Life Exam

Front 1

The benefit is received tax free.

Back 1

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

Hint 1

Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

Front 2

The plan is funded by permanent insurance only.

Back 2

All of the following are true of Key Person insurance EXCEPT

Hint 2

Key Person coverage may be funded by any type of life insurance.

Front 3

Survivor protection

Back 3

An insurer is helping a married couple determine their children's needs, assets, and liabilities, in the event that one or both of the spouses should die. What is the term most closely associated with this?

Hint 3

Protection planning helps to assess the needs, assets, and liabilities of the survivors in order to determine how to best care for them in the event of the primary wage earner’s death.

Front 4

Predicted needs of the family after the insured's death.

Back 4

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual’s life value?

Hint 4

The Human Life Value Approach to determining the value of an individual’s life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

Front 5

Premiums are not deductible as a business expense and the death benefit is not taxable to the company.

Back 5

Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy premiums and death benefit?

Hint 5

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.

Front 6

Whole life

Back 6

Which of the following types of insurance policies would perform the function of cash accumulation?

Hint 6

Life insurance is unique from other types of insurance in that it could perform the function of cash accumulation. Cash values are available in whole life policies.

Front 7

Whole life

Back 7

Which of the following types of insurance policies would perform the function of cash accumulation?

Hint 7

Life insurance is unique from other types of insurance in that it could perform the function of cash accumulation. Cash values are available in whole life policies.

Front 8

The cash value available to the insured

Back 8

What are liquid resources in a life insurance contract?

Hint 8

Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for immediate needs.

Front 9

Beneficiary

Back 9

If a loss occurs, insurance policies pay the proceeds to

Hint 9

The beneficiary is the person who receives the benefits from the insurance policy.

Front 10

Beneficiary

Back 10

If a loss occurs, insurance policies pay the proceeds to

Hint 10

The beneficiary is the person who receives the benefits from the insurance policy.

Front 11

Funding against general company financial loss.

Back 11

The following are legitimate uses of insurance in a business setting EXCEPT

Hint 11

Both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees.

Front 12

To lessen the risk of financial loss because of the death of a key employee

Back 12

What is the purpose of key person insurance?

Hint 12

A business can suffer a financial loss because of the premature death of a key employee that has specialized knowledge, skills or business contacts. A business can lessen the risk of such loss by the use of key person insurance.

Front 13

Family Dependency Period.

Back 13

A family's need for income is greatest during the

Hint 13

The Family Dependency Period is the time after the insured has died, leaving a surviving spouse with dependent children to support.

Front 14

Family Dependency Period.

Back 14

A family's need for income is greatest during the

Hint 14

The Family Dependency Period is the time after the insured has died, leaving a surviving spouse with dependent children to support.

Front 15

It may perform the function of cash accumulation.

Back 15

Which of the following would be a unique benefit life insurance has over other types of insurance?

Hint 15

Life insurance has a unique advantage over other types of insurance: it may allow cash accumulation and living benefits (permanent life insurance only).

Front 16

Taking a defensive driving course or installing deadbolt locks on the doors of a home are examples of which of the following?

Back 16

Risk reduction

Hint 16

Steps taken to prevent losses from occurring are called risk reduction.

Front 17

Which of the following is NOT true regarding the Needs Approach method of determining the value of an individual's life?

Back 17

Need is predicted using the number of years until the insured's retirement.

Hint 17

In the Needs Approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.

Front 18

Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach?

Back 18

Estimated longevity

Hint 18

There are four main types of information that an insurer needs to obtain in order to determine the value of someone’s life: debt status, income, mortgage, and expenses. Longevity is not a factor in the personal financial planning process.

Front 19

Which of the following is a term for a person who seeks insurance from an insurer?

Back 19

Applicant

Hint 19

The applicant is the person who is seeking insurance from an insurer.

Front 20

Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy premiums and death benefit?

Back 20

Premiums are not deductible as a business expense and the death benefit is not taxable to the company.

Hint 20

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.

Front 21

Which of the following is a term for a person who seeks insurance from an insurer?

Back 21

Applicant

Hint 21

The applicant is the person who is seeking insurance from an insurer.

Front 22

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

Back 22

The benefit is received tax free.

Hint 22

Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.

Front 23

What are the personal uses of life insurance?

Back 23

Survivor protection, estate creation and conservation, cash accumulation and liquidity

Hint 23

Personal uses of life insurance include survivor protection, estate creation and conservation, cash accumulation, and liquidity.

Front 24

Which of the following is NOT true regarding the Needs Approach method of determining the value of an individual's life?

Back 24

Need is predicted using the number of years until the insured's retirement.

Hint 24

In the Needs Approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.

Front 25

Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy premiums and death benefit?

Back 25

Premiums are not deductible as a business expense and the death benefit is not taxable to the company.

Hint 25

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.

Front 26

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

Back 26

The benefit is received tax free.

Hint 26

Should a key person die, the benefit is treated as a reimbursement to the business for loss of services from that key person.