Chapter 4-6 Quizzes
A policy that pays double or triple the face amount if death occurs during a specific period is a a.) multiple protection policy b.) credit life policy c.) family policy d.) joint policy
a.)
All of the following statements pertaining to reinstatement of a life insurance policy are correct EXCEPT a.) a suicide exclusion period is renewed with a reinstated policy b.) when reinstating a policy, the insurer will charge the policy owner for past-due premiums c.) when reinstating a policy, the insurer will charge the policy owner for interest on past-due premiums d.) a new contestable period becomes effective in a reinstated policy
a.)
If an error is discovered while the insured is living and the insured is older than the policy states, the insurance company can a.) increase the premium b.) reduce the premium c.) waive the difference d.) increase the benefits
a.)
Leland elects to surrender his whole life policy for a reduced paid-up policy. The cash value of his new policy will a.) continue to increase b.) decrease gradually c.) remain the same as in the old policy d.) be forfeited
a.)
The cash values of insurance policies belong to which of the following a.) policy owner b.) insured c.) insurer d.) beneficiary
a.)
Which of the following allows 30 days during which premiums may be paid to keep policies in force? a.) grace period b.) reinstatement clause c.) incontestable clause d.) waiting period
a.)
Which of the following is (are) a common life insurance policy exclusion? a.) death from war b.) death from accidental means c.) death by commercial aviation d.) all of the above
a.)
Which of the following is the goal of a sales presentation? a.) to educate the client so the client can make his/her own decision about what is right for him/her b.) to sell the client as many products as possible c.) to convince the client that the producer's recommendations are best d.) to explain the rules and regulations governing particular insurance products
a.)
Ron, an insured under a $100,000 life insurance policy, dies during the grace period. What happens, considering that the premium on the policy had not been paid? a.) the premium is cancelled because the insured died during the grace period b.) the amount of the premium is deducted from the policy proceeds paid to the beneficiary c.) the premium due, plus a 10% penalty, is charged against the policy d.) the beneficiary must pay the premium after the death claim is paid
b)
All of the following are reasons why it is seldom in the best interest of a policy holder to replace a life insurance policy with a new one EXCEPT a.) most of the first year premium is swallowed up in commission b.) replacement policies are never in the best interest in the policy owner c.) the premium is higher because the insured is older d.) waiting periods begin anew
b.)
All of the following are standard life insurance policy nonforfeiture options EXCEPT a.) cash surrender option b.) one-year term insurance option c.) extended term insurance option d.) reduced paid-up (permanent) insurance option
b.)
All of the following statements regarding assignment of a life insurance policy are correct EXCEPT a.) to secure a loan, the policy can be transferred temporarily to the lender as security for the loan b.) the policy owner must obtain approval from the insurance company before a policy can be assigned c.) the life insurance company assumes no responsibility for the validity of an assignment d.) the life insurance company must be notified in writing by the policy owner of any assignment
b.)
All of the following statements regarding term life insurance are correct EXCEPT a.) a three-year renewable policy allows a term policy owner to renew the same coverage for another three years b.) a three-year renewable policy allows a term policy owner to increase coverage for the next three years c.) an option to convert provides that a term life insurance policy can be exchanged for a permanent one d.) both the option to renew and the option to convert relieve the insured from furnishing evidence of insurability
b.)
Mrs Williamson purchases a five-year $50,000 level term policy with an option to renew. At the end of the five-year term, she renews the policy. Which of the following statements is CORRECT a.) the premium for the renewal period will be the same as the initial period b.) the premium for the renewal period will be higher than the initial period c.) the premium for the renewal period will be the same as the inital period, but a one-time service charge will be assessed upon renewal d.) the premium for the renewal period will be lower than the initial period
b.)
The purpose behind full disclosure requirements is to a.) make sure a client is told everything there is to know about a product b.) help a client make an informed decision c.) makes sure agents comply with the letter of the law d.) help a client distinguish one insurer's product from a similar offering from another insurer
b.)
The rider that provides for a waiver of premiums on a juvenile policy if the adult payor dies or becomes disabled is a a.) guaranteed insurability rider b.) payor rider c.) waiver of premium rider d.) automatic premium loan rider
b.)
What type of policy would be best used when the need for protection declines from year to year a.) level term b.) decreasing term c.) whole life d.) universal life
b.)
Which of the following statements about a life insurance policy's cash value is CORRECT? a.) in many states (but not all), policy owners are entitled to the accrued cash values of their whole life policies b.) when a whole life policy is active, the owner can borrow against the cash value d.) if a policy owner lets his or her whole life policy lapse, the beneficiary will be entitled to part of the policy's cash value
b.)
Which of the following statements regarding a cost of living (COL) rider on a life insurance policy is CORRECT? a.) a cost of living rider provides for a level premium even if the cost of living increases b.) an inflation index, usually the Consumer Price Index, determines the amount of inflation adjustment that is made to the policy up to a maximum percentage increase c.) to require additional amounts of life insurance under a COL rider, evidence of insurability must be provided d.) declines in the CPI cause corresponding declines in the amount of insurance coverage
b.)
Which type of policy allows for flexible premiums and an adjustable death benefit? a.) indeterminate whole life b.) universal life c.) interest sensitive whole life d.) variable whole life
b.)
"When level premium insurance is renewed, the premium amount rises to reflect the increased mortality risk of the insured's older age" What phrase best describes this approach to increasing premiums a.) variable rate b.) targeted rate c.) step rate d.) seniority rate
c.)
All of the following statements about term insurance are correct EXCEPT a.) it pays a benefit only if the insured dies during a specified period b.) level, decreasing and increasing are basic forms of term insurance c.) cash values build during the specified period d.) it provides protection for a temporary period of time
c.)
All of the following statements about variable insurance are correct EXCEPT a.) they are considered insurance contracts b.) sellers must hold a state insurance license c.) they are not considered securities contracts d.) sellers must hold a registered representative license from FINRA
c.)
All of the following statements about variable insurance policies are correct EXCEPT a.) sales presentations must be preceded or accompanied by a prospectus b.) state laws protect consumers and promote meaningful communication c.) materials used in selling variable policies must be approved by the state Office of Insurance Regulation d.) full and fair disclosure must be provided to prospective policy owners
c.)
All of the following statements regarding basic forms of whole life insurance are correct EXCEPT a.) generally, straight life premiums are payable, at least annually, for the duration of the insured's life b.) the owner of a 30-pay life policy will owe no more premiums after the 30th year the policy is in force c.) limited payment life provides protection only for the years during which premiums are paid d.) a single-premium life policy is purchased with a large one-time only premium
c.)
An error in age is discovered after the death of an insured but before any policy death proceeds are distributed. The insured was older than previously assumed. How would an insurance company handle such a situation? a.) no adjustment would be made because the contestable period has passed b.) the amount of death proceeds would be reduced to reflect the statistically diminished mortality risk c.) the amount of death proceeds would be reduced to reflect whatever benefit the premium paid would have purchased at the correct age d.) the beneficiary would be required to pay all underpaid back premiums before the death benefit received
c.)
Bob purchases a $50,000 five-year level term policy. All of the following statements about Bob's coverage are correct EXCEPT a.) the policy provides a straight, level $50,000 coverage for five years b.) if the insured dies at any time during the five years, his beneficiary will receive the policy's face value c.) if the insured dies beyond the specified five years, only the policies cash value will be paid d.) if the insured lives beyond the five years, the policy expires and no benefits are payable
c.)
Diverting insurance funds for personal use is an example of a.) replacement b.) rebating c.) misuse of premiums d.) misrepresentations
c.)
In contrast to traditional whole life insurance policies, with variable life insurance products a.) premiums are invested in an insurer's general account b.) investments match the insurer's contractual guarantees and liabilities c.) contract cash values are not guaranteed d.) the insurer assumes the investment risk
c.)
The most common guaranteed insurability riders allow additional life insurance to be purchased on the insured within a range of ages. The common age range in which guaranteed insurability is available is from a.) age 16-65 b.) age 21-59 1/2 c.) age 25-40 d.) age 30-70 1/2
c.)
Which of the following is an example of churning a.) illegally inducing a person to drop existing insurance to purchase similar coverage with another agent or company b.) rephrasing a policy provision in such a way that it says just the opposite of the original c.) replacing a policy for another with the same insurer with the intent of earning additional premiums or commissions d.) representing an insurance policy as a retirement plan
c.)
Which of the following is stated in the consideration clause of a life insurance policy a.) insured's risk classification b.) insured's general health condition c.) amount and frequency of premium payments d.) benefits payable upon the insured's death
c.)
Which of the following statements best describes life insurance policy dividends? a.) policy dividends represent earnings to shareowners who hold stock in insurance companies b.) policy dividends affect the cost of virtually all insurance policies issued today c.) policy dividends are an intentional return of a portion of the premiums paid d.) policy dividends provide policy owners with a level, known as annual cash inflow
c.)
Which of the following statements describing whole life insurance is CORRECT a.) the face amount of the policy gradually increases the longer the policy remains in force b.) the shorter the premium, the slower the cash value will grow c.) whole life insurance is designed to mature at age 100 d.) the policy's cash value decreases each year the policy is in force
c.)
Which of the following statements regarding modified endowment contracts (MECs) is CORRECT a.) a 1988 revenue act, commonly known as TAMRA, greatly increased the popularity of MECs b.) Congress has granted the MEC the most favorable tax status among all life insurance policies c.) to avoid being classified as an MEC, a life insurance policy must satisfy the "7-pay test" d.) according to the "7-pay test", if the total amount a policy owner pays into a life contract during the first seven years is less than the sum of the net level premiums that would have provided paid-up future benefits in seven years, the policy is an MEC
c.)
Which of the following terms best describes a life insurance policy that provides a straight $100,000 of coverage for a period of five years a.) permanent level b.) whole term c.) level term d.) variable term
c.)
Which of the following whole life insurance policies attempts to make insurance premiums more manageable by offering lower premiums during the first few years following issue? a.) minimal deposit whole life b.) indexed whole life c.) modified whole life d.) indeterminate premium whole life
c.)
Which provision of a life insurance policy states that the application is part of the contract? a.) consideration clause b.) insuring clause c.) entire contract clause d.) incontestable clause
c.)
"If an insurance company determines an insured is totally disabled, the policy owner is relieved of paying the policy premiums as long as the disability continues" This statement describes the a.) premium suspension clause b.) waiting period exemption c.) diability income rider d.) waiver of premium rider
d.)
A policy covering two lives that only pays a death benefit when the second insured person dies is a a.) joint life policy b.) family policy c.) family maintenance policy d.) joint and last survivor policy
d.)
An increasing term policy's death benefit may increase each year. The amount of increase could be tied to all of the following EXCEPT a.) the consumer price indexn (CPI) b.) a flat amount c.) a percentage of the face amount d.) a guaranteed minimum amount each year
d.)
Each of the following statements about the incontestable clause in a life insurance policy is correct EXCEPT a.) the clause gives people assurance that when their policies become claims, they will be paid without delays or protests b.) the incontestable clause means that after a certain period, an insurer cannot refuse to pay the proceeds of a policy or void the contact c.) incontestable clauses usually become effective two years from the issue date of the policy d.) insurers can void a contract even after the specified period, provided they can prove the policy was purchased fraudulently
d.)
If an error is discovered after an insured dies and the insured was younger than the insurance policy stated, the insurance company will a.) reduce the death benefits b.) reduce the premiums c.) waive the difference d.) increase the death benefits
d.)
In which of the following situations does the incontestable clause apply a.) impersonation of the applicant by another b.) no insurable interest c.) intent to murder d.) concealment of smoking
d.)
John stopped paying premiums on his permanent life insurance policy eight years ago though he never surrendered it. He is still insurable and has no outstanding loan against the policy. The company probably will decline to reinstate the policy because the time limit for reinstatement has expired. The limit usually is a.) six months b.) one year c.) two years d.) three to seven years
d.)
To what period would a 14-day free-look apply? a.) the first 14 days after the application has been signed by the applicant b.) the first 14 days after the application has been received by the insurer c.) the first 14 days after the policy has been issued by the insurer d.) the first 14 days after the issued policy has been received by the insured
d.)
When values of an insurance policy are used to purchase another policy with the same insurer for the sole purpose of earning additional premiums or commissions, this practice is called a.) replacement b.) misalliance c.) rebating d.) churning
d.)
Which life insurance provision allows the policyholder to inspect and , if dissatisfied, to return the policy for a full refund? a.) Waiver of premium b.) Facility of payment c.) Probationary period d.) Free Look
d.)
Which of the following provides level premiums for the life of the contract a.) annual renewable term b.) modified whole life c.) indeterminate whole life d.) a 30 year decreasing term policy
d.)
Which of the following statements regarding the assignment of a life insurance policy is NOT correct? a.) absolute assignment involves a complete transfer, giving the assignee full control over the policy b.) under a collateral assignment, a creditor is entitled to be reimbursed out of the policy's proceeds only for the amount of the outstanding credit balance c.) under a collateral assignment, policy proceeds in excess of the collateral amount pass to the insured's beneficiary d.) all beneficiaries must expressively approve any assignments of life insurance policies
d.)
Which type of policy allows for flexible premiums and an adjustable death benefit while allowing the policy owner to choose the investments of the cash value a.) variable whole life b.) universal life c.) indexed whole life d.) variable universal life
d.)
Who regulates a variable universal life policy a.) The Office of Insurance Regulation & FINRA b.) The Department of Insurance & the SEC c.) The Department of Insurance & FINRA d.) The Office of Insurance Regulation & SEC
d.)
