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Questions and Answers
What kind of beneficiary designation allows the right to change beneficiaries?
What kind of beneficiary designation allows the right to change beneficiaries?
- Contingent
- Primary
- Revocable (correct)
- Irrevocable
Under which provision is a policyowner allowed to pay premiums more than once a year?
Under which provision is a policyowner allowed to pay premiums more than once a year?
Mode of Premium
What percent of personal life insurance premiums is usually deductible for federal income tax purposes?
What percent of personal life insurance premiums is usually deductible for federal income tax purposes?
0%
Which premium schedule results in the lowest cost to the policyowner?
Which premium schedule results in the lowest cost to the policyowner?
What is the underlying concept regarding level premiums?
What is the underlying concept regarding level premiums?
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which statement is correct?
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which statement is correct?
Which statement regarding the Change of Beneficiary provision is true?
Which statement regarding the Change of Beneficiary provision is true?
A level premium indicates what?
A level premium indicates what?
What enables a whole life insurance policyowner to sell the policy for more than its cash value?
What enables a whole life insurance policyowner to sell the policy for more than its cash value?
What happens if the primary beneficiary dies before the insured?
What happens if the primary beneficiary dies before the insured?
Which best describes a contingent beneficiary?
Which best describes a contingent beneficiary?
What kind of life insurance beneficiary requires consent when a change of beneficiary is made?
What kind of life insurance beneficiary requires consent when a change of beneficiary is made?
Which statement is true regarding a minor beneficiary?
Which statement is true regarding a minor beneficiary?
What type of designation would a policyowner use to make a beneficiary change permanent?
What type of designation would a policyowner use to make a beneficiary change permanent?
Under which beneficiary designation are a policyowner's rights limited?
Under which beneficiary designation are a policyowner's rights limited?
Flashcards
Revocable Beneficiary
Revocable Beneficiary
Policyowner retains the right to change beneficiaries at any time.
Irrevocable Beneficiary
Irrevocable Beneficiary
Requires beneficiary's consent for changes; limits the policyowner's rights.
Mode of Premium
Mode of Premium
Allows policyowners to pay premiums in various frequencies.
Annual Premium Schedule
Annual Premium Schedule
The lowest overall cost for policyowners compared to more frequent payment modes.
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Tax Deductibility of Premiums
Tax Deductibility of Premiums
Personal life insurance premiums are not deductible for federal income tax purposes (0% deductible).
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Level Premiums
Level Premiums
Charged more in the initial years than necessary, averaging the cost over the policy term.
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Contingent Beneficiary
Contingent Beneficiary
Designated to receive proceeds if the primary beneficiary dies before the insured.
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Beneficiary is a Minor
Beneficiary is a Minor
Appointing a guardian is necessary to manage proceeds until the minor reaches adulthood.
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Life Settlement Contracts
Life Settlement Contracts
Enables policyowners to sell their policies for more than the cash value.
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No Surviving Beneficiaries
No Surviving Beneficiaries
Proceeds will be allocated to the estate if the primary beneficiary and contingent beneficiary have died.
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Irrevocable Beneficiary Designation
Irrevocable Beneficiary Designation
Provides a permanent status that limits the policyowner's ability to change beneficiaries.
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Revocable Beneficiary Designation
Revocable Beneficiary Designation
Allows flexibility for future changes by the policyowner.
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Change of Beneficiary Provision
Change of Beneficiary Provision
Policyowners retain the right to change beneficiaries as long as they are not irrevocable.
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Life Insurance Beneficiary Designations
- Revocable Beneficiary: Policyowner, J, maintains the right to change beneficiaries at any time.
- Irrevocable Beneficiary: Requires the beneficiary's consent for any changes; limits policyowner's rights.
Premium Payment Provisions
- Mode of Premium: Allows policyowners to pay premiums in various frequencies rather than just annually.
- Annual Premium Schedule: Results in the lowest overall cost for policyowners compared to more frequent payment modes (e.g., monthly).
- Monthly Premium Payment: Gross premium is higher due to increased administrative costs.
Tax Implications
- Tax Deductibility: Personal life insurance premiums are not deductible for federal income tax purposes (0% deductible).
Level Premiums Concept
- Underlying Concept: Level premiums are charged more in the initial years than what is necessary, averaging the cost over the term of the policy.
Beneficiary and Proceeds
- Contingent Beneficiary: Designated to receive proceeds if the primary beneficiary predeceases the insured; ensures protection of policy proceeds.
- Minor Beneficiary: Appointing a guardian is necessary to manage proceeds until the minor reaches adulthood.
Life Settlement Contracts
- Enables policyowners of whole life insurance to sell their policies for more than just the cash value if they no longer wish to continue payments.
Beneficiary Changes Upon Death
- If both the primary beneficiary and contingent beneficiary have died, proceeds will be allocated to the contingent beneficiary.
Key Characteristics of Beneficiary Designations
- Irrevocable: Provides a permanent status that limits the policyowner's ability to change beneficiaries.
- Revocable: Allows flexibility for future changes by the policyowner.
Summary of Beneficiary Situations
- Change of Beneficiary Provision: Policyowners retain the right to change beneficiaries as long as they are not irrevocable.
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