Chapter 4 Exam

Which of the following statements is CORRECT regarding the tax treatment of a lump sum payment paid to a life insurance policys primary beneficiary?

All proceeds are income tax free in the year they are received

When can a policyowner change a revocable beneficiary?

Anytime

T is covered by an accidental death and dismemberment policy that has an irrevocable beneficiary. What action will the insurance company take if T requests to change beneficiary?

request will be refused

____ of personal life insurance premiums is usually deductible for federal income tax purposes

0%

Which of these statements is INCORRECT regarding the federal income tax treatment of life incurance?

Entire cash surrender value is taxable

A policyowner would like to change the beneficiary on a life insurance policy and make the change permanent. Which type of designation would fulfill this need?

Irrevocable

P and Q are married and have three children. P is the primary beneficiary on Qs Accidental Death and Dismemberment (AD&D) policy. Qs sister R is the contingent beneficiary. PQ and R are involved in a car accident and Q and R are killed. The accidental death benefits be paid to?

P only

Which of the following best describes a contingent beneficiary?

Person designated by the insured to receive policy proceeds in the event the primary beneficiary dies before the insured

A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

Proceeds go to the contingent

A _____ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary

Revocable

M purchased an accidental death and dismemberment policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

Revocable

What is the underlying concet regarding level premiums?

The early years are charged more then what is needed

J chooses a monthly premium payment mode on his whole life insurance policy. Which of these statements is correct?

The gross premium is higher on a monthly payment mode as compared to being paid annually"

Which statement regarding the change of beneficiary provision is true?

The policyowner can change the beneficiary

A level premium indicates?

a level premium is fixed for the entire duration of the contact