Please answer the following questions which is on Life Insurance and Taxation

1)Tom and Hailey had been married for five years. Four years ago, Tom purchased life insurance on Hailey who was unemployed at the time. They divorced one year ago. When Hailey passed away last month, she was living with her new spouse, and Tom was remarried civilly.

What will the insurer decide regarding Tom's claim to collect on the insurance policy he had purchased on Hailey's life?

A. The insurer will refuse to pay, because Hailey had another spouse when she died.

B. The insurer will pay, because he had an insurable interest on Hailey at the time of her death.

C. The insurer will pay, because he had an insurable interest on Hailey at the time of application.

D. The insurer will refuse to pay, because he was remarried at the time of Hailey's death.

2) Jim purchased a $100,000 Participating Whole Life insurance policy some 12 years ago. The policy had a Waiver pf Premium Rider, Accidental Death benefit, and the dividends were purchasing Paid-Up Additions. Henry took advantage of the loan provision in his policy recently and borrowed $5000. Last night he died of a heart attack while playing 'old timer's hockey'.

What will Jim's beneficiary receive from the policy?

A. $100,000 plus paid-up additions minus the loan and any interest owing.

B. $200,000 plus paid-up additions minus the loan

C. $100,000 plus paid-up additions minus the loan and any interest owing and minus any outstanding premium.

D. $100,000 plus paid-up additions minus the loan and any interest owing and minus any outstanding premium.

3) Thomas completed an application for a new term 10 life insurance policy with his agent last month. Upon delivery of the policy, the agent reviewed the coverage and explained the suicide exclusion clause, the grace period, the misstatement period. He had accepted the temporary insurance, so the insurer had already taken a second monthly premium payment for the policy. Just as the agent is ready to sign the documents, he notices Thomas's bandaged leg. His family doctor had removed a small mass in his leg a couple of weeks ago and had sent it off for testing even though they think its benign. Since Thomas has not heard anything back, he is led to believe that it was nothing of consequence.

Knowing this, what should his agent advise to make sure that all requirements have been met to implement Thomas's new life insurance policy?

A. All documents must be returned to the underwriter and await their decision, since there has been a material change in Thomas's health.

B. There are no other requirements, since the doctor said the growth is benign so there is no change in the health.

C. There are no other requirements, since the premium has been taken, and the client accepted the delivery. His foot is probably fine.

D. The ten-day recession period must pass before the policy is in full force.

4) Kailey, a newly licensed life insurance agent, has just completed a life insurance application on her client Rusty. The amount of coverage applied for is $500,000 twenty year term. Kailey has collected the first premium and has issued a temporary insurance agreement (TIA) to Rusty.

What information should Kailey be providing Rusty with regards to the TIA?

A. The TIA coverage is limited to the lessor of a fixed amount and the amount of coverage requested. The TIA expires the date the policy becomes effective or within 90 days.

B. No matter, if any addition medical requested was not received, the TIA will remain in effect for as long it takes.

C. There is no need for Rusty to worry as he is guaranteed coverage as he has paid the initial monthly premium.

The TIA coverage is limited to the lessor of a fixed amount and the amount of the coverage requested. The TIA expires the date the policy becomes effective or within 90 days.

5) A 28 year old father is purchasing life insurance consisting of a $50,000 UL policy and riders to protect his growing family should he die prematurely. The riders and supplementary benefits the agent has recommended would be important to the father EXPECT:

A. Guaranteed Purchase Option

B. Term insurance riders in an amount sufficient to fund the family's needs should the father die prematurely.

C. Payor waiver benefit

D. Waiver of premium on disability.

6) In his meeting with Tom and Jenny, life insurance agent, Carlos discusses the potential of death and the financial consequences to be faced. He further explains to them that there are four general strategies that should be considered in dealing with the risk of death.

Look at the following statements and indicate which is correct.

A. Insurance is a risk transfer method whereby paying premiums the insurance company will take care of the financial catastrophe if death occurs.

B. A risk cannot be reduced as no one can see the future and there is no control as to what can happen.

C. The individual has to accept the fact that if he/she is extremely cautious, he/she will not face any undue risk.

D. Refusing to drive a car and taking public transit, is one way of avoiding risk as by not driving a car, the individual is safer.

7) Mike participates in the group insurance plan offered by his employer. He contributes $162 through payroll deduction. His tax rate is 45%. The annual premium for $45,000 of life insurance is $540, of which employer pays 70% (i.e. $378). The employer adds a taxable benefit to Michael's annual income.

On his death, what amount will Mike's estate receive?

A. $45,000

B. $ 24,750

C. $31,500

D. $13,500

8) Jacob and Megan have just completed divorce proceedings. The judgement orders Jacob to pay $600, per month in child support to Megan for their two children for a period of twenty years. Jacob's annual income is $250,000 and owns several rental properties. His marginal tax rate is 48%. The judgement also orders Jacob to guarantee the support payments in the event of his death by purchasing life insurance.

Which type of life insurance policy should Jacob purchase?

A. Whole life insurance with coverage of $250,000

B. Term 20 life insurance with coverage of $144,000

C. Term 20 life insurance with coverage of $120,000

D. Term life insurance to age 65, with coverage of $120,000

9) As he is growing old and has begun losing memory, Dan makes an absolute assignment of his life insurance policy to his wife. Which of the following is true?

A. His wife has to be insurable in order to become the new policy owner

B. Though Dan has absolutely assigned his policy, he may make decisions on contractual aspects of the policy, such as surrendering or canceling the policy.

C. All beneficiaries designations made by Dan are dropped, and his wife will be able to name beneficiaries of her choice.

D. Dan will have to pay tax on the policy gain, since an absolute assignment is a disposition.

10) Mark purchased a renewable Term 10 life insurance policy at age thirty. The coverage was for $150,000. Before turning 30, he contacts Jean, his life insurance agent . He wants to find out what will happen with the policy.

What will Jean tell him?

A. The policy will be renewed for ten years, provided Mark makes a request to that effect and provided proof of insurability.

B. The coverage will be automatically renewed for the same coverage, but the premium will be based on the age of forty,

C. The policy will be automatically renewed, but the coverage will be reduced.

D. The policy will be automatically renewed for the same coverage and premium.