6 - Life Insurance Premiums, Proceeds and Beneficiaries

The highest mortality rate belongs to which group? Age 60 females Age 70 females Age 60 males Age 70 males

Age 70 males

Death benefits from a life insurance policy are normally considered to be exempt from fed. income tax subject to the cost recovery rule subject to attachments subject to the value-added tax

exempt from fed. income tax

What effect does interest income have upon insurance premiums? increases premium decreases premium levels the premium adjusts premium on a quarterly basis

decreases premium

Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted? fixed amount installment option fixed period installment option life income option interest only option

fixed amount installment option

Which statement best describes a single premium whole life policy? premiums that can only be paid from a single source a single premium that is due annually paid-up policy that offers lifetime protection paid-up policy that offers limited protection

paid-up policy that offers lifetime protection

Tim is covered by Accidental Death and Dismemberment (AD&D) policy that contains an irrevocable beneficiary. What action will the insurance company take if Tim requests a change of beneficiary? request will be accepted only if in writing by the insured change will be made only if premiums are paid current change will be made immediately request of the change will be refused

request of the change will be refused

Which life insurance policy provision prohibits a beneficiary from "commuting, encumbering, withdrawing, or assigning" any portion of the proceeds prior to tactual receipt from the company? insuring clause spendthrift clause nonforfeiture clause collateral provision

spendthrift clause

A policyowner fell behind on the premium payments of a whole life insurance policy and is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period adn the policy also contains an outstanding policy loan? full face amount face amount minus the past-due premium face amount minus the loan balance face amount minus the loan balance and past-due premium

face amount minus the loan balance and past-due premium

What would be a valid reason for naming a trust as a beneficiary of a life insurance policy as opposed to naming an individual? avoiding probate management of proceeds would be provided trustee can pay off any existing policy loans more settlement options available with a trustee

management of proceeds would be provided

How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision? 1 month 2 months 4 months 6 months

6 months

Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate for fed. income tax reasons for fed. and state income tax purposes only if the insured's estate is listed as beneficiary only if the policy is owned by the beneficiary

for fed. income tax reasons

Where will a life insurance policy's proceeds be directed to if all the beneficiaries die before the insured? insured's creditors beneficiary's estate insured's estate court-ordered beneficiary

insured's estate

How much is normally paid to a policyowner in a life (viatical) settlement? total premiums paid plus interest full face amount more than face amount less than death benefit

less than the death benefit

A life insurance policy's contingent beneficiary is the primary person who receives the death benefits if the insured dies person who receives the death benefits if the primary beneficiary dies before the insured person who receives the death benefits if there is no named beneficiary person whose approval is needed before a beneficiary designation is changed

person who receives the death benefits if the primary beneficiary dies before the insured

The beneficiary of a life insurance policy is normally selected by whom? policyowner contingent beneficiary estate insurance company

policyowner

Which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy? a portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy payment adjusted monthly a portion of the payments paid to the beneficiary comes from interest generated from policy loans payments are normally guaranteed for 10 years or more

a portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy

Which tax is normally associated with an individual's death? excise tax consumption tax fed. estate tax ad valorem tax

fed. estate tax

Which statement is FALSE about the interest-only settlement option in a life insurance policy? interest rate guaranteed with a minimum rate interest proceeds must be paid by the beneficiary interest is payable to a stated beneficiary interest must be paid at least annually

interest proceeds must be paid by the beneficiary

When a policy loan is requested by a policyowner and it requires the consent of the beneficiary, what kind of beneficiary designation is this? collateral beneficiary revocable beneficiary irrevocable beneficiary per stripes beneficiary

irrevocable beneficiary

Switching life insurance policies without tax consequence is permitted under MEC rules Section 1035 rules exclusion ratio replacement rules

Section 1035 rules

Which settlement option makes minimum guaranteed dollar payments over a stated number of years? interest-only fixed-period fixed-amount life income

fixed-period

During the early years of a whole life insurance policy, the cash value will normally be equal to total premiums paid more than the total premiums paid less than the total premiums paid unavailable as a policy loan

less than the total premiums paid

When there is a named beneficiary on a life insurance policy, the death benefits are directed to a trustee paid directly to insured's creditors paid directly to the beneficiary without interference from the insured's creditors paid directly to the beneficiary minus any debt claims by the insured's creditors

paid directly to the beneficiary without interference from the insured's creditors

Who is the beneficiary in a life insurance policy? person designated to have control over nonforfeiture options stated person or entity who is designated to receive the death proceeds person responsible for payment fo the policy premiums stated person whose life is insured in the insurance contract

stated person or entity who is designated to receive the death proceeds

Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true? the periodic payment amount is determined by the beneficiary's age the shorter the period of time the larger the installment the longer the period of time the smaller the installment the installment payments are composed of both principal and interest

the periodic payment amount is determined by the beneficiary's age

A policyowner with a terminal illness who sells life insurance policy to a 3rd party is called a viable viatical viator viatee

viator