Chapter Exam - Life Premiums and Benefits

Which of these statements is INCORRECT regarding the federal income tax treatment if life insurance?

Entire cash surrender value is taxable

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?

Insured's contingent beneficiary

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

Which statement is true regarding a minor beneficiary?

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

Who had the right to change a revocable beneficiary?

Policyowner

A(n) ______ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.

Revocable

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

A level premium indicates:

the premium is fixed for the entire duration of the contract

What is the underlying concept regarding level premiums?

The early years are charged more than what is needed

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

Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?

All proceeds are tax free in the year they are received

Which of the following 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

The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?

This clause provides the payment of proceeds to the insured's estate

When can a policyowner change a revocable beneficiary?

anytime

Quarterly premium payments increase the annual cost of insurance because

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