7 - Life Policy Settlement Options, Beneficiaries, Premiums, and Additional Rights and Benefits Flashcards
Traditionally, policy proceeds are paid in a _________ to the policyowner, beneficiary or estate of the deceased insured.
-lump sum
Other methods of payment to a beneficiary:
- Interest-Only Income
- Fixed Period Installment
- Fixed Amount Installments
- The Life Income Option
___________ 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.
-Interest-Only Income
__________ is when the benefit is divided by a fixed pay-out period, such as 10 years.
-Fixed Period Installment
__________ is when the benefit is divided by a fixed installment amount such as $2,000 per month.
-Fixed Amount Installments
__________ provides the beneficiary with a payment of the proceeds through the use of an Annuity.
-The Life Income Option
The election of a Settlement Option can be by the:
- Policy-owner
- Beneficiary
__________ is a person or entity to which life insurance proceeds are paid upon the insured’s death.
-Beneficiary
__________ refers to equal distribution of proceeds between all individuals in the named class.
-Per Capita
___________ refers to equal distribution of proceeds between named groups which may not result in equal distribution of proceeds amongst individuals.
-Per Stirpes
A(n) _________ designation allows the policyowner to change the beneficiary designations as he or she needs.
-Revocable Beneficiary
A(n) _________ designation does not allow the policyowner to change the beneficiary.
-Irrevocable Beneficiary
Insurers commonly use these 3 beneficiary designations to indicate the order in which beneficiaries receive policy proceeds:
- Primary
- Contingent
- Tertiary
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.
-Uniform Simultaneous Death Act
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:
- Filing Method (Recording)
- Endorsement Method
Filing Method (Recording)
-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.
Endorsement Method
-Changes are made directly on the policy in the home office.
The amount of premiums required for each life insurance policy is calculated using the…
- mortality charge
- expense (load)
- interest credits
Load charges are associated with Universal Life and Annuities. Rear-end Loads are more advantageous to the consumer since ___________ is earning interest.
-more of the investment
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.
-90 days
Principal Sum
-death
Capital Sum
-dismemberment
Riders are used to create _______ benefits.
-additional
Riders generally ____ to the cost of life insurance policies.
-add
Contestable periods for riders added _____ the original policy was issued are separate from the policy’s original contestable period.
-after
Riders may be for a specified ______ or to a _______.
- number of years
- specific age
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?
-$100,000
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?
-Interest-income Only Option
Which of the following beneficiaries can prevent the policyowner from changing any of the beneficiary designations?
-irrevocable
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?
-Uniform Simultaneous Death Act
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?
-Interest-only Income Option
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:
-$24,500
Which life insurance policy Settlement Option could provide the most benefit to the beneficiary from the insurance company?
-Life-income option
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?
-Principal Sum
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?
-Life income option
The “Per Stirpes” designation in the life insurance policy means which of the following relative to beneficiaries?
-by the branch
The “Per Capita” designation in the life insurance policy means which of the following relative to beneficiaries?
-by the head
if there is NOT a named beneficiary the proceeds of a life insurance policy will likely go to which of the following?
-the estate of the insured
The policy owner can use the _______________ if he or she wants to name a group of beneficiaries.
-class designations
The policy owner can use the _______________ if he or she wants to name a group of beneficiaries to share an equal distribution..
-per capita
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?
-the coverage will not change and the option is forfeited
This life insurance policy rider will allow the insured to purchase additional sums of life insurance without proving health insurability:
-Guaranteed Insurability Rider
With all factors being equal which settlement option on a $50,000 death benefit would pay the lowest regular income?
-Interest Only Income
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
-$25,000
Beneficiary changes made in the home office of the insurance company is known as:
-Endorsement Method
