Insurance Planning & Risk Management Flashcards

A client's business overhead expense (BOE) disability policy will cover which of the following expenses during a disability?

Answer: Office rent, employee salaries, and utilities

BOE policies reimburse fixed business overhead expenses such as rent, employee salaries, utilities, and insurance premiums that continue during the owner's disability.

Under the 'own-occupation' definition of disability, a surgeon who loses the ability to perform surgery due to hand tremors but can still work as a medical consultant would:

Answer: Receive full disability benefits while working as a consultant

Under own-occupation definitions, the insured is considered totally disabled if unable to perform the duties of their own specific occupation, even if capable of other work.

Which annuity contract feature allows an investor to lock in market gains periodically so that the account value cannot fall below a previously attained high-water mark?

Answer: Annual reset (ratchet) method in an equity-indexed annuity

The annual reset (ratchet) method credits interest based on index gains each year and locks in those gains so they cannot be lost in subsequent down years.

A life insurance policy's 'spendthrift clause' is designed primarily to protect the policy's proceeds from:

Answer: The beneficiary's creditors before the proceeds are distributed

The spendthrift clause protects death benefit proceeds held by the insurer under a settlement option from the claims of the beneficiary's creditors until disbursed.

For a qualified long-term care (LTC) insurance policy to receive favorable tax treatment under HIPAA, which of the following requirements must be met?

Answer: The policy must be tax-qualified, guaranteed renewable, and benefits triggered by 2 of 6 ADLs or cognitive impairment

Tax-qualified LTC policies under HIPAA must be guaranteed renewable, not cash-surrender-able, and triggered by inability to perform 2 of 6 ADLs or by cognitive impairment certified by a licensed professional.

A client purchases a life insurance policy and names a revocable beneficiary. Which statement about a revocable beneficiary is correct?

Answer: The policyholder can change the beneficiary designation at any time without the beneficiary's consent

With a revocable beneficiary, the policyowner retains complete control and can change the designation at any time without the beneficiary's consent.

Which property insurance valuation method pays the cost to repair or replace damaged property with new property of like kind and quality, without deducting for depreciation?

Answer: Replacement cost value (RCV)

Replacement cost value (RCV) coverage pays the full cost to replace damaged property with new property of similar kind and quality, with no depreciation deduction.