Chapter Exam 2

P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 minus any outstanding policy loans. Policy is beyond the contestable period.

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied, suicide clause.

Variable Whole Life can be described as? A. Both an insurance and securities product B. An insurance product only C. A securities product only D. The insurance company assumes the investment risk

A. Both an insurance and securities product.

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to? A. Ex-Wife B. Current Wife C. Estate D. Spilt equally between the ex-wife and current wife

A. Ex-Wife

K owns a whole life policy, if K wants an increasing death benefit to protect against inflation, which dividend option should she chose? A. Paid-Up Additional Insurance B. Cash Option C. Reduced Premiums D. Accumulate with interest

A. Paid-Up Additional Insurance

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called? A. Reinstatement B. Grace Period C. Automatic Premium Loan D. Waiver of Premium

A. Reinstatement

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accidental Death and Dismemberment clause

N is covered by a Term Life policy and does not make the required premium payment which was due August 1st, N dies September 15. What action will the insurer take?

Claim will be denied due to nonpayment because policy would have lapsed.

Whose life is covered on a life insurance policy that contains a payor benefit clause?

The child

What action will an insurer take if an interest payment on a policy loan is not made on time? A. Cancel the policy if not paid within the grace period. B. Automatically add the amount of interest due to the loan balance. C. Subtract from any dividends owed. D. Disallow further loans.

B. Automatically add the amount of interest due to the loan balance.

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT? A. Fixed Period B. Interest Only C. Fixed Amount D. Life Income

B. Interest Only

An insured's inability to perform two or more activities of daily living may trigger which type of policy rider? A. Waiver of Premium B. Long Term Care C. Accelerated Death Benefit D. Accidental

B. Long Term Care

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy? A. Accelerated Death Benefit Rider B. Return of Premium Rider C. Family Income Rider D. Term Rider

B. Return of Premium Rider Pays the face amount, and the premiums paid.

The advantage of reinstating an original life policy is? A. The premiums are based on the current age of the insured. B. The premiums are based on a younger age. C. The interest charged on policy loans will be lowered. D. A new incontestable period will begin.

B. The premiums are based on a younger age.

Which of these statements about a Guaranteed Insurability Option rider is TRUE? A. Coverage can be added at specific events such as marriage or having a child. B. Evidence of insurability is not required when the option is exercised. C. Evidence of insurability is required when the option is exercised. D. Coverage can be added at specific ages.

C. Evidence of insurability is required when the option is exercised.

An insured is past due on his life insurance premium, but is still within the grace period. What will the beneficiary receive if the insured dies during this grace period? A. Refund of all premiums paid, plus interest. B. Refund of all premiums paid. C. Full face amount minus any past due premiums. D. Full face amount.

C. Full face amount minus any past due premiums.

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? A. Joint Life B. Adjustable Life C. Variable Universal Life D. Universal Life

C. Variable Universal Life

Which rider provides coverage for a child under a parent's life insurance policy?

Child Term Rider

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of A. Additional term life coverage at any time B. Additional term life coverage at specified intervals C. Additional whole life coverage at any time D. Additional whole life coverage at specified intervals

D. Additional whole life coverage at specified intervals

Which of these actions is taken when a policy owner uses a life insurance policy as collateral for a bank loan? A. Revocable Assignment B. Beneficiary Change C. Irrevocable Assignment D. Collateral Assignment

D. Collateral Assignment

The incontestable clause allows an insurer to? A. Disallow a change of ownership throughout the contestable period. B. Disallow a change of beneficiary during the contestable period. C. Contact a claim at anytime if the cause of death was accidental. D. Contest a claim during the contestable period.

D. Contest a claim during the contestable period.

Which of the following statement is correct about accelerated death benefits? A. The full face amount is available as an accelerated benefit. B. Those on social security disability automatically qualify for this benefits. C. The provision is usually provided with an increase in premium. D. Must have a terminal illness to qualify

D. Must have a terminal illness to qualify.

All of these statements concerning Settlement Options are true, except? A. Increased proceeds can be provided through accumulation of interest. B. Rapid depletion of proceeds can be avoided. C. Proceeds can be administered by the insurance company. D. Only the beneficiary may select.

D. Only the beneficiary may select.

What benefit does the Payor clause on a Juvenile Life policy provide? A. Allows payor to assign ownership in the event payor becomes disabled. B. Allows payor to increase face amount without providing evidence of insurability. C. Premiums are waived if juvenile becomes disabled. D. Premiums are waived if payor becomes disabled.

D. Premiums are waived if payor becomes disabled.

Which of the following statements about accumulated interest earned on dividends from an insurance policy is true? A. Partially Taxable B. Tax Deductible C. Nontaxable D. Taxed as ordinary income

D. Taxed as ordinary income

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a? A. Term Rider B. Accidental Death and Dismemberment Rider C. Family Rider D. Annuity

B. Accidental Death and Dismemberment Rider

A Whole Life insurance policy owner does NOT have the right to? A. Designate a Beneficiary B. Take out a policy loan C. Change the grace period D. Assign the policy

C. Change the grace period

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount, because in this situation, D was killed in an accident on leave.