Life Insurance
The suicide exclusion provision of a typical life insurance policy excludes coverage if death is the result of suicide within:
2 years following policy issue
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?
6 months
All the following are standard life insurance policy exclusions EXCEPT:
6-month legal action limit provision
All the following statements about term life insurance are correct EXCEPT:
A small cash value gradually accumulates while the policy is in force.
Which statement regarding life insurance accelerated benefits is correct?
An accelerated benefit rider pays out part or all of the policy's face value while the insured is still living.
Which of the following statements regarding the accidental death benefit (ADB) rider to a life insurance policy is correct ?
Benefits are payable under the accidental death benefit rider only if the insured dies as the direct result of an accident.
Which of the following employees of ABC Computers could NOT convert their group life coverage to an individual policy?
Bill, who is on long-term disability this month
Which statement about converting coverage under a children's term rider is correct?
Conversion is possible even if the child is uninsurable, and the converted policy coverage amount may be greater than the amount provided under the rider.
Which one of the following statements most correctly describes how interest-sensitive whole life and current assumption whole life insurance differ?
Current assumption policies guarantee minimum cash values while interest-sensitive policies do not guarantee a minimum cash value.
All the following statements regarding life insurance policy dividends are correct EXCEPT:
Dividends are guaranteed.
Donna, age 40, buys a $200,000 straight whole life policy. On the same date, Kara, age 40, buys a $200,000 20-pay life policy. Which of the following statements is correct?
Kara's policy will build cash value quicker than Donna's policy while she is paying premiums, but once premiums stop, cash value growth will slow down.
Which statement regarding adjustable life insurance is correct?
Premiums can increase or decrease to suit the policyowner's changing needs.
Which statement about credit life insurance is most correct?
State laws typically set a maximum coverage limit that creditors can offer to borrowers.
If an insured qualifies for and takes an accelerated benefit from a life insurance policy, which of the following accurately describes the impact this will have on the death benefit?
The death benefit is reduced by the amount of the accelerated benefit payment and may be further reduced to cover lost interest.
Which one of the following statements about variable life insurance is correct?
Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account.
Which one of the following statements about variable life insurance is correct?
With a variable life insurance policy, the policyowner assumes most of the investment risk
Tax law considers any limited payment life insurance policy that is paid-up in seven years or less to be which of the following?
a modified endowment contract
A "jumping juvenile" whole life insurance policy typically increases its face amount when the insured reaches:
age 21
Variable life and variable universal life insurance are similar in all of the following ways EXCEPT:
Both require fixed, set premiums.
What does the life insurance company do upon an insured's death if there is a collateral assignment attached to the insured's policy?
The insurer pays the collateral assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary.
All the following are types of riders that are available with most types of life insurance policies EXCEPT:
guaranteed dividend rider
Regarding policy dividend options, the so-called "fifth dividend option" involves the purchase of:
one-year term life insurance equal to the base policy's cash value or the amount that the dividend can purchase
What type of life insurance policy distributes its divisible surplus to policyowners in the form of policy dividends?
participating policy
The automatic premium loan (APL) provision does which of the following?
prevents a life insurance policy from lapsing if the policyowner fails to pay a premium
Most disability income benefit riders also include which of the following?
provision for a waiver of premium
The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner:
renew the policy at lower current rates rather than guaranteed renewal rates
What is the maximum amount of time most states allow insurers to delay paying cash surrender values?
six months
A rider that waives all monthly deductions from a UL policy's cash value but credits nothing to the cash value if the insured becomes totally disabled is called a:
waiver of monthly deductions rider
Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own?
graded premium whole life
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?
life income with period certain
The amount of coverage provided by a children's term life rider is usually:
limited to a modest flat dollar amount or a small percentage of the base policy's face amount
Under which of the following settlement options does the insurer distribute all the proceeds upon the death of the insured or surrender of the policy, with none held by the insurer?
lump-sum cash payment
Bill recently purchased an indeterminate premium whole life insurance policy. Which one of the following statements about his policy is correct?
Bill's policy was issued with a low introductory premium that may periodically increase over time, but which will never be higher than a guaranteed maximum rate.
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.
If a policyowner partially surrenders an adjustable life insurance policy, which of the following happens to the policy's premium?
It goes down
Which of the following statements regarding the life insurance return of premium rider is correct?
It pays the policyowner a sum equal to all or a portion of the premiums paid if the insured is alive at the end of the policy term..
Nicole, age ten, is the insured in a traditional "jumping juvenile" policy with a $5,000 face amount. When she reaches age 21, what will most likely happen to the policy's face amount?
It will increase to $25,000.
Melissa asks to continue her lapsed universal life insurance policy under the extended term option. How will the insurance company respond?
It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash or let the policy continue without premiums until the cash value can no longer cover monthly deductions.
In a current assumption whole life policy, what happens to premium rates if an insurer earns more on its investments than was factored into the premium calculation?
Premiums decrease to a new rate supported by the actual investment experience.
Henry owns a variable universal life insurance policy. He has put half of his premiums in the fixed account, 25 percent in a growth stock fund subaccount, and 25 percent in a bond fund subaccount. With respect to this policy, all the following statements are correct, EXCEPT:
The insurance company bears the investment risk for the amounts invested in the variable subaccounts.
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.
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 pays the proceeds, either in a lump sum or under one of the other settlement options.
Which of the following will happen if the outstanding balance of a whole life insurance policy loan, including accrued interest, ever exceeds the policy's cash value?
The insurer will cancel the policy.
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 the death benefit after first deducting the unpaid premium and any unpaid policy loans.
The convertibility provision of a term life policy lets the owner convert the term coverage into what type of policy?
a permanent life insurance policy
Jones is the policyowner and insured of a life insurance policy that contains a standard suicide provision. He commits suicide 18 months after the policy was issued, Jones's beneficiary will get which of the following from the insurer?
a return of premiums paid, plus interest
Life insurance settlement options are best described as which of the following?
alternative ways that a policyowner or beneficiary can choose to receive life insurance policy proceeds
Under the integrated long-term care option, the beneficiary receives the remainder of the face amount as the death benefit at the insured's death. In this way, the long-term care integrated option is similar to which of the following?
an accelerated benefits rider
All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT:
The paid-up policy will not build any more cash value.
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 lapses.
Andrea bought a $300,000 term-to-age-55 policy. All the following statements about her policy are correct EXCEPT:
The policy will generate a cash value that is payable at age 55.
Which of the following doubles or triples the benefits if the insured dies as the direct result of an accident?
accidental death benefit (ADB) riders
Under a family term rider to a life insurance policy, children who are covered under the rider can typically convert their coverage to permanent coverage as early as:
age 21, without having to provide evidence of insurability
Under standard exclusions, most insurers would deny coverage of which of the following?
someone serving as an aircraft crew member
Which type of life insurance company pays taxable dividends to its stockholders?
stock company
When underwriting a group life insurance policy, which of the following does the underwriter look at?
the group as a whole
What is the primary difference between a revocable and an irrevocable beneficiary?
the policyowner's ability or inability to change the beneficiary designation
In the purchase of a life insurance contract, the applicant's consideration consists of:
the signed application and the first premium
Under a survivorship life insurance policy, when does the insurer pay the death benefit?
upon the death of the insured who dies second
All the following statements regarding the "spendthrift clause" of a life insurance policy are correct EXCEPT:
The spendthrift clause keeps beneficiaries from claiming any death benefits until the insurer checks their personal and business credit histories.
Endowment contracts are NOT considered life insurance (for tax purposes) because:
They endow before age 120.
Billy, age 10, is insured under a juvenile life insurance policy purchased by his father, who pays the premiums. Which of the following would ensure that the insurance stays in force if the father dies or becomes disabled?
payor benefit rider
If a variable universal life policyowner chooses death benefit Option 3, what will the guaranteed minimum benefit equal?
the policy's net amount at risk plus the greater of total premiums paid or the policy's cash value
With respect to life and health insurance policies, the term "modal premium" generally refers to
the policy's premium amount for each of several different premium payment frequencies
With a joint life insurance policy, which of the following best describes the coverage continuation option available to the surviving insured upon the death of the first insured?
The surviving insured may buy an individual policy with the same or a lesser face amount, without having to provide evidence of insurability.
Which of the following statements is correct if a labor union buys a group life insurance policy to insure its members?
The union owns the policy for the benefit of its members.
Which one of the following statements about indexed whole life insurance is correct?
There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other.
Which of the following best describes a partial surrender of a permanent (non-universal) life insurance policy?
Under a partial surrender, the death benefit is reduced proportionately by the amount of the surrender.
All the following statements about life insurance policy riders that cover additional insureds are correct EXCEPT:
Each additional insured is issued his or her own separate policy.
All the following statements regarding the disclosure that must be made with accelerated benefits riders are correct EXCEPT:
Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested.
