Life Insurance Policy Provisions, Options, and Riders

All of the following are Nonforfeiture options EXCEPT A Extended term B Reduced paid-up C Interest only D Cash surrender

C

How long will the beneficiary receive payments under the single life settlement option? A Until the insured's death B For a specified period of time C Until the insured's age 100 D Until the beneficiary's death

D

A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury is called A Accelerated Benefit provision. B Viatical Settlement provision. C Automatic premium loan provision. D Waiver of maturity provision.

A

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? A Fixed amount option B Interest only option C Life income with period certain D Joint and survivor

B

What limits the amount that a policyowner may borrow from a whole life insurance policy? A Premiums paid B Amount stated in the policy C Face amount D Cash value

D

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? A Waiver of premium B Incontestability period C Assignment D Automatic premium loan

D

Naming a trust as the beneficiary of a life insurance policy can accomplish all of the following for the policyowner EXCEPT A Give the policyowner flexibility in disbursing the proceeds of a death benefit. B Receive death benefits on behalf of beneficiaries who are minor children. C Allow the trustee to transfer the assets of the trust to their personal account. D Establish an account to fund the insured's children's education.

C

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? A Life income period certain B Extended term C Fixed amount D Fixed period

C

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A Length of income period B Amount of interest C Size of each installment D Predetermined length of time stated in the contract

C

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? A Paid-up additions B Dividend Accumulation option C Paid-up option D Accumulation at Interest

C

Which of the following is TRUE about a class designation? A It is not allowed. B It determines the succession of beneficiaries. C Beneficiaries are not identified by name. D Beneficiaries must be part of the insured's immediate family.

C

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the A Primary beneficiary. B Irrevocable beneficiary. C Revocable beneficiary. D Secondary beneficiary.

C

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A $0 B $200 C $9,800 D $10,000

C

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 A Reinstatement clause. B Insuring clause. C Misstatement of Age clause. D Incontestability clause.

D

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? A 1 year B 2 years C 5 years D 7 years

B

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to A Probate. B The state. C The beneficiary's estate. D The insured's estate.

D

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy? A It requires that someone who is not the primary beneficiary handles the estate. B It determines who receives policy benefits if the primary beneficiary is deceased. C It allows creditors to receive payment out of the proceeds. D It ensures the policy proceeds will be split between the primary and contingent beneficiaries.

B

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? A Assignment Rights B Owner's Rights C The Entire Contract Provision D The Consideration Clause

B

An insured and his wife are 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? A Common Disaster B Accidental Death C Survivor Life D Second-to-Die

A

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount A In lesser amounts for the remaining policy term of age 100. B Equal to the cash value surrendered from the policy. C The same as the original policy minus the cash value. D Equal to the original policy for as long a period of time that the cash values will purchase.

D

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? A Pay nothing; there was a misrepresentation on the application B Pay the full death benefit and refund excess premium C Pay a reduced death benefit D Pay the full death benefit

C

Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy? A It is optional on all life insurance policies. B It begins when the policy is delivered. C It begins when the application is signed. D It applies only to term life insurance policies.

B

Which is NOT true about beneficiary designations? A Trusts can be valid beneficiaries. B The beneficiary must have insurable interest in the insured. C The beneficiary may be a natural person. D The policy does not have to have a beneficiary named in order to be valid.

B

All of the following are true regarding insurance policy loans EXCEPT A The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies. B The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. C Policyowners can borrow up to the full amount of their whole life policy's cash value. D Policy loans can be made on policies that do not accumulate cash value.

D

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? A Children's rider B Additional insured rider C Family term rider D Spouse rider

C

According to the entire contract provision, what document must be made part of the insurance policy? A Agent's report B Outline of coverage C Copy of the original application D Buyer's Guide

C

Which nonforfeiture option provides coverage for the longest period of time? A Paid-up option B Accumulated at interest C Reduced paid-up D Extended term

C

The two types of assignments are A Complete and partial. B Complete and proportionate. C Absolute and collateral. D Absolute and partial.

C

What is the purpose of a suicide provision within a life insurance policy? A To protect the insurer from persons who purchase life insurance with the intention of committing suicide B To limit the insurer's liability after the 2 year waiting period C To deter the policyowner from committing suicide D To protect the policyowner

A

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A The policyholder has the right to withdraw the accumulations at any time. B The interest is not taxable since it remains inside the insurance policy. C The annual dividend is retained by the company. D The interest is credited at a rate specified by the policy.

B

An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the application process. What can they do? A Refuse to pay the death benefit because of the fraud B Pay a decreased death benefit C Sue for the right to not pay the death benefit D Pay the death benefit

D

What is the advantage of reinstating a policy instead of applying for a new one? A Proof of insurability is not required B The face amount can be increased C The cash values have gained interest while the policy was lapsed D The original age is used for premium determination

D

Which is TRUE about the cash surrender nonforfeiture option? A After the cash surrender, the insured is covered for a grace period of 1 month. B The policy remains active for some time after the policyholder opts for cash surrender. C The policyholder receives the original cash value of the policy. D Funds exceeding the premium paid are taxable as ordinary income.

D

Which of the following best describes fixed-period settlement option? A Only the principal amount will be paid out within a specified period of time. B The death benefit must be paid out in a lump sum within a certain time period. C Income is guaranteed for the life of the beneficiary. D Both the principal and interest will be liquidated over a selected period of time.

D