Practice Exam 1 - Review

Which type of inquiry may occur when checking on current mortgage interest rates without applying for a mortgage?

A soft inquiry. When only checking rates without applying for a mortgage, a soft inquiry may occur. A hard inquiry would occur at application.

Annuities

Annuities must be annuitized to mitigate the risk of superannuation. annuities that cease making payments at death are not included in the decedent's gross estate. qualified annuities are subject to minimum distribution rules.

Karl earns $120,000 per year as a plumber. He has a loss-of-income disability policy with a benefit of $6,000 per month. He suffers a disability to his right leg while at work. As a result of his injury, he needs to work at a desk job, earning $80,000. How much in monthly disability benefits will he receive?

$2,000 Karl is partially disabled, and he lost one third of his income. Therefore, he will receive a benefit equal to one third of his monthly disability policy benefit, or $2,000 per month.

Noncancelable

Noncancelable policies prevent the insurance company from cancelling the policy as long as the premiums are paid.

What is the goal of long-term care?

Promote functional independence.

FICO scores are an indication of a person's credit worthiness. Brian has a score of 500. How would you characterize his score?

BAD The range for FICO scores is from 300 to 850. Anything below 550 is considered bad.

Which of the following statements concerning the reduction of Social Security benefits is (are) correct?

Both I. A Social Security recipient may have their current benefits reduced through early retirement, through the retirement earnings limitation test, and through the taxation of benefits. II. Generally, a person can continue to work even though he or she is considered retired under Social Security; However, if the earnings of a person under normal retirement age exceed certain limitations, those benefits are subject to taxation.

Which of the following can have a negative impact on a credit score? Opening a new credit account. Closing a credit account.

Both I and II Opening new accounts rapidly is a sign of debt issues. Closing accounts can negatively impact a person's credit history and utilization.

Jenny has decided to purchase a piece of furniture from a company online. She has some concerns about the company because it has such low prices. Which of the following cards would provide her the most protection? Her debit card. Her credit card

CREDIT CARD is more secure Hide question 86 feedback The correct answer is (B). If someone steals a debit card, the money is removed directly from the owner's bank account. However, credit cards holders generally are not held liable for fraudulent activities. Credit card charges are relatively easy to contest and the liability is limited to $50 for fraudulent purchases.

NAIC

assists in regulation of insurance by indirect involvement in the exchange of information and preparation of recommendations.

Exclusion Ratio

equals the owner's investment in the annuity contract divided by the expected return on the annuity.

Members of a three-person partnership want to enter into a buy-sell arrangement. How many life insurance policies would need to be purchased to properly fund coverage of the partnership using a cross-purchase agreement?

note "cross" purchase N * (N-1) Six Policies.

Abel is 30 years old and recently began a job with a salary of $60,000. He has saved about $25,000 in cash and has no debts. He is single and lives with his parents, who are not dependent on him for financial support. According to the needs approach, what is the amount of life insurance that Abel currently needs?

$0 Abel's current need for life insurance is $0 because he has no dependents.

Quinton has been feeling unwell, and he, decides that his health would improve if he were to retire now. He is 68 years old, and his normal Social Security retirement age is 66. If he retires today and his normal age retirement PIA is $1,500, how much can Quinton expect to receive as a monthly retirement benefit?

$1,740 Delayed benefits will increase at 8 percent per year of delay up until age 70. Therefore, Quinton's benefit will be 16 percent higher than his PIA. The 8 percent increase is not compounded.

Amber owns a house with a replacement cost of $500,000. She purchases $300,000 of insurance with an 80 percent coinsurance requirement and a $500 deductible. If Amber's house is hit by a hurricane and she suffers a $150,000 loss, what will the insurer pay?

$112,000 (amount of coverage purchased ÷ coinsurance) × loss [$300,000 ÷ ($500,000 × 0.80)] × $150,000 = $112,500 − $500 deductible = $112,000

Shira has a major medical policy with a $500 annual deductible, a $2,000 out-of-pocket limit on covered losses excluding the deductible, and an 80/20 coinsurance provision. Shira breaks a leg dancing and has surgery that costs $12,000. How much will she need to pay for the surgery?

$2,500 Shira is responsible for a $500 annual deductible and 20 percent of the costs. However, she has an out-of-pocket limit of $2,000 excluding the deductible. $12,000 − $500 = $11,500 $11,500 × 0.20 = $2,300 $2,000 + $500 = $2,500

Ernie began to collect Social Security retirement benefits this year at age 62, even though he continued to work. This year, he earned $32,000 over the earnings limit. If his Social Security benefit before any adjustments for this year is $20,000, what will his actual Social Security benefit be?

$4,000 The earnings reduction applies, and Ernie will lose $1 in Social Security benefits for every $2 he is over the earnings limit. Because his earnings are $32,000 over the limit, Ernie will lose $16,000 of Social Security Benefits, reducing his total benefit to $4,000.

Xavier is the historical interpreter at his city's museum, which does not provide disability insurance. He buys a private policy through an insurance agent that provides a benefit of $4,200 a month. If he has a 25 percent effective tax rate and is disabled, what are his benefits after tax?

$4,200 Hide question 42 feedback The correct answer is (D). Xavier paid the entire premium, so the entire benefit is tax-free. He is effectively self-insuring.

Scott purchased a single-premium annuity for $200,000. The annuity pays him $1,000 per month. If his life expectancy was 20 years when he purchased it, how much of each payment is NOT subject to tax?

$833 The exclusion ratio is the owner's investment in the contract divided by the expected return. exclusion ratio = $200,000 ÷ (20 years × 12 months × $1,000) = 83.33%non-taxable portion of the payment = $1,000 x 83.33% = $833

All of the following are covered under Part A, Hospital Insurance

-necessary medical care furnished by Medicare-certified providers. -inpatient hospital care -hospice care NOT prescription drugs (part D)

Henry is covered under his employer's major medical expense plan. The plan has a calendar-year deductible of $1,000, a 75 percent coinsurance provision that applies to the next $8,000 of covered expenses, and full coverage for any remaining covered expenses. If Henry incurs covered medical expenses of $15,000 during the year, how much will be paid by his employer's plan?

12,000 His employer's plan will pay $12,000. If Henry incurs $15,000 of covered medical expenses, he must pay $1,000 out-of-pocket to meet the deductible. Of the remaining $14,000 of expenses, $8,000 of it is subject to the 75 percent coinsurance provision. This means that Henry must pay another $2,000 (that is, .25 × $8,000 = $2,000) out-of-pocket for a total amount of $3,000 (that is, $1,000 deductible + $2,000 coinsurance = $3,000). Subtracting $3,000 from $15,000 leaves $12,000 for the medical expense plan to cover.

Rory plans to purchase an annuity. Which of the following options will give him the largest monthly annuity payment, assuming his life expectancy is 20 years and his husband's life expectancy is 22 years?

A 10-year term-certain annuity. Payments over 10 years will be larger than payments over 20 years or more, even if they are guaranteed.

PLUP

A PLUP will not be issued without the PLUP carrier insisting on certain levels of underlying liability coverages for both auto (typically 100/300) and home (300). The primary purpose of this type of policy is to protect assets and earning power. Some coverages apply to the entire family. A PLUP policy may be issued for $1 million or more of coverage.

Which of the following are covered under Medicare Part D?

Medicare Part D covers both generic and brand-name drug prescriptions found on the formulary.

Which is not an Insurable Risk?

Receiving a traffic ticket. is not an insurable risk. -ice storm, medical costs from crosswalk injury, and gas leak fire are insurable risks.

Tornado risk potential?

Risk transfer - allow insurance to cover.

FICO

Salary is not included as part of the FICO score. All of the other options are included.

John, aged 63, has enjoyed abundance during his lifetime and decided to share that abundance with three wives. His first marriage was to Sandra, currently aged 65. This marriage lasted 25 years, and Sandra never remarried. Two years after divorcing Sandra, John married Barbara, who is currently aged 65. However, that marriage ended 3 years later when Barbara divorced John and married another man. John and his current wife, Blanche, aged 58, have been married for 8 years. Which of the following statements concerning spousal benefits under Social Security is correct?

Sandra can collect a spousal benefit from John's Social Security record. Since John and Sandra's marriage lasted more than 10 years, they have been divorced for at least 2 years, and Sandra has attained an appropriate age, she can collect a spousal benefit on John's account. Option (A) is incorrect because Blanche is too young to collect a benefit this year. Option (B) is incorrect because John's marriage to Barbara did not last 10 years. Option (D) is incorrect because Blanche will be able to collect the greater of the spousal benefit under John's record or her PIA when she reaches Social Security retirement age.

Residual Benefits rider

A residual benefits clause provides partial benefits to an insured when the insured returns to work in a lower paying job.

Which of the following statements is true regarding the taxation of Social Security benefits?

A retiree whose only income is her Social Security benefit will not pay any taxes on those benefits. As little as 0 percent of a retiree's Social Security benefits may be subject to tax. Answer (B) is incorrect because retirees who have multiple sources of income may have up to 85 percent of their benefit taxed, depending on their modified adjusted gross income. Answer (C) is incorrect because Social Security benefits are only reduced for workers who are at or under their normal retirement age; a 70-year-old would be above normal retirement age. Answer (D) is incorrect because Social Security benefits are subject to their own tax rules that are distinct from those for earned income.

Callum is 67 years old and about to retire. His table life expectancy is 20 years. He has $25,000 in a retirement plan for which there is no lump-sum withdrawal option. Callum has two children. He wants to receive all of the $25,000 leave his other assets to his children and participate in equity returns. Which of the following is the most suitable option for Callum?

A single-life, variable annuity with a term certain of 20 years. The variable annuity will allow him to participate in equity returns, and the guarantee period equal to his life expectancy will likely ensure that he will get his entire principal back.

HSAs

You must have a high-deductible plan to qualify for an HSA. Employer contributions are NOT considered taxable income.

Part C of personal auto policy (PAP)

does NOT provide payment for punitive damages. but part C does provide payment for property damage, lost wages, and the insured's medical costs.

Hazard

moral hazard is dishonesty, morale hazard is attitudinal hazard (negligence), physical is physical

HMOs characteristics

the use of an organized system to deliver medical services to the members. broad, comprehensive health services that are provided to the members. a specified geographic region in which members must live. HMOs tend to emphasize preventative care and, consequently, generally offer lower deductibles than many other policies.

Aleatory

unequal monetary values are exchanged.

Which of the following statements about credit freezes and extended fraud alerts is correct?

A credit freeze is a more severe reaction than an extended fraud alert and may jeopardize a client's ability to access credit when needed. Statement (A) is incorrect because the client may continue to look at their credit report; however, no new items may be added to the report. Statement (C) is incorrect because the extended fraud alert lasts 7 years. Statement (D) is incorrect because the credit freeze does not require closing these accounts.

Joint Life Insurance contract info

A first-to-die policy pays beneficiaries upon the death of any insured. A survivorship policy written on two individuals pays beneficiaries upon the death of the last insured. Second-to-die policies may be helpful for couples expecting to owe estate taxes. Joint-life policies are usually some form of cash value insurance. (not term)

Taylor and Avery Blake wish to purchase an annuity that provides income as long as at least one of them is alive. They have no children and no interest in passing their assets to heirs. Which of the following annuities is best suited for their purposes?

A joint-and-last-survivor annuity is best suited to the Blakes' purposes. Option (A) is incorrect because providing a lump-sum cash refund to heirs is inconsistent with the Blakes' goals. Option (B) is incorrect because providing an installment refund to heirs is inconsistent with their goals. Option (D) is incorrect because joint-life annuity payments would cease when either Taylor or Avery dies, rather than providing an income for as long as at least one of them is alive.

MEC things

A life insurance policy that fails the seven-pay test is deemed a MEC. A 10 percent penalty applies to withdrawals taken from a MEC prior to the owner reaching age 59½. The primary issue with a MEC is the taxation of withdrawals (loans) because the death benefit is generally tax-free. Withdrawals from a MEC are subject to LIFO tax treatment.

Martha purchased an annuity with after-tax dollars and wants payments to begin next month. What type of annuity did Martha purchase?

A nonqualified immediate annuity

What is a peril?

A peril is the proximate cause of actual cause of a loss.

Which of the following life insurance policies contains a cash value savings component that reaches the face value of the policy at age 100 or 120?

A whole life insurance policy. Owners of whole life insurance policies pay premiums until age 100 or 120, when the cash value equals the face value of the policy.

Which of the following statements concerning the Social Security system is (are) correct?

A worker who takes early retirement benefits will receive a reduced benefit because he or she will receive more monthly benefit payments, as payments commence earlier than they would have had the worker waited until full retirement age to retire. Age 62 is the normal early retirement age, not 59½. The second statement is true. The benefits of a worker taking early retirement benefits are reduced by ⁵⁄₉ of 1 percent for the first 36 months of early retirement and ⁵⁄₁₂ of 1 percent for any additional months of early retirement up to 24 additional months.

Tax Qualified LTC policies must offer all the following features, provisions, or options:

A) guaranteed renewable. B) the option to purchase a policy that increases with inflation. C) a nonforfeiture option.

Carlotta was in an auto accident and suffered severe injuries, leaving her unable to work. Her employer provides disability insurance and Carlotta pays for 50 percent of the insurance on a pretax basis. The employer pays the remainder of the policy premium. Her monthly benefit is $2,500 per month. Which of the following is correct?

All of her premiums are paid on a pretax basis , therefore 100 percent of her benefit will be subject to income tax.

There are many options regarding the type of annuity one can purchase. Which of the following is correct?

An equity-indexed annuity generally has less risk than a variable annuity. Option (B) is incorrect as funds in a variable annuity can be invested in a variety of sub account types, including cash, bonds, and equities. Option (D) is not correct, as earnings will be subject to tax upon certain withdrawals from the annuity, such as those made before annuitization.

Monica is a 70-year-old widow with no dependents. She wants to invest in an annuity that will produce income now. She has $100,000 to invest and wants to receive the most she can in monthly income. Which of the following is the most suitable annuity for Monica based on her objectives?

An immediate, single-premium life annuity Monica wants the greatest amount of income now. A single-life annuity with no guarantee will provide her with the highest monthly income. A longevity annuity is usually deferred and any guarantees or use of a joint-life expectancy will reduce the monthly benefit.

Underwriting

An insurer attempts to select applicants who will have an expected amount of loss that is comparable to the company's expected loss. The underwriting process often begins with the agent. Underwriters sometimes explain steps that a borderline applicant can take to become acceptable. Underwriting involves both the selection and pricing of applicants.

An HO policy that covers all losses to covered property unless the loss is specifically excluded is

An open-perils policy. Open perils policies cover all losses except those that are specifically excluded. Named perils policies, whether basic or broad, cover perils that are specified in the contract. HO-2 policies cover both basic and broad named perils, but HO-2s are not open perils policies.

COBRA continuation timeframes (some)

Death of covered employee - 36 months Termination - 18 months Moving from Full Time to Part Time - 18 months Meeting Social Security Definition of Disability - 29 months

the 6 ADLs

Eating, bathing, dressing, transferring, toileting and continence are the six activities of daily living. Preparing meals is an instrumental activity of daily living.

Which of the following is one of the three major credit-reporting bureaus that collect credit information?

Equifax -Experian -TransUnion

FSAs

FSA funds cannot be used for childcare. Funds may be used for optional medical procedures like LASIK eye surgery. The accounts are funded with pretax dollars. You have longer than the end of the calendar year to use all of the funds. -While the particulars depend on the provisions of the FSA, there is no case where all funds will be lost by the end of the calendar year. In some cases, money in FSA accounts must be used by 2 ½ months after the end of the plan year or the funds are lost. In other cases, $500 may be rolled over year after year.

COLA rider

For a policy with a cost-of-living rider, an adjustment is made for each year of benefits paid to the insured and is calculated by using the same rate of change as that used by the Consumer Price Index.

Social Security

For a worker's family to qualify for survivors benefits, that worker must have worked in six of the previous 13 quarters. A worker must have earned 40 quarters of coverage to qualify for retirement benefits and be fully insured. A quarter of coverage, which is specified each year and is indexed, can be earned anytime during the year. The earnings must be subject to Social Security taxes.

Hanna, aged 59½, was employed full-time at AWY Corporation, but she was laid off during a recent downsizing. The company has 25 full-time employees and 10 part-time employees, but it does not offer group health insurance. What should Hanna do for health insurance while unemployed?

Hanna Should Purchase an individual major medical policy until she can obtain group coverage with a new employer. The employer is not required to offer COBRA because it does not have group health insurance. Hanna is not eligible for Medicare until age 65.

Cade purchased a life insurance policy to ensure that his children were provided for in the event of his untimely death. Since they are now grown, he feels he no longer needs the life insurance. He would like to exchange it for an annuity that can provide him additional income for his retirement years. Which of the following is correct?

He can make the exchange, which will not be taxable. An exchange of a life policy to an annuity is a tax-free exchange under Section 1035. The basis will include the original investment and the additional funds.

Darnell purchased a straight life annuity from Assurance Annuities using funds from his 401(k) plan. Which of the following is correct?

His annuity will have no return of basis.

Which of the following statements concerning the need for long-term care insurance is (are) correct?

I. Private medical expense insurance policies (both group and individual) generally provide coverage only if a person also needs medical care. II. Medicare is inadequate to cover long-term care because it does not cover custodial care if that is all that is needed. Neither private medical expense insurance nor Medicare is adequate to cover the risks of long-term care.

misstatement of age

If after the insured's death it is discovered that the insured's age had been misstated, the insurer will pay the beneficiary the amount that the premiums paid would have purchased at the insured's correct age.

longevity insurance

It is a deferred annuity purchased at or near retirement that is usually payable at age 85.

ST & LT Disability

It is important to coordinate between the two. Short-term coverage may range from 0 to 2 years. Long-term benefits may continue until retirement. The combination of short- and long-term coverages are common in group insurance offerings.

Which of the following statements about long-term care need for people who are 65 years old or older is correct?

It is more likely that a woman over age 65 will be ADL disabled than have an auto accident. LTC needs are much more likely than auto accidents or house fires, and women are more likely than men to need help with activities of daily living. Seventy percent of people over the age of 65 will need long-term care at some point in their lives.

Which one of the following statements concerning long-term care coverage is correct?

Long-term care insurance can preserve a client's ability to choose care providers. Maintaining coverage under a long-term care policy permits the insured a choice of providers. Option (A) is incorrect because the longer a person lives, the more likely it is that person will need long-term care insurance. Option (B) is incorrect because wealthy people with bequest motives may use long-term care as a hedge against LTC risk, permitting them to give more assets during life to their heirs. Option (D) is incorrect because only qualified long-term care contracts are deductible.

A client, aged 78, is confined to a nursing home. Which of the following programs is (are) likely to pay benefits toward the cost of the nursing home?

Long-term care insurance may pay part of the nursing care costs if policy coverage of the facility type is broad enough. Option (A) is incorrect because Medicare covers all of the costs for the first 20 days for a nursing home; there is a deductible from day 21 to day 100. Option (C) is incorrect because private medical insurance is unlikely to cover many - if any - costs of nursing home care. Option (D) is incorrect because Medicaid may only pay if the client's income and assets are below relevant thresholds.

LTC more

Long-term care policies do not pay for care provided by family members.

Therese, aged 75, is a widow with no close relatives. She is very ill, unable to walk, and confined to a custodial nursing home. Which of the following statements is true with regard to which program(s) is (are) likely to pay benefits toward the cost of the nursing home? Medicare may pay for up to 80 additional days of care after a 20-day deductible. Medicaid may pay if the client has income and assets below state-mandated thresholds.

Medicare may pay for up to 80 additional days of care after a 20-day deductible. Medicaid may pay if the client has income and assets below state-mandated thresholds. II only Statement I is incorrect because Medicare covers all costs for the first 20 days of skilled nursing home care and covers the next 80 days with a deductible.

Miguel, aged 33, is married and has a newborn daughter. Miguel is concerned about providing for his family in the event of his premature death. He is concerned about the long-term affordability of life insurance, but he is able to budget a fixed amount for a period of time. Which of the following policies would you recommend?

Miguel should select a level-premium term policy since he is able to budget a fixed amount each year. An annually renewable term policy will become too expensive as he ages. The other policies are more expensive because of their savings component.

Which of the following individuals should consider purchasing an HO-8 policy?

Moira owns a classic Edwardian-style home, and the functional replacement cost of the home is less than the actual replacement cost. HO-8 policies are appropriate when the functional replacement cost of the home is less than the actual replacement cost Option (B) is incorrect because Lukas should have an HO-6 (Condominium) policy. Option (C) is incorrect because Elijah's home can be easily replaced; the actual replacement cost should not exceed the functional replacement cost. Option (D) is incorrect because Wyatt should have an HO-4 (Renters) policy.

Insurable Interest for P & C

Must exist at the time of loss and at the policy's inception.

Nia, a technician, buys a disability policy with a base benefit that covers 60% of her salary by paying $6,000 a month. Nia becomes partially disabled but is able to immediately secure a new job paying $40,000. How much in monthly benefit will she receive from the insurance company?

Nia, a technician, buys a disability policy with a base benefit that covers 60% of her salary by paying $6,000 a month. Nia becomes partially disabled but is able to immediately secure a new job paying $40,000. How much in monthly benefit will she receive from the insurance company?

Noel carries the minimum required PAP liability limit of 10/25/10. Noel strikes a pedestrian with his car, resulting in medical costs of $45,000 for the victim. Ignoring any deductible, which of the following statements concerning this situation is correct?

Noel's insurance company will only pay $10,000 towards the victim's medical costs. Noel's insurance will cover the first $10,000 of the medical costs but Noel may be personally liable for the $35,000 difference between the covered amount and the total medical expenses.

Noncancellable vs Guaranteed Renewable Policies

Noncanelable Policies guarantee policy renewal with no premium increases until the client is 65 years old. Guaranteed Renewable contracts must be offered to be renewed, but companies may increase the premium based on the class claim experience.

PPOs Advantages

One advantage of a PPO is that there is no gatekeeper or primary care physician that serves as gatekeeper. PCP is not required^ Health Care costs are lower when the insured uses in-network providers (verses out of network providers) Yearly out of pocket costs are limited by maximum amount set by the policy (out of pocket max)

PAP Auto

PAP does not cover pets

Medicare Part B

Part B, Medical Insurance, is optional and is subject to an additional premium. Part B Covers: -doctor services -ambulance transportation -diagnostic tests

Section II is the same across all HO policies. What type of protection does it provide for the homeowner?

Personal Liability Section II deals with liability and medical payments to others. Options (A), (C), and (D) are in section I of the homeowners policy.

Auto Insurance Part A

Policyholders have a duty to notify the insurance company within the first 30 days of purchasing a replacement car. Obtaining a replacement car means that the policyholder is exchanging the insurance on the old car for the new car, not adding an additional car. fam members are covered under part A: -their auto -rented auto -borrowed auto

Disability Income Insurance

Premiums for disability income insurance coverage are a function of the insured's health, biological sex, age, and the level of income benefits provided by the policy. To qualify for disability income, one must become totally disabled while the policy is in force and remain so until the elimination (exclusion) period has ended. A policy that integrates with Social Security will reduce payable benefits by the amount of Social Security the person with a disability is eligible to receive. In order to receive disability benefits under Social Security (strict), a person must be disabled for 5 months, must be unable to perform the duties of any occupation, and must have a disability that is either expected to last for 12 months or to result in death.

Which of the following is the highest level of care under the category of long-term care?

Skilled-Nursing Care Skilled-nursing care requires doctors or nurses to assist with the patient's care. Custodial care refers to help with activities of daily living. Intensive care refers to medical care provided in a hospital, and advanced-nursing care is not a recognized type of care.

Which of the following concerning the Social Security system is correct?

Supplemental Security Income (SSI) benefits are funded by the U.S. Treasury, not Social Security taxes, as are the other benefits. The Social Security retirement benefit is payable at full retirement age with reduced benefits available as early as age 62 to anyone who has obtained at least a minimum amount of Social Security coverage. The two Medicare trust funds are the federal Hospital Insurance Trust Fund for Part A and the Supplementary Medical Insurance Trust Fund for Part B of Medicare benefits. Social Security benefits can be paid to the dependent parents of a deceased insured worker when the parents are 62 years old or older.

Of the following four individuals, which one is likely to have the highest credit score?

Ted has three credit cards, a credit utilization of 29 percent, an installment loan, a mortgage, and a perfect payment history for 3 years. Payment history, credit utilization, mix of credit, and credit history are all critical to credit scores. Ted has a lower utilization and a broader mix of credit.

A creditor makes a hard inquiry to a person's credit report. For what length of time does the hard inquiry affect the FICO score?

The hard inquiry adversely affects the FICO score for 12 months.

Eugene has been advised by his insurance agent to purchase a variable universal life insurance policy. He has sought your advice regarding this purchase. All of the following are characteristics of a variable universal policy:

The minimum death benefit of the variable universal life policy is guaranteed, but the death benefit can increase if the investment experience on cash value is good. The cash value of a variable universal life policy is dependent on premiums and investment returns. The policy owner has exclusive investment control over the cash value of the policy. The policy features increasing or decreasing death benefits and flexibility of variable premium payments.

HSAs Facts.

The size of an HSA balance carried over from prior years has no effect on a current year's contribution. tax free distributions can be used to pay premiums for long-term care insurance up to a limit. the high deductible health plans used with HSAs are permitted to waive the deductible requirement for preventative care. Contributions for an employee can be split between the employee and the employer

Purpose of DI

To provide a regular income while the insured is unable to work due to illness or injury

LTC Qualification of Benefits

To qualify for benefits, the insured must have a terminal illness (expected to result in death within 6 months) or be chronically ill (unable to perform two of the six ADLs). Matt is terminal and will therefore qualify for benefits. Pat does not meet the definition for chronically ill, but Jack and Al do meet the definition.

Under an HO-3 policy, all open perils are covered, with some exceptions. All of the following are perils that are excluded from coverage under an HO-3 policy EXCEPT

Tornado Damage Tornado damage is covered. Termite damage is slow, so it is excluded. Flood damage and earthquake damage are definitely excluded.

What are the two most well-known credit scores?

Vantage and FICO are the two most well-known credit scores.

Variable Life Insurance

Variable whole life has a fixed premium but investment experience can make the death benefit and cash value fluctuate. Variable whole life policies are regulated by the Securities and Exchange Commission (SEC). The owner of a variable whole life policy has the option to invest in a variety of investments. The policy will still have the face value benefit, even if the cash value has suffered from poor investment results.

PLUP

While a PLUP offers many broad coverages, it does not cover professional or business activities. Specific professional and business coverages must be purchased.

Shawn, now deceased, was married for 12 years. He had a 10-year-old daughter and a 12-year-old son who are cared for by their 48-year-old mother Shawn's mother, aged 75, was his dependent and survived him. At the time of his death, he was currently, but not fully, insured under Social Security. His dependents are entitled to all of the following benefits EXCEPT

a parental benefit. Shawn's dependent mother is not entitled to a parental benefit because Shawn was not fully insured. A lump-sum death benefit of $255 is payable to the surviving spouse or children of a deceased worker who was fully or currently insured, and Shawn was currently insured. The children's benefit of 75 percent of a worker's PIA is available to the children of a fully or currently insured deceased worker. The children's mother would be entitled to a benefit for caring for the children until they reach the age of 16.

not insured under medical payments coverage of PAP

a pedestrian who is struck and injured by the named insured's covered auto.

Indemnity

a person is entitled to compensation only to the extent that financial loss has been suffered.

A client dies and you meet with the spouse so that she can explore settlement options with you. After a complete review of her needs, she decides that she would like to preserve the death benefit on deposit and receive periodic payments of interest on the policy proceeds. The correct term for this settlement selection is

an interest-only settlement option.