Insurance Chapter 4 Exam

Quarterly premium payments increase the annual cost of insurance because?

Interest to the insurer is decreased while the admin costs are increased.

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 policyowner's rights are limited under which beneficiary designation?

Irrevocable

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life Income

A level premium indicates

the premium is fixed for the entire duration of the contract

On a life insurance policy, who is qualified to change the beneficiary designation?

Policyowner

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable

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

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?

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

What is the underlying concept regarding level premiums?

The early years are charged more than what is needed.

Which premium schedule results in the lowest cost to the policyowner?

Annual

P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:

P only

A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

Proceeds will go to the contingent beneficiary

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

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

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

What percent of personal life insurance premiums is usually deductible for federal income tax purposes?

0%

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 income tax free in the year they are received?

When can a policyowner change a revocable beneficiary?

Anytime

K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

Daughter

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

Entire Cash Surrender Value is Taxable

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

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

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?

Irrevocable 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

A policyowner is allowed to pay premiums more than once a year under which provision?

Mode of Premium

Which statement is true regarding a minor beneficiary? Normally, death proceeds are required to be held in trust until the beneficiary reaches the age of 21. Normally, a guardian is required to be appointed in the Beneficiary clause of the contract. The minor must pay the debts of the insurer's estate before receiving any of the proceeds. The minor is entitled to receive the death proceeds immediately.

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

A policy is able to choose the frequency of premium payments through what policy feature?

Premium Mode

K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? Proceeds will be paid to P's estate. Proceeds will be divided equally between K's and P's estate. Proceeds will be payable to K's estate if P dies within a specific time. The courts will decide who will receive death benefits.

Proceeds will be payable to K's estate if P dies within a specified time

Which statement regarding the Change of Beneficiary provision is true? The beneficiary can only can be changed with the consent of the insurer. The policyowner can change the beneficiary. The insured can change the beneficiary. A beneficiary change is subject to underwriting procedures.

The policyowner can change the beneficiary

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. Person designated by the primary beneficiary's executor to receive policy proceeds. Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies. Person designated by the insurance company to receive policy proceeds in the event that the primary beneficiary dies.

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.

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