk exposures facing the client. - identifying risk management goals. - monitoring the plan for any changes and/or updates - dentifying the insurance required to cover every risk.

identifying the insurance required to cover every risk.

All of the following are exclusions from Coverage C: Personal Property of a homeowners policy EXCEPT - jewelry - credit cards - animals, birds, and fish - property of roomers or boarders

jewelry

All of the following are requirements of an incentive stock option (ISO) EXCEPT - must be part of a written plan approved by the employee's supervisor - the option's exercise date cannot exceed 10 years from the date of the grant - the exercise price cannot be less than the market price of the stock on the date of the grant - there is an annual limit of $100,000 on the value of the ISOs exercisable during any 1 year for any employee for which the stock is valued on the grant date

must be part of a written plan approved by the employee's supervisor

All of the following are considered activities of daily living (ADLs) under the Health Insurance Portability and Accountability Act EXCEPT - talking - eating - maintaining continence - transferring from bed to chair

talking

All of the following are characteristics of a principal-agent relationship except - the agent may bind the principal in a contract with a third person - the agent has a duty of loyalty to the principal. - the agent typically has little or no independent discretion. - the agent acts on behalf of the principal in engaging in business transactions

the agent typically has little or no independent discretion.

All of the following perils are excluded from coverage under most homeowners policies EXCEPT - volcanic eruption - earthquake - power failure - flood

volcanic eruption