Chapter 5- Settlement

Which of the following is not a living benefits option for using cash value in a life insurance policy?

1035 policy exchange

All of the following are life insurance settlement options, EXCEPT:

Automatic premium loan

Which of the following best describes which individual(s) are permitted to choose the settlement option for a life insurance policy?

Both the beneficiary and the policyowner

All of the following is true regarding lump-sum payment of life insurance policy proceeds, EXCEPT:

Distribution is taxed.

Which life insurance settlement option uses an annuity to pay policy proceeds in which the payment amount is specified instead of a period of time?

Fixed-amount installment

Which of the following is false regarding the period certain life insurance settlement option?

If the recipient dies before the period ends, the remaining balance is forfeited.

What life insurance settlement option permits the insurer to retain the policy proceeds, which become principal, and pays out only the growth on the principal to the beneficiary on a regular basis?

Interest only

A settlement option that would leave the proceeds of the insurance policy with the insurer and the insurer would pay interest to the beneficiary on an installment basis is called:

Interest only option

Of the following life insurance settlement options, which pays only the interest earned on the principal in periodic payments?

Interest-only

Which of the following settlements of a life insurance policy is taxable?

Interest-only

Which settlement option pays the growth on the principal in installments?

Interest-only

This annuity provides a husband and wife with lifetime income while either spouse is alive

Joint and survivor annuity

Of the following settlement options for life insurance, which can result in the insurer paying more in benefits than the principal plus interest?

Life income

Which life insurance settlement option uses an annuity to pay policy proceeds to the beneficiary for a set number of years?

Period Certain

_______________ allow the policy proceeds to be retained by the insurer and paid out gradually.

Settlement options

All of the following are true regarding the period certain life insurance settlement option, EXCEPT:

Shorter payment periods result in lower payments.

All of the following are true regarding the fixed-amount installment life insurance settlement option, EXCEPT

The larger the payment amount, the longer time period payments will be received.

What happens if a policyowner does not specify a settlement option for their life insurance policy?

The policy proceeds default to lump-sum payment.

Who may choose the settlement option for a life insurance policy?

The policyowner and the beneficiary

A fixed period option pays policy proceeds in equal installments over a period of months or years. Which of the following is NOT considered when determining the amount of the installment?

The relationship of the beneficiary to the insured