Chapter 3

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed period

The interest earned on a policy dividend is

taxable

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

Fixed amount

What is the purpose of a fixed-period settlement option

to provide a guaranteed income for a certain amount of time

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called

Consideration

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accident death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from injured. What amount would his beneficiary receive as a settlement.

$200,000

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?

2 years

For how long is an insurance company allowed to defer policy loan requests

6 months

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?

A minor son of the insured

An applicant for insurance misstates her age at the time her life insurance application is taken. This misstatement may result in

Adjustment in the death benefit

Under which of the following cirumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and need shelp paying for her medical treatment.

Under which of the following circumstances would an insurer pay accelerated benefits

An insured is diagnosed with cancer and needs help paying for her medical treatment

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment premium

Automatic premium loan

Which of the following best describes fixed-period settlement option

Both the principal and interest will be liquidated over a selected period of time

What type of policy allows the insurance company to cancel a policy at an time?

Cancellable

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender

What are Nonforfeiture options?

Cash surrender, extended term, reduced paid-up

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Common Disaster Clause

Which nonforfeiture option has the highest amount of insurance protection?

Extended term

An individual purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time. he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

Guaranteed insurability writer

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months.

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die

Which of the following policy components contain the company's promise pay?

Insuring clause

The policy owner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policy owner choose?

Interest only option

Which of the following is TRUE about the 10-day free-look period in a Life insurance policy?

It begins when the policy is delivered

Which of the following statements is TRUE concerning the Accidental Death Rider

It will pay double or triple the face amount

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor

Which of the following settlement options in life insurance is known as straight life

Life income

Which of the following settlement options in life insurance is known as straight life?

Life income

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

What is the other term for the cash payment settlement option?

Lump sum

What is the term for how frequently a policy owner is required to pay the policy premium?

Mode

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a polic?

Owner's rights

An insured has a life insurance policy from a participating company and received quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The divided option that the insured has chosen is called

Paid-up additions

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?

Reduction of Premium

The policy owner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Reduction of premium

An insured committed suicide one year after his life insurance policy was issued. The insurer will

Refund the premiums paid

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability. which policy provision allow this?

Reinstatement provision

Methods used to pay the death benefits to a beneficiary upon the insured's death are called

Settlement options

Which of the following statements about a suicide clause in a life insurance policy is TRUE?

Suicide is excluded for a specific period of years and covered thereafter

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

If a life insurance policy has an irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?

The death benefit will be smaller

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

The insured's age at death

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled what will happen to the life insurance premiums?

The insureds' premiums will be waived until she is 21

If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?

The loan amounts are deducted from the death benefit

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing.

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

What is true concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary.

Which of the following statements is TRUE concerning irrevocable beneficiaries?

They can be changed only with written consent of that beneficiary

What is the purpose of a suicide provision within a life insurance policy

To protect the insurer from the persons who purchase life insurance with the intention of committing suicide

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal life

The two types of assignments are

absolute and collateral

The accelerated benefits provision will provide for an early payment of the death benefit when insured

becomes terminally ill

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

cash option

What happens when a policy is surrendered for its cash value?

coverage ends and the policy cannot be resinstated

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called

guaranteed insurability

What would be an advantage to naming a contingent ( or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased.

Which two terms are associated directly with the premium

level or flexible

An absolute assignment is a

transfer of all ownership rights in a policy

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the original policy for as long as cash values will purchase

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the

Entire Contract