All of the following statements about the tax treatment of life insurance purchased by an individual are true EXCEPT A) The annual increase in the cash value is currently taxable. B) Premium payments are not tax deductible. C) Death benefits received in a lump sum are not taxable income. D) Policyowner dividends are not considered […]
Which of the following statements is (are) true about the federal estate tax? I. The gross estate can be reduced by a number of deductions. II. If the person who died had any ownership interest in a life insurance policy at the time of death, the proceeds are included in the gross estate for federal […]
The policy reserve at the end of any given policy year is called the A) terminal reserve. B) unearned premium reserve. C) mean reserve. D) initial reserve. ANSWER Answer: A
To level a net single premium (NSP), the NSP is divided by A) the maximum number of years the premium could be paid. B) the ordinary life annuity factor for the premium payment period. C) the present value of a life annuity due of $1 for the premium payment period. D) the deferred life annuity […]
Marshall is interested in determining the cost per thousand of his life insurance policy. Which of the following will provide Marshall the most meaningful measure of the cost per thousand dollars per year of his life insurance? A) the needs approach B) the traditional net cost method C) the human life value approach D) the […]
Which method of analyzing the cost of life insurance does not consider the cash value of the policy in the analysis? A) traditional net cost method B) net payment cost index C) the Linton Yield D) the surrender cost index ANSWER Answer: B
Mary is interested in comparing life insurance policies. Rather than looking at the cost per thousand, she would like to compare the rate of return earned on the savings portion of the policy. Which of the following would be of the most interest to Mary? A) the policy’s Linton Yield B) the policy’s surrender cost […]
Which of the following statements is (are) true regarding taxation of life insurance? I. Life insurance proceeds paid in a lump-sum to a designated beneficiary are received free of federal income taxes. II. The policyowner must pay taxes annually on the amount by which the cash value of his or her life insurance policy has […]
Lisa does not want her life insurance policy included in her gross estate when she dies. Lisa can remove the life insurance policy from her estate if she does which of the following more than 3 years before she dies? A) borrow the cash value of the policy B) make an absolute assignment of the […]
Which of the following statements about the traditional net cost method of measuring the cost of life insurance is (are) true? I. The traditional net cost method does not consider the time value of money. II. The traditional net cost method can show that life insurance has a negative cost. A) I only B) II […]
