Unit 8

16. 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?

(b) Interest-only

1. A mortality table reveals which of the following?

The average number of deaths that are expected each year in any age group.

A mortality table reveals which of the following?

The average number of deaths that are expected each year in any age group.

Which of the following statements pertaining to life insurance premiums is CORRECT?

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.

Which of the following statements pertaining to life insurance premiums is NOT correct? (a) Someone who is extremely overweight could pay a higher premium due to a higher mortality risk. (b) Participating policyholders pay a higher premium than non participating policyholders. (d) The most significant factor in premium rate calculation is mortality.

c) Premium rates usually are lower for men than women.

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% 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.

All of the following are primary premium factors EXCEPT (a) expense (b) interest (c) dividends (d) mortality Your answer: a Correct answer: c

dividends

4. Which of the following statements pertaining to life insurance premiums is CORRECT?

(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.

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 his gross estate for estate tax purposes?

$75,000

3. Assume the following persons 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

Sarah, age 65, the 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?

(b) $36,000

1. Life insurance premiums are typically based on what increment of the face value?

1,000

Which of the following factors is most important when computing basic premiums for life insurance?

Mortality

5. Which of the following factors is most important when computing basic premiums for life insurance?

(c) Mortality

3. All of the following are primary premium factors EXCEPT (a) expense (b) interest (c) dividends (d) mortality

(c) dividends

1. 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?

(d) Fixed-period

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?

(d) Fixed-period

2. 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?

(d) Premiums for policies in which the insured is someone other than the policyowner are tax deductible

Which of the following statements pertaining to life insurance premiums is CORRECT?

(d) Premiums for policies in which the insured is someone other than the policyowner are tax deductible.

1. 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 husbands' identical life insurance 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) Under the fixed-period option, the payment of excess interest will lengthen the payment period.

4. 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 husbands' identical life insurance 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) Under the fixed-period option, the payment of excess interest will lengthen the payment period.

Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. With regard to the situation above, how much of the $75,000 death benefit that was paid to Art's wife in a lump sum is taxable income to her?

0

Life insurance premiums are typically based on what increment of the face value?

1,000 ONE THOUSAND

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?

No income tax is payable on the death proceeds.