Carl and Carol Williams, a married couple, are doing some estate planning. Upon his
death, Carl plans to leave $1,000,000 in property to his wife. This amount will reduce
the value of Carl’s gross estate and will be taxed later when Carol dies. This reduction
of the gross estate is called the
A) unified tax credit.
B) taxable estate.
C) capital gains deduction.
D) marital deduction.
Rita is 66 years old. She earned $20,000 this year working part-time at a store and her
modified adjusted gross income was $28,000. Rita is considering making a $3,000
contribution to her traditional IRA. Which of the following statements is true regarding
this contribution?
A) Rita cannot contribute to her traditional IRA because she is over age 65.
B) Rita can make a $3,000 contribution to her traditional IRA, but it is not tax
deductible.
C) Rita can make a $3,000 contribution to her traditional IRA, but it is only partially tax
deductible.
D) Rita can make a $3,000 contribution to her traditional IRA, and it is fully tax
deductible.
Nathan was hired as an actuary with ABC Insurance. Nathan was asked to calculate the
annual premium for a new product and to explain his calculations to ABC’s director of
ratemaking. Nathan calculated the pure premium and presented this value as the final
premium. After Nathan’s presentation, the director of ratemaking said, “You left out
something very important. If we sell coverage at the pure premium rate, we’ll be out of
business soon.” What did Nathan overlook in his calculations?
A) loading for expenses
B) the underwriting cycle
C) seasonality of claims
D) investment income
A cashier at Food World Supermarket accepted a phony $100 bill. Which ISO
commercial crime coverage is designed to cover such a loss?
A) Forgery or Alteration
B) Money Orders and Counterfeit Paper Currency
C) Inside the Premises – Theft of Money and Securities
D) Inside the Premises – Robbery or Safe Burglary of Other Property
Malcolm would like to purchase life insurance. He is concerned that he might need
additional life insurance in the future and that he might be uninsurable at that time.
What provision can Malcolm add to his life insurance policy that will permit him to
purchase additional life insurance at specified times in the future without providing
evidence of insurability?
A) double indemnity rider
B) guaranteed purchase option
C) waiver-of-premium provision
D) accelerated death benefits rider
Which of the following is least likely to occur during a “hard” insurance market period?
A) difficulty in obtaining insurance
B) tightening underwriting standards
C) higher insurer profits
D) increasing premiums
A restaurant owner leased a meeting room at the restaurant to a second party. The lease
specified that the second party, not the restaurant owner, would be responsible for any
liability arising out of the use of the meeting room, and that the restaurant owner would
be “held harmless” for any damages. The restaurant owner’s use of the hold-harmless
agreement in the lease is an example of
A) retention.
B) self-insurance.
C) insurance.
D) noninsurance transfer.
XYZ Mutual Insurance Company has total assets of $10 million. The policyholders’
surplus is $2 million. What are XYZ Mutual’s total liabilities?
A) $4.0 million
B) $8.0 million
C) $10.0 million
D) $12.0 million
Under which type of automobile insurance arrangement are all automobile insurers in a
state assigned their proportionate share of high-risk drivers based on the total volume of
automobile business written in the state?
A) automobile insurance plan
B) unsatisfied judgment fund
C) reinsurance facility
D) specialty automobile plan
Amy purchased a life insurance policy with the intent of committing suicide to pay all
the debts that were burdening her family. If she commits suicide 9 months after the
policy is purchased, and the insurer is able to prove that her death was a suicide, how
much will be paid by the insurance company?
A) nothing, because the policy is void
B) the premiums paid for the policy
C) the policy’s cash value
D) the face value of the policy