Chapter 6

Which of the following settlement options pays a specified monthly income for as long as the policy proceeds plus interest last? A. Lump sum B. Fixed period C. Life income D. Fixed amount

D. Fixed amount

In order to be eligible for long-term care benefits under a life insurance policy, the insured must be unable to perform how many activities of daily living? A. 2 B. 3 C. 4 D. 5

A. 2

Jack is covered by a $100,000 whole life policy. The policy includes a term life insurance rider providing an extra $50,000 of coverage until Jack retires at age 65. If he dies sixteen years following his retirement, what will the insurer pay the primary beneficiary? A. $0 B. $50,000 C. $100,000 D. $150,000

C. $100,000

John selects a settlement option paying a life income of $2,000 per month with ten years certain. If he dies five years later, his beneficiary would receive a cash refund of: A. $24,000 B. $96,000 C. $120,000 D. $240,000

C. $120,000

Whole life policies include non-forfeiture options that are available in the event the policy owner wishes to surrender the policy. Once a policy is surrendered it cannot be: A. Renewed B. Voided C. Reissued D. Reinstated

D. Reinstated

When a paid-up additions dividend option is selected, what type of insurance is purchased? A. Temporary insurance B. Permanent insurance C. An annuity D. Limited insurance

B. Permanent insurance

Each of the following is a dividend option available in a participating policy, EXCEPT: A. Reduce the premium B. Reduced paid-up insurance C. Accumulate at interest D. Paid-up additions

B. Reduced paid-up insurance

All of the following are settlement options available in a life insurance contract, EXCEPT: A. Fixed period B. Paid-up additions C. Interest only D. Life income

B. Paid-up additions

What type of non-forfeiture option provides the same type of insurance as the policy surrendered? A. Cash surrender B. Reduced paid-up insurance C. Extended term insurance D. One year term insurance

B. Reduced paid-up insurance

Which of the following riders provides an increasing amount of coverage each year based upon changes to the consumer price index? A. Living benefits rider B. Return of premium rider C. Return of cash value rider D. Cost of living rider

D. Cost of living rider

If a whole life policy premium is not paid by the end of the contract's grace period and the policy contains several thousand dollars of equity, what policy option will protect the insured against a coverage lapse? A. The grace period B. The automatic premium loan provision C. The non-forfeiture benefit D. The settlement options

C. The non-forfeiture benefit

If a policy owner exercises a paid-up additions dividend option, the amount of coverage purchased will be based upon the insured's attained age and: A. The amount of cash value policy B. The amount of the dividend C. The face amount of the D. The reduced paid-up amount

B. The amount of the dividend

Alex owns a $50,000 life insurance policy. It also includes a waiver of premium and disability income rider. If Alex is disabled for six straight months, he will begin to receive what amount of income per month while he is disabled? A. $250 B. $500 C. $1,000 D. $5,000

B. $500

The waiver of premium rider, when added to a life insurance policy, would provide coverage in which of the following circumstances? A. The insured breaks his leg which permits him to work part-time B. The insured is unemployed for six consecutive months C. The insured suffers a total disability lasting eight months D. The insured suffers a partial disability lasting twelve months

C. The insured suffers a total disability lasting eight months

Which of the following non-forfeiture options provides the greatest amount of life insurance protection? A. Paid-up additions B. Surrender for cash C. Extended term insurance D. Reduced paid-up insurance

C. Extended term insurance

Which of the following settlement options potentially provides a beneficiary with the greatest benefit per $1,000 of proceeds? A. Fixed period B. Interest only C. Life income D. Fixed amount

C. Life income

Each of the following riders affect the face amount of a life insurance policy, EXCEPT: A. Cost of living rider B. Return of premium C. Waiver of premium D. Accidental death

C. Waiver of premium

All of the following are considered to be an activity of daily living, EXCEPT: A. Dressing B. Bathing C. Working D. Feeding

C. Working

What type of rider can be added to a policy covering a juvenile which will allow him or her to purchase additional amounts of life insurance in the future without requiring a medical examination? A. A payor rider B. A guaranteed insurability rider C. A dependent rider D. A family rider

B. A guaranteed insurability rider

An accelerated benefits rider may be added for an additional premium to a life insurance policy. Living benefits may be paid for each of the following, EXCEPT: A. Long-term care B. Disability income C. Terminal illness D. Dread disease

B. Disability income

All of the following are types of dividend options, EXCEPT: A. Paid-up additions B. Reduced paid-up insurance C. One year term insurance D. Accumulate at interest

B. Reduced paid-up insurance

Which of the following policy options allows a policy owner to effectuate a single premium purchase? A. Cash refund insurance B. Reduced paid-up insurance C. One-year term D. Reduced premium payments

B. Reduced paid-up insurance

A rider that pays an increasing amount of term insurance equal to the amount of total payments made for coverage, in addition to the death benefit at the time of death, is known as a: A. Return of cash value B. Return of premium C. Increasing benefits rider D. Accelerated benefits rider

B. Return of premium

Which non-forfeiture option indicates that insurance coverage no longer exists? A. Cash surrender B. Extended term insurance C. Reduced paid-up insurance D. Paid-up additions

A. Cash surrender

A life insurance producer sells a straight life policy to a 55-year-old male in excellent health. The producer also convinces the applicant to add an accelerated benefits rider to the policy as well. What type of rider can be added to this policy to cover the applicant's spouse if she dies in an accident? A. Accidental death rider B. Payor rider C. Guaranteed insurability rider D. Dependent rider

D. Dependent rider

Beverly Rogers owns a permanent life insurance policy with a death benefit of $200,000. She has also added to it an accelerated benefits rider with a 25% clause. The policy also includes an accidental death rider for $500,000. If Beverly is diagnosed with terminal cancer and receives the maximum amount from the appropriate rider, what will be paid to her beneficiary following her death? A. $50,000 B. $150,000 C. $175,000 D. $200,000

B. $150,000

Jack owns a life insurance policy with an accelerated benefits rider. If a benefit from this rider is paid, how does it affect the policy's death benefit? A. The benefit will be increased B. The benefit will be decreased C. The benefit will be eliminated D. The benefit will be surrendered

B. The benefit will be decreased

An individual purchases a whole life policy with an accelerated benefits rider of 40%. The contract, which provides a death benefit of $250,000, also includes a $100,000 accidental death rider and a waiver of premium rider. A dependent rider is added to cover the remaining family members. Twenty-seven years after the policy is purchased, a loan of $13,000 is taken against the policy's cash value. If the insured dies from a terminal illness within a month after receiving the equity, what will be paid to the beneficiary? A. $137,000 B. $150,000 C. $237,000 D. $250,000

C. $237,000

Dividends paid on a life insurance policy may be referred to as a return of an overpayment of premium. Which of the following best describes the tax treatment of life insurance dividends? A. Not taxable as ordinary income B. Taxable as ordinary income C. Tax-deductible D. Not tax-deductible

A. Not taxable as ordinary income

Bill Miles buys an individual whole life policy with a face amount of $160,000. He adds to the policy a family rider to cover his 43-year-old wife, his daughter and an adopted son. All of the following will be covered by the rider, EXCEPT: A. The insured B. Spouse C. Daughter D. Adopted son

A. The insured

Which of the following riders prevents a policy from lapsing if the insured becomes disabled? A. Accelerated benefits rider B. Waiver of premium rider C. Accidental death rider D. Cost of living rider

B. Waiver of premium rider

Ben has a $200,000 whole life policy with a $50,000 AD&D rider. Also attached is an accelerated benefits rider. Later Ben becomes terminally ill and receives $25,000 from the policy. Six months later he dies. What will be paid? A. The principal sum B. $150,000 C. $175,000 D. $225,000

C. $175,000

Which non-forfeiture option is automatically exercised if a policy lapses with current cash value and the insurer is unable to contact the policy owner? A. Reduced paid-up insurance B. Surrender for cash C. Extended term insurance D. Return of premium

C. Extended term insurance

Alice owns a $100,000 life insurance policy with an accelerated benefits rider which includes a 40% clause. Five years after purchasing the policy, Alice is diagnosed with a serious illness. She notifies the insurer and fourteen months later dies. How much will the policy pay her beneficiary at the time of death? A. $0 B. $40,000 C. $60,000 D. $100,000

D. $100,000

Which of the following provides the least expensive form of life insurance protection? A. Level term insurance B. Decreasing term life insurance C. Modified life insurance D. Accidental death protection

D. Accidental death protection

A rider attached to a life insurance policy is part of the: A. Face page of the policy B. Incontestable provision C. Owner's rights D. Entire contract

D. Entire contract

A rider that permits the policy owner to purchase additional amounts of insurance without taking a physical examination best describes: A. Waiver of premium rider B. Payor benefit rider C. Cost of living rider D. Guaranteed insurability rider

D. Guaranteed insurability rider

Alex owns a graded premium life policy with a face amount of $500,000. A family term rider is added to the contract in addition to an accelerated benefits rider of 30%. Alex is suffering from a terminal disease and notifies the insurer. The insurer activates the latter rider and sends the maximum amount allowable to Alex. If he dies three months later, what will be paid to his beneficiary? A. $500,000 B. $470,000 C. The death benefit plus the accelerated amount of 30% D. The remainder of the death benefit

D. The remainder of the death benefit