NONFORFEITURE AND SETTLEMENT OPTIONS

Rhonda has a life insurance policy with a face amount of $75,000. She borrows $10,000 against the policy, pays back $9,000, then allows the policy to lapse. At the time of lapse, the cash value is $30,000. What is the single premium available for an extended term policy, and what is the face amount of the new policy? [A] $29,000, $74,000 [B] $30,000, $75,000 [C] $29,000, $75,000 [D] $30,000, $74,000

$29,000, $74,000

Sam is the beneficiary of his father's life insurance policy. The policy stipulates a fixed period settlement option, a form of annuity. Which of the following factors will determine the amount of the payment Sam will receive? [A] The amount comprising the principal in the payment [B] The amount earned on the principal [C] The period of time Sam will receive payments [D] All of the above

All of the above

Settlement options, other than lump sum payments, from life insurance policies can [A] Serve as a safety net to financially unsavvy beneficiaries [B] Prevent unnecessary spending sprees [C] Allow beneficiaries time to decide what to do with the proceeds [D] All of the above

All of the above

Which of the following is a correct statement about the reduced paid up insurance nonforfeiture option when an insured allows a life insurance policy to lapse? [A] The cash value purchases a single premium policy at attained age rates for a reduced face amount. [B] A new policy is purchased with the cash value and the amount of protection remains unchanged for the duration of the contract. [C] No further premiums are required, and expense loading is usually not included. [D] All of the above

All of the above

Under the extended term nonforfeiture option, any outstanding loan amount deducted from: [A] The cash value only [B] The face amount only [C] Both the cash value and the face amount of the policy [D] Neither the cash value or the face amount of the policy

Both the cash value and the face amount of the policy

If an insured allows her policy to lapse and takes the cash value, which of the following nonforfeiture options has she chosen? [A] Reduced paid up insurance option [B] Extended term option [C] Cash surrender value option [D] Lapsed policy option

Cash surrender value option

Larry's father, having selected the interest settlement option, dies naming Larry as the beneficiary of his life insurance. Which of the following are potential beneficiaries of the money still on deposit with the insurance company? [A] Larry's estate [B] Other named beneficiaries [C] Either a and b [D] Neither a or b

Either a and b

Raul allows his permanent life insurance policy to lapse. He cannot be contacted, so by default his cash values are used to purchase single premium, paid up term coverage in an amount equal to the original policy. Which of the following nonforfeiture options is described in this scenario? [A] Reduced paid up insurance option [B] Cash surrender value option [C] Extended term option [D] Default cash value option

Extended term option

Elaine's father dies naming her as the beneficiary of his life insurance. However, she receives only income from the earnings on the policy's death benefit which has been invested by the insurer. Which of the following settlement options had Elaine's father chosen? [A] Life income option [B] Fixed amount option [C] Interest option [D] Fixed period option

Interest option

When a life insurance policy lapses, [A] The past due premium is a debt against the existing cash value. [B] Past due premiums do not constitute an indebtedness against the existing cash value. [C] Past due premiums must be brought current before any cash values can be paid. [D] It can never be reinstated.

Past due premiums do not constitute an indebtedness against the existing cash value.

Once a policy has lapsed, which of the following governs the way excess premiums are treated? [A] Tax Reform Act of 1984 [B] Deficit Reduction Act of 2005 [C] Standard Nonforfeiture Law [D] Nondiscrimination in Life Insurance Law

Standard Nonforfeiture Law

Tom's father names him as beneficiary of his life insurance. The settlement option under the policy is life income. Which of the following can Tom's father select as installment payments? [A] Straight life or refund annuity [B] Refund annuity or life income certain [C] Straight life, refund annuity, or life income certain [D] Straight life, refund annuity, life income certain, or joint and survivor life income

Straight life, refund annuity, life income certain, or joint and survivor life income

What happens to cash value accumulations of life insurance policies if the insured stops paying premiums for any reason? [A] They are retained by the company. [B] They are paid to the policyowner in cash or its cash equivalent. [C] They are pooled with other forfeited cash values to pay dividends to other insureds. [D] They become part of the state's guarantee fund.

They are paid to the policyowner in cash or its cash equivalent.

Zeke's mother names him as beneficiary under her life insurance policy. The policy stipulates a fixed amount settlement option, a form of annuity. How long will Zeke receive payments? [A] For the term stated in the policy [B] Until the principal and interest have been exhausted [C] Zeke will make this decision based on the policy's cash value and his needs. [D] Unknown from the available facts

Until the principal and interest have been exhausted