#1
Which type of insurance policy allows the policyholder to accumulate cash value over time?
Whole life insurance
ExplanationAccumulates cash value over time.
#2
What is the tax treatment of premiums paid for a health insurance policy?
Deductible
ExplanationPremiums are deductible.
#3
In the context of insurance, what does 'cash surrender value' refer to?
The amount paid by the insurance company in case of policy cancellation
Explanation'Cash surrender value' is the amount paid upon policy cancellation.
#4
Which of the following insurance benefits is typically taxable as income?
Disability income benefits
ExplanationTaxable disability income benefits.
#5
What is the tax treatment of dividends received from a participating life insurance policy?
Tax-free
ExplanationDividends from participating life insurance are tax-free.
#6
Which of the following insurance policies allows for tax-deductible contributions?
Variable universal life insurance
ExplanationAllows tax-deductible contributions.
#7
What tax treatment applies to the death benefit received from a life insurance policy?
Tax-free in most cases
ExplanationDeath benefit from life insurance is tax-free in most cases.
#8
What is the tax treatment of the death benefit from a key person insurance policy?
Tax-free if the company is the beneficiary
ExplanationDeath benefit is tax-free if the company is the beneficiary.
#9
Under what circumstances can the interest earned on a life insurance policy be tax-free?
If the policyholder has held the policy for a minimum duration
ExplanationTax-free if policyholder holds for a minimum duration.
#10
Which type of insurance policy typically provides tax-free withdrawals for qualified education expenses?
529 plans
ExplanationTax-free withdrawals for education expenses in 529 plans.
#11
What is the tax treatment of employer-provided life insurance coverage exceeding $50,000?
Fully taxable as income
ExplanationFully taxable if coverage exceeds $50,000.
#12
What tax advantage does a 1035 exchange provide in relation to life insurance policies?
Tax-free exchange of one policy for another
ExplanationAllows tax-free exchange of policies through a 1035 exchange.
#13
Which of the following statements about the tax treatment of premiums for long-term care insurance is true?
Premiums are deductible up to certain limits based on age.
ExplanationDeductible premiums for long-term care insurance up to age-based limits.
#14
Which of the following is a characteristic of a Modified Endowment Contract (MEC)?
Subject to a 10% penalty on withdrawals before age 59½
ExplanationMEC withdrawals subject to a 10% penalty before age 59½.
#15
Which of the following insurance policies typically offers tax-deferred growth and tax-free withdrawals for qualified medical expenses?
Health Savings Account (HSA)
ExplanationHSA offers tax-deferred growth and tax-free withdrawals for medical expenses.