Question 1

Comprehensive losses are damages caused by events other than:&#10;A) Breakage of glass.&#10;B) Collision.&#10;C) Theft.&#10;D) Vandalism.

Accepted Answer

Comprehensive losses in insurance typically cover damages to a vehicle that are not caused by a collision. This includes events such as theft, vandalism, and breakage of glass. Collision damage is covered under a different part of an auto insurance policy, specifically collision coverage.

Question 2

Taxation of a withdrawal from an annuity contract is on a:&#10;A) First-in, first-out basis.&#10;B) First-in, last-out.&#10;C) Last-in, first-out basis.&#10;D) Last-in, last-out basis.

Accepted Answer

Withdrawals from an annuity contract are taxed on a Last-in, First-out (LIFO) basis, meaning the earnings are withdrawn and taxed before the principal.

Question 3

The owner of a condominium needs which of the following insurance policies?&#10;A) HO-3.&#10;B) HO-4.&#10;C) HO-5.&#10;D) HO-6.

Accepted Answer

HO-6 is the appropriate policy for a condominium owner, as it provides coverage for the owner's personal property, liability, and improvements to the unit. HO-3, HO-4, and HO-5 are designed for different types of homeowners and would not provide the necessary coverage for a condominium owner.

Question 4

Loss assessment coverage is provided under:&#10;A) HO-3.&#10;B) HO-4.&#10;C) HO-5.&#10;D) HO-6.

Accepted Answer

The answer of Loss assessment coverage is provided under:&#10;A) HO-3.&#10;B)...

Question 5

A contract that pays the insured a specific daily amount (based on scheduled limits) for services to assist with the activities of daily living is:&#10;A) Annuity insurance.&#10;B) Disability insurance.&#10;C) Long-term care insurance.&#10;D) Medical insurance.

Accepted Answer

A contract that pays the insured a specific daily amount for services to assist with the activities of daily living is known as Long-term care insurance. Annuity insurance pays the insurer a regular income stream, while Disability insurance provides income replacement if the insured is unable to work due to illness or injury, and Medical insurance covers the cost of medical expenses.

Question 6

The personal liability umbrella policy requires the policy owner to maintain minimum levels of:&#10;A) Automobile insurance.&#10;B) Directors' and officers' insurance.&#10;C) Errors and omissions insurance.&#10;D) Malpractice insurance.

Accepted Answer

The personal liability umbrella policy typically requires the policy owner to maintain certain minimum levels of automobile insurance, as the policy is meant to provide additional coverage beyond what is already provided by other insurance policies, such as auto insurance. The other options (B, C, and D) may be important for certain professions or circumstances, but are not typically required for a personal liability umbrella policy.

Question 7

If an individual receives a Social Security disability benefit from the government, which benefit from an insurance company may be terminated or reduced?&#10;A) Cost-of-Living Adjustment (COLA)   benefit.&#10;B) Guaranteed Renewable Disability benefit.&#10;C) Option to Purchase Additional Insurance benefit.&#10;D) Social Insurance Substitute benefit.

Accepted Answer

Social Insurance Substitute benefits from an insurance company are designed to integrate with government-provided benefits, such as Social Security disability benefits. If an individual starts receiving Social Security disability benefits, the amount received from the Social Insurance Substitute benefit may be reduced or terminated to account for the government benefits. This ensures the total income does not exceed a certain percentage of the individual's pre-disability income.

Question 8

IRC Section 1035 allows the owner of an annuity contract to exchange an existing annuity contract for a new one, without:&#10;A) Paying long-term capital gains tax on the investment gains in the current contract.&#10;B) Paying ordinary income tax on the investment basis in the current contract.&#10;C) Paying ordinary income tax on the investment gains in the current contract.&#10;D) Paying short-term capital gains tax on the investment gains in the current contract.

Accepted Answer

IRC Section 1035 allows for the tax-free exchange of an annuity contract for another annuity contract, meaning the owner does not have to pay ordinary income tax on the investment gains in the current contract during the exchange.

Deck 9: Insurance Planning Basics, Part II