Exam FX Ch5

What type of insurance would be used for a Return of Premium rider?

Increasing Term

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

It will pay double or triple the face amount.

The Ownership provision entitles the policy-owner to do all of the following EXCEPT

Set premium rates.

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.

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

Nonforfeiture values guarantee which of the following for the policy-owner?

That the cash value will not be lost

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life

All of the following are true regarding the guaranteed insurability rider EXCEPT

This rider is available to all insureds with no additional premium.

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

Cash surrender

A long stretch of national economic hardship causes a 7% rate of inflation. A policy-owner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

Cost of Living Rider

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had misstated information during the application process. What can they do?

Pay the death benefit

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

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.

All of the following statements concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy.

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

Common Disaster

Which of the following is true regarding the spendthrift clause in life insurance policies?

It can protect the policy proceeds from creditors of the beneficiary.

When a policy-owner 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 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

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

If a settlement option is not chosen by the policy-owner or the beneficiary, which option will be used?

Lump sum

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

Other-insured rider.

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

Coverage ends and the policy cannot be reinstated.

J applied for a life insurance policy on January 10. The policy was issued on January 31. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?

February 28th, or 10 days after the time the policy is delivered.

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions.

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

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

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

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

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.

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy.

When calculating the amount a policy-owner may borrow from a variable life policy, what must be subtracted from the policy's cash value?

Outstanding loans and interest

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

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection.

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

War or military service

Children's riders attached to whole life policies are usually issued as what type of insurance?

Term

Which of the following is true of a children's rider added to an insured's permanent life insurance policy?

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 applies to the 10-day free-look privilege?

It permits the insured to return the policy for a full refund of premiums paid.

Which is NOT true about beneficiary designations?

A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have interest in the policy holder.

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.

Which of the following is NOT typically excluded from life policies?

Death due to plane crash for a fare-paying passenger

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 insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

Universal life