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Lesson 4 Quiz

The following quiz is provided for your information to help you measure your retention level on the material covered within this lesson. It is not graded. Only the final examination is graded.

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1
Primary Factors in Premium Calculations

Actuaries calculate the cost of the premiums required on a continuous basis until maturity by using an assumed:

a) interest rate.
b) mortality charge.
c) loading charge.
d) All of the above.
CORRECTTRY AGAIN (Lesson 4.1)
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2

belong(s) to the insurer, whereas belong(s) to the policyowner.


Word bank: Cash Value, Policy Reserves

Policy Reserves belong(s) to the insurer, whereas Cash Value belong(s) to the policyowner.

Lesson 4.1.4 Check your answer

3

The is an intangible amount that is set aside by the insurer out of the insurer's assets at the beginning of the policy period, whereas the is basically a savings account that develops within the policy that builds through premium payments and belongs to the policyowner.


Word bank: cash value, policy reserve

The policy reserve is an intangible amount that is set aside by the insurer out of the insurer's assets at the beginning of the policy period, whereas the cash value is basically a savings account that develops within the policy that builds through premium payments and belongs to the policyowner.

Lesson 4.1.4Check your answer

4

Which of the following are principal factors utilized to determine premium rates?

a) Age
b) Gender
c) Health condition
d) Occupation or avocation
e) Habits
f) All of the above.
CORRECTTRY AGAIN (Lesson 4.1.5)
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5
Policy Proceeds and Settlement Options

Settlement of the policy takes place when death claim benefits are paid out to the beneficiary(ies) through one of several different venues. Match the following settlement options with their respective definitions.

a) Following the death of the insured, the beneficiary receives proceeds in one single payment.
b) Allows the beneficiary to receive a guaranteed income for the rest of the beneficiary's life - no matter how long that may be.
c) The beneficiary may opt to receive interest payments while the insurance company holds the policy proceeds.
d) Proceeds may be paid to two beneficiaries in equal monthly installments as long as at least one is alive.
e) provides the beneficiary with equal payments of both the principal (proceeds) and the interest earned at regular intervals over a specified period of years or instructs the insurance company to pay out an equal amount of income at regular intervals until the proceeds are depleted.
f) This provision allows the policyowner to withdraw the death benefit prematurely, in cases of terminal or chronic illness.
a) Lump Sum

b) Income for Life

c) Interest Only

d) Joint Life Income

e) Installment Payments

f) Accelerated Benefits

(Lesson 4.2)
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6

When a life insurance policy beneficiary opts to receive interest only payments, the insurance company can pay a _____________ interest rate than the pre-established minimum rate.

a) higher
b) lower
c) adjustable
d) Any of the above.
CORRECTTRY AGAIN (Lesson 4.2.2)
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7

A viatical settlement sales agent must be licensed as a life agent.

a) True
b) False
CORRECTTRY AGAIN (Lesson 4.2.5)
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8
Tax Treatment of Proceeds

Whenever a policy terminates for any reason other than a death benefit, any excess income over the cost basis is . Death benefits paid under a life insurance policy to a named beneficiary are .


Word bank: tax free, taxable

Whenever a policy terminates for any reason other than a death benefit, any excess income over the cost basis is taxable. Death benefits paid under a life insurance policy to a named beneficiary are tax free.

Lesson 4.3Check your answer

9

As long as the equity remains in the life insurance policy and continues to accumulate, the cash value remains . Once it is surrendered, the equity is considered .


Word bank: tax free, taxable income

As long as the equity remains in the life insurance policy and continues to accumulate, the cash value remains tax free. Once it is surrendered, the equity is considered taxable income.

Lesson 4.3Check your answer

10

IRS Section 1035 policy exchanges are allowed if:

a) a life insurance policy is exchanged for another life insurance policy.
b) an endowment policy is exchanged for an annuity contract.
c) an annuity contract is exchanged for another annuity contract.
d) All of the above.
CORRECTTRY AGAIN (Lesson 4.3)
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11
Beneficiaries

Life insurance proceeds when paid to the policy beneficiary are protected from creditors since those benefits are not subject to the claims of the insured's creditors.

a) True
b) False
CORRECTTRY AGAIN (Lesson 4.4)
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12

If a policyowner fails to designate a life insurance policy beneficiary, the proceeds of the policy go to the:

a) insured's closest relative.
b) insured's children.
c) insured's estate.
d) state government.
CORRECTTRY AGAIN (Lesson 4.5.2)
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13

A life insurance policy cannot be contested.

a) True
b) False
CORRECTTRY AGAIN (Lesson 4.5.3)
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14

Death proceeds from an insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual - this is called the method. Death proceeds from an insurance policy are divided equally among the living primary beneficiaries - this is called the method.


Word bank: Per Capita, Per Stirpes

Death proceeds from an insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual - this is called the Per Stirpes method. Death proceeds from an insurance policy are divided equally among the living primary beneficiaries - this is called the Per Capita method.

Lessons 4.6.1, 4.6.2Check your answer

15

The ________________ designation means that the beneficiary cannot be changed without the named beneficiary's permission.

a) revocable
b) irrevocable
c) substantial
d) menial
CORRECTTRY AGAIN (Lesson 4.6.5)
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16
Special Situations

The states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary. The is designed to provide an alternative beneficiary in the event that the insured as well as the original beneficiary die as the result of a common accident.


Word bank: Common Disaster Provision, Simultaneous Death Act

The Simultaneous Death Act states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary. The Common Disaster Provision is designed to provide an alternative beneficiary in the event that the insured as well as the original beneficiary die as the result of a common accident.

Lessons 4.7.1, 4.7.2Check your answer

17

The question "Have you made your policies creditor-proof for your beneficiaries?" refers to which of the following?

a) Spendthrift Clause
b) Premium Waiver Provision
c) Change of Beneficiary Provision
d) Automatic Premium Loan
CORRECTTRY AGAIN (Lesson 4.7.3)
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18
Definitions

Match the following with their respective definitions.

a) The equity or "savings" accumulation in a whole life policy.
b) Funds held by the company to help fulfill future claims.
c) Allows policyowners to exchange their policy for another to avoid tax on gains.
d) The early payment of some portion of the policy's face amount should the insured suffer from a terminal illness or injury.
e) Factors considered when computing the basic premium for insurance
a) Cash Value

b) Policy Reserves

c) 1035 Exchange

d) Accelerated Benefits

e) Premium Factors

CONGRATULATIONS on completing Lesson 4. Now complete Florida study manual Chapters 7 and 8 Questions for Review.
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