Life Insurance Flashcards
7 cards from real EXAMFX practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life Insurance flashcards as text
Which of the following best describes a 'split-dollar' life insurance arrangement?
Answer: An arrangement where the death benefit and premium costs are shared between an employer and employee
In a split-dollar arrangement, an employer and employee share the premium cost and death benefit of a permanent life insurance policy, commonly used as an executive benefit.
What does 'insurability' mean in the context of a guaranteed insurability rider?
Answer: The right to purchase additional coverage at specified intervals without evidence of good health
A guaranteed insurability rider allows the policyowner to purchase additional amounts of life insurance at specified option dates without providing proof of insurability, regardless of health changes.
Under a 20-pay life policy, when are premiums no longer required?
Answer: After 20 annual premium payments
A 20-pay life policy is a limited-payment whole life policy where all required premiums are paid within 20 annual payments, after which the policy remains in force for the insured's entire lifetime.
Which of the following is NOT a valid reason for an insurer to contest a life insurance claim?
Answer: Death occurring in a foreign country
Death in a foreign country, by itself, is not grounds for contesting a claim; contestability is based on misrepresentation, concealment, or fraud in the application, not the location of death.
A policyowner names a revocable beneficiary. What rights does the beneficiary have while the insured is still alive?
Answer: The beneficiary has no vested interest and the policyowner can change the designation at any time
A revocable beneficiary has no guaranteed rights during the insured's lifetime; the policyowner may change, add, or remove revocable beneficiaries at any time without the beneficiary's consent.
What is the tax treatment of life insurance death benefits paid to a named beneficiary?
Answer: They are generally received income-tax-free by the beneficiary
Life insurance death benefits are generally excluded from the beneficiary's gross income for federal income tax purposes under IRC Section 101(a), regardless of the settlement option chosen.
Which concept requires that a life insurance policyowner have a financial stake in the continued life of the insured at the time of application?
Answer: Insurable interest
Insurable interest requires that the applicant would suffer a genuine financial or emotional loss upon the insured's death, preventing life insurance from becoming a speculative wager.