Licensing Prep
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
Automatic premium loan
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
An insured and his wife both involved in a head-on collision. The husband dies instantly and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?
Common Disaster
According to the entire contract provision, what document must be part of the insurance policy?
Copy of the original application
A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?
Cost of living rider
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 the cash values will purchase
Which nonforfeiture option has the highest amount of insurance protection?
Extended term
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income
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 rider
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
Incontestability clause
Which of the following policy components contains the company's promise to pay?
Insuring clause
The policyowner 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 policyowner choose?
Interest only option
What is the purpose of a free-lock period in insurance policies?
It allows the insured to reject the policy with a full refund
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection
The settlement option which pays throughout the lifetime of two or more beneficiaries is called
Joint and survivorship
Which two terms are associated directly with the premium?
Level or flexible
Regarding the free-look provision, the insurance company
Must allow the policyowner to return the policy for a full refund
Using a class designation for beneficiaries means
Naming beneficiaries as a group
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One-year term option
A rider attached to a life insurance policy that provides coverage on the insured's family member is called the
Other-insured rider
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?
Paid-up option
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced faced amount
The paid-up addition option uses dividend to
Purchase a smaller amount of the same type of insurance as the original policy
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
The ownership provision entitles the policyowner to do all of the following EXCEPT
Set premium rates
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?
Term rider
Nonforfeiture values guarantee which of the following for the policyowner?
That the cash value will not be lost
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination
Which of the following statements is TRUE concerning irrevocable beneficiaries?
They can be changed only with the written consent of that beneficiary
An absolute assignment is a
Transfer of all ownership rights in a policy
When may an insurance company use suicide as a defense against paying a death claim?
When death occurs within a specified period of time after the policy was issued