Chapter 5: Life insurance premiums, proceeds and beneficiaries

Question 1

A policyowner is allowed to pay premiums more than once a year under which provision?

Answer 1

mode of premium

Question 2

Who has the right to change a revocable beneficiary

Answer 2

policyowner

Question 3

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 it’s cash value

Answer 3

life settlement contract

Question 4

____ of personal life insurance premiums is usually deductible for federal income tax purposes

Answer 4

0%

Question 5

a level premium indicates

Answer 5

the premium is fixed for the entire duration of the contract

Question 6

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 6

Proceeds will be paid to P’s estate
Proceeds will be divided equally between K’s and P’s estate
**Proceeds will be payable to K’s estate if P dies within a specified time

Question 7

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?

Answer 7

Premiums are normally not tax deductible
Cash dividends are normally not taxed
Entire cash surrender value is taxable
**Proceeds are received tax-free if there is a named beneficiary

Question 8

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

Answer 8

Life income

Question 9

Which statement is true regarding the change of beneficiary provision is true?

Answer 9

the policyowner can change the beneficiary

Question 10

When can a policyowner change a revocable beneficiary?

Answer 10

Anytime

Question 11

A(n) ________ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.

Answer 11

revocable

Question 12

Which of these is NOT an element of Life insurance premiums?

Answer 12

morbidity rate

Question 13

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

Answer 13

policyowner

Question 14

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

Answer 14

irrevocable

Question 15

T is the policyowner for a life insurance policy with an irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the

Answer 15

beneficiary

Question 16

quarterly premium payments increase the annual cost of insurance becasue

Answer 16

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

Question 17

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

Answer 17

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

Question 18

Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy’s primary beneficiary

Answer 18

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