4 - (Questions) Life Insurance Policies - Provisions, Options and Riders
Which of the following types of life insurance combines a savings element along with a flexible premium option?
Universal life combines a savings element along with a flexible premium option.
A life insurance policy's limit of liability would be
the policy's face amount.
Which of these is NOT a valid policy dividend option? Reduce premium Paid-up additions One-year term Monthly income payments
"Monthly income payments" is not a valid policy dividend option.
If an insured dies because of an accident, which type of life insurance rider will provide additional coverage?
An accidental death rider provides additional coverage in the event of accidental death.
Which statement is true regarding policy dividends?
Insureds elect a dividend option at the time of policy purchase.
How are acts of war considered under a group life insurance policy?
Under a group life insurance policy, acts of war are considered a policy exclusion.
In a renewable term life insurance policy, the contract will usually
require a higher premium payable at each renewal
A life insurance policy where the insured can choose where the cash value can be invested is called
variable life.
In a modified endowment contract, the penalty tax imposed on withdrawals is
10%
Which of the following is NOT a true description of non-medical life insurance?
Applicants are not required to answer medical questions on the application. Medical questions can still be asked on an application of non-medical life insurance.
What are collateral assignments normally associated with?
Collateral loans are normally associated with bank loans.
What does the grace period allow a life insurance policyowner to do?
The grace period allows a life insurance policyowner to make a premium payment after the due date without any loss of coverage.
What time period allows an insured's life insurance policy to remain in force even if the premium was not paid on the due date?
The grace period allows an insured's life insurance policy to remain in force even if the premium was not paid on the due date.
What does the guaranteed insurability option allow an insured to do?
The guaranteed insurability option allows an insured to purchase additional coverage with no evidence of insurability required.
An insurer can be protected from adverse selection with which policy provision?
The suicide clause protects the insurer against possible adverse selection.
Which of the following statements do NOT apply to child coverage in a family policy?
Only children born prior to policy's issue date may be included. Children born AFTER the policy's issue date may be covered in a family policy.
Which of the following types of life insurance is normally associated with a mortgage loan?
Decreasing term insurance is commonly used to protect an insured's mortgage.
Which of the following is NOT true regarding a family policy that covers children?
Conversion of child's coverage to permanent insurance requires evidence of insurability. Conversion of child's coverage to permanent insurance does NOT require evidence of insurability.
John and Mary have a handicapped child that is financially dependent upon them. The death of one of the parents would not be financially disastrous, however the death of both likely would be. Which policy would be best suited for them?
Second-to-die policy A second-to-die policy covers two lives, but the benefit is paid upon the death of the last surviving insured.
Which provision will pay a portion of the death benefit prior to the insured's death due to a serious illness?
The accelerated death benefit provision will pay a portion of the death benefit prior to the insured's death due to a serious illness.
What is the proper order of initial life insurance premiums, from lowest to highest?
The order of initial premiums for life insurance policies, from lowest to highest, is the following: modified premium, ordinary life, single premium.
When an accidental death benefit is added to a whole life policy, how does this affect the policy's cash value?
When an accidental death benefit is added to a whole life policy, the policy's cash value is not affected.
An insurance policy written after 1988 that fails to pass the seven-pay test is known as
An insurance policy written after 1988 that fails to pass the seven-pay test is known as a modified endowment contract.
Jerry is an insured who understated his age on his life insurance application, paying $12 per $1,000 of insurance instead of $15 per $1,000. If he dies, how will the adjusted death benefit be calculated?
In this situation, the adjusted death benefit will be calculated at 12/15th of the policy's face amount.
A life insurance policy can be surrendered for its cash value under which policy provision?
Nonforfeiture options allow a policyowner to surrender a policy for its net cash value.
Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty for taking a loan against this policy prior to age 59 1/2?
Penalty taxes (10%) on premature distributions prior to age 59 ½ from a modified endowment contract (MEC) normally apply to policy loans.
Which of the following is a life insurance policy that does NOT require a physical exam?
Non-medical life insurance policies are written without a physical exam.
After a policy has lapsed, which provision allows the insured to continue coverage?
The reinstatement provision allows an insured to continue coverage under a previously lapsed policy.
A life insurance policy that pays the face amount if the insured survives to a specified period of time is called
endowment insurance.
In a life insurance policy, the entire contract consists of the
policy and attached application
