Chapter 4 Life Insurance premiums, Proceeds and Beneficiaries Exam

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

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

Mode of Premium

Which statement is true regarding a minor beneficiary?

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

A level premium indicates

the premium is fixed for the entire duration of the contract

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 beneficiary occurs.

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?

Irrevocable

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?

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

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

Annual If the policyowner chooses to pay the premium more than once per year (example monthly, quarterly, semi-annually) there normally will be an additional charge because the company will have additional charges in billing and collecting the premium payments.

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? 1.Premiums are normally not tax deductible 2.Cash dividends are normally not taxed 3.Entire cash surrender value is taxable 4.Proceeds are received tax-free if there is a named beneficiary

Entire cash surrender value is taxable

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

On a life insurance policy, who is qualified to change the beneficiary designation?

Policyowner

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

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

Which statement regarding the Change of Beneficiary provision is true?

The policyowner can change the beneficiary However, consent may be needed by the current beneficiary if designated as irrevocable.

Quarterly premium payments increase the annual cost of insurance because

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