Chapter 5
A spendthrift clause in a life insurance policy
A spendthrift clause prevents a beneficiary from recklessly spending benefits.
Which of the following is NOT a life insurance settlement option?
All of these are life insurance settlement options EXCEPT "extended term option".
Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose?
In this situation, the beneficiary should select the interest option.
What would be an expense factor in an insurance program?
Mortality costs are considered an expense factor in an insurance program.
When calculating life insurance premium rates, which component is affected by an insured's age and gender?
Mortality is the component of a life insurance premium that age and gender affects.
Premiums are best described as
Premiums can be best defined as the amount an insured pays per unit of coverage.
Which of the following is NOT an insurer policy expense?
Premiums. They have operating expenses which need to be factored into the premiums. This includes expenses such as salaries, agent compensation, rent, legal fees, postage etc.
When calculating life insurance premium rates, which component would an agent's commission fall under?
The agent's commission is considered part of the insurer's expenses and is a component of the premium.
Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?
The clause in a life insurance policy protecting its proceeds from the beneficiary's creditors is referred to as the spendthrift trust clause.
Which of these is affected by the frequency of an insurance policy's premium payments?
The frequency of insurance premium payments affects the policy's cost.
A beneficiary receives only the death benefit earnings in which settlement option?
The interest-only settlement option allows only the death benefit earnings to be paid to the beneficiary.
Which of the following describes the number of deaths in a year compared to the number of people in a select group?
The number of deaths during a year compared with the total number of persons exposed in the class is known as the mortality rate.
What is the price of insurance for each exposure unit?
The price of insurance for each exposure unit is called the rate.
A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?
Creditors have rights to life insurance policy proceeds when the beneficiary is the insured's estate.
How are death benefits that are received by a beneficiary normally treated for tax purposes?
Death benefits that are received by a beneficiary are generally exempt from federal income tax.
