chapter 4 quiz- life insurance premiums proceeds and beneficiaries

Question 1

which of the following best describes a contingent beneficiary

Answer 1

person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

Question 2

P and Q are married and have three children. P is the primary beneficiary on Q’s Accidental death and dismemberment (AD&D) policy and Q’s sister R is the contigent beneficiary. P, Q and R are involved in a car accident and Q and R are killed instantly. the accidental

Answer 2

p only

Question 3

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

Answer 3

life income

Question 4

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?

Answer 4

proceeds will be payable to K’s estate if P dies within a specified time

Question 5

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?

Answer 5

proceeds will go to the contingent beneficiary

Question 6

a policyowner is able to choose the frequency of premium payments through what policy feature?

Answer 6

premium mode

Question 7

who has the right to change a revocable beneficiary

Answer 7

policyowner

Question 8

___________ of personal life insurance is usually deductible for federal income tax purposes.

Answer 8

0%

Question 9

on a life insurance policy, who is qualified to change the beneficiary designation?

Answer 9

insurer

Question 10

J chooses a monthly premium payment mode on his whole life insurance policy. which of these statements is correct?

Answer 10

the gross premium is higher on a monthly payment mode as compared to being paid annually.

Question 11

J chooses a monthly premium payment mode on his whole life insurance policy. which of these statements is correct?

Answer 11

the gross premium is higher on a monthly payment mode as compared to being paid annually.

Question 12

J chooses a monthly premium payment mode on his whole life insurance policy. which of these statements is correct?

Answer 12

the gross premium is higher on a monthly payment mode as compared to being paid annually.

Question 13

A _________ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary

Answer 13

revocable

Question 14

which of the following statments is CORRECT regarding the tax treatment of a lump sum payment paid to a life insurance policy primary beneficiary

Answer 14

all proceeds are income tax free in the year they are received

Question 15

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

Answer 15

annual

Question 16

T and S are named co-primary beneficiaries on a $500,000 AD&D policy insuring their father. their mother was name contingent beneficiary. five years later, S dies of natural causes and the father is killed in a scuba accident shortly after. How much of the death benefit will the mover receive?

Answer 16

$0

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

Question 17

What is the underlying concept regarding level premiums?

Answer 17

the early years are charged more than what is needed

Question 18

how would a contingent beneficiary receive the policy proceeds in an AD&D policy?

Answer 18

if the primary beneficiary dies before the insured

Question 19

when can a policyowner change a revocable beneficiary?

Answer 19

anytime

Question 20

T is covered by an AD&D policy that has an irrevocable beneficiary. what action witll the insurance company take if T requests a change of beneficiary?

Answer 20

request of the change will be refused

Question 21

which of these statements is INCORRECT regarding the federal income tax treatment of life insurance.

Answer 21

entire cash surrender value is taxable

Question 22

a policyowner is able to choose the frequency of premium payments through what policy feature?

Answer 22

premium mode

Question 23

which of the following best describes a contingent beneficiary

Answer 23

the person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.

Question 24

which of the following best describes a contingent beneficiary

Answer 24

the person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.

Question 25

quarterly premium payments increase the annual cost of insurance because

Answer 25

interest to the insurer is decreased while the administrative costs are increased

Question 26

a whole life insurance policyowner does not wish to continue making premium payments. which of the following enables the policyowner to sell the policy for more than its cash value?

Answer 26

life settlement contract