Insurance Planning & Risk Management Flashcards

A client owns a universal life policy and wants to increase the death benefit. Under which option does the death benefit equal the face amount plus the policy's accumulated cash value?

Answer: Option B (increasing death benefit)

Option B (increasing death benefit) pays the face amount plus the accumulated cash value, so the total death benefit rises as cash value grows.

Which life insurance policy rider allows the insured to purchase additional coverage at specified intervals without providing evidence of insurability?

Answer: Guaranteed insurability rider

The guaranteed insurability rider lets the policyholder buy additional coverage at set option dates without proving insurability.

A client's homeowners policy has an 80% coinsurance requirement. The home is valued at $400,000 but insured for only $240,000. A $60,000 partial loss occurs. How much will the insurer pay?

Answer: $45,000

The coinsurance formula pays (amount carried / amount required) × loss = ($240,000 / $320,000) × $60,000 = $45,000.

An RFC client receives a disability income benefit of $4,000 per month. The policy was purchased with after-tax dollars and the employer paid no portion of premiums. How are the benefits taxed?

Answer: Tax-free to the recipient

When the insured pays premiums with after-tax dollars and receives no employer contribution, disability income benefits are received income-tax-free.

Which long-term care insurance benefit trigger requires that a licensed health care practitioner certify the insured needs substantial supervision due to severe cognitive impairment?

Answer: Cognitive impairment trigger

The cognitive impairment trigger is activated when a practitioner certifies that severe cognitive impairment requires substantial supervision for safety.

A business uses a cross-purchase buy-sell agreement funded with life insurance. If there are 4 partners, how many total policies are needed?

Answer: 12

In a cross-purchase agreement, each of the 4 partners must own a policy on each of the other 3, requiring 4 × 3 = 12 policies.

Under which annuity settlement option does the insurance company guarantee payments for a specified period regardless of whether the annuitant is alive?

Answer: Life with period certain

The life with period certain option guarantees payments for a minimum period (e.g., 10 or 20 years) whether or not the annuitant survives.