Life Insurance Premiums, Proceeds and Beneficiaries

Question 1

allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and is certified by a physician as expected to die within 1-2 years

Answer 1

accelerated benefit rider

Question 2

the person or entity designated in a life insurance policy to receive the death proceeds

Answer 2

beneficiary

Question 3

the equity or savings element of whole life insurance policies

Answer 3

cash value

Question 4

a beneficiary group designation (for example, all of my children), opposed to specifying one or more beneficiaries by name

Answer 4

class designation

Question 5

ensures a policyowner if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary

the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds

Answer 5

common disaster provision

Question 6

the beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured

Answer 6

contingent beneficiary

aka secondary beneficiary

Question 7

the amount of premium paid by the policyowner for policy coverage or insurance
protection already received

Answer 7

earned premium

Question 8

a measure of what it costs an insurance company to operate

Answer 8

expense factor

aka loading charge

Question 9

pays a fixed death benefit in specified installment amounts until the principal and interest are exhausted

Answer 9

fixed amount installment option

Question 10

a concept of averaging what would be the total single premium for a policy over periodic payments

more periodic payments = higher total premium

Answer 10

level (fixed) premium

Question 11

Pays the death benefit proceed in equal installments over a set period of years.

The dollar amount of each installment depends upon the total number of installments.

Answer 11

fixed period

aka period certain option

Question 12

A premium funding option where the premium amount is lower in the beginning, during the introductory period, and increases each year.

After the introductory period, the premium increases above what the level premium amount would have been, then remains constant for the life of the policy.

Premiums increase gradually over time

Answer 12

graded premium

Question 13

the net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends

Answer 13

gross (annual) premium

Question 14

a calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums

Answer 14

interest factor

Question 15

a death settlement option where the insurance company holds death benefit
for a period of time and pays only the interest earned to the named beneficiary

A minimum rate of interest is guaranteed and the interest must be paid at least annually

Answer 15

interest only option

Question 16

A beneficiary which may not be changed by the policyowner without the written consent of the beneficiary

Answer 16

irrevocable beneficiary

Question 17

A settlement option which guarantees that benefits will be payed on a life-long basis to two or more people

Answer 17

joint and survivor option

Question 18

a death benefit settlement option which provides the beneficiary with an income that they cannot outlive

Answer 18

life income option

Question 19

an agreement in which a policyholder sells or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of the policy

Answer 19

life settlement

Question 20

A death settlement option where death benefit is paid in a single payment, minus
any outstanding policy loan balances and overdue premiums

considered the default option for most life insurance contracts

Answer 20

lump sum option

Question 21

A premium funding option where the premium amount is lower in the beginning, during the introductory period.

After the introductory period, the premium increases above what the level premium amount would have been, then remains constant for the life of the policy.

Premium increases once

Answer 21

modified premium

Question 22

demonstrates the incidence and extent of disability that may be expected from a given
group of persons

Answer 22

morbidity rate

Question 23

a measure of the average number of deaths that are expected to occur each year for specific age groups

Answer 23

mortality rate

Question 24

A cost comparison calculation formula used to determine the true cost of a policy for a policyowner

useful for comparing the cost of different life insurance policy options

Answer 24

net payment cost index

Question 25

a premium calculation used to calculate an insurer’s policy reserves factoring in interest and mortality

Answer 25

net (single) premium

Question 26

evenly distributes benefits among all named living beneficiaries

Answer 26

per capita

by the head

Question 27

distributes benefits amongst a beneficiary’s heirs in the event that a beneficiary dies before the insured

Answer 27

per stirpes

by the bloodline

Question 28

the frequency in which a policyowner elects to pay premiums

Answer 28

premium mode

Question 29

the first beneficiary in line to receive benefit proceeds upon the death of an insured

Answer 29

primary beneficiary

Question 30

the money set aside to pay future claims

required by the state’s insurance laws

Answer 30

reserves

Question 31

a beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary

Answer 31

recovable beneficiary

Question 32

optional modes of settlement provided by most life insurance policies

includes lump-sum cash, interest-only, fixed-period, fixed-amount, and life income

Answer 32

settlement options

Question 33

a policy funding option where the policyowner pays a single premium that provides protection for life as a paid-up policy

Answer 33

single premium funding

Question 34

a clause which prevents creditors from obtaining any portion of policy proceeds upon an insured’s death

can be selected by the policyowner to prevent a beneficiary from recklessly spending benefits

Answer 34

spendthrift clause

Question 35

a cost comparison calculation formula where the net cost is averaged over the number of years the policy was in force to arrive at the average cost-per-thousand for a policy that is surrendered for its cash value at the end of that period

Answer 35

surrender cost index

Question 36

the third beneficiary in line to receive death benefit proceeds if the primary and contingent beneficiaries both die before the insured

Answer 36

tertiary beneficiary

Question 37

premium which has been paid by a policyowner for insurance coverage which has not yet been provided

Answer 37

unearned premium

Question 38

states that if the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the law will assume that the primary beneficiary died first, which allows the death benefit proceeds to be paid to the contingent beneficiaries

Answer 38

Uniform Simultaneous Death Act

Question 39

involves someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit

Answer 39

viatical settlement