Health & Life Insurance

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? The employer is the owner and beneficiary

With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.

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 the cash values will purchase.

With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.

All of the following are required provisions in all individual health insurance policies delivered in this state EXCEPT Misstatement of age.

Reinstatement. Entire contract. Grace period.

According to the entire contract provision, what document must be made part of the insurance policy? Copy of the original application.

An insurance contract must contain a copy of the original application.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? Third-party ownership.

Contracts that are owned by someone other than the insured are known as third-party ownership. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.

Who is a third-party owner? A policyowner who is not the insured.

Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? Fixed amount.

When the fixed amount settlement option is chosen, the policyowner sets the amount of each installment. The insurer will determine how long the installments are to be paid.

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

When the reduced option is written as "joint and 2/3 survivor," the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? Viatical settlement

A viatical statement allows an insured with a life-threatening condition to sell the existing policy in order to receive benefits when they are most needed. Viators typically receive a percentage of the policy's face value from the person who purchases the policy.

What does "liquidity" refer to in a life insurance policy? Cash values can be borrowed at any time.

Liquidity in life insurance refers to availability of cash to the insured through cash values.

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.

Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner.

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.

The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the attached application in a test of the contract's validity. This is a mandatory provision in life insurance.

Which nonforfeiture option provides coverage for the longest period of time? Reduced paid-up

The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.

All of the following are examples of third-party ownership of a life insurance policy EXCEPT *An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.*

True: An insured couple purchases a life insurance policy insuring the life of their grandson. A company purchases a life insurance policy on their manager, who is an important part of the operation. When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company.

What is the name of the insured who enters into a viatical settlement? Viator

Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract.

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.

The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

All of the following are characteristics of group life insurance EXCEPT *Premiums are determined by the age, sex and occupation of each individual certificate holder.*

True: Certificate holders may convert coverage to an individual policy without evidence of insurability. Amount of coverage is determined according to nondiscriminatory rules. Individuals covered under the policy receive a certificate of insurance. Premiums are determined by the age, sex and occupation of the entire group.

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.*

True: Projected interest rates. Face amount of the policy. The beneficiary's life expectancy. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.