life and Health Insurance - FIN-3660

5. Jacob Schneider purchased a $50,000 whole life insurance policy on the life of his daughter, Victoria, shortly after her third birthday. The policy contained a typical change of ownership provision. Using the endorsement method, Jim transferred ownership of the policy to Victoria as a gift when she turned 23. With regard to making the transfer of ownership using the endorsement method in this situation, it most likely is correct to say that

a. Jacob must enter into a separate assignment agreement with Victoria that will exist apart from the life insurance policy

b. Jacob must make a collateral assignment of the life insurance policy to Victoria

c. The insurer must issue a new life insurance policy that names Victoria as the new policyowner

d. Jacob must notify the insurer, in writing, of the change of ownership

6. Ian Hollwater was the policyowner of a $150,000 life insurance policy insuring the life of his wife, Jane. The policy named Tangie, Jane’s mother, as primary beneficiary, and Joey, Jane’s brother, as contingent beneficiary. When Jane died, Ian, Tangie, and Joey had all predeceased her. This information indicates that the policy proceeds are payable to

a. Ian’s estate

b. Jane’s estate

c. Tangie’s estate

d. Joey’s estate

7. In addition to lump-sum settlements of policy proceeds, insurers also make available to the policyowner and to the beneficiary alternative settlement options for receiving life insurance policy proceeds. With regard to these settlement options, it is correct to say

a. that the life income option typically results in larger installment payments than would be available under the fixed amount or fixed period options

b. that a policyowner who selects the interest option cannot place restrictions on the payee’s right to withdraw the policy proceeds

c. that, under the fixed period option, the payee usually has the right to withdraw only a part of the policy proceeds during the payment period

d. that, under the fixed amount option, the insurer pays equal installments of a stated amount to the payee until the policy proceeds, plus the interest earned, are exhausted

8. The following statements are about revocable and irrevocable beneficiary designations. Select the answer choice containing the correct statement and explain why the other three choices are incorrect.

a. A beneficiary designation is said to be revocable if the policyowner has the right to change the beneficiary designation only after obtaining the beneficiary’s consent.

b. The vast majority of beneficiaries of life insurance policies are irrevocable beneficiaries.

c. A revocable beneficiary’s interest in a life insurance policy during the insured’s lifetime is referred to as a “mere expectancy” of receiving the policy proceeds.

d. A beneficiary designation is said to be irrevocable if the policyowner has the unrestricted right to change the designation during the life of the insured.

9. When Jaylon Brown purchased a participating whole life insurance policy on his life, he selected the cash dividend option. After the policy had been in force for five years, Mr. Brown requested that the dividend option be changed to the paid-up additional insurance dividend option. With regard to this situation, it is correct to say that

a. any paid-up additional insurance issued under this new dividend option will be one-year term insurance in an amount equal to the policy’s cash value

b. the premium charged for any paid-up additional insurance issued under this new dividend option will include an amount to cover the insurer’s expenses

c. the insurer will require Mr. Brown to provide satisfactory evidence of insurability before changing to this new dividend option

d. any paid-up additional insurance issued under this new dividend option will be whole life insurance in whatever face amount the dividend can provide at Mr. Brown’s attained age

10. The following statements are about participating and nonparticipating life insurance policies. Select the answer choice containing the correct statement.

a. Although policy dividends are not guaranteed to be paid, most insurers periodically pay dividends on their participating life insurance policies that are expected to remain in force over a long term.

b. Generally, the premium rates for participating policies are lower than those for equivalent nonparticipating policies.

c. In setting premium rates for nonparticipating policies, insurers typically use more

d. conservative assumptions regarding mortality, investment earnings, and expenses than they do for equivalent participating policies.

e. A policy dividend is not considered a refund of part of the premiums a participating policyowner paid during a policy year.