Premiums, Proceeds, and Beneficiaries Flashcards
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 contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to: <> Q's estate <> P only <> R's estate <> P and Q's estate
P only
~In this situation, benefits will be paid to P because P survived the accident and is the primary beneficiary
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?
<> The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis
<> The gross premium is higher on a monthly payment mode as compared to being paid annually
<> The gross premium is lower on a monthly payment mode as compared to being paid annually
<> The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis
The gross premium is higher on a monthly payment mode as compared to being paid annually
~ A premium payment mode that is more frequent than an annual will result in a higher gross premium
Which statement regarding the Change of Beneficiary provision is true?
<> The beneficiary can only be changed with the consent of the insurer
<> A beneficiary change is subject to underwriting procedures
<> The policy owner can change the beneficiary
<> The insured can change the beneficiary
The policy owner can change the beneficiary
~ A policy owner may change a beneficiary at any time. However, consent may be needed by the current beneficiary if designated as irrevocable.
What is the underlying concept regarding level premiums?
<> Level premiums build cash value quicker in early years
<> The early years are charged less that that is needed
<> The early years are charged more than what is needed
<> Level premiums can only be paid annually
The early years are charged mire than what is needed
~ The concept of level premiums charges more than needed in early years
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most? <> The nonforfeiture options <> The assignment of ownership <> The cost <> The contestable period
The cost
~ In this situation, the cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured’s original age or the insured’s attained age.
On a life insurance policy, who is qualified to change the beneficiary designation? <> Primary beneficiary <> Payor <> Insurer <> Policy owner
Policy owner
~ The policy owner has the right to change the beneficiary. However, consent may needed by current beneficiary if designated as irrevocable.
Which of these statement is INCORRECT regarding the federal income tax treatment of life insurance?
<> Premiums are normally not tax deductible
<> Cash dividends are normally not taxed
<> Proceeds are received tax-free if there is a named beneficiary
<> Entire cash surrender value is taxable
Entire cash surrender value is taxable
~ The total cash surrender value is NOT taxable. the interest gained is taxable
A level premium indicates:
<> The premium is fixed for the entire duration of the contract
<> The premium can only be changed with the consent of the insurer
<> The premium stays level until the policy’s renewal date
<> The premium is fixed for a period stated in the contract, the becomes variable
the premium is fixed for the entire duration of the contract
~ A level premium means that the premium remains fixed through the life policy
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
<> The estate taxes in the beneficiary’s estate may be reduced
<> This clause provides the payment of proceeds to the insured’s estate
<> This clause provides the payment of proceeds to the beneficiary’s estate
<> The estate taxes in the insured’s estate may be reduced
The clause provides the payment of proceeds to the insured’s estate
~ The Common Disaster clause provides that in the event of simultaneous death, the beneficiary is presumed to die first and therefore the contingent beneficiary would be next in line for proceeds. If no contingent beneficiary, then the proceeds would be paid to the insured’s estate.
Which statement is true regarding a monitor beneficiary?
<> Normally, the death proceeds are required to be held in trust until the beneficiary reaches the age of 21
<> The minor must pay the debts of the insured’s estate before receiving any of the proceeds
<> Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
<> The minor is entitled to receive the death proceeds immediately
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
~ In most cases, Insurers require that a guardian be appointed in the Beneficiary clause of the policy or that a guardian be designated in the will
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son? <> Tertiary <> Contingent <> Revocable <> Irrevocable
Revocable
~With a revocable beneficiary designation, the policy owner may change the beneficiary at any time without notifying or getting permission from the beneficiary
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?
<> Proceeds will be payable to K’s estate if P dies within a specific time
<> Proceeds will be paid to P’s estate
<> The courts will decide who will receive death benefit
Proceeds will be payable to K’s estate if P dies within a specific time
~ Under the Common Disaster provision, proceeds will be payable to K’s estate if P dies within a specified time.
T an S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
~ The mother receives $0 because T is still alive and the sole primary beneficiary while the mother is still the contingent beneficiary
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
<> If the insured died of accidental causes
<> If the primary beneficiary dies before the insured
<> If the primary beneficiary is a minor at the time of the insured’s death
<> If the insured died of natural causes
If the primary beneficiary dies before the insured
~ A contingent beneficiary will receive the policy proceeds if the primary dies before the insured’s death
Which of the following best describes a contingent beneficiary?
<> Person designated by the insurance compony to receive policy proceeds in the event that the primary dies
<> Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
<> Person designated by the primary beneficiary’s executor to receive policy proceeds
<> Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
~ A contingent beneficiary is named by the insured to receive the policy proceeds if the primary beneficiary does before the insured
