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?
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?
Entire cash surrender value is taxable.
A policyowner can change the beneficiary designation at any time.
Signup and view all the answers
Who is qualified to change the beneficiary designation on a life insurance policy?
Signup and view all the answers
Under the Common Disaster provision, proceeds will be payable to the insured's estate if the sole beneficiary dies within a specified time.
Signup and view all the answers
What beneficiary designation should J use if he wants to maintain the right to change beneficiaries?
Signup and view all the answers
If K and her husband are both killed in an automobile accident and K has a contingent beneficiary, who will receive the death proceeds?
Signup and view all the answers
Which premium schedule results in the lowest cost to the policyowner?
Signup and view all the answers
Why do quarterly premium payments increase the annual cost of insurance?
Signup and view all the answers
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?
Signup and view all the answers
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Signup and view all the answers
A policyowner is allowed to pay premiums more than once a year under the ______ provision.
Signup and view all the answers
What is correct about J choosing a monthly premium payment mode on his Whole Life insurance policy?
Signup and view all the answers
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.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
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.
