Licensing Prep

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

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

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

Which nonforfeiture option has the highest amount of insurance protection?

Extended term

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

Guaranteed insurability rider

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the

Incontestability clause

Which of the following policy components contains the company's promise to pay?

Insuring clause

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 purpose of a free-lock period in insurance policies?

It allows the insured to reject the policy with a full refund

Regarding the free-look provision, the insurance company

Must allow the policyowner to return the policy for a full refund

Using a class designation for beneficiaries means

Naming beneficiaries as a group

The ownership provision entitles the policyowner to do all of the following EXCEPT

Set premium rates

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

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

Which of the following statements is TRUE concerning irrevocable beneficiaries?

They can be changed only with the written consent of that beneficiary

An absolute assignment is a

Transfer of all ownership rights in a policy

When may an insurance company use suicide as a defense against paying a death claim?

When death occurs within a specified period of time after the policy was issued

An insured and his wife 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

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

It has the highest amount of insurance protection

The settlement option which pays throughout the lifetime of two or more beneficiaries is called

Joint and survivorship

Which two terms are associated directly with the premium?

Level or flexible

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

The policy owner 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

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

6 months

According to the entire contract provision, what document must be part of the insurance policy?

Copy of the original application

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner 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

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

Other-insured rider

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider

All of the following are true regarding insurance policy loans EXCEPT

Policy loans can be made on policies that do not accumulate cash value

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 faced amount

The paid-up addition option uses dividend to

Purchase a smaller amount of the same type of insurance as the original policy