Chapter 4: Life Policy Provisions and Options (Chapter Test)

Individual life policies typically pay out a death benefit if death is a result of suicide after being in force for _____ years. A. 2 B. 4 C. 5 D. 6

2 Life insurance policies issued in California must pay death benefits for death by suicide after the policy has been in force for 2 years.

Generally, an insurer may defer the granting of a policy loan for up to ______ months. A. 9 B. 12 C. 3 D. 6

6 An insurer, by law, can defer granting a policy loan for up to 6 months.

The provision that limits the amount of time an insurer has to challenge a claim and void the contract upon proof of a material misstatement is called the ____________ clause. A. Insuring B. Entire Contract C. Consideration D. Incontestability

Incontestability The Incontestability Clause limits the period of time during which the insurer has the right to contest a claim and void the contract upon proof of a material misstatement.

Which one of the following regarding collateral assignments is false? A. It takes precedence over any beneficiary designation B. It is not the insurer's responsibility to determine the validity of the assignment C. It causes a permanent change in ownership D. It is used when an insurance policy is used as collateral for a loan

It causes a permanent change in ownership A collateral assignment does not cause a permanent change in ownership.

Which of the following is the most expensive premium mode overall? A. Semi-annually B. Quarterly C. Annually D. Monthly

Monthly The greater the frequency the higher the overall cost is.

The free look period for individual life insurance and annuities begins as of the date: A. The first premium is paid B. The agent receives the issued policy from the home office C. The policyowner signs an Acknowledgement of Delivery Receipt D. The insurer mails the policy to the agent for delivery

The policyowner signs an Acknowledgement of Delivery Receipt The free look period begins when the policyowner signs an Acknowledgement of Delivery Receipt.

The insured's spouse bought a Whole Life policy 15 years ago on the insured, and it has accumulated a cash value of several thousand dollars. Who has the right to change beneficiaries and access the cash value? A. The insured B. The spouse C. The beneficiary D. The insurer

The spouse

Which of the following statements about policy dividends is true? A. Non-participating policies are eligible for dividends B. Dividends can only be withdrawn at certain specified intervals C. Dividends are guaranteed and taxable as income when received D. There are several dividend options to choose from

There are several dividend options to choose from Dividends are declared under participating policies. They are not guaranteed, and if received, the dividend itself is generally not taxable. They can be withdrawn any time there is an accumulation.

What is the primary purpose of the free look period? A. To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for B. It is a way to offer a legal rebate, 10-30 days of free insurance C. To force producers to deliver policies in person to resell the policy to reduce returns and early policy lapses D. It is a marketing strategy of major insurers to get applicants to sign up for a policy

To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for The free look allows the policyowner a specified number of days following receipt of the policy to look it over. If dissatisfied for any reason, the owner has the right to return it for a full refund of any premiums paid.

Which of the following policies allow for a partial withdrawal or partial surrender? A. Current Assumption life B. Traditional Whole life C. Universal life D. Variable Whole life

Universal life A partial withdrawal of cash value is permitted in a Universal or a Variable Universal life policy.