4 - Life Insurance Premiums, Proceeds and Beneficiaries

Life Settlement contract

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?

The early years are charged more than what is needed

What is the underlying concept regarding level premiums?

the premium is fixed for the entire duration of the contract

A level premium indicates:

Mode of Premium

A policyowner is allowed to pay premiums more than once a year under which provision?

Irrevocable

A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill this need?

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.

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?

Anytime With a revocable beneficiary designation, the policyowner may change the beneficiary at any time without notifying or getting permission from the beneficiary.

When can a policyowner change a revocable beneficiary?

Proceeds will be payable to K's estate if P dies within a specified time

K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?

$0 The mother receives $0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

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

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?

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

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?

The gross premium is higher on a monthly payment mode as compared to being paid annually

J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?

Daughter With a common disaster provision, a policyowner can be sure that if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent 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?

This clause provides the payment of proceeds to the insured's estate The Common Disaster clause provides that in the event of simultaneous death, the beneficiary is presumed to die first and therefore the contingent beneficiary would be next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the insured's estate.

The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?

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

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?