Life Insurance 3

Sue's annual premium is $1,500 and the declared dividend was $200. If Sue chooses the premium reduction dividend option, she will receive a premium notice for which of the following? $200 $1,300 $1,500 $1,700

$1,300

If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium? It increases. It stays level. It goes down. It fluctuates up and down thereafter.

It goes down.

Mary lost her job on June 15. She wants to convert her group life insurance policy to an individual policy. To do so, Mary must apply for a conversion policy by: June 30 December 15 July 16 September 15

July 16

Life insurance settlement options are best described as which of the following? alternative ways a creditor of the beneficiary may force an insurance company to pay it some or all of a policy's death benefit alternative ways that an insurance company may choose to pay out a policy's death benefit alternative ways that a policyowner or beneficiary can choose to receive life insurance policy proceeds alternative ways a life insurance company can be forced to pay a contested death benefit claim

alternative ways that a policyowner or beneficiary can choose to receive life insurance policy proceeds

An endowment policy matures (endows) when its cash value equals its face amount, which may be: at almost any age no earlier than the insured's age 120 only between ages 95 and 120 no earlier than the insured's age 95

at almost any age

Jerry asks his insurance company to pay him the cash value of his permanent life insurance and cancel the policy. Jerry is using which of the following nonforfeiture options? cash surrender option policy loan and withdrawal provision extended term option reduced paid-up insurance option

cash surrender option

Which one of the following would a state NOT permit as a life insurance policy exclusion? death resulting from suicide in the first couple policy years death resulting from a plane crash in which the insured was a fare-paying passenger death resulting from the insured's hobby death directly resulting from war

death resulting from a plane crash in which the insured was a fare-paying passenger

What is the standard life insurance policy suicide exclusion period? four years one to two years 18 months three years

one to two years

Which of the following is NOT a standard life insurance nonforfeiture option? policy loans extended term insurance cash surrender reduced paid-up insurance

policy loans

A policyowner who lapses his whole life policy and applies its cash value to buy paid-up whole life coverage has chosen which of the following? extended term option cash surrender option reduced paid-up option cash surrender and withdrawal provision

reduced paid-up option

Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's daughter from a previous marriage, Sue, is not a beneficiary. Reggie and Mary are in a car accident in which Reggie dies instantly and Mary survives for three days before dying from accident-related injuries. Under the policy's common disaster clause, to whom will the policy's death benefit be paid? Carl Reggie's estate Mary Sue

Carl

Under the interest-only life insurance settlement option, what happens to the death benefit proceeds at the end of the payment period (or upon request by the beneficiary)? The insurer keeps the interest, thus increasing the death benefit amount. The insurer pays the proceeds to the beneficiary. The insurer pays the proceeds in a lump sum. The insurer pays the proceeds, either in a lump sum or under one of the other settlement options.

The insurer pays the proceeds, either in a lump sum or under one of the other settlement options.

What is credit life insurance designed to cover? an association member's life the creditor's life the borrower's life an employee's life

the borrower's life

Life insurance waiver of premium riders most commonly require the insured to be disabled for a waiting period before premiums will be waived. How long is the typical waiting period? 12 weeks 10 months 6 weeks 6 months

6 months

If an insured dies during her life insurance policy's grace period without having paid her premium, what is the insurance company's obligation? The insurer will pay only the policy's cash surrender value. The insurer will cancel the policy and pay nothing. The insurer will pay the full death benefit. The insurer will pay the death benefit after first deducting the unpaid premium and any unpaid policy loans.

The insurer will pay the death benefit after first deducting the unpaid premium and any unpaid policy loans.

When underwriting a group life insurance policy, which of the following does the underwriter look at? the group as a whole the health status of specific members the health status of the group's older members only the health status of the group's youngest members only

the group as a whole

With certain limitations, a policyowner may change all of the following in a life insurance policy, EXCEPT: the beneficiaries the policyowner the mode of premium payment the incontestability provision

the incontestability provision

The basic agreement between the insured and the company, stating the company's promise to pay the policy's face amount (the death benefit) to the named beneficiary, is contained in which part of the life insurance policy? the entire contract provision the insuring clause the incontestability clause the application

the insuring clause

Regarding life insurance policy dividend options, which of the following types of life insurance is purchased under the paid-up additions option? one-year term life insurance level premium term life insurance level premium whole life insurance single premium life insurance

single premium life insurance

What happens when a universal life insurance policy's cash value no longer covers the monthly deductions to cover the policy's insurance and operational costs? The policy is surrendered for cash. The policy lapses. The policy goes on the reduced paid-up option. The policy goes on the extended term option.

The policy lapses.

Under the settlement option that Gary and Fran chose for their father's life insurance, they receive monthly payments until the second payee (survivor) dies. At that point, income payments stop. What option have Gary and Fran chosen? life income with period certain joint and survivor life income straight life income settlement option life income with refund

joint and survivor life income

Settlement options that effectively work like an annuity by providing income payments the payee cannot outlive are called which of the following? fixed period settlement options period certain income options fixed amount settlement options life income options

life income options

As beneficiary of her husband's life insurance, Beth chooses to receive payments for life. However, she is guaranteed that the payments will be made for ten years. Beth has chosen which of the following? joint and survivor life income life income with period certain life income with refund straight life income settlement option

life income with period certain

Policyowners can withdraw the interest earnings on their dividends or allow the interest to continue to accumulate. In either case, how is the interest treated for income tax purposes? The dividend itself is generally tax free but the interest earned on the dividend is reported as taxable income in the year credited. The interest earned is not taxable. The interest earned is not tax free, but it is tax deferred. The interest earned on the dividend is taxable if withdrawn, but if paid out as part of the death benefit it is income tax free.

The dividend itself is generally tax free but the interest earned on the dividend is reported as taxable income in the year credited.

Which of the following statements regarding association group life is correct? The association and its members must share premiums. The association must pay all of the premiums. The insured members are the policyowners. There must be a minimum of ten association members enrolled in the plan.

There must be a minimum of ten association members enrolled in the plan.

All the following statements regarding the automatic premium loan (APL) are correct, EXCEPT: The policy's cash value must be at least equal to the unpaid premium for the automatic premium loan to be made. Some policies prohibit automatic premium loans from paying any more than a total of 12 monthly premiums. Under the APL, a policy loan is created to pay a premium on its due date. Some policies prohibit automatic premium loans from paying consecutive premiums.

Under the APL, a policy loan is created to pay a premium on its due date.

With a variable life insurance policy, policy loans can be as high as: 100 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy 50-75 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy

75-90 percent of the cash value, less any outstanding debt against the policy

Which of the following explains why a traditional waiver of premium rider does not work with a universal life insurance policy? Premium payments can be occasionally missed with a universal life insurance policy, whereas they cannot be skipped with a traditional life insurance policy. Expense and mortality charges for a universal life policy are unbundled from the premium, whereas for traditional life insurance policies they are bundled into the premium. Universal life insurance policies have more administrative expenses than traditional life insurance policies. Premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies.

Premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies.

Which of the following correctly describes the two basic categories of life insurance settlement options? straight life and survivorship those without a life contingency and those with a life contingency period certain and refund fixed period and fixed amount

those without a life contingency and those with a life contingency

With a traditional whole life insurance policy, policy loans can be as high as: 100 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 50-75 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy

100 percent of the cash value, less any outstanding debt against the policy

The suicide exclusion provision of a typical life insurance policy excludes coverage if death is the result of suicide within: 3 years following policy issue 6 months following policy issue 2 years following policy issue 1 year following policy issue

2 years following policy issue

All the following statements about life insurance settlement options are correct EXCEPT: Available settlement options are listed in the insurance policy. All settlement options include a life contingency. A life insurance policy's death benefit can be paid out or settled in many different ways at the death of the insured. The policyowner or beneficiary can determine these options.

All settlement options include a life contingency.

Mary pays for her life insurance with an annual premium. However, she is thinking of switching to a monthly premium mode. Which of the following best describes the consequence if she changes her mode to a monthly premium? Mary will end up paying the same amount as if she had continued paying annual premiums. Mary will end up paying less over time than if she continued paying annual premiums. There is no way of determining how much more or less Mary will be paying by increasing the frequency of her premium payments without knowing her age. Mary will end up paying more over time than if she continued paying annual premiums.

Mary will end up paying more over time than if she continued paying annual premiums.

Which of the following most accurately describes who can be a life insurance policy beneficiary? It can be virtually any person or entity the policyowner chooses. The beneficiary must have an insurable interest in the insured. The beneficiary can be anyone as long as it is a natural person. The beneficiary must be a blood relative of the insured.

It can be virtually any person or entity the policyowner chooses.

Which of the following correctly describes the disability income benefit rider available with life insurance policies? A disability income benefit rider distributes the policy's death benefit in the form of monthly payments if the insured becomes disabled. A disability income benefit rider pays a monthly income equal to the policy premium if the insured becomes disabled. A disability income benefit rider distributes the policy's cash value in the form of monthly payments if the insured becomes disabled. It pays a monthly income determined by a formula specified in the policy if the insured becomes disabled, without impacting the policy's cash value or face amount.

It pays a monthly income determined by a formula specified in the policy if the insured becomes disabled, without impacting the policy's cash value or face amount.

The facility of payment clause of a life insurance policy, allowing an insurance company to determine who should receive a death benefit payment if a valid beneficiary is not available, could be applied in all the following situations EXCEPT: The insurer learns, when paying the claim, that the sole designated beneficiary had no insurable interest in the insured at the time of death. The sole beneficiary dies before the policyowner and the policyowner did not name a contingent beneficiary. The sole beneficiary is a minor at the time of the insured's death. The sole beneficiary is a charitable organization that no longer exists at the time of the insured's death.

The insurer learns, when paying the claim, that the sole designated beneficiary had no insurable interest in the insured at the time of death.

Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work? The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed. The trust passes the insurance benefit to Jerry's next of kin. A trust cannot be a beneficiary; Jerry must name an individual or business. The trustee invests the insurance benefit in securities.

The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed.

Why do endowment contracts not enjoy the same favorable tax treatment as life insurance? Their cash values equal the contract's death benefit when the policy is issued. They do not pay benefits if the insured dies before the contract matures. They do not build cash values. They mature before age 120.

They mature before age 120.

Why do most insurers require a waiting period of four to six months before the disability income benefit rider begins payments? They must meet federal disability waiting period requirements. They want to eliminate disability income rider claims by letting disabled insureds die before qualifying for benefit payments. They want to get at least six months of insurance premiums before they pay for the disability. They want to control claims by eliminating claims for short-term disabilities.

They want to control claims by eliminating claims for short-term disabilities.

Regarding policy dividends, which type of insurance is used with the so-called fifth dividend option? one-year term life insurance renewable term insurance extended-term insurance one-year permanent insurance

one-year term life insurance

For any given life policy death benefit amount, which of the following settlement options generally provides the largest monthly income to the payee? life income with refund straight life income settlement option joint and survivor life income life income with period certain

straight life income settlement option

Wilson buys life insurance but commits suicide three years later. Wilson's beneficiary will get which of the following from the insurer? a return of the premiums paid the full death benefit a return of premiums paid, plus interest nothing

the full death benefit