Xcel ch 5

Tanya has replaced her whole life policy within annuity without incurring a tax penalty. this transaction is called a

1035 Exchange

all of these are settlement options for life insurance policies EXCEPT

extended term CORRECT: life income, lump sum, and fixed period the extended term option is a nonforfeiture option, not a settlement option.

a tax-free section 1035 exchange of a life insurance policy to a different policy is permitted if it occurs

from insurer to insurer and no cash is received by the policyowner

which of these is considered a major tax advantage of Life Insurance?

income tax is typically not owed on proceeds paid directly to a beneficiary

how is the cost of a policy affected when a policyowner based premiums more frequently

increases

what happens to the total amount of Premium paid for an insurance policy when the payment frequency increases?

increases

which type of beneficiary should be named if the insured wants to give explicit directions and how the policy proceeds should be paid

individual

which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?

interest only

the policyowner is prohibited from making any changes to the policy without the beneficiaries written consent under which beneficiary designation?

irrevocable beneficiary

which of these ensures that proceeds of a life insurance policy will be free from attachment or seizure by the beneficiary's creditors?

spendthrift clause

proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?

spendthrift trust clause

if the beneficiary dies from the same accident as the insured individual, the insurer will proceed as if

the insured outlive the beneficiary

an example of naming a beneficiary by class would be

to the children born of my union with Ned Jackson

a policy owner can receive a percentage payment of the death benefits prior to death by using what kind of contract?

viatical settlement agreement

policyowner can receive an immediate payment before the insured dies by using a

viatical settlement contract a viatical settlement contract is a transaction that involves an immediate payment to the policyowner prior to the death of the insured.

how does life insurance create an immediate estate?

after first premiums paid, the face amount may be available to the beneficiary

which of these factors help determine an insured's life insurance premium?

avocation (hobby)

Pat is insured with a life insurance policy and Karen is his primary beneficiary. They are both involved in an automobile accident where Pat dies instantly and Karen dies 5 days later. Which policy provision will protect the rights of the contingent beneficiary to receive the policy benefits?

common disaster clause

where would policy proceeds be paid if both the insured and primary beneficiary were killed in the same accident?

contingent beneficiary

which of these is affected by the frequency of an insurance policies premium payments?

cost

what is created after policy proceeds are obtained and how lump sum and then immediately invested?

estate

purchasing a life insurance policy in order to avoid the forced sale of assets upon death is called

estate conservation

level premium term life insurance policies

have premiums that are averaged over the policy period

the premium payment mode that results in the highest overall cost would be

monthly

what would be an expense factor and insurance program?

mortality costs

a life insurance claim which involves a per capita distribution of policy proceeds would be payable to the

named living primary beneficiaries per capita is Method Of Life Insurance distribution using total number of individuals.

a beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed?

no federal income taxes owed on life insurance proceeds

a beneficiary change can occur

normally at any time during the policy term

what is the primary feature of a viatical settlement?

reduced death benefit prepayment

what does a life insurance policy guarantee to the stated beneficiary upon the death of the insured?

specified amount of money