Property & Casualty
True or False: Replacement cost is the current cost of replacing property with new materials of like kind, less depreciation.
False! Actual Cash Value (ACV) is correct.
A client wants to decide for themselves what the premium amounts will be on their life insurance policy and how the investments will be made. What type of life insurance should they buy?
Variable Universal Life
True or False: Exchanging an annuity for Life Insurance creates a taxable event.
True!
Who can tell you what notes are being played on any musical instrument just by hearing it (perfect pitch)!
A. Nikki
B. Tom
C. Jen
Jen!
A person is entitled to compensation only to the extent that financial loss has been suffered is the principle of ________.
Indemnity.
Name two of the Life Insurance Nonforfeiture Options.
Cash Surrender Value, Reduced Paid-up Insurance, Extended Term Insurance, Accelerated Death Benefits.
Loans & Withdrawals from a Life Insurance policy are taxed...
Basis First (FIFO). They are return of principal until accumulated premiums are depleted. Then they are taxed as Ordinary Income.
Who won their 4th grade talent show playing classical guitar and received an extra large bag of candy as the prize?
A. Jen
B. Brett P.
C. Tim
Brett P!
True or False: Bodily Injury coverage will pay out to a person injured during an accident, regardless of who was at fault for the accident.
False!
What do these have in common?
A. Cash
B. Accumulate at interest
C. Reduce Premiums
D. Paid-up Additions
E. One-year Term
These are all Dividend Options!
You have a life insurance policy with a cash value of $400,000. You paid $100,000 in premiums but have a $300,000 balance on an outstanding policy loan. If your policy lapses, how much is taxable to you and how is it treated?
$200,000 is taxed as ordinary income.
Who purchased a 1980's fishing boat last year and spent the summer fixing it up and refinishing it?
A. Mike
B. Morgan
C. Scott
Morgan!
What does Ordinance or Law cover in a home policy?
Increased construction costs as a result of building code enforcement.
Withdrawals of life insurance that reduce your cash value could cause your premiums to _____ to maintain the same death benefit; otherwise, the policy could _____.
increase & lapse.
You purchased a qualified annuity for $50,000 18 months ago. The surrender charge is 7% in year 1 and decreases by 1% each year. You had an accident and need $30,000 for medical bills. You do not have enough in savings and decide to take $20,000 from your annuity. How much is it costing you to withdraw that amount? (You are in the 24% bracket & 15% bracket for capital gains).
$6,000
Surrender = 20,000 x 6% = $1,200
Entire $20,000 taxable at 24% = $4,800
"Baby Got Back" is their go-to Karaoke Song!
A. Erin
B. Linda
C. Tim
Erin!
A tree in your front yard falls over and crushes your car, a Porsche worth $225,000. You have comprehensive coverage on your Auto Insurance with a limit of $175,000. What is the amount your Umbrella Insurance will cover?
Zero!
Your clients have a friend who has sold them several annuity products. They now have liquidity needs and are exploring canceling some of the annuity contracts. Name at least two things you should look for when they give you a copy of the contract.
Surrender period, surrender charge, cost basis, type of annuity.
Peter paid $500,000 into an non-qualified annuity. He has decided to begin receiving a lifetime annuity and will receive $4,000/mo for the remainder of his life (expected to be 20 more years). How much of the payments are taxable and how much is excluded from taxable income?
$2,080 is a return of basis - excluded from income & $1,920 is taxable as ordinary income.
Apply the exclusion ratio!
$4,000 x 12 mo x 20 yrs = $960,00 total payments
$500,000 (basis) / $960,000 = 52% exclusion ratio.
Who was hiking through the ruins of an abandoned Spanish castle and came across a fresh pack of Twizzlers?
A. Brett
B. Erich
C. Linda
Erich!