Chapter 5 Exam questions
What percent of personal life insurance premiums is usually deductible for federal income tax purposes? a. 100 b. 75% c. 50% d. 0
0
On a life insurance policy who is qualified to change the beneficiary designation? -payer -primary beneficiary -policyowner -insurer
Policyowner
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct? a. The gross premium is higher on a monthly payment mode as compared to being paid annually b. the gross premium is lower on a monthly payment mode as compared to being paid annually c. The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis d. The face amoutn of a life policy paid on a monthly basis is higher than one paid an annual basis
a
The common disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true? a. The clause provides the payment of proceeds to the insured's estate b. The clause provides the payment of proceeds to the beneficiarys estate c. The estate taxes in the insured's estate may be reduced d. The estate taxes in the beneficiary's estate may be redunced
a
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than it's cash value a. Cash surrender b. Life settlement contract c. Buy-sell arrangement d. 1031 exchange
b
What is the underlying concept regarding level premiums? a. level premiums build cash value quicker in the early years b. the early years are charged more than what is needed c. the early years are charged less than what is needed d. level premiums can only be paid annually.
b
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? a. Proceeds will be paid to P's estate b. Proceeds will be divided equally between k' and p's estate c. proceeds will be payable to k's estate if P dies within a specified time d. the courts will decide who will receive death benefits
c
M purchased an Accidental Death and Dismemberment (AD&D) 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? a. tertiary b. irrevocable c. revocable d. contingent
c
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? a. $1,000,000 b. $500,000 c. $250,000 d. $0
d
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary? -Request will be accepted only if in writing by the insured -Change will be made only if premiums are paid current -Change will be made immediately -Request of the change will be refused
d
Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policys primary beneficiary? a. The proceeds which exceed the amount paid in premiums are taxable b. The proceeds are taxable only if the beneficiarys tax bracket has changed from the payout c. All proceeds are considered taxable income in the year they are recieved d. all proceeds are income tax free in the year they are received.
d
a level premium indicates: a. the premium is fixed for a period stated in the contract, then becomes variable b. the premium can only be changed with the consent of the insuerer c. The premium stays level until the policy's renewal date d. the premium is fixed for the entire duration of the contract
d
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? - revocable -contingent -irrevocable -primary
irrevocable
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? a. interest only b. fixed period c. fixed amount d. life income
life income
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most? - The cost -The nonforfeiture options -the contestable period -the assignment of ownership
the cost
