Quiz: Life Insurance /settlement Options

In general, all settlement options with a life contingency base payments on which of the following? A. a specific period selected by the owner or beneficiary B. the insurance company's declared dividend schedule C. a specific monthly payment amount selected by the owner or beneficiary D. the beneficiary's life expectancy

D. the beneficiary's life expectancy The fixed period option does not include a life contingency.

Settlement options that effectively work like an annuity by providing income payments the payee cannot outlive are called which of the following? A. life income options B. fixed period settlement options C. fixed amount settlement options D. period certain income options

A. life income options A fixed period settlement option is a type of life insurance settlement option without a life contingency.

Which of the following correctly describes the two basic categories of life insurance settlement options? A. those without a life contingency and those with a life contingency B. fixed period and fixed amount C. straight life and survivorship D. period certain and refund

A. those without a life contingency and those with a life contingency Settlement options fall into two categories: those without a life contingency and those with a life contingency.

Many payees worry about choosing the straight life income option because they know that if they die after receiving only a single income payment, the insurer makes no further payment. To address this concern, the insurance industry created which of the following? A. life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid B. settlement options guaranteeing that the amount of each payment is calculated so that the principal plus the interest earned reaches zero at the end of the selected period C. contingent beneficiary designations D. policy riders for disability

A. life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid The industry created life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid, regardless of how short the payee's life is.

For any given life policy death benefit amount, which of the following settlement options generally provides the largest monthly income to the payee? A. life income with refund B. life income with period certain C. joint and survivor life income D. straight life income settlement option

D. straight life income settlement option Under a joint and survivor life income payout, monthly payments are made to two payees until the second payee (survivor) dies. At that point, income payments stop, unless a period certain applies. No further payments are made to a contingent payee.

All of the following statements about the fixed amount life insurance settlement option are correct EXCEPT: A. If the payee dies before the principal reaches zero, the insurer pays the contingent payee until the account is depleted. The contingent payee can also choose to receive the present value of the final payments in a lump sum. B. The insurer holds the proceeds under this option. The insurer then pays out the proceeds (including interest) on a schedule until the principal is exhausted. C. The policyowner or beneficiary selects the payment amount. This payment amount determines how long the payments continue. D. Payments must be made on a monthly basis.

D. Payments must be made on a monthly basis. Payments can be made monthly, quarterly, semi-annually, or annually.

Under the interest-only life insurance settlement option, what happens to the death benefit proceeds at the end of the payment period (or upon request by the beneficiary)? A. The insurer pays the proceeds to the beneficiary. B. The insurer pays the proceeds in a lump sum. C. The insurer keeps the interest, thus increasing the death benefit amount. D. The insurer pays the proceeds, either in a lump sum or under one of the other settlement options.

D. The insurer pays the proceeds, either in a lump sum or under one of the other settlement options. At the end of the interest-paying period (or upon request by the beneficiary), the insurer pays the proceeds either in a lump sum or under one of the other settlement options.

As beneficiary of her husband's life insurance, Beth chooses to receive payments for life. However, she is guaranteed that the payments will be made for ten years. Beth has chosen which of the following? A. life income with period certain B. life income with refund C. joint and survivor life income D. straight life income settlement option

A. life income with period certain Under the life income with period certain, a payee receives income payments for life. He or she is guaranteed to receive payments for a specified period. For example, a life income with ten-year period certain provides payments to the payee for life and guarantees payments for at least ten years. If the payee dies six years after payments begin, then payments will continue to a contingent payee for the remaining four years. If the payee lives beyond the guarantee period, payments will continue until he or she dies.