Policy provisions, riders and options
What type of insurance would be used for a Return of Premium rider? ADecreasing Term BAnnually Renewable Term CIncreasing Term DLevel Term
Increasing Term
During partial withdrawal from a universal life policy, which portion will be taxed? ACash value BPrincipal CLoan DInterest
Interest
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? AJoint and survivor BFixed amount option CInterest only option DLife income with period certain
Interest only option
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? AFixed period BFixed amount CLump sum DLife income
Lump sum
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? A$0 B$100,000 C$200,000 D$100,000 plus the total of paid premiums
$200,000
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in AAdjustment in the amount of death benefit. BNo change whatsoever. CAutomatic lapse. DRecession of the policy.
Adjustment in the amount of death benefit.
The interest earned on policy dividends is A40% taxable, similar to a capital gain. BTaxable. CNontaxable. DTax deductible.
Taxable.
Which of the following is NOT typically excluded from life policies? ADeath due to plane crash for a fare-paying passenger BSelf-inflicted death CDeath that occurs while a person is committing a felony DDeath due to war or military service
Death due to plane crash for a fare-paying passenger
Life income joint and survivor settlement option guarantees APayment of interest on death proceeds. BPayout of the entire death benefit. CEqual payments to all recipients. DIncome for 2 or more recipients until they die.
Income for 2 or more recipients until they die.
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 AInsuring clause. BMisstatement of Age clause. CIncontestability clause. DReinstatement clause.
Incontestability clause
Which of the following statements about the reinstatement provision is true? AIt permits reinstatement within 10 years after a policy has lapsed. BIt provides for reinstatement of a policy regardless of the insured's health. CIt guarantees the reinstatement of a policy that has been surrendered for cash. DIt requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? AAmount of interest BSize of each installment CPredetermined length of time stated in the contract DLength of income period
Size of each installment
What is the advantage of reinstating a policy instead of applying for a new one? AThe cash values have gained interest while the policy was lapsed. BThe original age is used for premium determination. CProof of insurability is not required. DThe face amount can be increased.
The original age is used for premium determination.
If an insured continually uses the automatic premium loan option to pay the policy premium, AThe insurer will increase the premium amount. BThe policy will terminate when the cash value is reduced to nothing. CThe face amount of the policy will be reduced by the automatic premium loan amount. DThe cash value will continue to increase.
The policy will terminate when the cash value is reduced to nothing.
Which of the following is true regarding the spendthrift clause in life insurance policies? AIt is only used when the beneficiary is a minor. BIt is the same as irrevocable settlement clause. CIt can protect the policy proceeds from creditors of the beneficiary. DIt allows the beneficiary to select a different settlement option.
It can protect the policy proceeds from creditors of the beneficiary.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? AAdjustable life BTerm life CLimited pay DUniversal life
Universal life
What is the benefit of choosing extended term as a nonforfeiture option? AIt matures at age 100. BIt allows for coverage to continue beyond maturity date. CIt can be converted to a fixed annuity. DIt has the highest amount of insurance protection.
It has the highest amount of insurance protection.
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? A$20,000 B$25,000 C$50,000 DThe face amount will be determined by the insurer.
$50,000
Which of the following is true regarding a single life settlement option? AProceeds are paid out in a lump sum. BIt provides income for a specified period of time. CIt provides income the beneficiary cannot outlive. DPayments continue until the entire principal is exhausted.
It provides income the beneficiary cannot outlive.
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? AThe insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. BThe insured's premiums will be waived until she is 21. CThe premiums will become tax deductible until the insured's 18th birthday. DSince it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected.
The insured's premiums will be waived until she is 21.
When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? AMortality costs BThe cash surrender amount COutstanding loans and interest DThe face amount
Outstanding loans and interest
Which of the following riders would NOT cause the Death Benefit to increase? AAccidental Death Rider BPayor Benefit Rider CGuaranteed Insurability Rider DCost of Living Rider
Payor Benefit Rider
Children's riders attached to whole life policies are usually issued as what type of insurance? ATerm BVariable life CAdjustable life DWhole life
term
An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do? ARefuse to pay the death benefit because of the misstatement on the application BPay a decreased death benefit CSue for the right to not pay the death benefit DPay the death benefit
Pay the death benefit
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? AHer parents' federal income tax receipts BMedical exam and parents' medical history CProof of insurability is not required. DMedical exam
Proof of insurability is not required.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? AAccumulation at Interest BCash option CReduction of Premium DAnnual Dividend Provision
Cash option
