AFK AFK Insurance Fundamentals 3

Question 1

A variable annuity differs from a fixed annuity primarily because its value is:

Accepted Answer

Linked to the performance of underlying investment sub-accounts

Answer

Guaranteed by the federal government

Answer

Based on the insurer's general account interest rate

Answer

Fixed for life and unaffected by market changes

Question 2

What does 'insurable interest' mean in the context of life insurance?

Accepted Answer

The requirement that the policy owner must have a legitimate financial or personal interest in the continued life of the insured at the time of application

Answer

The amount of interest the insurer charges on policy loans

Answer

The policyholder's right to earn interest on the cash value

Answer

A clause that limits coverage to accidental death only

Question 3

Which rider on a life insurance policy waives future premium payments if the insured becomes totally disabled?

Accepted Answer

Waiver of premium rider

Answer

Accidental death benefit rider

Answer

Guaranteed insurability rider

Answer

Return of premium rider

Question 4

What is an irrevocable life insurance trust (ILIT) primarily used for in estate planning?

Accepted Answer

To keep life insurance death benefits out of the taxable estate, thereby reducing estate taxes

Answer

To avoid paying income taxes on investment gains

Answer

To allow the grantor to change beneficiaries at any time

Answer

To guarantee long-term care benefits to the insured

Question 5

The 'benefit period' in a long-term care insurance policy refers to:

Accepted Answer

The maximum length of time the policy will pay benefits

Answer

The time the insurer has to approve or deny a claim

Answer

The waiting period before benefits begin after a qualifying event

Answer

The minimum number of ADL impairments required to trigger coverage

Question 6

What is the primary purpose of a 1035 exchange in insurance planning?

Accepted Answer

To exchange one insurance or annuity contract for another of like kind without triggering a taxable event

Answer

To transfer funds from a brokerage account to an IRA tax-free

Answer

To convert term insurance to a disability policy

Answer

To roll over an employer 401(k) to an IRA upon retirement