Chapter 5 Life Insurance Premiums, Proceeds, and Beneficiaries

All of these are settlement options for life insurance policies EXCEPT

Extended term

Elizabeth is the beneficiary of a life insurance policy. She is receiving the death benefit in payments of $10,000 per month until the principal and interest has been paid out. Which option was chosen?

Fixed amount

What happens to the total amount of premium paid for an insurance policy when the payment frequency increases?

Increases

Which type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?

Individual

Sharon is the policyowner of a $50,000 life insurance policy. Her son, Mike, is the beneficiary. If Sharon MUST obtain Mike's signature in order to change the beneficiary, what kind of beneficiary designation is this?

Irrevocable

A policyowner is prohibited from making any changes to the policy without the beneficiary's written consent under which beneficiary designation?

Irrevocable beneficiary

Over the course of a year, which premium payment mode is most expensive?

Monthly

What is the primary feature of a viatical settlement?

Reduced death benefit prepayment

Which of the following enables a life policy to be replaced with another life policy and results in the postponement of the tax consequence?

Section 1035 exchange

What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured?

Specified amount of money

Which of these ensures that proceeds of a life insurance policy will be free from attachment or seizure by the beneficiary's creditors?

Spendthrift Clause

A policyowner can receive a percentage payment of the death benefits prior to death by using what kind of contract?

Viatical settlement agreement

A life insurance claim which involves a per capita distribution of policy proceeds would be payable to the

named living primary beneficiaries Per capita" is a method of life insurance distribution using total number of individuals. This means that all living members that are identified in the life insurance policy will receive an equal amount of the life insurance proceeds. Using per capita distribution means that if one of the beneficiaries becomes deceased before the insured, then the other beneficiaries will simply have their share increased accordingly.

A beneficiary change can occur

normally at any time during the policy term

Mortality is calculated by using a large risk pool of

people and time

An example of naming a beneficiary by class would be

"To the children born of my union with Ned Jackson"

Tonya has replaced her whole life policy with an annuity without incurring a tax penalty. This transaction is called a(n)

1035 Exchange

How does life insurance create an immediate estate?

After first premium is paid, the face amount may be available to the beneficiary

Which of these premium payment frequencies is not typically available to a policyowner?

Bi-weekly

Naming a contingent beneficiary as "all surviving children" is described by which term?

Class designation

Which of these is affected by the frequency of an insurance policy's premium payments?

Cost