Questions and Answers
The Accidental Death benefits will be paid to whom in the case where P is the primary beneficiary and Q and R are killed instantly?
Which beneficiary designation should J use to maintain the right to change beneficiaries?
Revocable
What factor would affect C's decision to convert her life policy the most?
The cost
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
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Which premium schedule results in the lowest cost to the policyowner?
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What does a level premium indicate?
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What happens if the primary beneficiary had already died before the insured?
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What enables a whole life insurance policyowner to sell the policy for more than its cash value?
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What does the Common Disaster clause state about estate taxes?
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Which statement is INCORRECT regarding the federal income tax treatment of life insurance?
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What percent of personal life insurance premiums is usually deductible for federal income tax purposes?
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What policy feature allows a policyowner to choose the frequency of premium payments?
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How much of the death benefit will the mother receive if S dies and the father is killed shortly after?
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What kind of life insurance beneficiary requires consent for changes?
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When can a policyowner change a revocable beneficiary?
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Under which provision is a policyowner allowed to pay premiums more than once a year?
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Study Notes
Life Insurance Basics
- Primary beneficiaries receive benefits when the insured dies, contingent beneficiaries receive benefits only if the primary is also deceased.
- A level premium remains unchanged throughout the life of the policy, providing predictability in costs.
Beneficiary Designations
- Revocable beneficiary designations allow policyowners to change beneficiaries anytime without notification.
- Irrevocable beneficiaries require consent from the beneficiary for any changes to be made.
Conversion and Policies
- Choosing to convert from a term life policy to whole life can depend largely on the cost associated with using original or attained age for pricing.
- Life settlement contracts enable policyowners to sell their whole life policies for more than cash value if they wish to stop making premium payments.
Settlement Options
- The Life Income settlement option provides a fixed amount to the annuitant with no residual value left for beneficiaries after their death.
Premium Payments
- Annual premium schedules generally cost less than monthly, quarterly, or semi-annual options due to fewer administrative fees.
- Premium Mode allows policyowners to decide on the frequency of premium payments, affecting cash flow and planning.
Tax Implications
- Personal life insurance premiums are generally not deductible for federal income tax purposes.
- The cash surrender value of life insurance policies is not taxable, but any interest earned is subject to income tax.
Common Disaster Clause
- The Common Disaster clause can reduce estate taxes for beneficiaries if they die alongside the insured in a common accident.
Co-Primary Beneficiaries
- If co-primary beneficiaries exist and one passes away, the remaining individual continues as the sole beneficiary; contingent beneficiaries do not receive benefits unless all primary beneficiaries have died.
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Description
Test your knowledge on the fundamentals of life insurance, including beneficiary designations, policy conversions, and settlement options. This quiz covers key concepts that every policyholder should understand to make informed decisions about their life insurance plans.
