Chapter 11, 14, 17, 24
Term life insurance premiums increase upon renewal due to the insured's advancing age and they become prohibitively expensive for older insureds.
True
The excess of the amount received by a policyowner in the complete surrender of a policy over the policyowner's investment in the contract is taxable as ordinary income.
True
An advantage of straight life insurance is that lifetime distributions of cash value are subject to income tax to the extant attributable to gain in the policy.
False
A fixed portion of each annuity payment received can be excluded from income as a return of capital while the balance is reportable as ordinary taxable income.
True
A single purchase life insurance contract is defined as a policy on which substantially all the premiums are paid within the first four years.
True
An automatic premium loan provision utilizes any cash value to pay the premium after the 31 day grace period, but there is a significant administrative charge for this service.
False
Anytime death benefit proceeds include a financial gain as a result of interest accrued, those gains are considered tax exempt income to the recipient.
False
Group life insurance provides an after-tax benefit for employees and a tax deduction for employers.
False
If an employee covered by group life insurance gets laid off, they can demand that the employer continue coverage for a period of no less than six months, but the employee must pay the premiums.
False
Most group insurance is issued as yearly renewable whole life insurance, and is renewed automatically without evidence of insurability.
False
One of the advantages of group term insurance is that the premiums remain level on a per-employee basis regardless of the ages of the employees.
False
Policy dividends are a result of profitable operations by the insurance company and are therefore subject to income tax in the tax year received.
False
Premiums paid on personally owned life insurance are considered a nondeductable personal expense unless the owner is someone other than the insured.
False
Term insurance is always the least expensive form of insurance regardless of the duration of needed coverage.
False
Term life insurance is pure death protection over a specified number of years with substantial ancillary or lifetime benefits.
False
There is essentially no difference between policy loan and a cash value surrender since neither one is required to be paid back and neither affects the policy face value.
False
Under federal ERISA requirements, any married employee covered by a group term life contract must name their spouse as beneficiary.
False
If a policy meets the legal definition of life insurance, any annual increase in cash value is not subject to current income taxation.
True
If an employer is the beneficiary of a life insurance policy, the insured-employee is not taxed on the firm's payment of policy premiums.
True
In a fixed amount option, all additional payments made by the insurer after the guaranteed number are considered a result of excess interest and are fully taxable.
True
A term life insurance policy makes no promise to pay anything if the insured lives beyond the specified term.
True
All cash value policies must allow policyholders to borrow cash values from the policy.
True
An advantage of level premium term life insurance is that it is the best alternative for temporary life insurance needs.
True
An employee does not have to pay income taxes on the first $50,000 of group life insurance, but must pay taxes on any economic benefit over $50,000.
True
An important function of ordinary level-premium whole life is to direct family assets to family members while minimizing taxes.
True
Employer-paid premiums for dependent life insurance are tax deductible by the employer and non-taxable to the employee only if the coverage is considered incidental.
True
Experience rating means that premiums are based at least in part on the number of deaths and administrative costs of the specific employer group.
True
Group life provides insurance at standard premium rates for employees that may be otherwise uninsurable or that would only qualify for a rated policy.
True
If a plan discriminates in favor of "key employees," either as to eligibility or with respect to the kind or amount of benefits, the tax exclusion for the first $50,000 is eliminated.
True
If a policy loan is still outstanding when a policy is surrendered, the borrowed amount becomes taxable to the extent the cash value exceeds the policyowner's investment.
True
In ordinary life insurance, the premiums and death benefit remains level for the whole life of the policy, but the cash value increases until maturity.
True
Level term life insurance policies are subject to the same income, estate, gift, and generation-skipping transfer taxation rules as all other life insurance policies.
True
One of the disadvantages of level premium whole life insurance is that the premiums may be unaffordable for persons of limited financial resources.
True
Ordinary level premium whole life insurance has a guaranteed floor on interest credited to cash values and a guaranteed ceiling on mortality and expense charges.
True
Most insurance companies do not offer renewable term policies to new applicants after a certain age, which is usually between 60 and 70.
True
No tax deduction is allowed for premiums paid on any life insurance policy when the taxpayer is a beneficiary under the policy.
True
Life insurance proceeds are not part of the probate estate, unless the estate is the named beneficiary, so the death benefit is payable without any delay caused by the estate's administration.
True
Life insurance proceeds payable to someone other than the deceased's estate are not a matter of public record.
True
Term life insurance is ideal for temporary needs, such as paying off funeral, estate, and inheritance taxes.
True
The wavier of premium rider is common on cash value whole life insurance policies, but it is not available on level term life insurance policies.
True
