Individual Life Insurance Contract - Provisions and Option
Using a class designation for beneficiaries means
Naming beneficiaries as a group
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option
Fixed amount
The interest earned on policy dividends is
Taxable
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used
Lump sum
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the
Revocable beneficiary
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
All of the following are beneficiary designations EXCEPT
Specified
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
Which of the following is TRUE about a class designation
Beneficiaries are not identified by name
An insured receives an annual life insurance dividend check. What term best describes this arrangement
Cash option
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 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
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
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value
What is the purpose of a fixed-period settlement option
To provide a guaranteed income for a certain amount of time
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision
Automatic premium loan
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
An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit
If the primary beneficiary predeceases the insured
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights
Policyowner
Which nonforfeiture option provides coverage for the longest period of time
Reduced paid-up
2 Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner
Cash surrender
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner
Cash surrender
What limits the amount that a policyowner may borrow from a whole life insurance policy
Cash value
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 a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments
Spendthrift provision
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back
The balance of the loan will be taken out of the death benefit
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
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
Which of the following components must a life insurance policy have to allow policy loans
Cash value
According to the entire contract provision, what document must be made part of the insurance policy
Copy of the original application
Which of the following settlement options in life insurance is known as straight life
Life income
What happens when a policy is surrendered for its cash value
Coverage ends and the policy cannot be reinstated
Items stipulated in the contract that the insurer will not provide coverage for are found in the
Exclusions clause
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
The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the
Spendthrift clause
California law requires an insurance company's dividends be credited
To participating policies on the anniversary date of the policy provided all premiums are current
Which two terms are associated directly with the premium
Level or flexible
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit
If the primary beneficiary predeceases the insured
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
The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to
The insured's estate
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say
The policyowner can specify the way proceeds are split in the policy
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to
k9The contingent beneficiary
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
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance
The automatic premium loan provision is activated at the end of the
Grace period
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy
It is reduced to the amount of what the cash value would buy as a single premium
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy
$50,000
Which nonforfeiture option has the highest amount of insurance protection
Extended Term
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die
All of the following are Nonforfeiture options EXCEPT
Interest only
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
An insured committed suicide one year after his life insurance policy was issued. The insurer will
Refund the premiums paid
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy
Which of the following is TRUE about nonforfeiture values
They are required by state law to be included in the policy
Which of the following statements is TRUE concerning irrevocable beneficiaries
They can be changed only with the written consent of that beneficiary
An insured wants to change from an annual premium mode to a monthly premium mode. Which of the following is true
This change can only be made on the policy's anniversary
What is the purpose of a suicide provision within a life insurance policy
To protect the insurer from persons who purchase life insurance with the intention of committing suicide
How long will the beneficiary receive payments under the single life settlement option
Until the beneficiary's death
When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called
Class designation
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean
The beneficiary will only receive payments of the interest earned on the death benefit
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called
Joint and survivor
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
How does an insured typically decide which settlement option to choose for his/her beneficiary
He/she typically decides by determining if the beneficiary will need one payment or a "steady stream" of income
The policyowner 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 policyowner choose
Interest only option
What is the benefit of choosing extended term as a nonforfeiture option
It has the highest amount of insurance protection
Which of the following is true regarding a single life settlement option
It provides income the beneficiary cannot outlive
Which of the following statements about the reinstatement provision is true
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the
One-year term option
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount
The policyowner 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
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit
The insured's contingent beneficiary