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Questions and Answers
Who will the Accidental Death benefits be paid to in the scenario where P is the primary beneficiary on Q's policy and Q's sister R is the contingent beneficiary, but both Q and R are killed instantly?
Who will the Accidental Death benefits be paid to in the scenario where P is the primary beneficiary on Q's policy and Q's sister R is the contingent beneficiary, but both Q and R are killed instantly?
The insurance company will approve T's request to change the irrevocable beneficiary on his AD&D policy.
The insurance company will approve T's request to change the irrevocable beneficiary on his AD&D policy.
False
Which statement is incorrect regarding the federal income tax treatment of life insurance?
Which statement is incorrect regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable.
A policyowner can change the beneficiary designation at any time.
A policyowner can change the beneficiary designation at any time.
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Who is qualified to change the beneficiary designation on a life insurance policy?
Who is qualified to change the beneficiary designation on a life insurance policy?
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Under the Common Disaster provision, proceeds will be payable to the insured's estate if the sole beneficiary dies within a specified time.
Under the Common Disaster provision, proceeds will be payable to the insured's estate if the sole beneficiary dies within a specified time.
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What beneficiary designation should J use if he wants to maintain the right to change beneficiaries?
What beneficiary designation should J use if he wants to maintain the right to change beneficiaries?
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If K and her husband are both killed in an automobile accident and K has a contingent beneficiary, who will receive the death proceeds?
If K and her husband are both killed in an automobile accident and K has a contingent beneficiary, who will receive the death proceeds?
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Which premium schedule results in the lowest cost to the policyowner?
Which premium schedule results in the lowest cost to the policyowner?
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Why do quarterly premium payments increase the annual cost of insurance?
Why do quarterly premium payments increase the annual cost of insurance?
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Under the Uniform Simultaneous Death Act, if both the insured and primary beneficiary are killed in the same accident, where will the death proceeds be directed?
Under the Uniform Simultaneous Death Act, if both the insured and primary beneficiary are killed in the same accident, where will the death proceeds be directed?
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Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
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A policyowner is allowed to pay premiums more than once a year under the ______ provision.
A policyowner is allowed to pay premiums more than once a year under the ______ provision.
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What is correct about J choosing a monthly premium payment mode on his Whole Life insurance policy?
What is correct about J choosing a monthly premium payment mode on his Whole Life insurance policy?
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Study Notes
Life Insurance Beneficiaries
- In a situation where multiple parties die in an accident, only the surviving primary beneficiary receives Accidental Death benefits.
- An irrevocable beneficiary designation cannot be changed without the written consent of the current beneficiary.
- Under the Common Disaster provision, if the insured and the primary beneficiary die simultaneously, proceeds go to the insured's estate if the primary beneficiary passes away within a specified timeframe.
Federal Income Tax Treatment
- The total cash surrender value of a life insurance policy is not taxable; however, any interest earned on it is subject to taxation.
Beneficiary Designation Rights
- The policyowner has the authority to change the beneficiary designation unless the beneficiary is irrevocable, in which case consent is required.
- A revocable beneficiary designation allows the policyowner to change beneficiaries at any time without needing permission from the existing beneficiary.
Premium Payment Options
- Annual premium payments generally result in the lowest overall cost to the policyowner due to fewer administrative fees compared to more frequent payment schedules.
- Choosing quarterly or monthly premium payment modes leads to higher insurance costs due to increased administrative fees and decreased interest earnings for the insurer.
Uniform Simultaneous Death Act
- When a primary beneficiary and the insured perish in the same accident with no clear evidence of who died first, the death proceeds are paid to the contingent beneficiary under the Uniform Simultaneous Death Act.
Settlement Options
- The Life Income settlement option provides fixed payments to the annuitant without any remaining value being paid to a beneficiary upon the annuitant's death.
Premium Payment Mode
- The Mode of Premium provision allows policyowners to pay their premiums multiple times per year, offering flexibility in payment frequency.
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Description
Test your knowledge on life insurance beneficiary designations, rights, and tax implications. This quiz covers essential concepts such as irrevocable and revocable beneficiaries, as well as the federal income tax treatment of life insurance. Understand how to navigate these important aspects of life insurance policies.
