C17 & C19 - Life Cycle Risks & Life Insurance

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Questions and Answers

Which retirement plan allows employer contributions to be deducted as business expenses?

DB plan

Non-qualified plan

401(k) plan (correct)

IRA

What is a significant advantage of annuities in retirement planning?

They guarantee high returns

They provide unlimited withdrawal options

They can mitigate longevity risk (correct)

They offer immediate tax deductions

Which component of the Affordable Care Act is known for its potential impact on health care costs?

Veterans Health Administration

HIPAA regulations

Accountable Care Organizations (correct)

Medicare Part A

What are the key parts of the Medicare Health Insurance Program?

Part A, Part B, Part C, Part D Signup and view all the answers

What issue is a significant financial problem for Social Security?

Insufficient contributions from younger workers Signup and view all the answers

What is meant by the term 'human life value' in the context of insurance?

The potential income a deceased person would have earned if they had lived. Signup and view all the answers

What is the main advantage of the Waiver of Premium rider in a whole life insurance policy?

It allows the policyholder to skip premium payments if disabled. Signup and view all the answers

Which type of life insurance is characterized by fluctuating premiums that can change each year?

Term life insurance Signup and view all the answers

What distinguishes a living benefit from a death benefit in life insurance?

Living benefits can be used for various expenses during the insured's life; death benefits are paid upon death. Signup and view all the answers

Which statement best describes group life insurance?

It covers multiple people under a single policy. Signup and view all the answers

How is the cost of death protection calculated?

(#dying / #alive) x $1,000 Signup and view all the answers

In a contributory plan, who is responsible for the contributions?

Both the employer and employee share the contributions. Signup and view all the answers

What is the primary difference between cash employment and non-cash employment benefits?

Cash benefits are quantifiable monetary amounts; non-cash benefits include services or products. Signup and view all the answers

What distinguishes a qualified plan from a non-qualified plan in terms of tax benefits?

Qualified plans are deductible as business expenses until benefits are received. Signup and view all the answers

Which type of life insurance accumulates cash value over time?

Whole life insurance Signup and view all the answers

Which of the following describes the concept of nondiscrimination in group insurance?

It ensures equal coverage for all group members regardless of health. Signup and view all the answers

What does the reserve in life insurance represent?

The funds set aside to pay potential claims that exceed actual contributions. Signup and view all the answers

What is one key feature of the Accidental Death Benefit rider?

It doubles the death benefit if death occurs from an accident. Signup and view all the answers

What is the main characteristic of noncontributory plans?

They depend solely on employer contributions. Signup and view all the answers

What distinguishes term life insurance from whole life insurance?

Whole life insurance offers lifelong coverage, while term life covers a specific period only. Signup and view all the answers

Which life insurance feature allows an insured to purchase more coverage without a medical exam?

Rider of Guaranteed Insurability Option Signup and view all the answers

Study Notes

C17 - Life Cycle Risks/Exposures

Understand various life cycle risks, such as mortality, longevity, morbidity, disability, and annuity.
Be proficient with statistical tables for these factors.
Evaluate economic value of human life (deceased), including income they'd have acquired if they survived.
Assess needs of dependents (financial).
Know capitalization approach (principal reservation + income).
Differentiate between cash (taxable) and non-cash (non-taxable) employment-based benefits.

C19 - Life Insurance

Understand how life insurance works through pooling and discounted mortality rate calculations.
Calculate cost of death protection (#dying/#alive) * $1,000.
Differentiate between term, whole, universal (type a/b), and variable life insurance.

Term Life Insurance

Year-to-year premiums, premiums increase annually, pure death protection.
Only insured during policy period.

Whole Life Insurance

Lifetime protection, fixed-premium.

Universal Life Insurance

Guaranteed minimum interest rates based on only bonds.
Flexible death benefits.
Face amount increases as cash accumulates.

Variable Life Insurance

Mutual fund based (risky).
Value depends on stock performance.
Fixed premiums.

C20 - Whole Life Insurance Policy Provisions

Understand the level premium payment method, reserve (cash value) accumulation.
Understand cash value accumulation for meeting saving needs.
Know difference between living and death benefits and associated tax implications.
Know about living benefits (e.g., terminal illness coverage) — typically tax-free if used for qualified expenses, otherwise potentially taxable.
Understand death benefits (lump sum paid upon death), typically tax-free but may be taxable if estate related.
Calculate after-tax value of a terminated whole life insurance policy.
Know life riders like waiver of premium and accidental death benefit features.

Group vs Individual Life Insurance

Group Life Insurance: Offered by employers, covers multiple people under one policy, generally lower premium, limited customization, and limited portability if you leave the group.
Individual Life Insurance: Purchased by an individual, tailored coverage, higher cost, independent of employment or group affiliations.

C21 - Retirement Plans

Define qualified versus non-qualified retirement plans (and their features).
Know basic retirement types (e.g., DC, DB plans, 401(k), IRA).
Understand advantages and disadvantages of each type of plan.
Be familiar with annuities: types, options, advantages/disadvantages, and how they mitigate longevity risk.

C22 - Health Care System

Understand U.S. Health Care System: its operation, costs, and changes.
Understand advantages and disadvantages of the system.

Understand what the acronym OASDHI program stands for
Discuss financial problems of Social Security and some potential fixes.
Understand how you qualify for Social Security benefits, and when benefits can be received.

Medicare Coverage

Explain components of the Medicare Health Insurance Program.
Medicare parts A, B, and D coverage specifics.

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Description

Explore the critical concepts of life cycle risks, including mortality and longevity, and the intricacies of life insurance. This quiz covers understanding of statistical tables, life insurance types, and economic evaluations regarding dependents and deceased individuals. Test your knowledge on term, whole, and universal life insurance models.