Chapter 6 Flashcards
Which settlement option indicated the beneficiary is most concerned with receiving income for a specific period of time?
Fixed period
What is the name of the individual who sells her policy to a VSP?
A viator
T/F: Double or triple indemnity may be used to describe the AD&D death benefit.
T
T/F: Interest earned on dividend left with the insurer to accumulate is not taxable.
F
Accelerated benefits often require the insured to be _____________, with a life expectancy of ___ to ____ months
Terminally Ill; 12; 24
Policies sold to a VSP are said to have gone through_______________.
Viatication
T/F: A portion of the benefit provided by either fixed amount or fixed period will be taxable interest.
T
Once the VSP buys a contract, it is responsible for future ____________.
Premium payments
Who negotiated a VSP purchase?
A Viatical Settlement Broker
Upon disability, a life insurer may waive the premium obligation after _____ months of disability.
6
For the principal benefit to be paid under an AD&D policy, death must occur within _____ days following the accident.
90
In a Universal Life Insurance policy, what is the waiver of premium provision called?
The waiver of cost provision
What settlement option uses all or a portion of the death benefit to provide an income for life?
The Life Income Option
The AD&D rider is generally ____________ because it only protects against __________________.
Inexpensive; accidental losses
What dividend option provides the greatest additional amount of death benefit protection for a limited period?
The one year term option
Are death benefits taxable when received by the beneficiary?
No. Death benefits are not taxable
What nonforfeiture option continues to provide permanent insurance protection in a smaller face amount?
The paid up permanent insurance option
T/F: Waiver means a voluntary abandonment of an existing right.
T
What are the cash value options available to policy owners upon policy surrender?
Nonforfeiture options
Describe the paid up permanent insurance option.
This option provides for a smaller permanent life insurance policy requiring no further premiums.
Someone who has a very short life expectancy can expect a larger or smaller purchase price when selling to a VSP?
Larger
What did idea option provided an additional benefit for a limited period of time?
The one year term option
What rider uses an increasing term policy rider to pay an additional death benefit equal to the base policy’s existing cash value?
The return of cash value rider
If a person is disabled, life insurance premiums are waived once the insured is totally disabled for _____ months.
6
What is another name for the death benefit on an AD&D policy?
The principal sum or amount
What is a stranger originated life insurance policy (STOLI)?
A policy that is purchased by a third party with no insurable interest in the insured
What is the tax treatment upon policy surrender?
Upon policy surrender, the cash value that exceeds total premiums paid would be considered taxable
Hat type of insurance is used to provide dependent coverage using a family term rider?
Level term insurance
What additional rider increases the life insurance death benefit by an amount equal to the total policy premiums paid?
The return of premium rider
Dividends are paid to policy holders of a ___________ company.
Mutual
If the premium pay or dies, premiums on a child’s policy may be waived until the child reaches age ____.
21
Name the three nonforfeiture benefits.
Surrender for cash, extended level term, and reduced paid up permanent insurance
T/F: A time limit exists to purchase additional life protection without required evidence of insurability.
T; the guaranteed insurability (GI) rider usually limits this to age 40 or 50.
If someone has any paid up permanent additions, what is payable upon death?
The paid up permanent additions, in addition to the death benefit on the original policy
A family term rider is added to a policy issued to the family ____________.
Breadwinner
Benefits received through the accelerated benefits rider will _______ the future death benefit.
Reduce
What is the limitation to an accidental death rider?
It only pays for accidental death
Settlement options may be selected by _______________, but altered by a ___________ upon death of the ____________.
Policyowners; beneficiary; insured
Which option is more flexible — fixed period or fixed amount?
Fixed amount
What nonforfeiture option continues to provide an identical amount of insurance protection for a limited period?
The extended level term option
Identify the acronym: AD & D
Accidental Death and Dismemberment
What rider increases the death benefit to offset an increase in the CPI?
The Cost of Living Adjustment (COLA) rider
Dividends are considered a return of _________ premium, and are not __________ when returned to policyowners.
Overpaid; taxable
Identify the acronym: VSP
Viatical Settlement Provider
What name is synonymous for the waiver of premium rider in a UL policy?
The cost of insurance rider
Benefits received from an accelerated benefit are not taxable if the insured is ____________.
Terminally Ill
Dividend paid on life insurance policies are received ________ and are never ____________.
Tax-free; guaranteed
What rider is added to a policy and will provide a term insurance death benefit on the spouse or children?
A dependent rider
When a policy is sold to a VSP, who becomes the new policy owner?
The VAP is the new policy owner and beneficiary
Which settlement option allows interest to be paid on all of the retained benefit?
The interest only option
What is the result of a life settlement?
A policy owner sells his existing life insurance policy to a third party
T/F: If an insurer is to retain the death benefit, an interest rate will be paid on these assets.
T
If ______________, the proceeds received from a VSP sale are received tax-free.
Terminally Ill
This dividend option is used to gradually increase the overall death benefit as a possible inflation offset.
The paid up permanent additions option
What is probably the simplest and most common settlement option used?
Cash or lump sum payment
Is the waiver of premium rider optional or mandatory?
Optional. The waiver of premium rider must be added at time of application by paying an additional premium
The sale of a policy to a VSP may affect a persons eligibility for ________ assistance.
Public
In a life settlement, which party remains the same after the actual transfer of ownership occurs?
The insured party remains the same
What does the guaranteed insurability rider allow?
It allows additional coverage to be purchased without the insured having to prove they are insurable
What is another name for the accelerated benefits rider?
The living needs rider.
The payor rider is added to a _______ policy for an additional __________.
Child’s; premium
Name the six dividend options.
Cash, reduced premiums, accumulate at interest, paid up permanent additions, paid up option, and one year term.
What type of assignment is used when selling a policy to a VSP?
Absolute assignment
When does the settlement option become available to the beneficiary?
Upon the death of the insured
What is the name of the company that purchases existing life insurance policies from an existing policyowner?
VSP
What nonforfeiture option continues to provide an identical death benefit upon policy surrender?
The extended level term option
If disabled, the waiver of premiums still allows for ____________ growth.
Cash value
What is the surrender for cash benefit?
A nonforfeiture option whereby the owner surrenders the policy for its cash value
Requiring an additional premium, riders added to a life insurance policy must be purchased _______________.
At the time of application
An accelerated benefit may provide for ____________ of the insured is confined to a nursing home.
Long term care
What are the advantages of selling a contract to a VSP?
A larger living benefit and being free from federal taxes
Premium rates for additional insurance purchased under the GI rider are based on an insureds ________ or ________ age.
Attained; actual
Insurance policy dividends are received _________, while interest earned on dividend is _____________.
Tax-free; taxable
Which settlement option indicates the beneficiary is most concerned with receiving a specific monthly dollar amount?
Fixed amount
