Policy options quiz

If a $50k policy with a $10k policy loan is converted to extended term insurance the face amount of the new policy will be

$40k

Shawn takes out a $5k loan against his $100k whole life insurance policy. Shortly thereafter, he chooses to convert the policy using the extended term option. What will the face value of the term insurance?

$95k

Interest only settlement option

- Earned interest and policy proceeds are paid over a specific period of time - The beneficiary receives the interest on the proceeds from the insurer - The policy proceeds are paid in equal installments over a stated number of months or years

Paid up additions purchased with dividends

- The premium for paid up additions is based on insured's attained age - Permanent insurance - Less expensive to issue than the original policy

Factors in determining the amount of beneficiary will receive each time a payment is made under the fixed period option

- The principal amount - The interest earned on principal - The length of time payments are to be made

Which of the following dividend options is least likely to be used on a policy issued today

Accelerated endowment

What is the latest point at which whole life insurance policies are required to have some amount of cash value in most states?

At the end of the 3rd policy year

Carmen has selected to receive $10k per month until the principal and interest on her husband's life insurance policy have been paid out. Carmen has selected the

Fixed amount option

Emily has chosen to receive the payout from her husband's life insurance policy so that she will receive an income for the next 15 years. At the end of that time, the entire proceeds from the policy will have been paid out. Emily has selected the

Fixed period option

Jim has selected to receive only the interest from his mother's life insurance policy. When Jim dies, his children will receive the lump-sum benefit in addition to the benefit from his life insurance policy. Jim has selected the

Interest only option

Ken is receiving interest-only payments on the settlement of his father's life insurance policy. If Ken dies before the lump sum is pad to him, what happens to the balance of the money?

It's paid to any contingent beneficiary named in the original policy, or if there is no contingent beneficiary, it is paid to Ken's estate

The settlement option chosen by couples who want to make sure that income payments continue for as long as either one lives is called

Join and survivor life income option

Walter is the beneficiary of his mother's life insurance policy. He wants to make sure the proceeds will last not only as long as he lives but also as long as his wife is alive. Walter should select the

Joint and survivor life income option

Heath has chosen to receive the payout from his wife's life insurance policy in such a way that he will have income for the remainder of his life, regardless of how long he lives. Heath has selected the

Life income option

What doesn't affect the payment of dividends?

Morbidity

Carl has not selected a dividend option for his nonparticipating policy. What happens to his dividends?

No dividends are paid

The fixed period settlement option pays

Proceeds divided up to be paid out in equal installments over a chosen number of years

Thomas has chosen to receive the settlement from his wife's $100k life insurance policy according to the life income option. Under the option he chooses, he will receive an income for his life and his daughter will receive payments if he dies before receiving $100k in income. Thomas selected a

Refund annuity option

What isn't a factor in determining the length of time the beneficiary will receive payments under the fixed amount option?

The capital amount

Which of the following statements about paid-up additions true?

The dividends are used to purchase additional insurance protection

Ann quits paying premiums on her whole life policy that has been in effect for 17 years. She doesn't select a nonforfeiture option. What happens to the cash value in her policy?

The insurer will issue a paid-up term insurance policy with the same face value as the policy with a term as long as the cash value will purchase

What isn't true about reduced paid-up insurance option?

The new protection is for the same amount as the original policy

What is fixed under the fixed amount option?

The number of dollars in each payment

Tina has a whole life insurance policy on her life that has been in effect for 15 years. Tina and her husband review their insurance coverage and decide that this policy, which was purchased before their marriage, is no longer necessary for their financial future. If Tina decides to stop paying the premiums, what will happen?

The policy will lapse, and Tina will be able to select a nonforfeiture option to receive value for the cash value built up in the policy

Under the settlement option amir has chosen, he will receive payments as long as he lives, but if he dies before his payments total the full amount of the original proceeds, payments will continue to his beneficiary until the total is paid out. The settlement option Amir has chosen is called

The refund annuity option

In most states, a whole life policy must have at least a small cash value by the end of the policy's

Third year

Why did insurance companies develop settlement option?

To avoid problems for beneficiaries who might be unprepared or unable to wisely handle a lump-sum settlement

Nonforfeiture options become operative when

a policy lapses

If the policy owner has not selected a nonforfeiture option, the one that usually goes into effect automatically is

extended term

A reduced paid up policy issued under a nonforfeiture option

has growing cash values

What dividend option is available on nonparticipating policies?

none

The settlement option that pays benefits for as long as the beneficiary lives is

the life income option