Chapter Exam - Life premiums and benefits

Which premium schedule results in the lowest cost to the policyowner?

Annual (If the policy owner chooses to pay the premium more than once per year (example monthly, quarterly, semi-annually) there normally will be an additional charge because the company will have additional charges in billing and collecting the premium payments.)

When can a policy owner change a revocable beneficiary?

Anytime (With a revocable beneficiary designation, the policy owner may change the beneficiary at anytime without notifying or getting permission from the beneficiary)

J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?

The gross premium is higher on a monthly payment mode as compared to being paid annually. (A premium payment mode that is more frequent than an annual payment will result in a higher gross premium.)

What is the underlying concept regarding level premiums?

the early years are charged more than what is needed (The concept of level premiums charges more than needed in early years)

A policy owner would like to change the beneficiary on a life insurance policy and make the change permanent. Which type of designation would fulfill this need?

"irrevocable". An irrevocable designation may not be changed without the written consent of the beneficiary.

Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policy owner?

Irrevocable beneficiary (An irrevocable designation may not be changed without the written consent of the beneficiary)

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life income (The life income settlement option pays a specified amount to the annuitant with no residual value payable to a beneficiary.)

K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?

Proceeds will be payable to K's estate if P dies within a specified time. (Under the common disaster provision, proceeds will be payable to K's estate if P dies within a specified time)

A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

Proceeds will go to the contingent beneficiary (If the primary beneficiary dies before the insured, the contingent beneficiary will receive the proceed when the insured dies.)

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

$0 The mother receives $0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary.

K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

Daughter (With a common disaster provision, a policy owner can be sure that if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary.)

If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?

Insured's contingent beneficiary (Under the Uniform Simultaneous Death Act, if both insured and primary beneficiary are killed in the same accident and there is insufficient evidence to show who died first, policy proceeds will be paid as if the insured died last. In other words, the proceeds will be paid to the secondary or contingent beneficiary.)

Which statement is true regarding a minor beneficiary?

Normally, a guardian is required to be appointed in beneficiary clause of the contract. (In most cases, insurers require that a guardian be appointed in the beneficiary clause of the policy or that a guardian be designated in the will.)

A policy owner is able to choose the frequency of premium payments through what policy feature?

Premium Mode (is the feature that allows the policy owner to select the timing of premium payment, such as monthly, quarterly, annually etc.)

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable (With a revocable beneficiary designation, the policy owner may change the beneficiary at any time without notifying or getting permission from the beneficiary.)