Chapter 4 Premiums, proceed, and Beneficiairies

Question 1

1035 Exchange

Answer 1

Tax code allows owners to exchange policy for another one to avoid tax on gains

exchange life insurance policy for another life insurance policy, endowment policy or annuity contract

and endowment for an annuity

and annuity for another annuity

Question 2

Accelerated Benefits

Answer 2

early payment of some portion of face amount if insured becomes terminally ill or badly injured

Question 3

Cash Value

Answer 3

The “equity” of savings accumulation in a whole life policy

Question 4

Level Premium Funding

Answer 4

used by all regular life insurance companies. equivalent level premium is paid.

Question 5

Policy Reserves

Answer 5

Funds held by company for future claims

Question 6

3 Premium Factors (for computing premium)

Answer 6

1. Mortality
2. Expense
3. Interest

Question 7

Settlement Options

Answer 7

optional settlements instead of lump sum.

ex. interest only, fixed period, lump sum cash, fixed amount, life income.

Question 8

Viatical Settlement

Answer 8

policy owner sells to another person in exchange for a bargain payment. generally less than death benefit

Question 9

Primary Purposes of Mortality Table

Answer 9

expectation of life at given ages

averages numbers of deaths for a group in given years

Question 10

Net Single Premium

Answer 10

Mortality Cost - Interest

Question 11

Gross Premium

Answer 11

Net Single Premium + Expenses

Question 12

Policy Reserve belongs to _______

Cash Value belongs to ________

Answer 12

Insurer

policy owner

Question 13

6 Settlement Options

Answer 13

1. Single premium payment
2. Installment payments
3. income for life
4. joint life incomes
5. interest payments
6. special payment plans

Question 14

Optional modes of settlement (instead of traditional lump sum)

Answer 14

• lump sum cash
• interest only
• fixed period
• fixed amount
• life income

Question 15

Spendthrift Trust Clause

Answer 15

policy proceeds are not subject to the claims of creditors. of the beneficiary or policy holder

Question 16

Uniform Simultaneous Death Act

Answer 16

states when insured and beneficiary die at same time , it is presumed the insured survived the beneficiary.

Question 17

Revocable Beneficiary

Answer 17

policy owner can change beneficiary at any time

Question 18

Irrevocable Beneficiary

Answer 18

Policy owner cannot change beneficiary without written consent from beneficiary.

Question 19

Per Capita

Answer 19

Death benefits divided equally among living beneficiaries

Question 20

Per Stirpes

Answer 20

benefits divided equally among named beneficiaries, if named is deceased that share goes to their decendents

Question 21

Facility of Payment Provision

Answer 21

Provision normally in industrial policies permitting issuer to chose who the beneficiary is if not listed in policy.

Question 22

Common Disaster Provision

Answer 22

provides alternative beneficiary if insured and beneficiary die in same accident.

Question 23

true or false

death benefits paid to beneficiary are tax free

Answer 23

True: but any interest earned in taxable

Question 24

true or false:

If owner doesnt name a beneficiary or beneficiary dies before them proceeds go to insureds estate and are taxable

Answer 24

TRUE