5/3 Quiz

It is important to specify beneficiary designations very carefully. Taking care when the policy is written will avoid problems later, such as:

Taking care when specifying beneficiary designations will help to minimize the potential for conflicts, confusion and/or litigation when the insured dies. The correct answer is: All of the above

Which of the following is NOT a life insurance beneficiary designation option?

Life insurance beneficiary designation options are: individuals, classes of individuals (per capita and per stirpes), estates, minors, trusts, and by succession (primary, contingent, and tertiary). Beneficiaries may be classified as revocable or irrevocable. The correct answer is: None of the above

Which life insurance beneficiary designation specifically provides assignment rights of the policy proceeds?

Irrevocable beneficiaries have the right of assignment. If an irrevocable beneficiary makes an assignment but predeceases the insured, then the assignment is cancelled, unless it was made in writing or the policyowner agrees to the assignment in writing. The correct answer is: Irrevocable

There are different kinds of beneficiaries in a life policy. When Alice dies, the death benefit will be paid to Walter. If Walter dies before Alice, the benefit would go to Alexander. Which of the following statements is true?

Alice is the policyholder and Walter is the primary beneficiary. Alexander is the contingent beneficiary. The correct answer is: The primary beneficiary is Walter and Alexander is the contingent beneficiary.

Which of the following is a drawback in naming a trust as a beneficiary of a life insurance policy?

Drawbacks of naming a trust as a life insurance beneficiary include the high costs of administering a trust and the trust beneficiary's inability to intercede if the trustee is not managing the trust correctly. The correct answer is: High costs of administering a trust

Ricardo and Kim were killed simultaneously in a car crash on the freeway. Ricardo was the insured and Kim was the primary beneficiary. How will the policy proceeds most likely be distributed?

If the insured and the primary beneficiary die at the same time, the proceeds would be paid to the contingent beneficiary. If there were no contingent beneficiary, then the proceeds would go to Ricardo's estate. The correct answer is: The proceeds go to the contingent beneficiary.

Who are the named individuals or entities the policyowner designates to receive life insurance policy proceeds upon the insured's death?

Beneficiaries are the named individuals or entities designated by the policyowner to receive the policy proceeds upon the insured's death. The correct answer is: Beneficiaries

Regina buys a $300,000 life insurance policy naming her children, Adam, Adrian and Muriel, as per stirpes beneficiaries. All of Regina's children are married and have their own children. Adam has two children from a prior marriage, and Adrian has an adopted daughter. If Adam predeceases Regina, how will the policy proceeds be split upon Regina's death?

Under the per stirpes beneficiary designation, a deceased beneficiary's children will receive the portion of the proceeds the beneficiary would have received if alive at the time of the insured's death, regardless of whether the beneficiary's children are adopted, stepchildren or the natural children of the beneficiary. The correct answer is: Muriel will receive $100,000, Adam's children each receive $50,000 and Adrian will receive $100,000.

Which of the following types of life insurance beneficiary designations should be used to establish a scholarship fund?

A trust can be named as the beneficiary. In this scenario, the policyowner (grantor) gives the legal title of the insurance policy to another person _ the trustee for the benefit of the trust beneficiary. Legally, the trustee cannot benefit from the trust, but is paid to manage the property on behalf of the trust beneficiary. The advantage of naming a trust is that it is a secure way to establish a scholarship fund, give money to an institution, or to assure that policy proceeds are disbursed exactly as the policyowner intends. The correct answer is: Trust

The Common Disaster Clause:

If the primary beneficiary does not outlive the insured by the number of days specified in the policy's common disaster clause, then the insured's estate receives the death benefit. The correct answer is: Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit in a common disaster between the insured and the primary beneficiary

Which of the following is a beneficiary designation based on a group of people with shared characteristics?

The class designation allows all members of a group with a set of common traits to be beneficiaries of a life insurance policy. The correct answer is: Class designation

Roberta wants to buy a life insurance policy, naming her son Marvin as beneficiary, but she wants to keep all ownership rights under the policy. How should Roberta name Marvin as beneficiary?

Revocable beneficiaries do not have any rights of ownership, whereas irrevocable beneficiaries have ownership rights. The correct answer is: Roberta should name Marvin as a revocable beneficiary.

Mary Williams has been named the tertiary beneficiary on her sister's life policy. What is the role of the tertiary beneficiary?

Sometimes a tertiary beneficiary is named and would receive the face amount of the policy if the contingent (or secondary) beneficiary predeceased the insured. The correct answer is: The tertiary receives the benefit if the contingent beneficiary predeceases the insured.

Stephanie is the primary beneficiary on her sister Janet's life policy. Both sisters are seriously injured in a boating accident and Janet dies. How long must Stephanie survive the accident in order to receive the policy proceeds?

Usually the policy will stipulate that the primary beneficiary needs to survive the insured by 15 _ 30 days to collect policy proceeds. The correct answer is: 15 _ 30 days

Which beneficiary designation is most appropriate for a person who wants to name his spouse as a beneficiary of his life insurance policy, and simultaneously retain full policy ownership rights?

By naming a beneficiary as irrevocable, that person effectively becomes a co-owner of the policy. In this case, that is not what the policyowner needs. The policyowner should name his spouse as a revocable beneficiary. The correct answer is: Revocable beneficiary

John and Maria have a joint life policy. They name their three children, Margaret, Terry, and Jean, as beneficiaries: Margaret is primary, Terry is secondary, and Jean is tertiary. If John and Maria die in a car accident who will receive the policy proceeds?

Margaret is the primary beneficiary and will receive the policy proceeds. If Margaret predeceased John and Maria, then Terry would receive the policy proceeds. If both Margaret and Terry predeceased John and Maria, then Jean would receive the policy proceeds. The correct answer is: Margaret

All of the following options are available if the only logical beneficiary is a minor, EXCEPT:

The guardian, trust and insurance company holding the proceeds are all options if a minor is a beneficiary. The correct answer is: The benefits can go directly to the estate of the insured.

All of the following statements are true of beneficiary designations in a life insurance policy, EXCEPT:

More than one beneficiary may be named in a life insurance policy. The correct answer is: Only one beneficiary may be named.

Abigail and Bob have a joint life insurance policy. They name their three children, Simon, Stacey, and Terry as beneficiaries: Simon is primary, Stacey is secondary, and Terry is tertiary. If Abigail and Bob die in a car accident, who will receive the policy proceeds?

Simon is the primary beneficiary and will receive the policy proceeds. If Simon predeceased Abigail and Bob, then Stacey would receive the policy proceeds. If both Simon and Stacey predeceased Abigail and Bob, then Terry would receive the policy proceeds. The correct answer is: Simon

The insured and the primary beneficiary are killed in a car accident. Which of the following is true according to the Uniform Simultaneous Death Act?

The Uniform Simultaneous Death Act states that if the insured and the primary beneficiary are in a common accident or died simultaneously, the policy proceeds will be paid as if the primary beneficiary died first, in which case the policy proceeds are paid to the insured's contingent beneficiaries or to the insured's estate. The correct answer is: Policy proceeds are paid as if the primary beneficiary died first.

Mary and Philip are married. Philip named Mary as the primary beneficiary of his life insurance policy. His children from a prior marriage are contingent beneficiaries. Under the Uniform Simultaneous Death Act, who will receive the death benefit if Mary and Philip are in a car accident and there is no evidence of who died first?

Under the Uniform Simultaneous Death Act, the death benefit is paid as if the primary beneficiary died first. If Philip's children predeceased him, then his estate would receive the death benefit. The correct answer is: Philip's children from his prior marriage

Which of the following statements is not true about a revocable beneficiary on a life insurance policy?

In the case of a revocable beneficiary, the policyowner can change the beneficiary with or without their knowledge and consent. The correct answer is: The policyowner cannot change the beneficiary without their knowledge.

All of the following statements are false regarding the beneficiary designation of a life insurance policy, EXCEPT:

The beneficiary may be a person or a legal entity. One or more beneficiaries may be named. As part of ownership rights, the policyowner names the beneficiary or beneficiaries. The correct answer is: The beneficiary does not need to have an insurable interest in the life of the insured.

If the primary beneficiary predeceases the insured, the policy proceeds are paid to the ________________ upon the death of the insured.

The contingent beneficiary receives the proceeds if the primary beneficiary dies before the insured. The correct answer is: Contingent beneficiary

A life insurance policy is a contract between the insurer and the policyowner. After the insured has died, the contractual arrangement is between the insurer and the beneficiary. What responsibilities does the insurer have to the insured's creditors?

The insured's creditors have no right to the proceeds of the policy. The creditors of the beneficiary, however, could have rights to the proceeds. The correct answer is: None

The _______________ solves the problem of determining who receives the policy proceeds if the insured and the primary beneficiary are killed at the same time due to a common accident.

The uniform simultaneous death act solves the problem of determining who receives the policy proceeds if the insured and the primary beneficiary are killed at the same time due to a common accident. The correct answer is: Uniform simultaneous death act

If an irrevocable beneficiary is named on a life insurance policy, all of the following statements are true, EXCEPT:

The policy owner must have the consent of the irrevocable beneficiary to borrow from the cash value. The correct answer is: Policy owners can borrow from cash value without consent.

Which of the following prevents creditors from seizing life insurance policy proceeds as long as there is at least one living named beneficiary, excluding the insured's estate?

The spendthrift clause is used to prevent creditors from seizing life insurance policy proceeds, provided there is at least one named beneficiary, excluding the insured's estate. The correct answer is: Spendthrift clause

As long as a beneficiary is named as revocable, the policyowner may change a beneficiary at any time. Which of the following is not a way to change a beneficiary?

To change a beneficiary on a life insurance policy, the policyholder must contact the insurer, by mail, phone or endorsement. Stating the designation in a will does not constitute a legal change of beneficiary. The correct answer is: Designating him/her as a beneficiary in the policyholder's will

Abel and Raquel are married. Raquel owns a life insurance policy, naming her husband Abel as the primary beneficiary and her children from a prior marriage as contingent beneficiaries. According to the Uniform Simultaneous Death Act, who receives the death benefit if Abel and Raquel are in a car accident and there is no evidence of who died first?

Under the Uniform Simultaneous Death Act, the death benefit is paid as if the primary beneficiary died first. If Raquel's children predeceased her, then her estate would receive the death benefit. The correct answer is: Raquel's children from her prior marriage