Financial Advisor Insurance Planning for Financial Advisors

Question 1

What type of life insurance provides coverage for a specified period and pays a death benefit only if the insured dies within that period?

Accepted Answer

Term life insurance

Answer

Whole life insurance

Answer

Universal life insurance

Answer

Variable life insurance

Question 2

Which life insurance policy type combines a permanent death benefit with a cash value component that grows at a guaranteed interest rate?

Accepted Answer

Whole life insurance

Answer

Term life insurance

Answer

Variable universal life insurance

Answer

Group term life insurance

Question 3

Under IRC Section 101(a), life insurance death benefits paid to a named beneficiary are generally:

Accepted Answer

Received income-tax-free by the beneficiary

Answer

Taxable as ordinary income to the beneficiary

Answer

Subject to capital gains tax on growth

Answer

Partially taxable based on premiums paid by the insured

Question 4

Which estate planning tool uses a trust to own life insurance policies so that the death proceeds are excluded from the insured's taxable estate?

Accepted Answer

Irrevocable Life Insurance Trust (ILIT)

Answer

Revocable Living Trust

Answer

Charitable Remainder Trust (CRT)

Answer

Grantor Retained Annuity Trust (GRAT)

Question 5

A 'paid-up' life insurance policy means:

Accepted Answer

No further premiums are required and the policy remains in full force

Answer

The policy has lapsed due to non-payment of premiums

Answer

The death benefit has already been paid to the beneficiary

Answer

The policy has been surrendered for its cash value

Question 6

Which fundamental insurance principle holds that a policyholder cannot profit from an insurance claim beyond their actual financial loss?

Accepted Answer

Principle of indemnity

Answer

Principle of subrogation

Answer

Principle of insurable interest

Answer

Principle of utmost good faith

Question 7

A client wants permanent life insurance with the flexibility to adjust premium payments and death benefit amounts over time. Which policy type is most appropriate?

Accepted Answer

Universal life insurance

Answer

Level term life insurance

Answer

Traditional whole life insurance

Answer

Group term life insurance