Insurance MCQ

Which of these factors help determine an insured's life insurance premium? insured's salary marital status place of residence avocation (hobby) Answer: avocation (hobby)

What happens to the total amount of premium paid for an insurance policy when the payment frequency increases? No difference in cost Decreases Increases Depends on the type of coverage Answer: Increases

What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured? Policy Dividend Specified amount of money Policy's cash value Funeral expense fund Answer: Specified amount of money

What is the primary feature of a viatical settlement? No interest on policy loans Reduced death benefit prepayment Longer contestable period Lower premiums Answer: Reduced death benefit prepayment

A beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed? A flat tax of 10% is owed on all proceeds Federal income tax is owed if proceeds exceed $250,000 No federal income tax is owed on life insurance proceeds Tax liability owed depends on the type of life insurance policy Answer: No federal income tax is owed on life insurance proceeds

Which of these is affected by the frequency of an insurance policy's premium payments? Settlement options Cash value Death benefit Cost Answer: Cost

The premium payment mode that results in the least overall cost would be monthly quarterly semi-annual annual Answer: annual

A tax-free Section 1035 Exchange of a life insurance policy to a different policy is permitted if it occurs in the same state as the original transaction within a 12 month period from insurer to insurer and no cash is received by the policyowner from agent to agent as long as the agents are licensed in the same line Answer: from insurer to insurer and no cash is received by the policyowner

Which of the following enables a life policy to be replaced with another life policy and results in the postponement of the tax consequence? Section 1040 exchange Section 1035 exchange Nonforfeiture Option Spendthrift Option Answer: Section 1035 exchange

Which of these premium payment frequencies is not typically available to a policyowner? Bi-weekly Monthly Quarterly Semi-annual Answer: Bi-weekly

Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause? protection clause creditor clause spendthrift trust clause beneficiary trust clause Answer: spendthrift trust clause

How is the cost of a policy affected when a policyowner pays premiums more frequently? Not affected Increases Decreases Depends on the type of coverage Answer: Increases

What would be an expense factor in an insurance program? Premiums collected Mortality costs Opportunity costs Investment interest Answer: Mortality costs

Mortality is calculated by using a large risk pool of hobbies and time people and time family history and geographical area insurance companies and agents Answer:  people and time.

Where would policy proceeds be paid if both the insured and primary beneficiary were killed in the same accident? primary beneficiary's estate contingent beneficiary insured's estate children of the insured Answer: contingent beneficiary

Which of these is considered a major tax advantage of life insurance? Tax credits are available for life insurance premiums paid Annual earnings are tax free Premiums are tax deductible by an employee if paid for by an employer Income tax is typically not owed on proceeds paid directly to a beneficiary Answer: Income tax is typically not owed on proceeds paid directly to a beneficiary

Which of these ensures that proceeds of a life insurance policy will be free from attachment or seizure by the beneficiary's creditors? Spendthrift Clause Protection Clause Viatical Clause Settlement Clause Answer: Spendthrift Clause

Pat is insured with a life insurance policy and Karen is his primary beneficiary. They are both involved in an automobile accident where Pat dies instantly and Karen dies 5 days later. Which policy provision will protect the rights of the contingent beneficiary to receive the policy benefits? Nonforfeiture clause Common disaster clause Spendthrift clause Accident indemnity clause Answer: Common disaster clause

A policyowner can receive a percentage payment of the death benefits prior to death by using what kind of contract? Viatical settlement agreement Funding medium agreement Split dollar plan Buy-sell plan Answer: Viatical settlement agreement

An example of naming a beneficiary by class would be "To the children born of my union with Ned Jackson: David Jackson, Jennifer Jackson, and Scott Jackson" "To the child born of my union with Ned Jackson: Scott Jackson" "To the children born of my union with Ned Jackson" "To Ned Jackson" Answer: "To the children born of my union with Ned Jackson"