Ch. 5 Exam Questions (Life) - Life insurance Premiums, Proceeds, and Beneficiaries

Which tax is normally associated with an individual's death?

Federal estate tax

How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision?

6 months

The highest mortality rate belongs to which group?

Age 70 males

When there is a named beneficiary on a life insurance policy, the death benefits

Are paid directly to the beneficiary without interference from the insured's creditors

Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted?

Fixed amount installment option

Which life insurance settlement option pays lifetime benefits to two or more people?

Joint and survivor

A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens with the remaining balance of the death proceeds?

Kept by the insurance company

How much is normally paid to a policyowner in a life (viatical) settlement?

Less than the death benefit

During the early years of a whole life insurance policy, the cash value will normally be

Less than the total premiums paid

What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a minor?

Minors are normally not capable of handling money in a reasonable manner

Life insurance premiums are computed on what three factors?

Mortality, interest, expenses

Which of these occurrences could improve an insurer's ability to reduce premiums?

Rate of earnings on investments increase

Switching life insurance policies without tax consequence is permitted under

Section 1035 rules

What would be a valid reason for naming a trust as the beneficiary of a life insurance policy as opposed to naming an individual?

Management of proceeds would be provided

Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true?

The periodic payment amount is determined by the beneficiary's age