Chapter 7-9 Quizzes
All of the following statements about beneficiary designations are correct EXCEPT a.) when a charity is named beneficiary, the policy owner's heirs cannot contest the gift b.) minors cannot be named life insurance beneficiaries c.) a business may be designated as a beneficiary d.) when a trust is named beneficiary, a trustee will manage the insurance proceeds
b.)
Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. How much of the death benefit will be included in the gross estate for tax purpose? a.) $0 b.) $26,000 c.) $49,000 d.) $75,000
d.)
Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. How much of the $75,000 death benefit that was paid to Art's wife in a lump sum is taxable income to her? a.) $0 b.) $26,000 c.) $49,000 d.) $75,000
a.)
Assume the following person's buy identical life insurance policies from the same company. Generally speaking, who will pay the lowest premium, if all have standard ratings? a.) Linda, age 28 b.) Thomas, age 28 c.) Louise, age 40 d.) Joe, age 45
a.)
If an applicant is missing answers to certain questions and the policy is issued, the company can take which course of action? a.) the company may rescind the policy b.) the company may demand the applicant answer the questions and there would be no coverage during this period c.) the company can take no action, as it was the agent's responsibility to complete the application d.) the company can contest the validity of the policy
a.)
An applicant, in good health, completed the application without the premium. Upon delivery of the policy the agent noticed the applicant's health had changed. The agent is to do which of the following? a.) return the policy to the insurance company b.) deliver the policy, obtain a check, and a signed statement of the insured's good health c.) collect the additional premium d.) start the underwriting process over again
a.)
Under which option does the insurer hold the death proceeds for a specified period of time and, at regular intervals, pay the beneficiary interest on the proceeds? a.) fixed-period b.) interest-only c.) fixed-amount d.) life-income
b.)
All of the following statements about facility of payment provisions are correct EXCEPT a.) they are often found in group life policies b.) they permit an insurer to pay all or part of the proceeds to a party who is not named in the contract c.) they are typically found in industrial policies d.) they permit insurance proceeds to be paid to someone not named in the policy when the named beneficiary is a minor
a.)
All of the following statements about the classification of applicants are correct EXCEPT a.) a substandard applicant can never be rejected outright by the insurer b.) applicants who are preferred risks have premium rates that are generally lower than standard rate risks c.) an individual can be rated as a substandard risk because of a dangerous occupation d.) a standard applicant fits the insurer's guidelines for policy issue without special restrictions
a.)
The method used today to change beneficiaries is known as the a.) recording method b.) beneficiary alteration method c.) assignment method d.) change of designation method
a.)
Which of the following statements pertaining to a life insurance policy application is CORRECT? a.) the names of both the insured and the beneficiary are indicated on the application b.) if an applicant's age is shown erroneously on a life insurance application as 28 instead of 29, the result may be a premium quote that is higher than it should be c.) the size of the policy being applied for does not affect the underwriting process d.) the agent's report in the application must be signed by the agent and the applicant
a.)
Which of the following statements regarding the Fair Credit Reporting Act (FCRA) is CORRECT? a.) applicants must be notified within a short period of time that their credit report has been requested b.) if an applicant for insurance is rejected based on a consumer report, the name of the reporting agency must be kept confidential c.) if requested to do so, the insurance company must provide the actual consumer report to the applicant d.) consumer reports are final in nature and cannot be disputed by an applicant
a.)
All of the following statements about accelerated death benefits and viatical settlements are correct EXCEPT a.) a terminally ill person receives accelerated death benefits tax-free b.) an insured who sells an insurance policy to a viatical company usually receives 100 percent of the policy's face value c.) the maximum amount of accelerated benefits that a chronically ill person can exclude from income is limited d.) accelerated benefit provisions are standard in most individual and group life insurance policies
b.)
Elaine signs an application for a $50,000 non medical life policy, pays the first premium and receives a conditional insurability receipt. If Elaine were killed in an auto accident two two days later a.) the company would reject the application on the basis that death was accidental b.) her beneficiary would receive $50,000, if Elaine qualified for the policy as applied for c.) the premium would be returned to Elaine's family because the policy had not been issued d.) the company could reject the death claim because the underwriting process was never completed
b.)
Generally, the party who delivers the insurance policy to the new policy owner is the a.) insurance company's home office b.) sales agent c.) state chief financial officer d.) underwriter
b.)
If a medical report is required on an applicant, it is completed by a.) a home office underwriter b.) a paramedic or examining physician c.) the agent d.) the home office medical director
b.)
Kevin, the insured under a $200,000 life insurance policy, and his sole beneficiary, Lynda, are killed instantly in a car accident. Under the Uniform Simultaneous Death Act, to whose estate will the policy procees be paid? a.) Lynda's estate b.) Kevin's estate c.) both Kevin's and Lynda's estate, equally d.) the proceeds will escheat to the state
b.)
Sarah, age 65, owner of a $150,000 whole life policy, decides to surrender the policy and take the $90,000 cash value in a lump sum. Over the years she has paid a total of $54,000 in premiums. How much, if any, of the payment will be taxed? a.) $0 b.) $36,000 c.) $54,000 d.) $90,000
b.)
The beneficiary of Walter's life insurance reads, "Children of the Insured." Which of the following phrases best describes this type of beneficiary designation? a.) juvenile beneficiaries b.) class beneficiaries c.) generational beneficiaries d.) attractive nuisance beneficiaries
b.)
The primary distinction between the insurability and approval types of conditional receipts is when the a.) applicant pays the initial premium b.) coverage goes into effect c.) medical exam is given d.) applicant proves insurable
b.)
Which of the following statements about the Fair Credit Reporting Act is CORRECT? a.) it prohibits insurance companies from obtaining reports on applicants from outside investigative agencies b.) it provides that consumers have the right to question reports made about them by investigating agencies c.) it applied to reports about applicants that are made by insurance agents to their companies d.) it prohibits insurance companies from rejecting an application based on a credit report
b.)
Which of the following statements pertaining to the life insurance premiums is CORRECT a.) premium rates usually are lower for men than women b.) Harold and Billy, both age 25, each buy a whole life policy from the same company. However, Harold has a participating policy, while Billy's policy is nonparticipating. Harold will pay a higher premium c.) the most significant factor in premium rate calculation is interest d.) Lucy, who is substantially overweight, has applied for a life insurance policy. Her weight may affect her insurability, but not the amount of premium on her policy
b.)
A clause that states that policy distributions payable to the beneficiary after the insured dies are not assignable or transferable and may not be attached in any way is called a a.) facility-of-payment clause b.) debtors protection clause c.) spendthrift trust clause d.) assignment claues
c.)
A mortality table reveals which of the following? a.) there is no death rate for persons age 99 b.) the people who will die in any given year c.) the average number of deaths that will occur each year in an age group d.) the death rate normally is higher in the lower age groups
c.)
All of the following are primary premium factors EXCEPT a.) expense b.) interest c.) dividends d.) mortality
c.)
All of the following statements about the taxation of insurance proceeds are correct EXCEPT a.) accumulated policy dividends are exempt from income tax b.) a beneficiary will not be taxed on insurance proceeds paid as a lump sum death benefit c.) a policy owner who receives cash value for a surrendered policy must pay capital gains tax on any gain d.) generally, no gain or loss is recognized when one insurance policy is exchanged for another
c.)
Bill names his church as the beneficiary of his $300,000 life insurance policy. When Bill dies, who is responsible for the income taxes payable on the lump-sum proceeds received by the church? a.) his estate b.) his church c.) no income tax is payable on the death benefit d.) his estate and the beneficiary share the tax equally
c.)
If an irrevocable beneficiary dies before the policy owner, who of the following gains control of a life insurance policy with a reversionary irrevocable clause? a.) insured b.) irrevocable beneficiary's children c.) policy owner d.) insurer
c.)
Life insurance premiums are typically based on what increment of the face value? a.) $0 b.) $100 c.) $1,000 d.) $10,000
c.)
Mary names her husband, Rick, as primary beneficiary of her life insurance policy and her two children, Pam and Matt, as contingent beneficiaries. Rick dies in March. Pam and Matt are killed simultaneously in a car accident later that month. Hearing the news, Mary has a fatal heart attack. In this case, Mary's life insurance will be paid a.) one-half to Rick's estate and on-quarter each to Pam and Matt's estates b.) to Rick's estate c.) to Mary's estate d.) in equal shares to Rick, Pam and Matt's estate
c.)
Mr. Williams names his son John a beneficiary of his life insurance policy. What designation should he use if he wants to make sure that John's children would receive John's share of the life insurance policy proceeds should John predecease his father? a.) per capita b.) all my children c.) per stirpes d.) grandchildren
c.)
When a policy owner cannot exercise his rights of ownership without the policy beneficiary's consent, the beneficiary is designated a.) vested b.) contractual c.) irrevocable d.) primary
c.)
Which of the following factors is most important when computing basic premiums for life insurance? a.) expense b.) interest c.) mortality d.) reserves
c.)
Which of the following statements are CORRECT? a.) a per capita distribution is the most common method of distributing proceeds to beneficiaries b.) if the policy owner designates a per stirpes distribution of the proceeds, the designation becomes irrevocable once a beneficiary predeceases the policy owner c.) a per stirpes distribution means that a beneficiary's share of a policy's proceeds will be passed down to his or her living child or children if the named beneficiary predeceases the insured d.) a per capita distribution ensures that an insured's surviving family will share in the insurance proceeds
c.)
Which of the following statements pertaining to life insurance premiums is CORRECT a.) the premiums for a policy that insures a spouse are tax deductible b.) a company may purchase key-person life insurance and deduct the premiums as a business expense c.) premiums for group term insurance covering employees are tax deductible, assuming certain requirements are met d.) premiums for policies in which the insured is someone other than the policy owner are tax deductible
c.)
Which of the following statements pertaining to the Medical Information Bureau (MIB) is CORRECT? a.) the MIB is operated by a national network of hospitals b.) information obtained by the MIB is available to all physicians c.) the MIB provides assistance in the underwriting of life insurance d.) applicants may request that MIB reports be attached to their policies
c.)
All of the following statements concerning a common disaster provision are correct EXCEPT a.) the provision activates when the insured and primary beneficiary die as a result of the same accident b.) the provision stipulates that is the insured and primary beneficiary die in the same accident, it is presumed that the insured died last c.) the provision gives a policy owner assurance that proceeds will be distributed according to his or her wishes d.) the provision stipulates that if the primary beneficiary outlives the insured by more than 48 hours, then the proceeds will be paid to the primary beneficiary's estate
d.)
Beth, age 50, the beneficiary of her late husband's life insurance policy, has elected to receive the proceeds in monthly installments over the next five years. Due to the insurer's interest earnings, Beth notices that the amount of the payments is often more than what she was guaranteed. What kind of settlement option did Beth select? a.) life-income b.) fixed-amount c.) cash-value d.) fixed-period
d.)
Christine's policy has a clause that reads as follows, "Should the primary beneficiary and the insured die in the same accident and the primary beneficiary fails to survive the insured by 14 days, it will be assumed that the beneficiary predeceased the insured." Which of the following phrases best describes this clause? a.) secondary beneficiary provision b.) facility-of-payment provision c.) uniform simultaneous death act d.) common disaster provision
d.)
If the insurance company requests an inspection report, which of the following would require notice to be given to the applicant? a.) The Freedom of Information Act b.) The Office of Insurance Regulation Information Act c.) The Health Insurance Portability & Accountability Act d.) The Fair Credit Reporting Act
d.)
Sandra has a life insurance policy that states that her husband, Gerald, is to receive the full death benefit. if he predeceases her, their three children are to share the benefit equally. If her husband and all three children predecease her, the benefit is payable to the First Community Church. All of the following are correct EXCEPT a.) Gerald is the primary beneficiary b.) the three children are all secondary beneficiaries c.) the First Community Church is the tertiary beneficiary d.) the designation of the First Community Church can be contested by any of Sandra's relatives who survive the children
d.)
Underwriting is a process of a.) selection and issue of policies b.) evaluation and classification of risks c.) selection, reporting, and rejection of risks d.) selection, classification and rating of risks
d.)
What is the beneficiary designation that can only be changed with the beneficiary's written agreement? a.) revocable beneficiary b.) wife of the insured c.) per stirpes d.) irrevocable beneficiary
d.)
Which of the following statements pertaining to life insurance policy settlement options is NOT correct? a.) by using the interest-only option, two or more settlement options can be combined for added flexibility b.) payments under the interest-only option may be made at a rate higher than the guaranteed minimum c.) Diane and Rhonda each are receiving monthly income from their deceased husband's identical life policies under the fixed-period option. Diane's payments are to be made for 15 years and Rhonda's for 20 years. Diane receives the larger monthly payments d.) under the fixed-period option, the payment of excess interest will lengthen the payment period
d.)
With an irrevocable beneficiary named, a policy owner may do which of the following without the beneficiary's permission? a.) take a loan b.) increase the amount c.) reduce the amount d.) change the premium mode
d.)