7 - Life Policy Settlement Options, Beneficiaries, Premiums, and Additional Rights and Benefits

Question 1

Traditionally, policy proceeds are paid in a _________ to the policyowner, beneficiary or estate of the deceased insured.

Answer 1

-lump sum

Question 2

Other methods of payment to a beneficiary:

Answer 2

• Interest-Only Income
• Fixed Period Installment
• Fixed Amount Installments
• The Life Income Option

Question 3

___________ is when the insurer retains the death benefits until a later agreed upon time but pays an income based on the interest earned on the death benefits to the beneficiary until the agreed upon time.

Answer 3

-Interest-Only Income

Question 4

__________ is when the benefit is divided by a fixed pay-out period, such as 10 years.

Answer 4

-Fixed Period Installment

Question 5

__________ is when the benefit is divided by a fixed installment amount such as $2,000 per month.

Answer 5

-Fixed Amount Installments

Question 6

__________ provides the beneficiary with a payment of the proceeds through the use of an Annuity.

Answer 6

-The Life Income Option

Question 7

The election of a Settlement Option can be by the:

Answer 7

• Policy-owner

- Beneficiary

Question 8

__________ is a person or entity to which life insurance proceeds are paid upon the insured’s death.

Answer 8

-Beneficiary

Question 9

__________ refers to equal distribution of proceeds between all individuals in the named class.

Answer 9

-Per Capita

Question 10

___________ refers to equal distribution of proceeds between named groups which may not result in equal distribution of proceeds amongst individuals.

Answer 10

-Per Stirpes

Question 11

A(n) _________ designation allows the policyowner to change the beneficiary designations as he or she needs.

Answer 11

-Revocable Beneficiary

Question 12

A(n) _________ designation does not allow the policyowner to change the beneficiary.

Answer 12

-Irrevocable Beneficiary

Question 13

Insurers commonly use these 3 beneficiary designations to indicate the order in which beneficiaries receive policy proceeds:

Answer 13

• Primary
• Contingent
• Tertiary

Question 14

In the United States the _____________ states that if the insured and primary beneficiary dies so closely that it is impossible to determine who died first, the insured will be deemed to have outlived the primary beneficiary.

Answer 14

-Uniform Simultaneous Death Act

Question 15

The policyowner has the right to change beneficiaries provided that the beneficiaries’ status is revocable. To do this, the policyowner must provide notification to the insurer using one of the following methods:

Answer 15

• Filing Method (Recording)

- Endorsement Method

Question 16

Filing Method (Recording)

Answer 16

-The policyowner makes a written request on the insurer’s prescribed form. The beneficiary change becomes effective on the date that the form is signed.

Question 17

Endorsement Method

Answer 17

-Changes are made directly on the policy in the home office.

Question 18

The amount of premiums required for each life insurance policy is calculated using the…

Answer 18

• mortality charge
• expense (load)
• interest credits

Question 19

Load charges are associated with Universal Life and Annuities. Rear-end Loads are more advantageous to the consumer since ___________ is earning interest.

Answer 19

-more of the investment

Question 20

The death benefit or dismemberment in the AD&D typically requires that death or loss must occur within _______ of the accident in order for the benefit to be paid.

Answer 20

-90 days

Question 21

Principal Sum

Answer 21

-death

Question 22

Capital Sum

Answer 22

-dismemberment

Question 23

Riders are used to create _______ benefits.

Answer 23

-additional

Question 24

Riders generally ____ to the cost of life insurance policies.

Answer 24

-add

Question 25

Contestable periods for riders added _____ the original policy was issued are separate from the policy’s original contestable period.

Answer 25

-after

Question 26

Riders may be for a specified ______ or to a _______.

Answer 26

• number of years

- specific age

Question 27

J has a $100,000 life insurance policy with an accidental death benefit that pays triple the face amount. If J commits suicide three (3) years after purchasing the policy, how much will his beneficiary receive?

Answer 27

-$100,000

Question 28

J has a $250,000 life insurance policy that his son, l., is the beneficiary. J feels that his son may not handle such a large sum of money well because his son is only eighteen (18) years old. J wants his son to have an income for a period of time and after that period of time the $250,000 will be given to his son. Which of the following Settlement Options would fit this situation?

Answer 28

-Interest-income Only Option

Question 29

Which of the following beneficiaries can prevent the policyowner from changing any of the beneficiary designations?

Answer 29

-irrevocable

Question 30

If the insured and the primary beneficiary are killed in a common disaster and the medical examination CANNOT reveal who died first in the accident, what provision in the life insurance policy would provide for the funds of the policy to go to the named contingent beneficiary or the estate of the insured?

Answer 30

-Uniform Simultaneous Death Act

Question 31

K was the primary beneficiary of a $200,000 life insurance policy. K received payments of approximately $650 a month for 5 years. After the 5 year period K received a lump-sum payment of $200,000. What settlement option was elected?

Answer 31

-Interest-only Income Option

Question 32

An insured owns a $25,000 policy with a $5,000 cash value and a 6 percent loan interest rate. On January 1, the insured borrows $500 and pays one year’s interest in advance. During the year, the insured does not repay any part of the loan. If the insured dies on December 31, the beneficiary will be entitled to a MAXIMUM of:

Answer 32

-$24,500

Question 33

Which life insurance policy Settlement Option could provide the most benefit to the beneficiary from the insurance company?

Answer 33

-Life-income option

Question 34

The death benefit paid by the Accidental Death and Dismemberment (AD&D) Rider on a life insurance policy is referred to as which of the following?

Answer 34

-Principal Sum

Question 35

M wants to arrange the distribution of his life insurance proceeds so that his wife, as his beneficiary, will receive monthly payments for as long as she lives. Which of the following settlement options will meet this need?

Answer 35

-Life income option

Question 36

The “Per Stirpes” designation in the life insurance policy means which of the following relative to beneficiaries?

Answer 36

-by the branch

Question 37

The “Per Capita” designation in the life insurance policy means which of the following relative to beneficiaries?

Answer 37

-by the head

Question 38

if there is NOT a named beneficiary the proceeds of a life insurance policy will likely go to which of the following?

Answer 38

-the estate of the insured

Question 39

The policy owner can use the _______________ if he or she wants to name a group of beneficiaries.

Answer 39

-class designations

Question 40

The policy owner can use the _______________ if he or she wants to name a group of beneficiaries to share an equal distribution..

Answer 40

-per capita

Question 41

Which of the following will occur If a policyowner does not use his or her option to purchase an additional policy under a guaranteed insurability rider?

Answer 41

-the coverage will not change and the option is forfeited

Question 42

This life insurance policy rider will allow the insured to purchase additional sums of life insurance without proving health insurability:

Answer 42

-Guaranteed Insurability Rider

Question 43

With all factors being equal which settlement option on a $50,000 death benefit would pay the lowest regular income?

Answer 43

-Interest Only Income

Question 44

E has been totally disabled for two (2) years. During that time, the insurance company has paid all premiums (a total of $2,500) on her $25,000 life policy, which has a waiver of premium clause. If E dies now, the company will pay a death benefit to his beneficiary of

Answer 44

-$25,000

Question 45

Beneficiary changes made in the home office of the insurance company is known as:

Answer 45

-Endorsement Method