Life Insurance Premiums, Proceeds, and Beneficiaries

Question 1

Accelerated benefit (option ) rider

Answer 1

Allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and is certified by physician, that will die in 1-2 years

Question 2

Beneficiary

Answer 2

Is the person or entity designated in a life insurance policy to receive the death proceeds? 

Question 3

Cash value

Answer 3

The cash value is the entity or savings element of whole life insurance policies 

Question 4

Class designation

Answer 4

Is a beneficiary group designation (for example all my children) opposed to specifying one or more beneficiaries by name

Question 5

Common disaster, provision

Answer 5

Ensures a policy owner if both the insured and the primary beneficiary die with any short period of time, the death benefits will be paid to the contingent beneficiary

Question 6

Contingent (second) beneficiary

Answer 6

Second in line to receive death benefits

Question 7

Earned premium

Answer 7

Is the amount of premium paid by the policy owner for policy coverage or insurance protection received up to this point

Question 8

Expense factor

Answer 8

Also known as the loading charge is a measure of what it cost an insurance company to operate

Question 9

Excess interest

Answer 9

The cash value will increase faster than the guaranteed rate, if the insurer earns a greater return than the guaranteed rate

Question 10

Fixed amount installment option

Answer 10

Pays a fixed death benefit in specified installment amount, until the principal and interest are exhausted

Question 11

Fixed/level premium

Answer 11

averaging what would be the total single premium for a policy over periodic payments, more periodic payments, equal higher total premium

Question 12

Fixed period or period certain option

Answer 12

Pays the death benefit proceeds in equal installments of a set period of years

Question 13

Graded premium

Answer 13

Lower premium in the early years of contract with premiums increasing annually for an introductory. After that. The premium to an amount, higher than what the initial level premium would have been, then remains fixed or constant for the life of the policy

Question 14

Gross (annual) premium

Answer 14

The net premium for Insurance , plus commissions, operating and miscellaneous expenses and dividends

Question 15

Interest factor

Answer 15

Calculation of determining the amount of interest in insurance company can expect to earn from investing insurance premiums

Question 16

Interest only option

Answer 16

Where the insurance company holds the death benefit for a period of time and pays only the interest earned to the name beneficiary a minimum rate of interest is guaranteed and the interest must be paid at least annually

Question 17

Irrevocable beneficiary

Answer 17

A beneficiary that may not be changed by the policy owner without the written consent of the beneficiary

Question 18

Joint and survivor option

Answer 18

Guarantees the benefits will be paid on a lifelong basis to two or more people. This option may include a period certain, and the amount payable is based on the ages of the beneficiaries.

Question 19

Life income option

Answer 19

Provides the beneficiary with an income that they cannot outlive

Question 20

Life settlement

Answer 20

Agreement in which a policyholder cells or transfers ownership in all or part of a life insurance policy to a third-party for compensation

Question 21

Lump sum option

Answer 21

The death benefit is paid in a single payment minus any outstanding policy loan balance and overdue premiums. lump sum option is considered “default” option

Question 22

Modified premium

Answer 22

An initial premium that is lower than it should be during an introductory period of time. After this time, the premium will increase to an amount, greater than what the industrial level premium would have been, and then remains level or constant for the life of the policy.

Question 23

Mortality rate

Answer 23

The measure of the number of deaths in some population scaled to the size of the population per unit time

Question 24

Morbidity rate

Answer 24

The incidence and extent of disability that may be expected from a given group of people

Question 25

Net payment cost index

Answer 25

 if formula used to determine the actual cost of a policy for a policy owner it helps the consumer compare cost of death protection between policies that will be held for 10 or 20 years

Question 26

Net (single) premium

Answer 26

Premium calculation used to calculate an ensures policy reserves, factoring in interest in mortality

Question 27

Per capita

Answer 27

Evenly distributes benefits among all name, living beneficiaries, (example all living children)

Question 28

Per stripes (by the bloodline)

Answer 28

Evenly distributes benefits among the insured according to the family line or root (children and grandchildren)

Question 29

Premium mode

Answer 29

The premium mode is the frequency in which a policy owner elects to pay premiums

Question 30

Primary beneficiary

Answer 30

The first beneficiary in line to receive benefit proceeds upon the death of the insured

Question 31

Policy proceeds

Answer 31

The amount actually paid as a death, surrender or maturity benefit. Includes the face value plus any earned dividends, less any outstanding loans and interest. If surrender benefits, the amount includes any cash value minus surrender charges, and outstanding loan interest. If maturity and benefit include the cash value less any outstanding loan and interest.

Question 32

Reserves

Answer 32

The money set aside (required by the states insurance laws) to pay future claims 

Question 33

Revocable beneficiary

Answer 33

Is a beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary

Question 34

Settlement options

Answer 34

 are optional modes of settlement provided by most life insurance policies options include lump sum, cash interest only fixed. Fixed amount, and life income.

Question 35

Single, premium funding

Answer 35

Policy funding option where the policy owner pays a single premium that provides protection for life as a paid up policy

Question 36

Spendthrift clause

Answer 36

Prevents creditors from obtaining any portion of policy proceeds upon an insured death. Additionally, the clause can be selected by the policy owner to prevent a beneficiary from recklessly spending benefits by requiring the benefits to be paid and fixed amounts or installments over certain period of time.

Question 37

Surrender cost index

Answer 37

Is a cost comparison calculation formula used to determine the average cost per thousand for a policy that is surrendered for its cash value. It aids in cost comparison if the policy owner plans to surrender the policy for its cash value in 10 or 20 years.

Question 38

Tertiary beneficiary

Answer 38

Is the third beneficiary in line to receive death benefit proceeds

Question 39

Underwriting department

Answer 39

Is the department within an insurance company, responsible for reviewing applications, approving, or declining applications, and assigning risk classifications

Question 40

Unearned premium

Answer 40

Premium that has been paid by policy owner for insurance coverage that has not yet been provided

Question 41

Uniform simultaneously death act

Answer 41

States that if the insured and the primary beneficiary die at approximately the same time in a common accident, with no clear evidence, as to who died first the law will assume that the primary died first, therefore the death benefit proceeds are paid to the contingent beneficiary

Question 42

Vertical settlement

Answer 42

A vertical cell settlement involves someone with a terminal illness, selling their existing life insurance policy to a third-party for a percentage of the death benefit

Question 43

Viatical (viatee)

Answer 43

Is the new third-party owner in a viatical settlement

Question 44

Viator

Answer 44

The viator is the original policy owner in a viatical settlement