Chapter 5: Life Insurance Premiums, Proceeds, and Beneficiaries
How are death benefits that are received by a beneficiary normally treated for tax purposes?
Exempt from federal income taxes
A cost involved in determining premium rates is called the loading charge. This is also known as
Expense factor
Which of the following is NOT a life insurance settlement option?
Extended term option
Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose?
Interest Option
The probability of death, listed by year, are demonstrated in
mortality tables
Life insurance premiums are typically based on what increment of the face value?
$1,000
Which of the following is NOT a component of determining policy premiums?
Dividends
All of the following statements about beneficiary designations are correct EXCEPT
Minors cannot be named life insurance beneficiaries.
Which of the following statements is CORRECT?
A per stirpes distribution means that a beneficiary's share of a policy's proceeds will be passed down to the beneficiary's living child or children if the named beneficiary predeceases the insured.
All of the following are primary premium factors EXCEPT
Dividends
When an insurer pays proceeds, including interest and principal, in minimum guaranteed dollar payments over a specified number of years, it is referred to as the
Fixed-Period option
When calculating life insurance premium rates, which component would an agent's commission fall under?
Insurer's expenses
When calculating life insurance premium rates, which component is affected by an insured's age and gender?
Mortality
Which of the following describes the number of deaths in a year compared to the number of people in a select group?
Mortality rate
If an irrevocable beneficiary dies before the policyowner, who of the following gains control of a life insurance policy with a reversionary irrevocable clause?
Policyowner
Sonya wants to name her husband as the beneficiary of her life policy. She also would like to retain all of the rights of ownership. Sonya should have her husband named as
Revocable beneficiary
A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?
The insured's estate
Premiums are best described as
money paid by the insured to acquire a policy's benefits