WMS Risk Management and Insurance Solutions 4

Question 1

A wealthy client wants life insurance primarily as an estate planning tool to pay estate taxes. Which policy structure is most tax-efficient for this purpose?

Accepted Answer

Second-to-die (survivorship) life insurance held in an ILIT

Answer

A survivorship policy held in an Irrevocable Life Insurance Trust (ILIT) pays the estate tax upon the second spouse's death while keeping proceeds outside the taxable estate.

Question 2

Under the 'own occupation' definition of disability, a surgeon who loses the use of one hand is considered disabled even if they can work as a medical consultant because:

Accepted Answer

The insured cannot perform the material duties of their specific occupation

Answer

Own-occupation disability means the insured cannot perform the duties of their specific occupation, regardless of whether they can work in another field.

Question 3

Which of the following insurance products is specifically designed to cover the overhead expenses of a small business while the owner is disabled?

Accepted Answer

Business overhead expense (BOE) insurance

Answer

BOE insurance reimburses a business for fixed overhead expenses (rent, utilities, staff salaries) during the owner's disability, keeping the business operational.

Question 4

A client received a $500,000 life insurance death benefit. Under federal income tax rules, this benefit is generally:

Accepted Answer

Income-tax-free to the beneficiary

Answer

Life insurance death benefits paid to a beneficiary are generally excluded from gross income under IRC Section 101(a).

Question 5

When comparing hybrid long-term care policies to standalone LTC policies, a key advantage of hybrid products is:

Accepted Answer

If LTC benefits are not used, a death benefit is still payable

Answer

Hybrid life/LTC policies address the 'use it or lose it' concern by providing a death benefit if LTC benefits are never needed.

(WMS) Wealth Management Specialist Certification Practice Test

(WMS) Wealth Management Specialist Certification Practice Test

WMS Risk Management and Insurance Solutions 4