Chapter 4 exam - Life Premiums and Benfits

When can a policyowner change a revocable beneficiary? A: Anytime B: After the consent of the current beneficiary C: Never D: Only if the primary beneficiary dies

A: Anytime With a revocable beneficiary designation, the policyowner may change the beneficiary at anytime without notifying or getting permission from the beneficiary.

K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? A: Daughter B: Husband's estate C: K's estate D: Trust fund

A: Daughter

Which type of life beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner? A: Irrevocable beneficiary B: Tertiary beneficiary C: Primary beneficiary D: revocable beneficiary

A: Irrevocable beneficiary An Irrevocable beneficiary designation may not be changed without the written consent of the beneficiary

How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy? A: If the primary beneficiary is a minor at the time of the insured's death B: If the primary beneficiary dies before the insured C: If the insured died of accidental causes D: If the insured died of natural causes

B: If the primary beneficiary dies before the insured A contingent beneficiary will receive the policy proceeds if the primary beneficiary dies before the insured's death

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: The early years are charged more than what is needed

Which of these statement is INCORRECT regarding the federal income tax treatment of life insurance A: Premiums are normally not tax deductible B: Cash dividends are normally not taxed C: Entire cash surrender value is taxable D: Proceeds are received tax-free if there is a named beneficiary

C: Entire cash surrender value is taxable The total cash surrender value is NOT taxable. The interest gained is taxable

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: Revocable With a Revocable Beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary

What percent of personal life insurance is usually deductible for federal income tax purpose A: 100% B: 75% C: 50% D: 0%

D: 0% In general, personal life insurance premium are NOT deductible for federal income tax purposes

If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act? A: Primary beneficiary's estate B: Primary beneficiary's next of kin C: Insured's estate D: Insured's contingent beneficiary

D: Insured's contingent beneficiary Under the Uniform Simultaneous Death Act, if both insured and primary beneficiary are killed in the same accident and there is insufficient evidence to show who died first, policy proceeds will be paid as if the insured died last. In other words, the proceeds will be paid to the secondary or contingent beneficiary

Quarterly premium payments increase the annual cost of insurance because A: Insurer risk exposure is greater B: Interest to the insurer is increased while administrative are decreased C: Mortality costs are greater D: Interest to the insurer is decreased while the administrative costs are increased

D: Interest to the insurer is decreased while the administrative costs are increased The higher the frequency of payments, the higher the premiums`

A policyowner's rights are limited under which beneficiary designation? A: Revocable B; Tertiary C: Contingent D: Irrevocable

D: Irrevocable An Irrevocable beneficiary designation requires the consent and signature of that named beneficiary before a change of beneficiary occures

A policyowner is allowed to pay premiums more than once a year under which provision A: Insuring B: Consideration C: Payor D: Mode of Premium

D: Mode of Premium

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? A: Request will be accepted only if in writting by the insured B: Change will be made only if premiums are paid current C: Change will be made immediately D: Request of the change will be refused

D: Request of the change will be refused An irrevocable designation may not be changed without the written consent of the beneficiary

J would like to maintain the right to change beneficiary. Which beneficiary designation should be used A: Irrevocable B: Contingent C: Primary D: Revocable

D: Revocable With a Revocable Beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary

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 change with the consent of the insurer C: The premium stays level until the policy's renewal date D: The premium is fixed for the entire duration of the contract

D: The premium is fixed for the entire duration of the contract A level premium means that the premium remains fixed through the life of a policy