2. Life Policy Provisions, Riders and Options QUIZ

Question 6 of 15 Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? A The wife of the deceased insured B The former wife of the deceased insured C A minor son of the insured D A business partner of the insured ​

Correct! C A minor son of the insured Because a minor does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee.

Question 5 of 15 When may an insurance company use suicide as a defense against paying a death claim? A Only when there was a witness to the event B At any time suicide can be proven C At no time D When death occurs within a specified period of time after the policy was issued ​

Correct! D When death occurs within a specified period of time after the policy was issued An insurance company can deny a claim if the death of the insured was by suicide and occurred within a time specified in the policy.

Question 10 of 15 What limits the amount that a policyowner may borrow from a whole life insurance policy? A Cash value B Premiums paid C Amount stated in the policy D Face amount

A Cash value The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest.

Question 7 of 15 What kind of policy allows withdrawals or partial surrenders? A Term policy B Variable whole life C Universal life D 20-pay life ​

Correct! C Universal life Universal Life products allow the partial withdrawal, or surrender, of the policy cash value.

Question 3 of 15 A rider attached to a life insurance policy that provides coverage on the insured's family members is called the A Juvenile rider. B Payor rider. C Other-insured rider. D Change of insured rider. ​

C Other-insured rider. The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance.

Question 9 of 15 When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? A The insurance company B The insured's estate C The primary beneficiary's estate D The insured's contingent beneficiary ​

D The insured's contingent beneficiary Under the Uniform Simultaneous Death Law, the law will assume that the beneficiary dies first in a common disaster. This provides that the proceeds will be paid to the contingent beneficiary or to the insured's estate if none is designated.

Question 1 of 15 Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean? A The beneficiary will receive the lump sum, plus interest. B The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. C The beneficiary will only receive payments of the interest earned on the death benefit. D The beneficiary must pay interest to the insurer. ​

With the Interest Only settlement option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals (monthly, quarterly, semiannually, or annually).

Question 4 of 15 Which type of beneficiary is changeable at any point? A Revocable B Contingent C Primary D Irrevocable ​

Correct! Revocable beneficiaries can be changed at any point. Irrevocable beneficiaries must give permission to the policyowner in order for the beneficiary to be changed. The terms "primary" and "contingent" refer to succession of beneficiaries.

Question 15 of 15 When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? A The face amount B Mortality costs C The cash surrender amount D Outstanding loans and interest ​

D Outstanding loans and interest Correct! To calculate the loan value an insured may take out of the variable life insurance policy, any unpaid loans and interest must be subtracted from the policy's cash value.

Question 8 of 15 Children's riders attached to whole life policies are usually issued as what type of insurance? A Variable life B Adjustable life C Whole life D Term ​

D Term - Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age.

Question 2 of 15 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. How much will the beneficiary receive from the policy? A $0 B $100,000 C $200,000 D $100,000 plus the total of paid premiums ​

C $200,000 The beneficiary will most likely receive twice the face value of the policy, since the insured's fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

Question 13 of 15 Which of the following statements is TRUE about a policy assignment? A It authorizes an agent to modify the policy. B It transfers rights of ownership from the owner to another person. C It is the same as a beneficiary designation. D It permits the beneficiary to designate the person to receive the benefits. ​

Correct! B It transfers rights of ownership from the owner to another person The policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment).

Question 11 of 15 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? A Single life B Fixed-amount C Life income with period certain D Joint and survivor

C Life income with period certain The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.

Question 12 of 15 An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? A The insurer will not permit the policyowner to take out any more loans. B The policy will be reduced to an extended term option. C The policy will terminate when the loan amount with interest equals or exceeds the cash value. D The insurer will increase the interest rate on the loan and charge a penalty.

C The policy will terminate when the loan amount with interest equals or exceeds the cash value. In most policies, failure to pay back a loan will result in termination of the policy if the total amount of the loan and accrued interest equals the cash value.

Question 14 of 15 The paid-up addition option uses the dividend A To purchase a one-year term insurance in the amount of the cash value. B To reduce the next year's premium. C To accumulate additional savings for retirement. D To purchase a smaller amount of the same type of insurance as the original policy.

D To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.