Health and life insurance 2022 QUESTIONS WITH COMPLETE SOLUTIONS

Health and life insurance 2022 QUESTIONS WITH COMPLETE SOLUTIONS Carla has written life insurance policies on the lives of her children. What type of business is this considered? Correct Answer: Controlled John knowingly made an inaccurate comparison of coverage in order to induce his client to replace existing life insurance for a new policy John hoped to sell him. Which unfair trade practice did John commit? Correct Answer: Twisting Which type of agent works exclusively for an insurance company and normally does not solicit for other companies? Correct Answer: Captive agent Which of the following is not a duty of a state's Insurance Commissioner? Correct Answer: Write the states insurance laws Shirley's universal life insurance policy has a $100,000 death benefit. Her cash value is equal to $25,000. What term is used to describe the other $75,000? Correct Answer: The net amount at risk Bridget's life insurance policy provides $500,000 of coverage for a period of ten years, and she pays the same premium each year. At the end of the ten-year term, the policy will no longer provide any coverage, unless renewed or converted. Which type of policy does Bridget own? Correct Answer: Level term Which of the following types of life insurance involves a cash value whose accumulation depends, in part, on the investment performance of a portfolio of securities? Correct Answer: Variable life insurance Sharon, an applicant for life insurance, is interested in obtaining immediate coverage but wants the permanent insurance protection to begin four months from now. Which of the following types of term life insurance is likely to best meet her objectives? Correct Answer: Interim term insurance Which of the following death benefit options may be found on universal life insurance policies? Correct Answer: Both a level death Benefit and a generally increasing death benefit Helen requested a $20,000 cash value withdrawal from her universal life insurance policy, which has a $100,000 death benefit. What would her death benefit be immediately following her cash value withdrawal? Correct Answer: $80,000 $100,000-$20,000=$80,000 Arthur paid total net premiums of $20,000 for his universal life insurance policy, which has a cash value of $24,000. Assuming the policy is not a modified endowment contract and Arthur has never previously received a cash value withdrawal or a dividend, how much income would he be required to recognize if he took a $5,000 cash value withdrawal? Correct Answer: $0. a withdrawal is considered a tax-free recovery of the policyowner's cost basis until the policyowner's entire cost basis has been fully withdrawn. At this point, any further withdrawals are deemed to consist of taxable gain. Since Arthur's cost basis is $20,000 at the time of his cash value withdrawal, he is not required to recognize any income as a result of the withdrawal. His cost basis is simply reduced by $5,000. John requested a partial surrender of his $100,000 whole life insurance policy in order to access funds in his policy's cash value. The cash value was $50,000 just prior to the partial surrender and John received $20,000 from the cash value. What would be the new face amount of the policy? Correct Answer: $60,000 $20,000 of $50,000 is 40%, therefore the payout decreases by 40%; $100,000 -40%=$60,000 Lee has a terminal illness and has taken a $100,000 viatical loan under his $150,000 life insurance policy. The provider imposed $5,000 in fees for the loan. The loan also accrued interest of $8,000, and $12,000 in premiums were paid for the policy after the loan was made. How much of the death benefit, if any, will Lee's beneficiary receive upon his death? Correct Answer: $25,000 $100,000+$5,000+$8,000+$12,000=$125,000 $150,000 payout-$125,000 loan and fees/interest=$25,000 left over Susan's universal life insurance policy is a modified endowment contract. She paid premiums amounting to $15,000, and never received a dividend or previously took a distribution. What amount of income would she be required to recognize if she took a $10,000 cash value withdrawal when the cash value was $23,000? Correct Answer: $8,000 Policy distributions from a life insurance policy that is deemed a MEC receive "last-in, first-out" (LIFO) tax treatment. Under LIFO tax treatment, the first element deemed to be distributed is the taxable gain under the life insurance policy. Since Susan's policy has an $8,000 gain, that gain is deemed to be distributed before any tax-free cost basis is distributed. Thus, Susan must recognize a taxable gain of $8,000. After Harry got divorced, he no longer needed his $100,000 life insurance policy. Harry then sold the policy to his brother Seth for its $10,000 cash value. Seth named himself the beneficiary and made additional premium payments amounting to $8,000 until Harry's death. How much of the $100,000 death benefit proceeds that Seth received must be recognized as income? Correct Answer: $82,000 $100,000-$10,000-$8,000=$82,000 Jason paid $10,000 in net premiums for his $100,000 life insurance policy. He did not receive any dividends and took no withdrawals. How much income would he be required to recognize if he surrendered the policy when its cash surrender value was $14,000? Correct Answer: $4,000 He received more money that his cost basis Phil paid $25,000 in net premiums for his universal life insurance policy, which has a $35,000 cash value. He received no dividends and had not previously taken a cash value withdrawal when he