FiCEP Insurance Planning 5

Question 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?

Accepted Answer

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

Answer

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.

Question 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?

Accepted Answer

HIPAA-qualified trigger

Answer

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

Question 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:

Accepted Answer

Cross-purchase plan

Answer

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.

Question 4

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

Accepted Answer

Medical loss ratio requirement

Answer

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

Question 5

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

Accepted Answer

Taxable imputed income based on IRS Table I rates

Answer

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.

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP Insurance Planning 5