Chapter 3

According to the Entire Contract provision, a policy must contain

A copy of the original application for insurance

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

Which nonforfeiture option has the highest amount of insurance protection?

Extended term

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

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

Guaranteed insurability

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option

Which of the following is true about the mandatory free look in a Life Insurance policy?

It commences when the policy is delivered

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount

Which two terms are associated directly with the premium?

Level or flexible

Using a class designation for beneficiaries means

Naming beneficiaries as a group

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider

An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?

Pay the death benefit

Which of the following statements about a suicide clause in a life insurance policy is true?

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

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?

Term rider

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

Which is true about a spouse term rider?

The rider is usually level term insurance

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

Which of the following is TRUE about nonforfeiture values?

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

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of Premium

Which of the following premium payment modes will incur the lowest overall payment?

annual

Which of the following components must a life insurance policy have to allow policy loans?

cash value

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used

lump sum

What is the term for how frequently a policyowner is required to pay the policy premium?

mode

If an insured continually uses the automatic premium loan option to pay the policy premium,

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

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?

fixed period

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

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?

$9,800

Which of the following best describes fixed-period settlement option?

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

All of the following are dividend options EXCEPT

Fixed period installments

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?

If the father is disabled for more than 6 months

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

Insuring 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?

Insuring clause

All of the following are Nonforfeiture options EXCEPT

Interest only

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy

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

Who can request changes in premium payments, face value, loans, and policy plans?

Policyowner

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

Proof of insurability is not required

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

Which nonforfeiture option provides coverage for the longest period of time

Reduced Paid-Up

If a life insurance policy has an irrevocable beneficiary designation

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

Which of the following riders would NOT cause the Death Benefit to increase?

payor benefit rider

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums

the insured's premiums will be waived until she is 21.

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender

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

Class designation

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

Cost of Living Rider

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated

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

contingent beneficiary

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?

The death benefit will be smaller

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

paid up option

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

paid up option