Financial Advisor Insurance Planning for Financial Advisors 3

Question 1

Which type of annuity guarantees a fixed interest rate during the accumulation phase, providing predictable, stable growth?

Accepted Answer

Fixed annuity

Answer

A fixed annuity credits a guaranteed interest rate set by the insurance company, shielding the contract holder from market risk during the accumulation phase.

Question 2

What is the primary tax advantage of a non-qualified deferred annuity?

Accepted Answer

Earnings grow on a tax-deferred basis until withdrawn

Answer

Non-qualified annuities are funded with after-tax dollars, but the earnings accumulate tax-deferred; taxes on gains are owed only when funds are withdrawn.

Question 3

A Section 1035 exchange permits a policyholder to:

Accepted Answer

Exchange one life insurance or annuity contract for another without triggering immediate income tax

Answer

IRC Section 1035 allows tax-free exchanges of life insurance policies, endowment contracts, and annuity contracts, preserving the tax-deferred status of the funds.

Question 4

In property insurance, a coinsurance clause penalizes the insured when:

Accepted Answer

The insured carries less coverage than the required percentage of the property's replacement value

Answer

A coinsurance clause requires the insured to carry coverage equal to a stated percentage (often 80%) of the property's value; underinsurance results in the insured bearing a proportionate share of any partial loss.

Question 5

An umbrella liability insurance policy is primarily designed to:

Accepted Answer

Provide additional liability coverage above the limits of underlying policies

Answer

An umbrella policy provides excess liability coverage that kicks in after the limits of underlying policies (auto, homeowners, etc.) are exhausted, offering broad protection against large claims.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Insurance Planning for Financial Advisors 3