Questions and Answers
What is the percentage of personal life insurance premium that is usually deductible for federal income tax?
0%
Which settlement option pays a stated amount to an annuitant, but no residual value to the beneficiary?
Life income
Which of the following best describes a contingent beneficiary?
A person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
Why do quarterly premium payments increase the annual cost of insurance?
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In the case of a common disaster, where would the death proceeds be directed if K has a life insurance policy where her husband is the beneficiary and her daughter is the contingent beneficiary?
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Which option enables a policyowner to sell a life insurance policy for more than cash value?
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What factor would affect C’s decision the most when considering converting a convertible term life policy to whole life insurance using her original or attained age?
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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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What is true regarding a monthly premium payment mode on a Whole Life insurance policy?
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What policy feature allows a policyowner to choose the frequency of premium payments?
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What kind of life insurance beneficiary requires his/her consent when a change of beneficiary is made?
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Which premium schedule results in the lowest cost to the policyowner?
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Under the Common Disaster provision, what is true if K is the insured and P is the sole beneficiary on a life insurance policy?
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On a life insurance policy, who is qualified to change the beneficiary designation?
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Study Notes
Life Insurance Premiums
- Personal life insurance premiums are not deductible for federal income tax purposes (0% deductible).
- Choosing quarterly premium payments increases annual costs due to decreased interest for insurers and higher administrative costs.
- The lowest cost premium schedule for policyholders is the annual payment option.
Settlement Options
- The "life income" settlement option pays an annuitant a fixed amount but provides no residual value to beneficiaries.
Beneficiaries
- A contingent beneficiary is designated to receive policy proceeds if the primary beneficiary predeceases the insured.
- Under the Common Disaster clause, if both the insured and primary beneficiary die simultaneously, proceeds are directed to the contingent beneficiary.
- Irrevocable beneficiaries require consent for any changes to the beneficiary designation.
Policy Ownership and Features
- Policyowners can choose how often to make premium payments through the "premium mode" feature.
- Life settlements allow policyowners to sell their policy for more than the cash value if they wish to discontinue premium payments.
- The decision to convert a convertible term life policy to whole life insurance is most influenced by cost considerations.
Additional Considerations
- In an Accidental Death and Dismemberment (AD&D) policy, contingent beneficiaries receive proceeds only if the primary beneficiary dies before the insured.
- Monthly premium payment modes result in higher gross premiums compared to annual payments.
- The policyowner holds the right to change the beneficiary designation at any time.
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Description
Test your knowledge of life insurance premiums, proceeds, and beneficiaries with these flashcards from Chapter 4. Learn about tax deductions, settlement options, and the role of contingent beneficiaries. Perfect for students looking to deepen their understanding of life insurance concepts.
