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1. What are the tax implications of an insured's health insurance costs if the insured is self employed with an S corporation, has a net profit for the tax year, and is unmarried?
A) The insured can deduct 100% of all health insurance costs from his gross income.
B) The insured can deduct 70% of all health insurance costs from his gross income.
C) The insured can pay for 70% of health insurance costs with pre-tax income.
D) The insured can pay for 100% of health insurance costs with pre-tax income.
2. An insured named her four children as beneficiaries in equal shares to her $60,000 life insurance policy. Her eldest child has two children and dies prior to the insured. The other three children do not have children of their own. If the insured designated the beneficiaries per capita, how will the proceeds be distributed?
A) The three surviving children will each receive $15,000.
B) The three surviving children will each receive $15,000. The insured's grandchildren will each receive
$7,500.
C) The three surviving children will each receive $20,000.
D) The three surviving children will each receive $15,000. The remaining $15,000 will be paid to the insured's estate.
3. The main purpose of insurance is to
A) reduce risk.
B) transfer risk.
C) retain risk.
D) avoid risk.
4. The total premium paid by a life policy owner for one policy year is
A) less when paid quarterly than if paid semiannually.
B) the same regardless of the frequency of payment.
C) based on the assumption that the insured will pay policy premiums at the end of the policy year in one payment; if paid earlier in the policy year, a discount will be allowed.
D) greater if the premium is paid semiannually rather than annually.
5. Which of the following policies has a guaranteed interest rate with the possibility to earn an interest rate higher than the guaranteed rate?
A) Universal life.
B) Renewable term.
C) Credit life.
D) Term insurance.
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: C | Question # 3 Answer: B | Question # 4 Answer: D | Question # 5 Answer: A |
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