Unit 8 Flashcards
A mortality table reveals which of the following?
(A) There is no death rate for persons age 99
(B) It specifies the people who will die in any given year
(C) It shows the average number of deaths that are expected each year in any age group
(D) The death rate normally is higher in the lower age groups
(C) It shows the average number of deaths that are expected each year in any age group
All of the following are primary premium factors EXCEPT:
(A) expense
(B) interest
(C) dividends
(D) mortality
(C) dividends
Which of the following statements pertaining to life insurance premiums is CORRECT?
(A) Premium rates usually are lower for men than women.
(B) Harold and Billy, both age 25, each buy a whole life policy from the same company. However, Harold has a participating policy, while Billy’s policy is nonparticipating. Harold will pay a higher premium.
(C) The most significant factor in premium rate calculation is interest.
(D) Lucy, who is substantially overweight, has applied for a life insurance policy. Her weight may affect her insurability, but not the amount of premium on her policy.
(B) Harold and Billy, both age 25, each buy a whole life policy from the same company. However, Harold has a participating policy, while Billy’s policy is nonparticipating. Harold will pay a higher premium.
Which of the following statements pertaining to life insurance premiums is CORRECT?
(A) THe premiums for a policy that insures a spouse are tax deductible.
(B) A company may purchase key-person life insurance and deduct the premiums as a business expense.
(C) Premiums for group term insurance covering employees are tax deductible, assuming certain requirements are met.
(D) Premiums for policies in which the insured is someone other than the policyowner are tax deductable.
(C) Premiums for group term insurance covering employees are tax deductible, assuming certain requirements are met.
Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. How much of the death benefit will be included in his gross estate for estate tax purposes?
(A) $0
(B) $26,000
(C) $49,000
(D) $75,000
(D) $75,000
Art, the owner and insured under a $75,000 life policy, is killed in an accident. He had paid total premiums of $26,000. How much of the $75,000 death benefit that was paid to Art’s wife in a lump sum is taxable income to her?
(A) $0
(B) $26,000
(C) $49,000
(D) $75,000
(A) $0
Which of the following statements pertaining to life insurance policy settlement options is NOT correct?
(A) By using the interest-only option, two or more settlement options can be combined for added flexibility.
(B) Payments under the interest-only option may be made at a rate higher than the guaranteed minimum.
(C) Diane and Rhonda each are receiving monthly income from their deceased husbands’ identical life insurance policies under the fixed-period option. Diane’s payments are to be made for 15 years and Rhonda’s for 20 years.
(D) Under the fixed-period option, the payment of excess interest will lengthen the payment period.
(D) Under the fixed-period option, the payment of excess interest will lengthen the payment period.
Assume the following person buy identical life insurance policies from the same company. Generally speaking, who will pay the lowest premium, if all have standard ratings?
(A) Linda, age 28
(B) Thomas, age 28
(C) Louise, age 40
(D) Joe, age 45
(A) Linda, age 28
Sarah, age 65, the owner of a $150,000 whole life policy, decides to surrender the policy and take the $90,000 cash value in a lump sum. Over the years, she has paid a total of $54,000 in premiums. How much, if any, of the payment will be taxed?
(A) $0
(B) $36,000
(C) $54,000
(D) $90,000
(B) $36,000
Beth, age 50, the beneficiary of her late husband’s life insurance policy, has elected to receive the proceeds in monthly installments over the next 5 years. Due to the insurer’s interest earnings, Beth notices that the amount of th epayments is often more than what she was guaranteed. What kind of settlement option did Beth select?
(A) Life-income
(B) Fixed-amount
(C) Cash value
(D) Fixed-period
(D) Fixed-period
Under which option does the insurer hold the death proceeds for a specified period of time and, at regular intervals, pay the beneficiary interest on the proceeds?
(A) Fixed-period
(B) Interest-only
(C) Fixed-amount
(D) Life-income
(B) Interest-only
Bill names his church as the beneficiary of his $300,000 life insurance policy. When Bill dies, who is responsible for the income taxes payable on the lump-sum proceeds received by the church?
(A) His estate is responsible
(B) His church is responsible
(C) No income tax is payable on the death proceeds
(D) His estate and the beneficiary share the tax liability equally
(C) No income tax is payable on the death proceeds
Which of the following factors is most important when computing basic premiums for life insurance?
(A) Expense
(B) Interest
(C) Mortality
(D) Reserves
(C) Mortality
All of the following statements about accelerated death benefits and viatical settlement are correct EXCEPT:
(A) a terminally ill person receives accelerated death benefits tax-free
(B) an insured who sells an insurance policy to a viatical company usually receives 100% of the policy’s face value
(C) the maximum amount of accelerated benefits that a chronically ill person can exclude from income is limited
(D) accelerated benefit provisions are standard in most individual and group life insurance policies
(B) an insured who sells an insurance policy to a viatical company usually receives 100% of the policy’s face value
All of the following statements about the taxation of insurance proceeds are correct EXCEPT:
(A) interest earned on policy dividends is exempt from income tax
(B) a beneficiary will not be taxed on insurance proceeds paid as a lump sum death benefit
(C) a policyowner who receives the cash value for a surrendered policy must pay taxes on any gain
(D) generally, no gain or loss is recognized when one insurance poolicy is exchanged for another
(A) interest earned on policy dividends is exempt from income tax
