Chapter 5- Life Insurance Premiums, Proceeds and Beneficiaries
Life insurance premiums are computed on what three factors?
Mortality, interest, expenses
What minimum percentage of all eligible employees must participate in a group life insurance plan if the premiums are completely paid for by the employer?
100%
How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision?
6 months
Which type of policy can group term life insurance normally be converted to?
An individual permanent life insurance policy
Which statement about group life insurance is INCORRECT?
Each participant requires evidence of insurability
An employer has a group life coverage for his employees. How would an employee in poor health be treated in this situation?
Eligible for the same type of coverage as the other employees
What are premiums for group credit life insurance based on?
Flat rate unrelated to the borrower's age
What is an insurance contract that identifies individuals by relationship to a specific organization?
Group insurance
When premiums are determined, one factor would be the expenses of the
Insurer
Which statement regarding the certificate of insurance is accurate?
It indicates evidence of an employee's insurance coverage
Which life insurance settlement option pays lifetime benefits to two or more people?
Joint and Survivor
Why do insurers require a minimum number of employees participate in a group insurance plan?
Minimize adverse selection
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
A life insurance company just paid a $100,000 death benefit to a beneficiary. When the insured died, the cash value was $15,000 and the total premiums-paid equaled $10,000. How much of the proceeds will be added to the beneficiary's gross income for federal income tax purposes?
Nothing
Which of these factors does NOT affect life insurance premium rates?
Producer Certification
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
Which life insurance policy provision prohibits a beneficiary from "commuting, encumbering, withdrawing, or assigning" any portion of the proceeds prior to actual receipt from the company?
Spendthrift clause
Which statement regarding the joint and survivor life insurance settlement option is NOT true?
The amount of each installment is larger than the single life income option
Which statement regarding a fixed period settlement option is correct?
The installment payment amount is determined by the total number of installments
Who is the beneficiary in a life insurance policy?
The stated person or entity who is designated to receive the death proceeds
What would be the disadvantage of naming a trust as beneficiary of a life insurance policy?
Trust administration fees would reduce policy proceeds
The policy provision that permits an employee to change from group life coverage to an individual life policy is called the
conversion provision
Any employee insured under a group life insurance plan is normally
covered with term life insurance
Death benefits from a life insurance policy are normally considered to be
exempt from federal income tax
Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate
for federal income tax reasons
Group life insurance is typically issued as
level term insurance
If an employer pays for accidental death and dismemberment insurance for its employees, the amount paid by the employer is generally
tax deductible to the business
The conversion option for group term insurance may be exercised by an employee
within 31 days of terminated employment
