CFP512: Risk Management, Insurance, and
Employee Benefits Planning UPDATED
ACTUAL Questions and CORRECT
Answers
Taxation on life insurance transfer due to divorce - CORRECT ANSWER 2018 & Before:
premiums deductible to payor, taxable to payee
2019+: premiums NOT deductible to payor or taxable to payee
Investment in life insurance contract = - CORRECT ANSWER premiums - dividends -
loans/withdrawals
Guaranteed lifetime withdrawal benefit (GLWB) - CORRECT ANSWER can withdraw
certain % of contract each year for life regardless of subaccount performance
Guaranteed minimum withdrawal benefit (GMWB) - CORRECT ANSWER can withdraw
certain amount of contract (typically return of premium) during specific period regardless of
subaccount performance
Guaranteed minimum income benefit (GMIB) - CORRECT ANSWER can annuitize to a
certain minimum guaranteed income regardless of subaccount performance
Guaranteed minimum accumulation benefit (GMAB) - CORRECT ANSWER guarantees
at least return of principal after specific waiting period
Fixed annuity exclusion ratio = - CORRECT ANSWER investment in contract / expected
return
Variable annuity exclusion ratio = - CORRECT ANSWER investment in contract / #
expected annual payments
, Taxable annuity payments - CORRECT ANSWER amount in excess of excluded amount
payments beyond projected life expectancy
Non-natural person as annuity holder - CORRECT ANSWER income on contract treated
as ordinary income in that year
loss on contract treated as ordinary loss without limit
Modified own occupation - CORRECT ANSWER Unable to work in occupation
reasonably fitted by education, training, experience, and prior economic status
Presumptive disability conditions - CORRECT ANSWER blindness
deafness
loss of speech
loss of two or more limbs
Social Security disability definition - CORRECT ANSWER inability to engage in any
substantial gainful activity longer than 12 months
Social Security disability elimination period - CORRECT ANSWER 5 months
Residual disability rider - CORRECT ANSWER policy will pay difference in income prior
to disability after returning to work and earning lower income
Conditionally renewable DI - CORRECT ANSWER continuous-term policy that insurance
company can cancel if conditions are met
Disability buyout premiums - CORRECT ANSWER not tax deductible by employer
Employee Benefits Planning UPDATED
ACTUAL Questions and CORRECT
Answers
Taxation on life insurance transfer due to divorce - CORRECT ANSWER 2018 & Before:
premiums deductible to payor, taxable to payee
2019+: premiums NOT deductible to payor or taxable to payee
Investment in life insurance contract = - CORRECT ANSWER premiums - dividends -
loans/withdrawals
Guaranteed lifetime withdrawal benefit (GLWB) - CORRECT ANSWER can withdraw
certain % of contract each year for life regardless of subaccount performance
Guaranteed minimum withdrawal benefit (GMWB) - CORRECT ANSWER can withdraw
certain amount of contract (typically return of premium) during specific period regardless of
subaccount performance
Guaranteed minimum income benefit (GMIB) - CORRECT ANSWER can annuitize to a
certain minimum guaranteed income regardless of subaccount performance
Guaranteed minimum accumulation benefit (GMAB) - CORRECT ANSWER guarantees
at least return of principal after specific waiting period
Fixed annuity exclusion ratio = - CORRECT ANSWER investment in contract / expected
return
Variable annuity exclusion ratio = - CORRECT ANSWER investment in contract / #
expected annual payments
, Taxable annuity payments - CORRECT ANSWER amount in excess of excluded amount
payments beyond projected life expectancy
Non-natural person as annuity holder - CORRECT ANSWER income on contract treated
as ordinary income in that year
loss on contract treated as ordinary loss without limit
Modified own occupation - CORRECT ANSWER Unable to work in occupation
reasonably fitted by education, training, experience, and prior economic status
Presumptive disability conditions - CORRECT ANSWER blindness
deafness
loss of speech
loss of two or more limbs
Social Security disability definition - CORRECT ANSWER inability to engage in any
substantial gainful activity longer than 12 months
Social Security disability elimination period - CORRECT ANSWER 5 months
Residual disability rider - CORRECT ANSWER policy will pay difference in income prior
to disability after returning to work and earning lower income
Conditionally renewable DI - CORRECT ANSWER continuous-term policy that insurance
company can cancel if conditions are met
Disability buyout premiums - CORRECT ANSWER not tax deductible by employer
