Pre-Licensing Insurance Course Chapter 7

Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use? a. Cash surrender value b. Accumulation at interest c. Extended term d. None of the above

b. Accumulation at interest

All of the following are true regarding the reduced paid-up insurance nonforfeiture option for life insurance policies, EXCEPT: a. With the reduced paid-up insurance option, the policy may be reinstated to the original face amount within the terms of the reinstatement provision. b. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing reduced paid-up insurance. c. The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value. d. The cash values act as a single premium to purchase reduced paid-up insurance.

c. The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value.

Extended term is another option of the nonforfeiture provision. If Clarice opts to no longer pay the premiums on her $100,000 whole life policy and exchanges it for an extended term policy, what will be the face value of the term insurance policy? a. $10,000 b. $25,000 c. $50,000 d. $100,000

d. $100,000

All of the following are nonforfeiture options, EXCEPT: a. Cash surrender value b. Reduced paid-up insurance c. Accumulate at interest d. Extended term

c. Accumulate at interest

Which of the following nonforfeiture options does not allow the insured to reinstate the policy: a. None b. Extended term option c. Reduced paid-up d. Cash surrender

d. Cash surrender

What nonforfeiture option allows the policyowner to receive the policy's cash value? a. None b. Cash surrender value c. Extended term d. Reduced paid-up insurance

b. Cash surrender value

Which nonforfeiture option is the "automatic" option? a. None b. Extended term option c. Reduced paid-up d. Cash surrender

b. Extended term option

Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid? a. Assignment clause b. Nonforfeiture option c. Consideration clause d. Insuring clause

b. Nonforfeiture option

Life insurance policies that build cash value have certain guarantees, required by law, if the policyholders discontinue payment of premiums. The provision to access the cash value of the policy is called the: a. Reinstatement provision b. Nonforfeiture provision c. Settlement option d. Conversion option

b. Nonforfeiture provision

The automatic nonforfeiture option is: a. Any nonforfeiture option b. None of the nonforfeiture options are automatic c. Reduced paid-up d. Extended term

d. Extended term

The automatic dividend option is: a. Paid-up additions b. Cash payment c. One-year term d. Paid-up insurance

d. Paid-up insurance

Rick is planning on getting married next month. He currently has a $100,000 whole life participating policy. Because he is planning a family, he wants to increase his life insurance while keeping his costs down. Which of the following options would best suit his needs? a. Rick could use his dividends to purchase one-year term insurance. b. Dividends could be applied against Rick's future premium payments. c. He could allow the dividends to accumulate at interest. d. Rick could use the dividends to purchase paid-up additions.

d. Rick could use the dividends to purchase paid-up additions.

If used, this nonforfeiture option does not allow the policyowner to reinstate the original policy: a. All nonforfeiture options b. Cash surrender value c. Extended term d. Reduced paid-up

b. Cash surrender value

Which life insurance dividend option does not increase a policy's cash value? a. Cash payment b. Accumulate at Interest c. Paid-up insurance d. Paid-up additions

a. Cash payment

Which of the following is not true about the accumulation of interest dividend option? a. Dividends left to accumulate at interest are part of the policy's cash value. b. The option allows the insurer to retain the dividend. c. The dividend earns a rate of interest specified in the policy. d. Policyowner can withdraw dividend tax-free.

a. Dividends left to accumulate at interest are part of the policy's cash value.

When the extended term option is used, the face amount is: a. Equal to the original coverage b. Lower than the original coverage c. Higher than the original coverage d. The amount the cash value can purchase for the extended policy term

a. Equal to the original coverage

This dividend option provides additional permanent coverage: a. Paid-up additions b. One-year term c. Accumulate at interest d. Cash payment

a. Paid-up additions

Which dividend option allows the policyowner to use the dividend as a single premium to purchase additional face amounts of permanent coverage? a. Paid-up additions b. Paid-up insurance c. Accumulation at interest d. One-year term

a. Paid-up additions

Charlotte decides to exercise a nonforfeiture option. Which option is not available to her? a. Reduce premium payment b. Receive a lump sum of cash c. Purchase paid-up term insurance d. Purchase paid-up whole life insurance at a reduced face amount

a. Reduce premium payment

Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment? a. Reduction of premium payments b. Accumulation at interest c. One-year term d. Paid-up additions

a. Reduction of premium payments

Mr. Johnson has decided to surrender his whole life policy, and has chosen the reduced paid-up nonforfeiture policy option. How will this decision affect the cash value of his new policy? a. The cash value will continue to increase. b. The cash value will decrease over time. c. The cash value will restart at $0. d. The cash value will not change.

a. The cash value will continue to increase.

Some policies offer the policyholder the opportunity to purchase additional insurance when they get married, or have children. What is the factor that determines the rate of the additional coverage? a. The initial date of the policy b. The attained age of the insured when the additional insurance is purchased c. The exclusion of a waiver of premium rider d. The reason for wanting the additional insurance

b. The attained age of the insured when the additional insurance is purchased

Marie wants a year of extra term life insurance protection valued at $10,000. How should she use her dividend? a. Take the money from her dividend as a cash payment b. Elect the paid-up additions dividend option c. Choose the one-year term option d. None of the above

c. Choose the one-year term option

What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage? a. None b. Cash surrender value c. Extended term d. Reduced paid-up insurance

c. Extended term

Mr. George will soon receive a dividend payment on his life policy from the insurer. Which of the following is NOT an option available to Mr. George pertaining to receipt of his dividend? a. He may use the dividend to purchase additional insurance. b. He may allow the dividends to accumulate and earn interest. c. He may apply the dividends to overdue premiums from past years. d. He may use the dividends to reduce his premiums for the next year.

c. He may apply the dividends to overdue premiums from past years.

Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value? a. Insuring clause b. Settlement option c. Nonforfeiture option d. Dividend option

c. Nonforfeiture option

What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value? a. Extended term b. Cash surrender value c. Reduced paid-up insurance d. None

c. Reduced paid-up insurance

Which of the following is not a dividend option? a. Reduction of premium payments b. Paid-up additions c. Reduced paid-up insurance d. Cash payments

c. Reduced paid-up insurance

Jenny has a rated whole life insurance policy. Which nonforfeiture option(s) may she select? a. Cash only b. Reduced paid-up or extended term c. Reduced paid-up or cash d. Reduced paid-up only

c. Reduced paid-up or cash

Life insurance policies that pay dividends are referred to as "participating policies". Participating policies pay dividends to policyholders. Which of the following is a true statement about dividends? a. Dividends are not taxable. b. Dividends are usually paid on an annual basis. c. Dividends are actually a return of overcharged premiums. d. All of the above

d. All of the above