Life Insurance Licensing Chapter 3

All of the following are dividend options EXCEPT

Fixed-period installments

Which of the following premium payment modes will incur the lowest overall payment?

Annual

What provision in an insurance policy extends coverage beyond the premium due date?

Grace period

Which of the following statements is TRUE about a policy assignment?

It transfers rights of ownership from the owner to another person

Which of the following settlement options in life insurance is known as straight life?

Life income

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider

Which of the following is true of a children's rider added to an insured's permanent life insurance policy?

It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age

Which is NOT true about beneficiary designations?

The beneficiary must have insurable interest in the insured

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

The contingent beneficiary

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy?

The full death benefit

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

The insured's age at death

All of the following are true regarding the guaranteed insurability rider EXCEPT

This rider is available to all insureds with no additional premium

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 interest earned on policy dividends is

Taxable

A policy owner fails to pay the premium 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

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months

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

An insured purchased a life policy in 2010 and dies in 2017. The insurance company discovers at that time that the insured had concealed information during the application process. What can they do?

Pay the death benefit

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he want to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option

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 face amount

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

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

Proof of insurability is not required

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy?

Substitute insured rider

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

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