Life Insurance Premiums Proceeds And Beneficiaries-5

Question 1

Life insurance premiums are calculated based on the three primary factors

Answer 1

Mortality factor
Interest factor
Expense factor

Question 2

Mortality factor

Answer 2

A measure of the number of deaths in a given population

Question 3

Interest factor

Answer 3

The rate of earnings on investments is one of the ways an insurance company can reduce premium rates

Question 4

Expense factor

Answer 4

Operating expenses are which need to be factored into the premiums

Question 5

Benefits

Answer 5

Number and kinds of benefits provided by a policy affect the premium rate

Question 6

Factors that impact the premium amount include

Answer 6

Age 
Sex/gender
Health 
Occupation 
Hobbies 
Habits

Question 7

Premium payment options

Answer 7

Annual
Semi annual
Quarterly
Monthly

Question 8

Level premium funding

Answer 8

Policyowner pays more in the early years for protection to help cover the cost in later years

Question 9

Single premium funding

Answer 9

The policyowner pays a single premium that provides protection for life as a paid up policy

Question 10

Reserves

Answer 10

Money that together with future premiums interest and survivorship benefits

Question 11

Cash value

Answer 11

Applies to the savings element of whole life insurance policies that are payable before death

Question 12

Surrender cost index

Answer 12

Uses a calculation formula where the net cost is averaged over the number of years the policy was in force

Question 13

Net payment cost index

Answer 13

Uses the same formula as surrender cost index with the exception that it doesn’t assume the policy will be surrendered at the end of the period

Question 14

Tax treatment of premiums

Answer 14

Premiums paid on individual life insurance policies are generally not deductible

Question 15

Tax treatment of cash values

Answer 15

If cash value is surrendered the portion that exceeds the premiums paid is taxable

Question 16

Death benefit settlement options

Answer 16

Lump sum 
Interest only 
Fixed period 
Fixed amount 
Life income 
Joint and survivor 
Living benefits

Question 17

Lump sum

Answer 17

Death benefit is paid in a single payment minus any outstanding policy loan balances and overdue premiums

Question 18

Interest only

Answer 18

Insurance company holds death benefit for a period of time and pays only the interest earned to beneficiaries

Question 19

Fixed period

Answer 19

Option is when the insurer pays proceeds in minimum guaranteed dollar payments over a specified number of years

Question 20

Fixed amount

Answer 20

Option pays a fixed death benefit in specified installment amounts until the proceeds are exhausted

Question 21

Life income

Answer 21

Provides the beneficiary with an income that they cannot outlive

Question 22

Joint and survivor

Answer 22

Benefits will be paid on a life long basis to two or more people

Question 23

Living benefits

Answer 23

Option to use some of the future death benefit proceeds when they may be most needed

Question 24

Living benefit options

Answer 24

Accelerated benefit

Viatical settlement

Question 25

Accelerated benefit

Answer 25

Allows someone that a physician certified as terminally ill to access the death benefit

Question 26

Viatical settlement

Answer 26

Allows someone with a terminal illness to sell their existing life insurance policy to a third party for a percentage of the death benefit

Question 27

Policy surrender

Answer 27

When a policy is surrendered for the cash value some of the cash value received may be taxable

Question 28

Accelerated death benefit

Answer 28

When benefits are paid under a life insurance policy to a terminally ill person the benefits are received tax free

Question 29

1035 exchange

Answer 29

When an existing life insurance policy is assigned to another insurer for a new contract

Question 30

Order of succession for beneficiaries

Answer 30

Primary Secondary Tertiary

Question 31

Revocable beneficiary

Answer 31

The policyowner May change the beneficiary at any time without notifying or getting permission from the beneficiary

Question 32

Irrevocable beneficiary

Answer 32

An irrevocable designation may not be changed without the the written consent of the beneficiary

Question 33

Common disaster provision

Answer 33

A policyowner can be sure that if both the insured and the primary beneficiary die within a short period of time the death benefits will be paid to the contingent beneficiary

Question 34

Spendthrift clause

Answer 34

Prevents a beneficiary from recklessly spending benefits by paying it over time and not all at once

Question 35

Facility of payment

Answer 35

Allows the insurance company to pay all or part of proceeds to someone not named in the policy that has a valid right