*****CA Life and Health Chapter 5: Individual life insurance contract- Provisions and Options Multiple choice

All of the following are beneficiary designations EXCEPT A) Specified B) Tertiary C) Contingent D) Primary

A) Specified

What type of account will most likely be established for a minor? A) Trust B) Annuity C) Credit Life D) Estate planning

A) Trust

Items stipulated in the contract that the insurer will NOT provide coverage for are found in the A) Consideration clause B) Exclusions clause C) Insuring clause D) Benefit Payment clause

B) Exclusions clause

Which nonforfeiture option has the highest amount of insurance protection? A) Decreasing term B) Reduced Paid-up C) Extended term D) Conversion

C) Extended term

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of the premium? A) Automatic premium loan B) Extended term C) Reinstatement D) Reduced paid-up option

A) Automatic premium loan

California law requires an insurance company's dividends to be credited A) To participating policies on the anniversay date of the policy provided all premiums are current B) To extend term policies on the anniversary date of the policy provided all premiums are current C) To all reduced paid-up policies on the anniversary date of the policy provided all premiums are current D) To policyholders of policies issued by stock companies

A) To participating policies on the anniversay date of the policy provided all premiums are current

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible? A) Modification clause B) Ownership provision C) Collateral assignment D) Insurable interest

C) Collateral assignment

The automatic premium loan provision is activated at the end of the A) Elimination period B) Policy period C) Grace period D) Free-look period

C) Grace period

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? A) Pay the full death benefit B) Pay nothing; there was a misrepresentation on the application C) Pay the full death benefit and refund excess premium D) Pay a reduced death benefit

D) Pay a reduced death benefit

If an insured continually uses the automatic premium loan option to pay the policy premium, A) The policy will terminate when the cash value is reduced to nothing B) The face amount of the policy will be reduced by the automatic premium loan amount C) The cash value will continue to increase D) The insurer will increase the premium amount

A) The policy will terminate when the cash value is reduced to nothing

California law requires an insurance company's dividends to be credited A) To participating policies on the anniversary date of the policy provided all premiums are current B) To extended term policies on the anniversary date of the policy provided all premiums are current C) To all reduced paid-up policies on the anniversary date of the policy provided all premiums are current D) To policyholders of policies issues by stock companies

A) To participating policies on the anniversary date of the policy provided all premiums are current

When a reduced-paid up nonforfeiture option is chosen, what happens to the amount of the policy? A) It decreases over the term of the policy B) It remains the same as the original policy C) It is reduced to the amount of what the cash value would buy as a single premium D) It is increased when extra premiums are paid

C) It is reduced to the amount of what the cash value would buy as a single premium

The interest earned on policy dividends is A) Tax deductible B) 40% taxable, similar to a capital gain C) Taxable D) Nontaxable

C) Taxable

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? A) Common disaster B) Accidental death C) Survivor life D) Second-to-die

A) Common disaster

Under an extended term nonforfeiture option, the policy cash value is converted to A) The same face amount as in the whole life policy B) The face amount equal to the cash value C) A lower face amount than the whole life policy D) A higher face amount than the whole life policy

A) The same face amount as in the whole life policy

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? A) Extended term B) Fixed amount C) Fixed period D) Life income period certain

B) Fixed amount

All of the following are dividend options EXCEPT: A) Fixed-period installments B) Accumulated at interest C) Reduction of premium D) Paid-up additions

A) Fixed-period installments

Which of the following policy components contains the company's promise to pay? A) Owner's rights B) Entire contract provision C) Insuring clause D) Premium mode

C) Insuring clause

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? A) Joint and survivor B) Fixed amount option C) Interest only option D) Life income with period certain

C) Interest only option

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had concealed information during the application process. What can they do? A) Pay the death benefit B) Refuse to pay the death benefit because of the fraud C) Pay a decreased death benefit D) Sue for the right to not pay the death benefit

A) Pay the death benefit

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy? A) It requires that someone who is not the primary beneficiary handles the estate B) It determines who receives policy benefits if the primary beneficiary is deceased C) It allows creditors to receive payment out of the proceeds D) It ensures the policy proceeds will be split between the primary and contingent beneficiaries

B) It determines who receives policy benefits if the primary beneficiary is deceased

Which of the following settlement options in life insurance is known as straight life? A) Fixed amount B) Life income C) Single life D) Life with period certain

B) Life income

Which type of beneficiary is changeable at any point? A) Irrevocable B) Revocable C) Contingent D) Primary

B) Revocable

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 D) The face amount will be determined by the insurer

C) 50,000

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A) 0 B) 200 C) 9800 D) 10,000

C) 9800

What is the other term for the cash payment settlement option? A) Face amount B) Proceeds C) Lump sum D) Principal amount

C) Lump sum

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to A) The estate B) The beneficiary's estate C) The insured's estate D) Probate

C) The insured's estate

An insured misstates her age at the time the life insurance application is taken. This misstatement may result in A) No change whatsoever B) Automatic laps C) Recession of the policy D) Adjustment in the amount of the death benefit

D) Adjustment in the amount of the death benefit

A policyowner fails to pay the premium on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? A) Waiver of premium B) Incontestability period C) Assignment D) Automatic premium loan

D) Automatic premium loan

An insured receives an annual life insurance dividend check. What term best describes this arrangement? A) Reduction of premium B) Annual dividend provision C) Accumulation at interest D) Cash option

D) Cash option

All of the following are Nonforfeiture options EXCEPT A) Cash surrender B) Extended term C) Reduced-paid up D) Interest only

D) Interest only

What is the benefit of choosing extended term as a nonforfeiture option? A) It matures at age 100 B) It allows for coverage to continue beyond maturity date C) It can be converted to a fixed annuity D) It has the highest amount of insurance protection

D) It has the highest amount of insurance protection

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) Joint and survivor B) Single life C) Fixed-amount D) Life income with period certain

D) Life income with period certain

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A) Paid-up addition B) Accumulation at interest C) Cash option D) Reduction of premium

D) Reduction of premium

An insured committed suicide one year after his life insurance policy was issued. The insurer will A) Pay the policy's cash value B) Pay the full death benefit to the beneficiary C) Pay nothing D) Refund the premiums paid

D) Refund the premiums paid

A man is injured while robbing a convenience store. How does his major medical policy handle the payment of his claim? A) Claim is denied if his policy contains the Illegal Occupation provision B) 50% of the claim will be paid C) If the man is not convicted, he will get 75% of his claim paid D) The claim is paid in full

A) Claim is denied if his policy contains the Illegal Occupation provision

Which of the following applies to the 10-day free-look privilege? A) It permits the insured to return the policy for a full refund of premiums paid B) It allows the insured 10 days to pay the initial premium C) It can be waived only by the insurance company D) It is granted at the option fo the agent

A) It permits the insured to return the policy for a full refund of premiums paid

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 primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments B) The beneficiary must pay interest to the insurer C) The beneficiary will only receive payments of the interest earned on the death benefit D) The beneficiary will receive the lump sum, plus interest

C) The beneficiary will only receive payments of the interest earned on the death benefit

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 policy owner to take out any more loans B) The policy will be reduced to an extended term option C) The policy owner 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 owner will terminate when the loan amount with interest equals or exceeds the cash value

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A) Life with period certain B) Fixed amount C) Interest only D) Fixed period

D) Fixed period

Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy? A) It begins when the application is signed B) It applies only to term life insurance policies C) It is optional on all life insurance policies D) It begins when the policy is delivered

D) It begins when the policy is delivered

Nonforfeiture values guarantee which of the following for the policyowner? A) That the dividends will be paid annually B) That the death benefit will be paid in a lump sum C) That the policy premiums will never increase D) That the cash value will not be lost

D) That the cash value will not be lost

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to A) The insured's spouse B) The policyowner C) The insurance company D) The contingent beneficiary

D) The contingent beneficiary

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A) The annual dividend is retained by the company B) The interest is credited at a rate specified by the policy C) The policyholder has the right to withdraw the accumulations at any time D) The interest is not taxable since it remains inside the insurance policy

D) The interest is not taxable since it remains inside the insurance policy

The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? A) The policyowner can specify the way proceeds are split in the policy B) The way proceeds are split between beneficiaries is decided by which type of policy is chosen C) Life insurance policies may have only one beneficiary D) The proceeds will be split evenly between the two beneficiaries

A) The policyowner can specify the way proceeds are split in the policy

All of the following are true regarding insurance policy loans EXCEPT A) The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy B) Policyowners can borrow up to the full amount of their whole life policy's cash value C) Policy loans can be made on policies that do not accumulate cash value D) The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies

C) Policy loans can be made on policies that do not accumulate cash value

Which of the following statements is TRUE concerning irrevocable beneficiaries? A) They may be changed on the anniversary date of the policy B) They can be changed only with the written consent of that beneficiary C) They may be changed at any time D) They can never be changed

B) They can be changed only with the written consent of that beneficiary

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called A) Utmost good faith B) Acceptance C) Consideration D) Conditions

C) Consideration

A fee charged to the insured when a policy or annuity is exchanged for its cash value is A) Premature distribution penalty B) Maturation fee C) Surrender charge D) Policy cancellation fee

C) Surrender charge

Life income joint and survivor settlement option guarantees A) Income for 2 or more recipients until they die B) Payment of interest on death proceeds C) Payout of the entire death benefit D) Equal payments to all recipients

A) Income for 2 or more recipients until they die

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A) Size of each installment B) Predetermined length of time stated in the contract C) Length of income period D) Amount of interest

A) Size of each installment

Which is NOT true about beneficiary designations? A) The beneficiary must have insurable interest in the insured B) The beneficiary may be a natural person C) The policy does not have to have a beneficiary named in order to be valid D) Trusts can be beneficiaries

A) The beneficiary must have insurable interest in the insured

Which of the following is true if the policyowner excercises his/her right to surrender his/her life insurance policy for its current cash value? Assume that the policyowner and insured are the same person. A) The beneficiary automatically receives the cash value of the policy B) The insured is no longer covered under the surrendered policy C) The insured is still covered under the policy, but the death benefit is reduced D) the beneficiary can sue the policyowner for the cash value of the surrendured policy

B) The insured is no longer covered under the surrendered policy

What provision in an insurance policy extends coverage beyond the premium due date? A) Automatic premium loan B) Waiver of premium C) Grace period D) Free look

C) Grace period

An insured purchased a life insurance policy on his naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit? A) If the primary beneficiary predeceases the insured B) The primary and contingent beneficiary share the death benefits equally C) With the primary beneficiary's written consent D) If the insured died from accidental means

A) If the primary beneficiary predeceases the insured

Which two terms are associated directly with the premium? A) Level or flexible B) Fixed or variable C) Term or permanent D) Renewable or convertible

A) Level or flexible

An absolute assignment is a A) Transfer of all ownership rights in a policy B) Transfer of some ownership rights in a policy C) Change in beneficiary D) Change of insurer

A) Transfer of all ownership rights in a policy

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? A) Paid-up options B) Extended term C) Cash surrender D) Reduced paid-up

C) Cash surrender

Which is TRUE about the cash surrender nonforfeiture option A) The policy remains active for some time after the policyholder opts for cash surrender B) The policyholder receives the original cash value of the policy C) Funds exceeding the premium paid are taxable as ordinary income D) After the cash surrender, the insured is covered for a grace period of 1 month

C) Funds exceeding the premium paid are taxable as ordinary income

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

C) To purchase a smaller amount of the same type of insurance as the original policy

Which settlement option provides a single beneficiary with income for the rest of his/her life? A) Fixed amount B) Lump sum C) Retained assets D) Single life

D) Single life

Which of the following is NOT typically excluded from life policies? A) Death due to a plane crash for a fare-paying passenger B) Self-inflicted death C) Death that occurs while a person is committing a felony C) Death due to war or military service

A) Death due to a plane crash for a fare-paying passenger

What required provision protects against the unintentional lapse of the policy? A) Grace period B) Assignment C) Payment of premiums D) Reinstatement

A) Grace period

What is the advantage of reinstating a policy instead of applying for a new one? A) The original age is used for premium determination B) Proof of insurability is not required C) The face amount can be increased D) The cash values have gained interest while the policy was lapsed

A) The original age is used for premium determination

Which of the following is TRUE about nonforfeiture values? A) They are required by state law to be included in the policy B) They are optional provisions C) A table showing nonforfeiture values for the next 10 years must be included in the policy D) Policyowners do not have the authority to decide how to exercise nonforfeiture values

A) They are required by state law to be included in the policy

J applied for a life insurance policy on January 10. The policy was issued on January 31. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not was the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid? A) It was already too late when J received the policy because the 10-day free look period had expired B) Anytime, because the agent did not deliver the policy promptly C) February 28th, or 10 days after the time the policy is delivered D) The time varies from one policy to another

C) February 28th, or 10 days after the time the policy is delivered

Which of the following statements about the reinstatement provision is true? A) It provides for reinstatement of a policy regardless of the insured's health B) It guarantees the reinstatement policy that has been surrendered for cash C) It requires the policy owner to pay all overdue premiums with interest before the policy is reinstated D) It permits reinstatement within 10 year after a policy has lapsed

C) It requires the policy owner to pay all overdue premiums with interest before the policy is reinstated

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights? A) Beneficiary B) Insured C) Policyowner D) The insured and the policyowner

C) Policyowner

How long will a beneficiary receive payments under the single life settlement option? A) For a specified period of time B) Until the insured's age 100 C) Until the beneficiary's death D) Until the insured's death

C) Until the beneficiary's death

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called: A) Revocable designation B) Irrevocable designation C) Stirpes designation D) Class designation

D) Class designation

What happens when a policy is surrendered for its cash value? A) Coverage ends but can reinstated at any time B) The policy can be reinstated by paying back all policy loans and premiums C) The policy can be converted to term coverage D) Coverage ends and the policy cannot be reinstated

D) Coverage ends and the policy cannot be reinstated

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this? A) Waiver of premium provision B) Incontestable clause C) Grace period D) Reinstatement provision

D) Reinstatement provision

Which of the following statements about a suicide clause in a life insurance policy is TRUE? A) Suicide is covered for a specific period of years and excluded thereafter B) Suicide is covered as long as the policy is in force C) Suicide is excluded as long as the policy is in force D) Suicide is excluded for a specific period of years and covered thereafter

D) Suicide is excluded for a specific period of years and covered thereafter

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? A) The policy beneficiary receives the full death benefit B) The policy beneficiary takes over the loan payments C) The policy is rendered null and void D) The balance of the loan will be taken out of the death benefit

D) The balance of the loan will be taken out of the death benefit

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? A) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time B) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies C) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies D) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

D) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? A) 0 B) 200 C) 9800 D) 10,000

9800

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 A) Misstatement of Age clause B) Incontestability clause C) Reinstatement clause D) Insuring clause

B) Incontestability clause

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid A) Consideration clause B) Insuring clause C) Entire contract clause D) Beneficiary clause

B) Insuring clause

If a settlement option is not closed by the beneficiary or policyowner, which option will be used? A) Fixed amount B) Lump sum C) Life income D) Fixed period

B) Lump sum

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

C) It transfers rights of ownership from the owner to another person

Which nonforfeiture option provides coverage for the longest period of time? A) Accumulated at interest B) Reduced paid-up C) Extended term D) Paid-up option

B) Reduced paid-up

The ownership provision entitles the policyowner to do all of the following EXCEPT A) Designate a beneficiary B) Set premium rates C) Receive a policy loan D) Assign the policy

B) Set premium rates

What is the other term for the cash settlement option? A) Face amount B) Proceeds C) Lump sum D) Principal amount

C) Lump sum

The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the A) Incontestability clause B) Beneficiary protection clause C) Spendthrift clause D) Benefit protection clause

C) Spendthrift clause

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 insured's contingent beneficiary B) The insurance company C) The insured's estate D) The primary beneficiary's estate

A) The insured's contingent beneficiary

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to A) The insurance company B) The insured's estate C) The insured's firstborn child D) Both children who share equally on a per-capita basis

B) The insured's estate

Which of the following is true regarding a single life settlement option? A) Proceeds are paid out in a lump sum B) It provides income for a specified period of time C) It provides income the beneficiary cannot outlive D) Payments continue until the entire principal is exhausted

C) It provides income the beneficiary cannot outlive

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

D) A minor son of the insured

Which of the following is TRUE about a class designation? A) Beneficiaries are not identified by name B) Beneficiaries must be part of the insured's immediate family C) It is not allowed D) It determines the succession of beneficiaries

A) Beneficiaries are not identified by name

The two types of assignments are A) Complete and proportionate B) Absolute and collateral C) Absolute and partial D) Complete and partial

B) Absolute and collateral

According to the entire contract provision, what document must be made part of the insurance policy? A) Outline of coverage B) Copy of the original application C) Buyer's guide D) Agent's report

B) Copy of the original application

What is the purpose of a fixed-period settlement option? A) To provide a guaranteed income for a certain amount of time B) To settle the insurance company's liability C) To provide guaranteed income for life D) To provide a guaranteed amount of money each month

A) To provide a guaranteed income for a certain amount of time

How does an insured typically decide which settlement option to choose for his/her beneficiary? A) He/ she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income B) He/ she usually decides based on how many beneficiaries he/she has chosen to receive benefits C) He/ she typically decides based on the advice of the insurer D) He/she decides based on the amount of the death benefit

A) He/ she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called A) Joint and survivor B) Fixed period C) Fixed amount D) Joint life

A) Joint and survivor

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military? A) Military service or war B) Limited C) Aviation D) Hazardous occupation

A) Military service or war

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? A) The policy's cash value B) A refund of premiums C) Nothing, since the insured was killed as a result of war D) The full death benefit

D) The full death benefit

What is the purpose of the suicide provision within a life insurance policy? A) To limit the insurer's liability after the 2 year waiting period B) To defer the policyowner from committing suicide C) To protect the policyowner D) To protect the insurer from person who purchase life insurance with the intention of committing suicide

D) To protect the insurer from person who purchase life insurance with the intention of committing suicide

The dividend option in which the policyowner uses dividend to purchase a term policy for one year is referred to as the A) One-year term option B) Paid-up option C) Accelerated endowment D) Paid-up additions

A) One-year term option

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosed is called A) Paid-up additions B) One-year term purchase C) Accumulation at interest D) Reduction of premiums

A) Paid-up additions

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premiums, after the policy has been in force for at least how many years? A) 1 year B) 2 years C) 5 years D) 7 years

B) 2 years

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident? A) Nonforfeiture clause B) Common disaster clause C) Spendthrift clause D) Settlement clause

B) Common disaster clause

All of the following statements concerning dividends are true EXCEPT A) Favorable investment results generate higher dividends B) Dividend amounts are guaranteed in the policy C) Lower insurance company costs generate higher dividends D) They stem from favorable underwriting experience

B) Dividend amounts are guaranteed in the policy

The provision which states that both the policy and a copy of the application form between the policyowner and the insurer is called the A) Aleatory contract B) Complete contract C) Entire contract D) Total contract

C) Entire contract

According to the entire contract provision, a policy must contain A) A copy of the original application for insurance B) A declarations page with a summary of insureds C) Buyer's guide to life insurance D) Listing of the insured's former insurer(s) for incontestability provisions

A) A copy of the original application for insurance

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

Using a class designation for beneficiaries means A) Naming beneficiaries as a group B) Not naming beneficiaries C) Naming an estate as the beneficiary D) Naming each beneficiary by his or her name

A) Naming beneficiaries as a group

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? A) Owner's rights B) The entire contract provision C) The consideration clause D) Assignment rights

A) Owner's rights

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to A) Purchase a single premium policy for a reduced face amount B) Purchase a term rider to attach to the policy C) Pay back all premiums owed plus interest D) Receive payments for a fixed amount

A) Purchase a single premium policy for a reduced face amount

A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wished to retain all of her rights of ownership. The policyowner should have her husband named as the A) Revocable beneficiary B) Secondary beneficiary C) Contingent beneficiary D) Irrevocable beneficiary

A) Revocable beneficiary

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? A) Spendthrift provision B) Settlement option C) Accelerated benefit provision D) Loan provision

A) Spendthrift provision

Which of the following information will be stated in the consideration clause of a life insurance policy? A) The amount of premium payment B) The parties to the contract C) The time period allowed for the payment of premium D) The conditions for insurability

A) The amount of premium payment

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A) The same as the original policy minus the cash value B) Equal to the original policy for as long as the cash values will increase C) In lesser amounts for the remaining policy term of age 100 D) Equal to the cash value surrendered from the policy

B) Equal to the original policy for as long as the cash values will increase

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT A) Face amount of the policy B) The insured's age at death C) The beneficiary's life expectancy D) Projected interest rates

B) The insured's age at death

Which of the following best describes fixed-period settlement option? A) The death benefit must be paid out in a lump sum within a certain time period B) Income is guaranteed for the life of the beneficiary C) Both the principal and interest will be liquidated over a selected period of time D) Only the principal amount will be paid out within a specific period of time

C) Both the principal and interest will be liquidated over a selected period of time

The termination of marital property rights may be reversed for all of the following reasons EXCEPT A) The beneficiary can prove the couple were living together as husband and wife or planning to remarry B) The spouse was named as beneficiary by class C) The divorce or annulment decree or judgement is not recognized as valid D) The spouse named as beneficiary has obtained or consented to a final decree or judgment of an annulment, divorce or seperation

D) The spouse named as beneficiary has obtained or consented to a final decree or judgment of an annulment, divorce or seperation

An insured wants to change from an annual premium mode to a monthly premium mode. Which of the following is true? A) It is only possible to change from a monthly premium mode to an annual premium mode B) The insurer will need to terminate the current policy and issue a new one C) The insured can make this change at any time, without any penalty D) This change can only be made on the policy's anniversary

D) This change can only be made on the policy's anniversary

If a life insurance policy has an irrevocable beneficiary designation, A) The beneficiary cannot be changed for at least 2 years B) The owner can always change the beneficiary at will C) The beneficiary cannot be changed D)The beneficiary can only be changed with written permission of the beneficiary

D)The beneficiary can only be changed with written permission of the beneficiary