Ch 4- Life Insurance Premiums, Proceeds, and Beneficiaries

A level premium indicates:

the premium is fixed for the entire duration of the contract

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?

Revocable

Which statement regarding the Change of Beneficiary provision is true?

The policy owner can change the beneficiary

T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain obtain permission from the

beneficiary

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

Entire cash surrender value is taxable

Quarterly premium payments increase the annual cost of insurance because

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

Who has the right to change a revocable beneficiary?

Policy owner

A primary beneficiary has died before the insured in an life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

Proceeds will go to the contingent beneficiary

C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?

The cost

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

Mode of Premium

Which premium schedule results in the lowest cost to the policyowner?

annual

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.

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?

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

How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?

If the primary beneficiary dies before the insured

Which of these is NOT an element of Life insurance premiums?

Morbidity rate

P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to

P only

which of the following best describes a contingent beneficiary?

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

(blank) of personal life insurance premiums is usually deductible for federal income tax purposes.

0%

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

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

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

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?

Life settlement contract

Which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in the Beneficiary clause of the contract.

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