#1
Which of the following is a tax advantage associated with life insurance?
Tax-free withdrawals
Tax-deductible premiums
Tax-deferred growth
Tax-exempt death benefit
#2
Which of the following is a characteristic of a whole life insurance policy?
Flexible premiums
Cash value accumulation
No death benefit
Term-based coverage
#3
What is the primary purpose of an annuity?
To provide life insurance coverage
To accumulate funds for retirement
To pay off mortgage debts
To cover medical expenses
#4
Which of the following is a feature of a universal life insurance policy?
Fixed premiums
No cash value component
Guaranteed death benefit
Flexibility to adjust premiums and death benefits
#5
What is the tax treatment of surrender charges on a life insurance policy?
Deductible as medical expenses
Tax-deductible as investment losses
Not tax-deductible
Partially deductible if the policyholder is over 65
#6
Which of the following is true regarding the tax treatment of annuity payouts?
Annuity payouts are always tax-free.
Annuity payouts are always fully taxable as ordinary income.
Annuity payouts may be partially taxable as ordinary income.
Annuity payouts are tax-deductible.
#7
What is the tax treatment of the death benefit received from a life insurance policy?
Fully taxable
Partially taxable
Tax-free
Tax-deferred
#8
Annuity distributions are taxed as ordinary income except when?
Upon death of the annuitant
When the annuity is surrendered
When the annuity was purchased with pre-tax dollars
When the annuity was purchased with after-tax dollars
#9
How are withdrawals from a variable annuity taxed?
As long-term capital gains
As ordinary income
As tax-free distributions
As tax-deferred growth
#10
Under what circumstances are life insurance premiums typically tax-deductible?
When the policyholder is below 40 years old
When the policy is owned by a corporation and the insured is an employee
When the policyholder's income exceeds $100,000
When the policyholder is retired
#11
Which of the following is a benefit of owning a life insurance policy inside an irrevocable life insurance trust (ILIT)?
Lower premiums
Avoidance of estate taxes
Immediate access to cash value
Higher death benefit
#12
In what way do life insurance policy loans affect the tax treatment of the policy?
They are tax-deductible
They trigger taxable income
They are not taxable
They reduce the death benefit
#13
Which of the following is a characteristic of a non-qualified annuity?
Payouts are tax-free
Contributions are tax-deductible
Contributions are made with after-tax dollars
Withdrawals are penalty-free at any age
#14
What happens to the cash value of a life insurance policy if the policyholder surrenders the policy?
It is subject to capital gains tax
It is subject to income tax
It is returned tax-free
It is returned minus taxes and surrender charges
#15
What is a 1035 exchange in relation to life insurance and annuities?
A tax-free exchange of one life insurance or annuity contract for another
A tax deduction for long-term care insurance premiums
A provision allowing for early withdrawals without penalty
An option to convert term life insurance into permanent life insurance
#16
What is the tax treatment of the annuitization phase of an annuity?
Fully taxable
Partially taxable
Tax-free
Tax-deductible
#17
In which situation would the death benefit from a life insurance policy be subject to estate taxes?
The policy is owned by the insured's spouse.
The policy is owned by the insured's child.
The policy is owned by the insured's employer.
The policy is owned by the insured's estate.
#18
What is the tax treatment of premiums paid for a key person life insurance policy by a business?
Tax-deductible for the business
Tax-exempt for the key person
Tax-deductible for the key person
Taxable as income for the key person