Life - Life Insurance Policy Provisions, Options And Riders - Practice Questions

The Ownership provision entitles the policyowner to do all of the following EXCEPT A) Designate a beneficiary. B) Set premium rates. C) Receive a policy loan. D) Assign the policy.

B) Set premium rates. Correct! The insurer sets premium rates based upon underwriting considerations.

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? A) Aviation B) Hazardous occupation C) War or military service D) Limited benefit

C) War or military service Correct! There are two different types of exclusions that may be used by life insurers that limit the death benefit if the insured dies as a result of war or while serving in the military. The status clause excludes all causes of death while the insured is on active duty in the military. The results clause only excludes the death benefit if the insured is killed as a result of an act of war.

Items stipulated in the contract that the insurer will not provide coverage for are found in the A) Insuring clause. B) Benefit Payment clause. C) Consideration clause. D) Exclusions clause.

D) Exclusions clause. Correct! Exclusions are restrictions of coverage as stated in the policy.

According to the Entire Contract provision, a policy must contain A) A copy of the original application for insurance. B) A declarations page with a summary of insureds. C) Buyer's guide to life insurance. D) Listing of the insured's former insurer(s) for incontestability provisions.

A) A copy of the original application for insurance. Correct! An insurance contract must contain a copy of the original application.

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? A) Owner's Rights B) The Entire Contract Provision C) The Consideration Clause D) Assignment Rights

A) Owner's Rights Correct! Policyowners can learn about their ownership rights by referring to the policy.

The two types of assignments are A) Complete and proportionate. B) Absolute and collateral. C) Absolute and partial. D) Complete and partial.

B) Absolute and collateral. Correct! Absolute assigns the entire policy. Collateral assigns a part or all of the benefits.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? A) Pay the full death benefit B) Pay nothing; there was a misrepresentation on the application C) Pay the full death benefit and refund excess premium D) Pay a reduced death benefit

D) Pay a reduced 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. However, it does not apply to statements relating to age, sex and identity.

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 A) Misstatement of Age clause. B) Incontestability clause. C) Reinstatement clause. D) Insuring clause.

B) Incontestability clause. Correct! If an insurer wishes to contest any statements on an application, they must do so within the first two years.

A provision in a life or health insurance policy that may assist an insurance company in determining the cause of death of an insured is called A) Autopsy. B) Inspection. C) Attending physician's report. D) Medical exam.

A) Autopsy. Correct! Most life and health policies have a provision that allows them, in the absence of any state law to the contrary, to cause an autopsy to be performed on a deceased insured, if they choose.

Which of the following applies to the 10-day free-look privilege? A) It permits the insured to return the policy for a full refund of premiums paid. B) It allows the insured 10 days to pay the initial premium. C) It can be waived only by the insurance company. D) It is granted only at the option of the agent.

A) It permits the insured to return the policy for a full refund of premiums paid. Correct! A policyowner may return a policy for any reason during the free-look period and receive a full refund.

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? A) Pay the death benefit B) Refuse to pay the death benefit because of the misstatement on the application C) Pay a decreased death benefit D) Sue for the right to not pay the death benefit

A) Pay the death benefit Correct! 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.

Which of the following best describes fixed-period settlement option? A) Income is guaranteed for the life of the beneficiary. B) Both the principal and interest will be liquidated over a selected period of time. C) Only the principal amount will be paid out within a specified period of time. D) The death benefit must be paid out in a lump sum within a certain time period.

B) Both the principal and interest will be liquidated over a selected period of time. Correct! Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.

Life income joint and survivor settlement option guarantees A) Equal payments to all recipients. B) Income for 2 or more recipients until they die. C) Payment of interest on death proceeds. D) Payout of the entire death benefit.

B) Income for 2 or more recipients until they die. The Life Income Joint and Survivor option guarantees an income for two or more recipients for the duration of their lives. Most contracts stipulate that the surviving partner will receive a reduced payment after the other dies, although some will continue to pay the same amount. There is no guarantee that all the life insurance proceeds will be paid out.

What is the purpose of a fixed-period settlement option? A) To provide a guaranteed amount of money each month B) To provide a guaranteed income for a certain amount of time C) To settle the insurance company's liability D) To provide a guaranteed income for life

B) To provide a guaranteed income for a certain amount of time When the fixed-period installments option is selected, the insurer agrees to pay the proceeds in equal installments over a specified period of time.

Which of the following statements is TRUE about a policy assignment? A) It permits the beneficiary to designate the person to receive the benefits. B) It authorizes an agent to modify the policy. C) It transfers rights of ownership from the owner to another person. D) It is the same as a beneficiary designation.

C) It transfers rights of ownership from the owner to another person. The policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment).

Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy? A) It begins when the application is signed. B) It applies only to term life insurance policies. C) It is optional on all life insurance policies. D) It begins when the policy is delivered.

D) It begins when the policy is delivered. Correct! The 10-day free-look provision is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.