Chapter 6: premiums, proceeds and beneficiaries

purchasing a life insurance policy in order to avoid the forced sale of assets upon death is called:

estate conservation

a tax free section 1035 exchange of life insurance policy to a different policy is permitted if it occurs:

from insurer to insurer and no cash is received by the policyowner

Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?

interest only

a beneficiary receives only the death benefit earnings in which settlement option?

interest option

what is the automatic mode of settlement for life insurance policy proceeds?

lump sum

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

monthly

what would be an expense factor in an insurance program?

mortality cost-==

what describes the number of death in a year compared to the number of people in a select group?

mortality rate

A beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed?

no federal income tax is owed on life insurance

a beneficiary chance can occur:

normally at any time during the policy term

Mortality is calculated by using a large risk pool of:

people and time

what is NOT an insurer policy expense?

premiums

what is the primary feature of a viatical settlement?

reduced death benefit repayment

A spendthrift clause in a life insurance policy:

restricts the ability of the beneficiary to assign benefits

What 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

Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?

spendthrift trust clause

an example of naming a beneficiary by class would be:

to the children born of my union with Ned Jackson

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

viatical settlement agreement

what premium payment frequencies is not typically available to a policyowner?

bi-weekly

Pat is insured with a life insurance policy and Karen is his primary beneficiary. They are both involved in an automobile accident where Pat dies instantly and Karen dies 5 days later. Which policy provision will protect the rights of the contingent beneficiary to receive the policy benefits?

common disaster clause

what is affected by the frequency of an insurance policys premium payments?

cost

what is created after policy proceeds are obtained in a lump sum and then immediately invested?

estate

How does life insurance create an immediate estate?

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

what helps determine an insureds life insurance premium?

avocation (hobby)