Ch3 VA Life and Health

The rider that allows the company to forgo collecting the premium if the insured is disabled is called A) Payor benefit. B) Waiver of premium. C) Guaranteed insurability. D) Waiver of cost of insurance.

B) Waiver of premium.

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

A) Lump sum

An insured pays $1,200 annually for her life insurance premium. The insured applies this years' $300 worth of accumulated dividends to the next years premium, thus reducing it to $900. What option does this describe? A) Flexible Premium B) Reduction of Premium C) Accumulation at Interest D) Cash Option

B) Reduction of Premium

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 lapse. C) Recession of the policy. D) Adjustment in the amount of death benefit.

D) Adjustment in the amount of death benefit.

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount A) In lesser amounts for the remaining policy term of age 100. B) Equal to the cash value surrendered from the policy. C) The same as the original policy minus the cash value. D) Equal to the original policy for as long a period of time that the cash values will purchase.

D) Equal to the original policy for as long a period of time that the cash values will purchase.

M is the owner of a $225,000 life policy with a triple indemnity rider for accidental death. When M is killed in a car accident, it is determined that the accident was his fault and that he was intoxicated at the time of the accident. The triple indemnity rider in M's policy specifies that the death must not be contributed to by the insured in any manner. In this case the beneficiary will receive A) $225,000 B) $675,000 (ttriple the amount of policy value) C) $0 D) $112,500 (50% of the policy value)

A) $225,000

All of the following statements concerning Waiver of Premium riders are correct EXCEPT A) An insured who has recovered from a disabling injury will be required to repay the insurer for any premiums that were waived. B) Waiver of Premium riders require that disablement needs to last for a certain period of time. C) There is a maximum age limit for the Waiver of Premium rider to activate. D) Once activated, the Waiver of Premium will continue until the insured's recovery or the maturity of the policy, whichever occurs first.

A) An insured who has recovered from a disabling injury will be required to repay the insurer for any premiums that were waived.

When a policy is surrendered for its cash value A) Coverage ends and the policy cannot be reinstated. B) Coverage ends but the policy can be reinstated at anytime. C) It can be reinstated by paying back all policy loans and premiums. D) It can only be reinstated as term policy.

A) Coverage ends and the policy cannot be reinstated.

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

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

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

A) Life income with period certain

An insured purchases a policy in 2000 and dies in 2005. The insurance company discovers at that time that the insured 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 beneift

A) Pay the death benefit

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

A) Reduced paid-up

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

A) Revocable

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

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

The Waiver of Cost rider is found in what type of insurance? A) Universal Life B) Whole Life C) Joint and Survivor D) Juvenile Life

A) Universal Life

Which of the following named beneficiaries would not be able to receive the death benefit directly from the insurer in the event of the insured's death? A) William, Jr., minor son of the insured B) Fred, a business partner of the insured C) Flossie, the present wife of the deceased D) Wilma, the former wife of the decease

A) William, Jr., minor son of the insured

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 Absolute assigns the entire policy. Collateral assigns a part or all of the benefits.

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

B) Cash surrender

Earl borrowed money at the bank to send his daughter to college,. Instead of purchasing Cred Life insurance, he used an existing life insurance policy to secure the debt. This would be called a A) Assignment of ownership B) Collateral Assignment C) Temporary Assignment D) Change of Beneficiary

B) Collateral Assignment

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 high dividends D) They stem from favorable underwriting experience.

B) Dividend amounts are guaranteed in the policy

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

B) Entire Contract

Which of the following is an example of third-party ownership? A) 401(k) B) Group insurance C) Non-qualified annuity D) Modified Endowment Contract

B) Group insurance

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called A) Cost of living. B) Guaranteed insurability. C) Waiver of cost of insurance. D) Supplemental add on.

B) Guaranteed insurability.

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

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

B) Incontestability clause.

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

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

When an insured dies, who has the first claim to the death proceeds of the insured life insurance policy? A) Policyowner B) Primary beneficiary C) Contingent beneficiary D) Estate

B) Primary beneficiary

Bonnie wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. Bonnie should have her husband named as the A) Irrevocable beneficiary B) Revocable beneficiary C) Secondary beneficiary D) Tertiary beneficiary

B) Revocable beneficiary

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. The insurer sets premium rates based upon underwriting considerations.

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? A) Change of insured rider B) Term rider C) Accidental death and dismemberment rider D) Guaranteed insurability rider

B) Term rider

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

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

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

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

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

B) The insured's estate.

An individual purchased a Whole Life Insurance policy and named his wife as the owner. After 20 years the policy has cash values of $12,000. Who has the right to the cash values? A) The original purchaser of the policy B) The policyowner C) The beneficiary named in the policy D) The insurance company

B) The policyowner

All of the following are true regarding the guaranteed insurability rider EXCEPT: A) It allows the insured to purchase additional amounts of insurance without proving insurability only a specified dates or events B) This rider is available to all insured. C) The insured may purchase additional coverage the attained age. D) The insured may purchase additional insurance up to the amount specified in the base policy.

B) This rider is available to all insured.

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

B) To provide a guaranteed income for a certain amount of time.

Walter purchased a 15-year level term life insurance policy with a face amount o $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. Walter was severely injured in an auto accident, and after 10 weeks of hospitalization, he died from the injuries. What amount would beneficiary receive a settlement? A) 0 B) $100,000 C) $200,000 D) $100,000 plus the total of paid premiums

C) $200,000

Alexander has a policy with his ex-wife as its beneficiary. What provisions allows him to change the beneficiary to this new wife? A) Entire contract B) Payment of claims C) Change of beneficiary D) Absolute assignment

C) Change of beneficiary

A business owner went to the bank to obtain a loan in order to fund the purchase of a doughnut shop, but the bank needed more in trade than she had expected. Since the business owner has a $250,000 life insurance policy, she decided to use it to secure the loan. Which provision makes this possible? A) Modification clause B) Ownership provision C) Collateral assignment D) Insurable Interest

C) Collateral assignment

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

C) If the primary beneficiary predeceases the insured.

Which of the following is true of a children s rider added to an insureds permanent life insurance policy? A) The policy covers only the natural children of the insured. B) Each child covered must show evidence of insurability C) It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. D) It is permanent insurance.

C) It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.

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 of a policy that has been surrendered for cash. C) It requires the policyowner to pay, with interest, all overdue premiums before the policy is reinstated. D) It permits reinstatement within 10 years after a policy has lapsed.

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

Which of the following statements is true about a policy assignment? A) It permits the beneficiary to designate the person or persons to receive the benefits. B) It is valid during the insured's lifetime only, because the death benefit is payable to the named beneficiary. C) It transfers the owner's rights under the policy to the extent expressed in the assignment form. D) It is the same as a beneficiary designation.

C) It transfers the owner's rights under the policy to the extent expressed in the assignment form.

An employer provides a group life plan for its employees; it is $50,000 of term to age 65. When one of the employees was hired 10 years ago, he misstated his age and told the employer he was 50, when in fact he was 56 years old. The insured employee die last week. His beneficiary will receive A) Nothing, due to the misstatement of age. B) $50,000 C) Nothing, due the insured's reaching the maximum age. D) The amount of death benefit premium would have purchased at his correct age.

C) Nothing, due the insured's reaching the maximum age.

The primary beneficary of her husbands life policy found that no settlement option was stated in the policy on the date of her husbands death. Who will select the settlement option in this case.? A) The insurance company B) The court C) The beneficiary D) The benefit must be paid in a lump sum

C) The beneficiary

An insured is covered under a life insurance policy with an Accidental Death and Dismemberment rider with a principal amount of $50,000. If the insured lost both arms in auto accident, how much will the policy pay? A) Nothing since the loss was incurred in an automobile accident B) $100,000 (Double indemnity) due to loss of both limbs C) The full benefit (100% of principal sum) due to loss of both limbs D) 50% of capital sum due to loss of both limbs

C) The full benefit (100% of principal sum) due to loss of both limbs

Life insurance benefits for minors must be placed in the hands of either a guardian or a trustee. Which of the following is true? A) The guardian and trustee cannot be the same person B) The trustee is not accountable for assets C) The guardian may or may not be accountable for assets D) The guardian must also be the trustee

C) The guardian may or may not be accountable for assets The guardian and trustee may be the same person of different people. The primary difference in function is that the trustee is accountable for assets, whereas the guardian may or may not be accountable for assets.

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

C) To protect the insurer from persons who purchase life insurance with the intention of committing suicide.

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium? A) If the father is disabled for at least a year B) if the daughter is disabled for more than 3 months C) If the daughter is disabled for any length of time D) If the father is disabled for more than 6 months

D) If the father is disabled for more than 6 months

Which of the following is true about the mandatory 10-day free look in a Life insurance policy? A) It commences 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 commences when the policy is delivered.

D) It commences when the policy is delivered.

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

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

When Mary's husband John died, she was the beneficiary of his $100,000 life insurance policy. She decided to assure that she would ahve income for life, so she chose the life income settlement option. The amount of her payments will be determined by using all of the following, EXCEPT A) Mary's life expectancy B) Projected interest rates C) Face amount of the policy D) John's age at death

D) John's age at death

An insured is involved in an accident. He is informed by his insurance company that he will receive the principal amount due to his accidental death and dismemberment rider on his life insurance policy. For what losses could the insured generally receive the principal amount of the policy? A) Loss of the primary hand of the insured. B) Loss of use of the primary hand of the insured. C) Loss of vision in 1 eye D) Loss of vision in both eyes

D) Loss of vision in both eyes

Which of the following terms is used to describe attachments made to policies that either add or delete provisions? A) Conditions B) Restrictions C) Exclusions D) Riders

D) Riders

Which is NOT true about beneficiary designations? A) The beneficiary does not have to have an insurable interest in the insured. B) The policyowner does not have to name a beneficiary in order for the policy to be valid. C) Trusts can be valid beneficiaries, in order to manage life insurance proceeds for a minor. D) The beneficiary must have insurable interest in the insured.

D) The beneficiary must have insurable interest in the insured.

An insured is involved in a car accident that damages his cervical vertebrae and surrounding nerves. As a result, the insured become quadriplegic. If the policy contains a Waiver of Premium rider, which of the following statements is true regarding the policy premiums? A) The insured will continue to pay the premiums in the same manner as before the accident. B) The premium rate will be substantially reduced for the rest of the insured's life. C) The insured will have to pay regular premiums fr 1 year, after which a reduced rate will apply. D) The insured will have to pay regular premiums for 6 months, after which the premiums will be reimbursed and subsequent premiums will be waived.

D) The insured will have to pay regular premiums for 6 months, after which the premiums will be reimbursed and subsequent premiums will be waived.

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 change the beneficiary, the policy proceeds will go to A) The insured's firstborn child B) Both children who share equally on a per-capita basis C) The insurance company D) The insured's estate

D) The insured's estate

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

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