Chapter 3
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 interest earned on a policy dividend is
taxable
Items stipulated in the contract that the insurer will not provide coverage for are found in the
Exclusions clause
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount
What is the purpose of a fixed-period settlement option
to provide a guaranteed income for a certain amount of time
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
Consideration
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 purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accident death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from injured. What amount would his beneficiary receive as a settlement.
$200,000
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?
2 years
For how long is an insurance company allowed to defer policy loan requests
6 months
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance
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 minor son of the insured
An applicant for insurance misstates her age at the time her life insurance application is taken. This misstatement may result in
Adjustment in the death benefit
Under which of the following cirumstances would an insurer pay accelerated benefits?
An insured is diagnosed with cancer and need shelp paying for her medical treatment.
Under which of the following circumstances would an insurer pay accelerated benefits
An insured is diagnosed with cancer and needs help paying for her medical treatment
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment premium
Automatic premium loan
Which of the following best describes fixed-period settlement option
Both the principal and interest will be liquidated over a selected period of time
What type of policy allows the insurance company to cancel a policy at an time?
Cancellable
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Cash surrender
What are Nonforfeiture options?
Cash surrender, extended term, reduced paid-up
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?
Common Disaster Clause
Which nonforfeiture option has the highest amount of insurance protection?
Extended term
An individual 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
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
Guaranteed insurability writer
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.
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die
Which of the following policy components contain the company's promise pay?
Insuring clause
The policy owner 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 policy owner choose?
Interest only option
Which of the following is TRUE about the 10-day free-look period in a Life insurance policy?
It begins 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
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
Joint and survivor
Which of the following settlement options in life insurance is known as straight life
Life income
Which of the following settlement options in life insurance is known as straight life?
Life income
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?
Life income with period certain
What is the other term for the cash payment settlement option?
Lump sum
What is the term for how frequently a policy owner is required to pay the policy premium?
Mode
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a polic?
Owner's rights
An insured has a life insurance policy from a participating company and received quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The divided option that the insured has chosen is called
Paid-up additions
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?
Reduction of Premium
The policy owner 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?
Reduction of premium
An insured committed suicide one year after his life insurance policy was issued. The insurer will
Refund the premiums paid
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. which policy provision allow this?
Reinstatement provision
Methods used to pay the death benefits to a beneficiary upon the insured's death are called
Settlement options
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
Nonforfeiture values guarantee which of the following for the policyowner?
That the cash value will not be lost
If a life insurance policy has an irrevocable beneficiary designation,
The beneficiary can only be changed with written permission of the 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
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
The insured's age at death
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 insureds' premiums will be waived until she is 21
If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans?
The loan amounts are deducted from the death benefit
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.
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy
What is true concerning irrevocable beneficiaries?
They can be changed only with the written consent of that beneficiary.
Which of the following statements is TRUE concerning irrevocable beneficiaries?
They can be changed only with written consent of that beneficiary
What is the purpose of a suicide provision within a life insurance policy
To protect the insurer from the persons who purchase life insurance with the intention of committing suicide
The Waiver of Cost of Insurance rider is found in what type of insurance?
Universal life
The two types of assignments are
absolute and collateral
The accelerated benefits provision will provide for an early payment of the death benefit when insured
becomes terminally ill
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
cash option
What happens when a policy is surrendered for its cash value?
coverage ends and the policy cannot be resinstated
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
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.
Which two terms are associated directly with the premium
level or flexible
An absolute assignment is a
transfer of all ownership rights in a policy
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as cash values will purchase
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire Contract
