AD Banker Chapter 4 Quiz

What will cause the time period of the fixed amount settlement option to be extended?

An increase in interest credited

When is the earliest a beneficiary designation can be made?

At the time of policy application

All of the following are nonforfeiture values, except:

Automatic Premium Loan

The cash received by the policyowner when he/she terminates a policy is known as what?

Cash Surrender Value

Which of the following is TRUE concerning reinstatement of a life insurance policy?

Companies have the right to require medical examinations

The _________ clause states what each party exchanges in the contract.

Consideration

If the policyowner specifies the time over which all settlement option installments are to be paid, he/she has chosen which Settlement Option?

Fixed Period

Which of the following is FALSE about the Automatic Premium Loan Provision (APL)?

For it to be included in the policy, there is an additional premium charge

Which of the following statements regarding life insurance policy exclusions is TRUE?

Generally, aviation is excluded, except for fare-paying passengers on a commercial flight

Failure to repay a loan or loan interest will void a life insurance policy:

If the total amount due equals or exceeds the policy's cash values

The ______________ clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force.

Insuring

If a beneficiary has the choice and is interested in capital conservation, then which of the following settlement options should be chosen?

Interest Only

All of the following are TRUE about the Automatic Premium Loan (APL) Provision, except:

It is available on any type of life insurance policy

Tom is the beneficiary and is concerned about both running out of money during his lifetime and at the same time leaving funds behind to the insurer. Looking for some time period guarantee, Tom should consider the _________ settlement option.

Life with Period Certain

What is the additional premium cost to have the automatic premium loan provision included in a permanent policy?

Nothing

Frank has a life insurance policy in which he chooses to have the dividends increase the death benefit. Which Dividend Option did he select?

Paid-Up Additions

Which of the following is not a way to access the money accumulated in a traditional ordinary permanent life insurance policy?

Partial surrender

A misstatement of an insured's age was not discovered until after the insured died. The policy had been in effect for 3 years. What will the insurer do to address this situation?

Pay benefits based on what past premiums would have purchased at the correct age

f an insured dies during the policy's grace period, the insurer will:

Pay the death benefit, less the amount of premium due

All of the following are TRUE of Policy Loan Rate provisions, except:

Policies with fixed interest loan rates have a maximum interest rate of 10%

Beth owns a 20-Pay Life participating policy. She has decided that the dividends should be applied toward future premiums. Which Dividend Option did she choose?

Premium Reduction

When does a change in beneficiary take effect?

The date the policyowner signs the request to change the beneficiary

All of the following can determine the death benefit settlement option, except:

The insurer

What is the main purpose of backdating a policy?

To save age

Contractual provisions explain all of the following, except:

Where the premium is going to come from

B's policy had a $1,000 annual premium. B has not paid it for 2 years and wants to put the policy back in force. The insurer charges 10% interest on overdue premiums. How much will B have to pay to have coverage once again?

$2,200

K has a $50,000 traditional whole life policy in force with $25,000 of cash values. Her outstanding loan and loan interest total $5,000. If K surrenders the policy, K will receive:

$20,000

Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy when it has $15,000 of cash value and exercise the Extended Term Option. Ted's term benefit will be:

$50,000

Albert owned a $100,000 policy that had accumulated a cash value of $20,000, against which he had borrowed $10,000. If he dies with this loan outstanding, his beneficiary will receive which of the following amounts?

$90,000

The time limit to bring legal action against an insurer cannot be less than _______ after the act occurs.

12 months

If overdue premiums are not paid by the end of the grace period, a traditional whole life policy will automatically:

Become extended term

If the insured dies while the _______ period is in effect, the death benefit paid is the face amount, minus the premiums due.

Grace

The _________ is the time period provided after the premium due date before a policy lapses.

Grace period

All of the following must be included in a whole life policy, except:

Guaranteed dividend table

Life insurance benefits are usually paid ____________, unless another mode of settlement has been selected.

In a lump sum

A life insurance policy lists the names of 3 people as primary beneficiaries. Other than listing the person's names, which of the following is the most important next step?

Indicate what percentage of the death benefit each is entitled to receive

Albert, as the owner of a life insurance policy insuring his son David, wants a Settlement Option that, if David were to die, would provide guaranteed payments to Albert and his wife Lois, until both of them die. Albert should choose:

Life Income Joint and Survivor

If an insurer is successful in challenging the claim on a life insurance policy, what happens next?

The insurer refunds all premiums received

Maria's policy was issued with an incorrect age. She was actually older than what was listed in the policy. Which of the following will the insurer most likely do if she had died 5 years after policy issue, but prior to this discovery?

The insurer would pay out a reduced benefit in proportion to the underpayment of premium

Which of the following is TRUE regarding payment of premium?

The more frequent the payment, the greater the overall cost

Which of the following is responsible for paying the premiums due on a life insurance policy?

The policyowner

Which of the following statements about policy dividends is TRUE?

There are several dividend options to choose from

By law, what happens to any values remaining in a life insurance policy when it lapses due to non-payment of premiums?

They are the property of the owner and cannot be forfeited

How long, typically, is the reinstatement period from policy lapse?

3 years

Typically, how many days can elapse before an overdue premium will cause a policy to lapse?

30

Tom elects the Life Income with 10-year Period Certain settlement option. Tom dies in year 6. The beneficiary receives payments for _______.

4 years

When a life insurance policy's ownership is changed from the original owner to a new owner without payment, this is known as a(n) ___________.

Absolute Assignment

Sylvia was the insured and owner of a policy that named her husband as the beneficiary. Upon her husband's death, she decided to change the beneficiary designation to her best friend since she has no close living relatives. The insurance company will:

Accept the beneficiary change

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds?

Alice's estate

Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage?

Automatic Premium Loan

Which of the following provisions is NOT a standard provision?

Backdating

Which of the following is FALSE regarding Settlement Options?

Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary

A beneficiary receives ample income each month from the interest earned while the insurance company retains the principal. This is referred to as which of the following?

Capital Conservation

What provision describes the parts of the life insurance contract?

Entire Contract

All of the following are situations in which a life insurance company can legally get out of paying a death claim after the insured has died, except:

Five years after the policy was issued, the insurer discovered that the insured was actually older than was stated on the application

Which Settlement Option pays a specified dollar amount until benefits are exhausted?

Fixed Amount

Frank, the owner of a life insurance policy, chooses a Settlement Option whereby the proceeds of his policy will be paid out over 20 years. Frank has chosen:

Fixed Period

If the beneficiary is concerned about a payout for a particular period of time, the _______ settlement option should be selected.

Fixed Period

If the insured dies while the _______ period is in effect, the death benefit paid is the face amount, minus the premiums due

Grace

Cranston wants a Settlement Option for his beneficiary that will guarantee the beneficiary an income as long as the beneficiary lives. Cranston should choose:

Life Income Only

Beth exercised an owner's option on a life policy to stop paying premiums but continue to be covered until she was age 100. Which Nonforfeiture Option did she choose?

Reduced Paid Up

If the insured outlives all of the beneficiaries named in the policy and then dies, by default who receives the death benefit?

The insured's estate

What provision establishes that if both the insured and the primary beneficiary die in the same accident, and it cannot be determined who died first, the insured will be presumed to have survived the beneficiary and proceeds will be paid to a named contingent beneficiary of the insured, or to the insured's estate?

Common Disaster Clause

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option?

Extended Term

K needs funds and needs to maintain the life insurance she has at the same time. Which of the following should K do with her traditional whole life policy?

Take out a policy loan

Which statement is FALSE regarding Nonforfeiture Options?

They are used when the insured lives to the endowment date of the policy or at the insured's death

A partial withdrawal is permitted on which of the following policies?

Universal Life

A life insurance policy cannot be backdated more than ______ months.

6

Generally, an insurer may defer the granting of a policy loan for up to ______ months.

6

Mona let her permanent policy lapse. She discovered there was $2,498 in cash value remaining in the policy and decided to pay off some of her credit card debt. She exercised which Nonforfeiture Option?

Cash Surrender

The entire contract typically consists of all of the following, except:

A copy of the cancelled check and receipt

Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which Nonforfeiture Option provides this protection?

Extended Term

Z is the beneficiary of a life insurance policy. Rather than take a lump sum, Z wanted a lifetime payout. However, Z would feel bad if after he died, residual values were retained by the insurer rather than being paid out. Z should consider which of the following settlement options?

Life Refund

Provisions and clauses, unlike riders, are included in the contract for:

No additional charge

A _______ Option protects the policyowner against total loss of benefits in the event of a lapsed policy.

Nonforfeiture

How long, typically, is the grace period on a $500,000 level term life insurance policy?

One month

John is the insured. His wife Mary is the primary beneficiary. Their three children are the contingent beneficiaries. John and Mary are killed in a common accident. The proceeds of John's policy would be paid to:

The children

Jamie has a $200,000 permanent policy and cannot continue making the premium payments. She still, however, wants the peace of mind of being covered for the same $200,000 in death benefit although it may be for an abbreviated period of time. The Nonforfeiture Option Jamie should choose is:

Extended Term

Lyle owns a $50,000 20-Pay Life Policy that he lets lapse at the end of the fourth year. The Nonforfeiture Option providing the longest period of coverage would be:

Reduced Paid-Up

All of the following are traditional whole life policy nonforfeiture values, except:

Renewable and convertible features

Which of the following terms means that the policyowner can change the beneficiary designation at any time and for any reason?

Revocable

Linda wants her husband to be the beneficiary of her life policy but also wants to retain all rights of ownership. Which of the following types of beneficiary designations should she use?

Revocable beneficiary

If a beneficiary is designated as irrevocable, then all of the following require the irrevocable beneficiary's approval, except:

Changing the mode of premium

Ed purchased a policy naming his children as per capita beneficiaries. Upon his death the proceeds are paid to:

His surviving children, who will share the proceeds equally

The provision that limits the amount of time an insurer has to challenge a claim and void the contract upon proof of a material misstatement is called the ____________ clause.

Incontestability

Which of the following is NOT a Dividend Option?

Reduce Paid Up

The provision which denies the beneficiary the right to commute, alienate, or assign his/her interest in the policy proceeds is:

The Spendthrift Clause

Which of the following statements is accurate concerning the changing of an irrevocable beneficiary?

The beneficiary may be changed only with the written consent of the present beneficiary