Chapter 5: Life Insurance Premiums, Proceeds, and Beneficiaries

How are death benefits that are received by a beneficiary normally treated for tax purposes?

Exempt from federal income taxes

A cost involved in determining premium rates is called the loading charge. This is also known as

Expense factor

Which of the following is NOT a life insurance settlement option?

Extended term option

Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose?

Interest Option

The probability of death, listed by year, are demonstrated in

mortality tables

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

$1,000

Which of the following is NOT a component of determining policy premiums?

Dividends

All of the following statements about beneficiary designations are correct EXCEPT

Minors cannot be named life insurance beneficiaries.

Which of the following statements is CORRECT?

A per stirpes distribution means that a beneficiary's share of a policy's proceeds will be passed down to the beneficiary's living child or children if the named beneficiary predeceases the insured.

All of the following are primary premium factors EXCEPT

Dividends

When an insurer pays proceeds, including interest and principal, in minimum guaranteed dollar payments over a specified number of years, it is referred to as the

Fixed-Period option

When calculating life insurance premium rates, which component would an agent's commission fall under?

Insurer's expenses

When calculating life insurance premium rates, which component is affected by an insured's age and gender?

Mortality

Which of the following describes the number of deaths in a year compared to the number of people in a select group?

Mortality rate

If an irrevocable beneficiary dies before the policyowner, who of the following gains control of a life insurance policy with a reversionary irrevocable clause?

Policyowner

Sonya wants to name her husband as the beneficiary of her life policy. She also would like to retain all of the rights of ownership. Sonya should have her husband named as

Revocable beneficiary

A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?

The insured's estate

Premiums are best described as

money paid by the insured to acquire a policy's benefits