Exams Questions: Chapters 5-10

Which rider may be added to a life insurance policy to make sure that a policy will not lapse if the insured is totally disabled?

Waiver of Premium

Each of the following is a provision found in a life insurance policy, EXCEPT:

Change of Occupation

In order for the waiver of premium benefit rider to be activated, which of the following must occur?

The insured must be under the care of a doctor

Leslie purchases a whole life policy covering her husband with a face amount of $500,000. Eighteen months after it goes into effect, Leslie's spouse takes his own life. What will be paid to Leslie?

A return of premium

The policyowner wishes to provide for the care of her minor child in the event of premature death. To accomplish this, the owner should probably designate as beneficiary:

A trust

What life insurance policy provision permits the policyholder to select the face amount of protection, name a beneficiary, or to borrow from the policy's cash savings value?

Owner's Rights Provisions

A life insurance policy is comprised of numerous provisions. Which of the following protects a beneficiary from creditors when proceeds at death are left with the insurer?

Spendthrift Provision

An error in age is discovered after the death of an insured but before any policy death proceeds are distributed to the beneficiary. It is determined that the insured was older than previously assumed. How will this affect the policy proceeds?

The amount of death proceeds would be reduced to reflect whatever benefit the premium paid would have purchased at the correct age

Viatical settlements are amounts paid by a viatical settlement company to a terminally ill person. Which of the following is true regarding a viatical settlement?

The amount paid to the viator is tax-free

Who will be paid death proceeds from a life insurance policy if the primary beneficiary predeceases the insured?

The contingent beneficiary

A Family Policy's premium is based upon the age and health history of the primary insured. It automatically covers the insured's spouse and children. The same type of coverage may be provided by adding which of the following to an individual policy covering the primary insured?

Dependent Rider

Sara purchases a whole life policy with a death benefit of $450,000. What type of rider can Sara add to her policy to cover her spouse in case he dies in an accident?

Dependent Rider

Which of the following best describes a return of unused premium?

Dividend

Which of the following best describes a return of unused premiums to a policyowner from a whole life insurance contract?

Dividend

Which of the following policy provisions prevents an insurer from denying a death claim in the future after the purchase of a life insurance policy?

Entire contract clause

Which of the following provisions places limitations on an insurer's or producer's authority to waive a provision in an insurance contract?

Entire contract provision

Life insurers issuing participating policies may pay dividends to policyowners from surplus. All of the following are dividend options available to policyholders of such life insurance policies, EXCEPT:

Extended Term Insurance

Whole life policies include several non-forfeiture values or options. What non-forfeiture option in this policy provides the greatest face amount of life insurance protection if selected?

Extended level term insurance

The settlement option which pays principal and interest until proceeds are exhausted is called:

Fixed amount option

When an annuity contract is delivered to its owner by a producer, which of the following allows for a review of the contract and a full refund if the owner decides to return it to the insurer:

Free-look provision

A rider is an additional attachment to a life insurance policy and can provide a benefit or restrict coverage. Which of the following is true regarding the following life insurance policy benefit riders?

Guaranteed insurability provides the insured with the option to purchase additional amounts of insurance without a medical exam

A benefit rider may be added to a life insurance policy for an additional premium. What benefit rider may be attached to a policy which protects an insured's future insurability?

Guaranteed insurability rider

Which of the following statements is true with regard to the misstatement of age provision which appears in a life insurance policy?

If the insured's age is overstated, the insurer will pay an additional death benefit at death

If a life insurance policy has been in force for five years, it will generally not be contestable in each of the following situations, EXCEPT:

If the owner has engaged in fraud

Except in cases of fraud, what life insurance policy provisions limits an insurer to contest application information for the initial two years of the contract?

Incontestable clause

Which part of the life insurance contract describes the obligation assumed by the insurance company in exchange for a premium paid?

Insuring Clause

A life insurer's promise to pay the death benefit is found in which of the following provisions?

Insuring Provision

Which of the following provides interest payments to the primary beneficiary following the death of the insured?

Interest Only Option

Which of the following is true regarding dividends paid by a permanent life insurance policy?

Intrest earned on dividends is taxable

Which of the following settlement options does not provide for a predetermined amount of income?

Life Income

Which of the following will allow a chronically ill individual to generally receive a larger living benefit than an accelerated benefit rider ?

Life or viatical settlement

A life insurance dividend may be paid on a participating policy. Which of the following dividend options can be used when the policyowner is interested in minimizing his outlay of funds?

Reduce the Premium

Which of the following policy options allows a policyowner to effectuate a single premium purchase?

Reduced Paid-Up Premium

All of the following are dividend options available in a participating life insurance policy, EXCEPT:

Reduced paid-up insurance

All of the following are types of dividend options, EXCEPT:

Reduced paid-up insurance

Nonforfeiture options are available to the owner of a cash value life insurance policy. Which of the following options provides the insured with life insurance for the greatest length of time?

Reduced paid-up insurance

When an insured dies, his or her beneficiary may select any of several settlement options in which to receive the policy proceeds. Each of the following is an available life insurance settlement option, EXCEPT:

Reduced paid-up insurance

A prepaid life insurance policy is issued. When the policy is delivered by the producer, he or she should:

Remind the policyholder of the ten-day free-look

Cash value life insurance includes nonforfeiture benefits. Which of the following is such a benefit that appears in a permanent life insurance plan, whether issued to cover an individual or an eligible group ?

Surrender for Cash

The provision which permits a policyowner to return a life insurance policy within a certain period of time following delivery and receive a full refund of premium is the:

Ten-day free-look

Nonforfeiture Values in a whole life insurance policy may be used when a policyowner surrenders the contract. One option available is the reduced paid-up insurance option. The amount of insurance that one may purchase under this option is based upon the insured's attained age and which of the following?

The Amount Of the Cash Value

Which of the following parties may change the beneficiary designation in a life insurance policy?

The Policyowner

The insured and primary beneficiary die in a common accident. The insured dies at the scene and the primary beneficiary dies thirty-six days later. To whom is the insured's $250,000 death benefit paid?

The primary beneficiary's estate

Which of the following best describes the beneficiary designation of "per stirpes"?

Through the root or family line

An insured dies and the death benefit is paid to the named beneficiary. The beneficiary dies three months later. There are three surviving children. Any remaining proceeds from the policy covering the insured would be paid to which of the following?

To the estate of the deceased beneficiary

Non-forfeiture options provide a policyowner with all, EXCEPT:

Using the cash value to fund the automatic premium loan

Which of the following parties transfers ownership of a life insurance policy to a viatical settlement firm ?

Viator

Which of the following is not automatically included in a life insurance contract?

Waiver of Premium

Which of the following riders prevents a policy from lapsing if the insured becomes disabled for more than six months?

Waiver of Premium

Dick owns a whole life policy with a face amount of $200,000. He has added an accidental death rider with the same face amount for an additional premium. A second rider has also been added which will prevent the policy from lapsing if Dick becomes disabled. This latter rider is known as the:

Waiver of premium rider

Bill has a $200,000 whole life policy with a $50,000 AD&D rider. Also attached is an accelerated benefits rider. A couple of years later Bill is terminally ill and receives $25,000 from the policy. Six months later he dies. What will the beneficiary receive?

$175,000

An increasing term rider is characterized by which of the following?

An increasing face amount

A reinstatement provision is generally included in all life insurance policies issued for delivery. If a policy owner applies for reinstatement after a policy lapse, the insurer will require the completion of a reinstatement application. Statements made on this application are contestable for what period of time?

2 Years

Permanent or continuous premium whole life insurance includes a policy loan provision. All of the following statements are true regarding this policy provision, EXCEPT:

A delay clause of twelve months is included in a policy loan provision

Which of the following riders does not provide a benefit for a living insured?

Accidental death benefit

Tim has a whole life policy with an assortment of riders attached. He is blinded in an accident and receives proceeds from one of the riders. Which of the following riders paid a benefit for his loss of sight?

Accidental dismemberment rider

An insurer will take what type of action if the applicant misstates his or her age on a term life insurance application?

Adjust the death benefit

The assignment provision in a life insurance policy is a policyowner right. When a policyowner uses the cash value of a whole life policy as security against a debt, he or she has engaged in a:

Collateral assignment

An applicant's statements recorded in the life insurance application constitute a portion of which of the following?

Consideration clause

Permanent insurance plans include various options available to the policyowner. What whole life insurance policy options protect a policyowner against an unintentional coverage lapse?

Non-forfeiture option

Whole life policies include various options available to the owner. Which of the following policy options protects an insured against the lapse of a policy?

Non-forfeiture options

A life insurance policy was issued to Bob four years ago. The insurer then learns of material misrepresentations when Bob dies. How will the insurer respond when the claim is filed by the beneficiary?

Pay the Claim

Which of the following settlement options is determined by the length of time proceeds are paid to a beneficiary?

Period

What provision found in a life insurance policy allows an insurer to assess an extra charge if the policyowner makes payments on a quarterly basis?

Premium paying provision

The payor benefit clause stipulates that:

Premiums will be waived until the insured child reaches the age of majority

Life insurance proceeds are generally payable to a named beneficiary. A contingent beneficiary is one who:

Receives proceeds if there is no living primary beneficiary when the insured dies

Dividends paid by a life insurance policy are tax-exempt. Each of the following are true regarding dividend options, EXCEPT:

The dividend is subject to taxation as ordinary income if taken in cash

According to the Uniform Simultaneous Death Act, when an insured and the primary beneficiary are killed in a common disaster and it is not known who died first, what does the policy presume?

The insured survives the beneficiary

Pamela is 34 years of age and owns a $20,000 whole life policy with a guaranteed insurability rider. At age 35, Pamela exercised her first option without proving insurability and purchased another $20,000 policy. At age 37 Pamela contacted the insurer and asked if she could exercise her next option a year early. How will the insurer respond?

The insurer informs Pamela that she cannot move up to her next option date but she may buy more insurance by proving insurability

If an applicant for life insurance intentionally misstates his age on a life insurance application, what action will the insurer take five years later when it learns of the misstatement?

The insurer will adjust the death benefit

John owns a whole life policy. If he uses the equity in it to secure a loan, which of the following is true?

The lender becomes the primary beneficiary for its interest

If a policy loan plus cash values exceed premium payments, which of the following is true?

The loan may be subjected to be taxed

Why is it that a death benefit from a life insurance contract cannot generally be paid to a beneficiary who is a minor?

The minor is not competent to control the funds

In order for a policyowner to assign his or her policy to another party, which of the following must be done?

The owner must receive written permission from the insurer