5/4 Quiz Already Passed
1). A settlement option that would leave the proceeds of the insurance policy with the insurer
and the insurer would pay interest to the beneficiary on an installment basis is called:
Ans: The interest only option leaves the proceeds with the insurer and pays the interest
to the beneficiary on an installment basis.
The correct answer is: Interest only option
2). All of the following are life insurance settlement options, except:
Ans: There are four settlement options: interest only, fixed-period installments (period
certain), fixed-amount installments and life income. An automatic premium loan is a
policy loan provision.
The correct answer is: Automatic premium loan
3). A fixed period option pays policy proceeds in equal installments over a period of months or
years. which of the following is not considered when determining the amount of the
installment?
Ans: The relationship of the beneficiary to the insured is not considered when the
amount of the installment is determined.
The correct answer is: The relationship of the beneficiary to the insured
4). Which of the following settlements of a life insurance policy is taxable?
Ans: Life benefits paid to a beneficiary are generally tax-free. However, with an interest-
only settlement, installment payments are taxable because they are 100% interest earned
on the principal.
The correct answer is: Interest-only
5). All of the following is true regarding lump-sum payment of life insurance policy proceeds,
except:
Ans: Life insurance proceeds received in a lump-sum distribution are not taxed.
The correct answer is: Distribution is taxed.
6). All of the following are true regarding the fixed-amount installment life insurance settlement
option, except:
PaperStoc.com Page 1 of 4
1). A settlement option that would leave the proceeds of the insurance policy with the insurer
and the insurer would pay interest to the beneficiary on an installment basis is called:
Ans: The interest only option leaves the proceeds with the insurer and pays the interest
to the beneficiary on an installment basis.
The correct answer is: Interest only option
2). All of the following are life insurance settlement options, except:
Ans: There are four settlement options: interest only, fixed-period installments (period
certain), fixed-amount installments and life income. An automatic premium loan is a
policy loan provision.
The correct answer is: Automatic premium loan
3). A fixed period option pays policy proceeds in equal installments over a period of months or
years. which of the following is not considered when determining the amount of the
installment?
Ans: The relationship of the beneficiary to the insured is not considered when the
amount of the installment is determined.
The correct answer is: The relationship of the beneficiary to the insured
4). Which of the following settlements of a life insurance policy is taxable?
Ans: Life benefits paid to a beneficiary are generally tax-free. However, with an interest-
only settlement, installment payments are taxable because they are 100% interest earned
on the principal.
The correct answer is: Interest-only
5). All of the following is true regarding lump-sum payment of life insurance policy proceeds,
except:
Ans: Life insurance proceeds received in a lump-sum distribution are not taxed.
The correct answer is: Distribution is taxed.
6). All of the following are true regarding the fixed-amount installment life insurance settlement
option, except:
PaperStoc.com Page 1 of 4
