Life & Health Insurance Exam Premium Calculations and Tax Treatment

Question 1

Life insurance death benefits paid to a named beneficiary are generally treated as:

Accepted Answer

Income tax-free under IRC Section 101(a)

Answer

Fully taxable ordinary income

Answer

Subject to capital gains tax

Answer

Taxable as a gift

Question 2

Which factor does NOT directly affect the net premium calculation for a life insurance policy?

Accepted Answer

Expense loading

Answer

Mortality rate

Answer

Interest rate assumption

Answer

The insured's occupation

Question 3

Employer-paid group term life insurance premiums for coverage up to what amount are excluded from an employee's taxable income?

Accepted Answer

$50,000

Answer

$25,000

Answer

$100,000

Answer

$250,000

Question 4

What is 'level premium' in permanent life insurance?

Accepted Answer

Premiums that remain the same throughout the premium-paying period

Answer

Premiums that decrease over time as the cash value grows

Answer

Premiums that increase each year based on attained age

Answer

Premiums that fluctuate with investment performance

Question 5

A health savings account (HSA) contribution made by an individual is:

Accepted Answer

Tax-deductible and grows tax-free if used for qualified medical expenses

Answer

Not deductible and grows tax-free

Answer

Taxable as income when withdrawn for any purpose

Answer

Matched dollar-for-dollar by the federal government

Question 6

Which premium mode typically results in the highest total annual cost to the policyholder?

Accepted Answer

Monthly

Answer

Annual

Answer

Semi-annual

Answer

Quarterly