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Insurance Planning Flashcards

7 cards from real FICEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Insurance Planning flashcards as text

  1. A client owns a universal life policy and wants to know the effect of taking a policy loan versus a partial surrender. Which statement is CORRECT?

    Answer: Partial surrenders permanently reduce the death benefit; loans do not if repaid

    Partial surrenders permanently reduce the cash value and death benefit, while policy loans keep the death benefit intact as long as they are repaid with interest.

  2. Which long-term care insurance benefit trigger requires a policyholder to need assistance with at least two Activities of Daily Living (ADLs) to qualify for benefits?

    Answer: HIPAA-qualified trigger

    HIPAA-qualified LTC policies require inability to perform at least 2 of 6 ADLs or cognitive impairment to trigger tax-favored benefits.

  3. A business owner wants a buy-sell agreement funded by life insurance where each partner buys a policy on the other. This structure is called a:

    Answer: Cross-purchase plan

    In a cross-purchase plan, each co-owner buys life insurance on the other owners, with proceeds used to purchase the deceased owner's interest.

  4. Under the ACA, which provision requires insurance companies to spend a minimum percentage of premium dollars on medical claims rather than administrative costs?

    Answer: Medical loss ratio requirement

    The ACA's medical loss ratio (MLR) rule requires insurers to spend at least 80–85% of premiums on healthcare claims and quality improvement.

  5. A client's group term life insurance coverage through work exceeds $50,000. The cost of coverage above $50,000 is treated as:

    Answer: Taxable imputed income based on IRS Table I rates

    IRS rules require the imputed cost of employer-provided group term life above $50,000 to be included in the employee's W-2 as taxable income using Table I rates.

  6. Which annuity payout option provides the highest monthly income but leaves no residual value or survivor benefit?

    Answer: Straight life annuity

    A straight life (life-only) annuity pays the maximum monthly amount because payments cease at death with no continuation or refund provision.

  7. A client suffered a loss due to flood damage, but their standard homeowners policy did not cover it. Through which federal program can homeowners typically purchase flood insurance?

    Answer: National Flood Insurance Program (NFIP)

    The National Flood Insurance Program (NFIP), managed by FEMA, provides federally backed flood insurance to homeowners in participating communities.