Life Insurance Premiums,
Proceeds, and Beneficiaries Exam
Questions and Answers 100%
PASS
What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a
minor?
Minors are not capable of having insurable interest
Minors are normally not capable of handling money in a reasonable manner
Minors are usually not capable of paying for the insurance premium
Minors cannot legally enter into a contract—ANSWER--Minors are normally not capable of
handling money in a reasonable manner
Rationale: A life insurance company usually will NOT pay policy proceeds directly to a minor
beneficiary because a minor may not use sound judgement in handling money.
What would be a valid reason for naming a trust as the beneficiary of a life insurance policy
as opposed to naming an individual?
,Avoiding probate
Management of proceeds would be provided
Trustee can pay off any existing policy loans
More settlement options available with a trustee—ANSWER--Management of proceeds
would be provided
Rationale: One reason for naming a trust rather than an individual as the beneficiary of a life
insurance policy is to provide management of the proceeds.
How much is normally paid to a policyowner in a life (viatical) settlement?
Total premiums paid plus interest
Full face amount
More than the face amount
Less than the death benefit—ANSWER--Less than the death benefit
Rationale: The amount received for a life insurance policy in a life (viatical) settlement is less
than the death benefit.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
, A terminally ill policyowner decides to sell his life insurance policy at a discount to help
support his family. This sale is called a(n)
Accelerated death benefit
Assignment
Viatical settlement
Nonforfeiture option—ANSWER--Viatical settlement
Rationale: A terminally ill policyowner selling an existing life insurance policy to help support
his family is an example of a viatical settlement.
Death proceeds from a life insurance policy are typically included in a deceased insured's
gross estate
For federal income tax reasons
For federal and state income tax purposes
Only if the insured's estate is listed as beneficiary
Only if the policy is owned by the beneficiary—ANSWER--For federal income tax reasons
Rationale: Life insurance death proceeds are normally included in a deceased insured's gross
estate for federal income tax purposes only.
Proceeds, and Beneficiaries Exam
Questions and Answers 100%
PASS
What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a
minor?
Minors are not capable of having insurable interest
Minors are normally not capable of handling money in a reasonable manner
Minors are usually not capable of paying for the insurance premium
Minors cannot legally enter into a contract—ANSWER--Minors are normally not capable of
handling money in a reasonable manner
Rationale: A life insurance company usually will NOT pay policy proceeds directly to a minor
beneficiary because a minor may not use sound judgement in handling money.
What would be a valid reason for naming a trust as the beneficiary of a life insurance policy
as opposed to naming an individual?
,Avoiding probate
Management of proceeds would be provided
Trustee can pay off any existing policy loans
More settlement options available with a trustee—ANSWER--Management of proceeds
would be provided
Rationale: One reason for naming a trust rather than an individual as the beneficiary of a life
insurance policy is to provide management of the proceeds.
How much is normally paid to a policyowner in a life (viatical) settlement?
Total premiums paid plus interest
Full face amount
More than the face amount
Less than the death benefit—ANSWER--Less than the death benefit
Rationale: The amount received for a life insurance policy in a life (viatical) settlement is less
than the death benefit.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
, A terminally ill policyowner decides to sell his life insurance policy at a discount to help
support his family. This sale is called a(n)
Accelerated death benefit
Assignment
Viatical settlement
Nonforfeiture option—ANSWER--Viatical settlement
Rationale: A terminally ill policyowner selling an existing life insurance policy to help support
his family is an example of a viatical settlement.
Death proceeds from a life insurance policy are typically included in a deceased insured's
gross estate
For federal income tax reasons
For federal and state income tax purposes
Only if the insured's estate is listed as beneficiary
Only if the policy is owned by the beneficiary—ANSWER--For federal income tax reasons
Rationale: Life insurance death proceeds are normally included in a deceased insured's gross
estate for federal income tax purposes only.
