Arkansas Life and Health Insurance Practice Exam

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A married couple wants to have funds available so that the heirs to their estate have the funds necessary to pay the estate taxes. Which of the following would be the most economical and effective way to accomplish this?

  1. Annuities

  2. Buy a Joint Survivorship Life policy

  3. Individual Term Life policies for each spouse

  4. Variable Life Insurance policy

The correct answer is: Annuities

Annuities would be the most economical and effective way for a married couple to have funds available to ensure their heirs can pay the estate taxes. Annuities provide a guaranteed income stream over a specified period or for life, depending on the type of annuity chosen. In this case, the annuity payments can be used to cover any estate taxes that may be due upon the death of the insured individuals. Buying a Joint Survivorship Life policy, individual Term Life policies for each spouse, or a Variable Life Insurance policy might provide a death benefit to cover the estate taxes, but they may not be as cost-effective or efficient as annuities in providing a guaranteed income stream specifically for this purpose.

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