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

Term life insurance provides pure death benefit protection for a defined period (e.g., 10, 20, or 30 years) with no cash value component.

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

Whole life insurance offers a guaranteed death benefit, guaranteed cash value growth at a fixed rate, and level premiums for the life of the insured.

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

IRC Section 101(a) provides that life insurance proceeds paid by reason of death are excluded from the gross income of the beneficiary.

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

An ILIT is an irrevocable trust that owns and is the beneficiary of life insurance policies, keeping proceeds outside the insured's gross estate for estate tax purposes.

Question 5

A 'paid-up' life insurance policy means:

Accepted Answer

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

Answer

A paid-up policy has accumulated sufficient cash value so that no additional premiums are needed to keep the policy in force until death.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Insurance Planning for Financial Advisors