Chap 4 Life Premiums & Benefits

A policyowner's rights are limited under which beneficiary designation?

Irrevocable. An irrevocable beneficiary designation requires the consent and signature of that named beneficiary before a change of the beneficiary occurs.

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?

Irrevocable beneficiary. An irrevocable designation may not be changed without the written consent of the beneficiary.

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. A contingent beneficiary is named by the insured to receive the policy proceeds if the primary beneficiary dies before the insured.

Quarterly premium payments increase the annual cost of insurance because

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

A policyowner is able to choose the frequency of premium payments through what policy feature?

Premium Mode. Premium Mode is the feature that allows the policyowner to select the timing of premium payment, such as monthly, quarterly, annually etc.

What percent of personal life insurance premiums is usually deductible for federal income tax purposes?

0%. In general personal life insurance premiums are NOT deductible for federal income tax purposes.

Which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in the Beneficiary clause of the contract. In most cases, insurers require that a guardian be appointed in the Beneficiary clause of the policy of that a guardian be designated in the will.

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

Mode of Premium. The Mode of Premium provision permits an insured to pay premiums more than once every year.

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?

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.

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.

Request of the change will be refused. An irrevocable designation may not be changed without the written consent of the 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. In this situation, the cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.

A level premium indicates:

The premium is fixed for the entire duration of the contract. A level premium means that the premium remains fixed through the life of a policy.

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. 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 the next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the insured's estate.

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. Under the Common Disaster provision, proceeds will be payable to K's estate if P dies within a specified time.

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

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