Premium, Proceeds & Beneficiaries

Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary? The proceeds which exceed the amount paid in premiums are taxable The proceeds are taxable only if the beneficiary's tax bracket has changed from the payout All proceeds are considered taxable income in the year they are received All proceeds are income tax free in the year they are received

All proceeds are income tax free in the year they are received

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? Premiums are normally not tax deductible Cash dividends are normally not taxed Entire cash surrender value is taxable Proceeds are received tax-free if there is a named beneficiary

Entire cash surrender value is taxable

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? Primary beneficiary's estate Primary beneficiary's next of kin Insured's estate Insured's contingent beneficiary

Insured's Contingent Beneficiary

Quarterly premium payments increase the annual cost of insurance because insurer risk exposure is greater interest to the insurer is increased while administrative costs are decreased mortality costs are greater interest to the insurer is decreased while the administrative costs are increased

Interest to the insurer is decreased while the administrative costs are increased

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? Interest Only Fixed Period Fixed Amount Life Income

Life Income

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? Cash surrender Life settlement contract Buy-sell arrangement 1031 Exchange

Life Settlement Contract

Which of these is NOT an element of Life insurance premiums? Mortality rate Insurer's expenses Interest credit Morbidity rate

Morbidity Rate

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? Proceeds will be paid to P's estate Proceeds will be divided ecually between k's and P's estate Proceeds will be payable to K's estate if P dies within a specified time The courts will decide who will receive death benefits

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

What is the underlying concept regarding level premiums? Level premiums build cash value quicker in the early years The early years are charged more than what is needed The early years are charged less than what is needed Level premiums can only be paid annually

The early years are charged more than what is needed

A level premium indicates: the premium is fixed for a period stated in the contract, then becomes variable the premium can only be changed with the consent of the insurer the premium stays level until the policy's renewal date the premium is fixed for the entire duration of the contract

The premium is fixed for the entire duration of the contract

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? This clause provides the payment of proceeds to the insured's estate This clause provides the payment of proceeds to the beneficiary's estate The estate taxes in the insured's estate may be reduced The estate taxes in the beneficiarv's estate mav be reduced

This clause provides the payment of the proceeds to the insured's estate