Chapter 4 - Policies
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy? - $400 - $800 - $2,000 - $4,000
$4,000
A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n) - Automatic premium loan - Nonforfeiture option - Collateral assignment - Irrevocable assignment
Collateral assignment
Ownership of a life insurance policy may be temporarily transferred with a(n) - Collateral assignment - Absolute assignment - Transferable assignment - Beneficiary assignment
Collateral assignment
Life insurance policies will normally pay for losses arising from - Commercial aviation - War - Suicide - Hazardous jobs
Commercial aviation
A waiver of premium rider allows an insured to waive premium payments if the insured is - Temporarily disabled - Unemployed - Completely and permanently disabled - Experiencing financial hardship
Completely and permanently disabled
In what part of an insurance policy are policy benefits found? - Declarations - Entire contract - Waivers - Conditions
Declarations
Matt is applying for life insurance and request a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt - Is killed while committing a felony - Dies of a stroke - Dies instantly from a car accident - Is injured in a skiing accident and dies 18 months later
Dies instantly from a car accident
All of these are standard exclusions found in a life insurance policy EXCEPT - Hazardous occupations - Aviation - Disability - War
Disability
Which of these is considered to be a Living Benefit option in a life insurance policy? - Reinstatement - Waiver of premium - Accelerated death benefit - Payor benefit
Accelerated death benefit
Which of the following is considered to be an alternative to a life settlement? - Accelerated death benefit rider - Waiver of premium rider - Extended term option - Decreasing term insurance
Accelerated death benefit rider
The double indemnity provision in a life insurance policy pertains to an insured's death caused by a(n) - Sickness - Suicide - Accident - War
Accident
All of these are common exclusions to a life insurance policy EXCEPT - Accidental death - Military service - Aviation - Hazardous occupation
Accidental death
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue? - Accumulated at Interest Option - Cash Dividend Option - Paid-Up Additions Option - One-Year Term Dividend Option
Accumulated at Interest Option
Of the following dividends options, which of these is taxable? - Reduction of premium - One year term - Paid-up additions - Accumulated at interest
Accumulated at interest
All of these are valid policy dividend options for a life insurance policyowner EXCEPT - Cash outlay to the policyowner - Accumulated without interest - Reduction in policy premium - Buy additional insurance coverage
Accumulated without interest
An error was made on Mary's life insurance application. Which of the following areas do errors commonly occur on applications and for which of the incontestable clause does NOT apply? - Marital status - Age - Address - Income
Age
A life insurance policyowner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability? - Long-term care rider - Disability income rider - Annuity rider - Waiver of premium
Disability income rider
What is the name of the provision which states that a copy of the application must be attached to the policy when issued? - Policy Summary - Buyer's Guide - Entire Contract - Entire Policy
Entire Contract
Which of these would limit a company's liability to provide insurance coverage? - Waiver - Exclusion - Rider - Provision
Exclusion
A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT - Fare-paying passenger - Pilot of personal airplane - Suicide - War
Fare-paying passenger
An insurer will accept a premium from the insured and continue the coverage in full as though it was NOT late during which time period? - Incontestable period - Probation period - Reinstatement period - Grace period
Grace period
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n) - Guaranteed term rider - Guaranteed insurability rider - Accelerated benefit rider - Cost of living rider
Guaranteed insurability rider
Barbra's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n) - Guaranteed insurability rider - Payor rider - Endowment rider - Family income rider
Guaranteed insurability rider
Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake? - Reinstatement clause - Entire Contract clause - Incontestable clause - Nonforfeiture clause
Incontestable clause
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy? - Interest only - Reduced paid-up insurance - Extended term insurance - Cash surrender
Interest only
What is the purpose for having an accelerated death benefit on a life insurance policy? - It allows for a spouse to be added as a rider to a life insurance policy - It allows for policy loans to be advanced to the insured in the event of unemployment - It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill - It allows for a third party to purchase a life insurance policy at a discounted rate and immediately advance a portion of the death benefit
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
Which of these is NOT considered to be a common life insurance nonforfeiture option? - Cash surrender - Extended term insurance - Reduced paid-up insurance - Life income annuity
Life income annuity
A guaranteed issue insurance policy has no - Initial premium requirement - Incontestable period - Waiting period - Medical underwriting
Medical underwriting
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid - Minus indebtedness and with interest - During the last 12 months - Minus indebtedness and without interest - During the last 6 months
Minus indebtedness and without interest
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statement is TRUE? - Net death benefit will be reduced if the loan is not repaid - No interest will be charged on loan balance - Term life policies are the only type of insurance that allows policy loans - A loan can be taken out for up to the face amount of the policy
Net death benefit will be reduced if the loan is not repaid
A whole life policy option where extended term insurance is selected in called a(n) - Dividend option - Settlement option - Nonforfeiture option - Interest-only option
Nonforfeiture option
A provision in a while life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n) - Insuring clause - Payor provision - Reinstatement provision - Nonforfeiture provision
Nonforfeiture provision
A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n) - Partial surrender - Waiver of premium - Automatic premium loan - Grace period
Partial surrender
The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of - Any interest payable from an outstanding policy loan balance - Past due premiums that have not been paid by the end of the grace period - The outstanding policy loan balance - Any surrender changes owed by the policyowner
Past due premiums that have not been paid by the end of the grace period
Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies? - Waiver of premium - Juvenile waiver - Guaranteed insurability - Payor benefit
Payor benefit
A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age called a(n) - Waiver of premium rider - Payor rider - Automatic premium loan rider - Juvenile waiver rider
Payor rider
What is an insurance policy's grace period? - Period of time after the initial premium is paid and before the policy is issued - Period of time it takes for a policy's underwriting to complete - Period of time after a policy is issued and before it is delivered to policyowner - Period of time after the premium is due but the policy remains in force
Period of time after the premium is due but the policy remains in force
Which situation accurately describes a reduced paid-up nonforfeiture option? - Policy has a decreased face amount - Face amount of the new policy equals that of the original policy - Cash value is surrendered to policyowner - Premiums must continue to be paid
Policy has a decreased face amount
Which of the following is a reinstatement condition? - Proof of insurability - Changes in the insuring clause - Premium increase - Premium decrease
Proof of insurability
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST - Remit all past-due premiums within the grace period - Provide evidence of insurability to the insurer - Resubmit a new life insurance application - Provide a valid reason for the lapse
Provide evidence of insurability to the insurer
The two major actions required for a policyholder to comply with the Reinstatement Clause are - Provide evidence of insurability, agree to a new incontestable period - Provide evidence of insurability, pay past due premiums - Pay past due premiums, agree to a new incontestable period - Pay past due premiums, agree to a reduction in coverage
Provide evidence of insurability, pay past due premiums
All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT - Extended Term Insurance - Cash Surrender - Reduction of Premium - Reduced Paid-Up Insurance
Reduction of Premium
A policyowner may exercise which of these dividend options that use the dividend to pay all or part of the next premium due? - Reduction of premium - Extended term option - Paid-up option - Cash dividend option
Reduction of premium
A policyowner may exercise which of these dividend option that use the dividend to pay all or part of the next premium due? - Reduction of premium dividend option - Extend term option - Paid-up option - Cash dividend option
Reduction of premium dividend option
Kurt is an active duty serviceman who was recently killed in an accident while home on leave. Which military service exclusion clause would pay upon his death? - Active - Status - Results - Leave
Results
A life insurance policyowner does NOT have the right to - Change a beneficiary - Select a beneficiary - Take out a policy plan - Revoke an absolute assignment
Revoke an absolute assignment
An indorsement found in an insurance plan which modifies the provisions of the policy is called a(n) - Attachment - Add-on - Rider - Supplement
Rider
Which of these is NOT a characteristic of the Accelerated Death Benefit option? - The face amount and policy premium are not affected by the payment - Before the payment of the benefit is made, specific conditions must exist, such as suffering from a terminal illness - There may be a dollar limit of the maximum benefit - The benefit can be offered as a rider at a specific extra cost or may be at no cost
The benefit can be offered as a rider at a specific extra cost or may be at no cost
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if - The insured outlived the beneficiary - The beneficiary outlived the insured - No beneficiary was ever named - The insured and beneficiary died at the same time
The insured outlived the beneficiary
All of the following riders can increase the death benefit amount EXCEPT - Cost of living - Waiver of premium - Accidental Death Rider - Guaranteed Insurability
Waiver of premium
Loans obtained by a policyowner against the cash value of a life insurance policy - Are treated as taxable income - Would not be treated as taxable income - Are limited by the face amount of the policy - Would be subject to a Federal estate tax
Would not be treated as taxable income
If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies? - No death benefit is owed because of the misstatement of age - The full original death benefit listed on the policy - A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age - The original death benefit listed on the policy minus any outstanding loans and interest
A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age
Which of the following is NOT part of an insurance contract? - Policy - Application - Riders - Certificate of Authority
Certificate of Authority
James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount? - The original face amount will be paid to the beneficiary - The policy will be voided with no death benefit paid - The death benefit paid will be what the premium would have purchased at the correct age - The amount of premiums paid will be returned with interest
The death benefit paid will be what the premium would have purchased at the correct age
Under a life insurance policy, what does the insuring clause state? - The agent's obligation to provide the proper amount of coverage - The insurer's obligation to return all premium upon an approved death claim - The insurer's obligation to pay a death benefit upon an approved death claim - The agent's obligation to pay a death benefit upon an approved death claim
The insurer's obligation to pay a death benefit upon an approved death claim
A whole life insurance policy accumulates cash value that becomes - The policy loan value which the insured may borrow against - The death benefit - The source of funding for administration fees - A source of funding a term rider to the policy
The policy loan value which the insured may borrow against
Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true? - The policy may be paid up early by using accumulated cash values - The policy may be paid up early by using policy dividends - The policy's premiums will increase after 20 years - The policy's cash value steadily decreases after 20 years
The policy may be paid up early by using policy dividends
If an insured dies during the grace period with no premiums paid - The policy would be payable, minus the premium amount - The policy would be payable only after the beneficiary makes past due premium payment - All past premiums will be refunded with interest - The claim would be denied
The policy would be payable, minus the premium amount
Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires, - He has the option of resuming the original policy and paying the same premium - The coverage can be extended with a lump sum payment - All remaining cash values are paid to the policyowner - The protection ends
The protection ends
The free-look provision gives the policyowner - The right to return the policy for a partial refund within a specified number of days - The right to contest the terms of the policy - The right to change a policy provision - The right to return the policy for a full refund within a specified number of days
The right to return the policy for a full refund within a specified number of days
