Insurance and Risk Management Flashcards
6 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Insurance and Risk Management flashcards as text
The elimination period in a long-term care insurance policy is best described as:
Answer: A waiting period before benefits begin after qualifying for care
The elimination period is the deductible measured in days — the insured must receive qualifying care for this period before LTCI benefits begin to pay.
A CFC recommends an irrevocable life insurance trust (ILIT) to a high-net-worth client primarily to:
Answer: Keep life insurance proceeds outside the taxable estate
An ILIT owns the policy, so death proceeds are not included in the insured's gross estate, removing them from federal estate tax calculations.
Which type of annuity indexes credited interest to a market index like the S&P 500, with a floor protecting against losses?
Answer: Fixed indexed annuity (FIA)
Fixed indexed annuities credit interest based on a market index's performance up to a cap or participation rate, while a floor (typically 0%) prevents negative crediting.
For a business continuation plan, which buy-sell agreement structure requires each owner to personally purchase life insurance on the other owners?
Answer: Cross-purchase agreement
In a cross-purchase agreement, each co-owner buys and owns life insurance on the other owners, using proceeds to purchase the deceased owner's interest directly.
The needs analysis method for life insurance differs from the human life value method in that it focuses on:
Answer: Specific financial obligations and goals the insurance must fund
The needs analysis approach identifies specific financial needs — income replacement, debt payoff, education funding, final expenses — and calculates coverage to meet each obligation.
An insurance policy's 'incontestability clause' protects the insured by preventing the insurer from voiding the policy after:
Answer: Two years from policy issue
After the incontestability period (typically two years), the insurer generally cannot contest policy validity based on misrepresentations in the application, except for fraud.