Chapter 6: Life Premiums and Benefits

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

The highest mortality rate belongs to which group

Age 70 males

When there is named beneficiary on a life insurance policy, the death benefits

Are paid directly to the beneficiary without inference from the insured's creditors

Al surrenders his life insurance policy for its cash value. The total of premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the

Cost basis

What effect does interest income have upon insurance premiums?

Decreases premium

Death benefits from a life insurance policy are normally considered to be

Exempt from the federal income tax

A policy owner fell behind on the premium payments of a whole life policy and is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period and the policy also contains an outstanding policy loan?

Face amount minus the loan balance and past due premium.

Which tax cost is normally associated with death?

Federal estate tax

Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted?

Fixed amount

Which settlement option marked minimum guaranteed dollar payments over a stated number of years?

Fixed period

Which life insurance settlement option pays lifetime benefits to two or more people?

Joint and survivor

A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens to the remaining balance of the death proceeds?

Kept by the insurance company

How much is normally paid to a policyowner in a life viatical settlement?

Less than the death benefit

During the early years of whole life insurance policy, the cash value will normally be

Less than the total premiums paid

What would be a valid reason for naming a trust as the beneficiary of life insurance policy as opposed to naming an individual?

Management of proceeds would be provided

Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?

Net payment cost index

The beneficiary of a life insurance policy is normally selected by whom?

Policy owner

Who is the beneficiary in a life insurance policy?

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