Questions and Answers
When can a policyowner change a revocable beneficiary?
Anytime
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
If K and her husband are both killed in an automobile accident, where would the death proceeds be directed according to the Common Disaster clause?
Daughter
What type of beneficiary is M's son if M has the right to change the beneficiary designation anytime?
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How much of the death benefit will the mother receive if her son S dies and the father is killed shortly afterwards?
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How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
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Which type of designation would fulfill the need for a permanent change in the beneficiary on a Life insurance policy?
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What factor would affect C's decision the most regarding converting her convertible term life policy to whole life insurance?
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Who will the Accidental Death benefits be paid to if P and Q are married, and catastrophe strikes resulting in Q and R's death?
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Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
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Study Notes
Beneficiary Designations
- A revocable beneficiary can be changed by the policyowner at any time.
- A revocable designation allows the policyowner to maintain control over the beneficiaries, enabling changes as desired.
- An irrevocable beneficiary designation makes changes permanent without the beneficiary’s consent.
Common Disaster Clause
- If both the insured and the primary beneficiary die simultaneously, the proceeds go to the contingent beneficiary.
- In cases where K and her husband die in an accident, their daughter, as the contingent beneficiary, would receive the death proceeds.
Accidental Death and Dismemberment (AD&D) Policies
- A beneficiary named in an AD&D policy can be revoked at any time by the policyowner, demonstrating their control over the designation.
- Co-primary beneficiaries mean benefits are shared; if one primary beneficiary dies, the remaining one retains rights to the full benefit.
- If a primary beneficiary passes away prior to the insured, the contingent beneficiary will receive the policy proceeds.
Conversion of Life Insurance
- Policyowners considering conversion from term to whole life should evaluate costs, as this is the most significant factor in their decision-making process.
- Choosing between original age or attained age for conversion affects premium costs and coverage.
Tax Treatment of Life Insurance
- It is incorrect to state that the entire cash surrender value of a life insurance policy is taxable for federal income tax purposes; only certain elements may be subject to taxation.
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Description
Test your knowledge on insurance beneficiary designations with these flashcards from Chapter 4. Learn about revocable and contingent beneficiaries and key policyowner rights in insurance. Perfect for students looking to refine their understanding of insurance concepts.
