Life Insurance - Chapter 4: Premium, Proceeds and Beneficiaries
Which premium schedule results in the lowest cost to the policyowner?
Annual
A level premium indicates
the premium is fixed for the entire duration of the contract
A policyowner is able to choose the frequency of premium payments through what policy feature?
Premium Mode
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
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?
Insureds contingent beneficiary
A policyowner rights are limited under which beneficiary designation?
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?
Irrevocable
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life income
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
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
What is an underlying concept regarding level premiums?
The early years are charge more than what is needed
This is true regarding the change of beneficiary provision.
The policyowner can change the beneficiary.
T is the policyowner for a Life insurance policy with an irrevocable beneficiary. if T wished to change the beneficiary who must he obtain permission from?
Beneficiary
A whole life insurance policyowner does not wish to continue making premium payments. What enables the policyowner to sell the policy for more than its cash value?
Life settlement contract
Which 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.
Who has the right to change a revocable beneficiary?
Policyowner
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 -- cause T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.
When can a policyowner change a revocable beneficiary?
Anytime
What best describes a contingency beneficiary.
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
This is correct regarding the tax treatment of a lump sum payment paid to a life insurance policys 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.
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
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.
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while administrative costs are increased -- the higher the frequency of payments, the higher the premiums
Elements of life insurance premiums include
mortality rate -- insurers expenses -- interest credit