CHAPTER 5 LIFE INSURANCE

interest only (The settlement option that allows proceeds to remain with the insurer and earnings to be paid to the beneficiary on a monthly basis is called interest only.)

Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?

Irrevocable beneficiary (An irrevocable beneficiary designation prohibits the policyowner from making any changes to the policy without the beneficiary's written consent.)

A policyowner is prohibited from making any changes to the policy without the beneficiary's written consent under which beneficiary designation?

Specified amount of money (Life insurance guarantees to the beneficiary a specified sum of money in the event of the insured's death.)

What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured?

Income tax is typically not owed on proceeds paid directly to a beneficiary ( One of the major tax advantages of life insurance is that the beneficiary generally does not pay income tax on the proceeds.)

Which of these is considered a major tax advantage of life insurance?

After first premium is paid, the face amount may be available to the beneficiary (. An immediate estate can be created because the face amount may be available to the beneficiary after the first premium is paid.)

How does life insurance create an immediate estate?

spendthrift trust clause (The clause in a life insurance policy protecting its proceeds from the beneficiary's creditors is referred to as the spendthrift trust clause.)

Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?

avocation (hobby) (Life insurance premiums are determined by several factors pertaining to the insured, such as age, occupation, and avocation (hobby)

Which of these factors help determine an insured's life insurance premium?

Increases (The cost of a policy increases when an insured pays premiums more frequently.)

How is the cost of a policy affected when a policyowner pays premiums more frequently?

Spendthrift Clause A Spendthrift Clause is a statement in a settlement agreement that indicates that the proceeds of the policy will be free from attachment or seizure by the beneficiary's creditors.

Which of these ensures that proceeds of a life insurance policy will be free from attachment or seizure by the beneficiary's creditors?

Individual ( An individual beneficiary designation would be most appropriate in this situation.)

Which type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?