Xcel chapter 3a questions

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

$20,000 death benefit

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

$50,000

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000

P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 minus any outstanding policy loans

A policy owner may generate taxable income from which of the following dividend options?

Accumulation at interest

The consideration clause in a life insurance contract contains what pertinent information

Amount of premium payments and when they are due

What does the insuring agreement in a life insurance contract establish?

An insurer's basic promise

When does a guaranteed insurability rider allow the insured to buy additional coverage?

At future dates specified in the contract without evidence of insurability required

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

Which statement regarding the misstatement of age provision is considered to be true? Coverage will be adjusted to reflect the insured true age of a misstatement of age is discovered Requires that a new policy must be applied for if I'm a statement of age is found on the current policy Miss statement of age provision is only valid during the contestable. Insurer may avoid the policy of a misstatement of ages discovered

Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered

Which of these types of policies may not have an automatic premium loan provision attached to it?

Decreasing term

How are surrender charges deducted in the life policy with a rear-ended provision?

Deducted when the policy is discontinued

Which of the following nonforfeiture options offer is the highest death benefit?

Extended term

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

Extended term Choosing the non-forfeiture extended term option allows a policy owner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole life policy. Extended term insurance is often the default nonforfeiture option in the event of non-payment premiums

When a misrepresentation on a life insurance policy application is discovered, what action man insurance company take?

For the policy only if it is discovered during the contestable period and proven to be material

An insured has passed you on his life insurance premium, But it's still within the Grace Period. What will the beneficiary receive if the insured dies during this grace period?

Full face amount minus any past due premiums

Which of these are not an example of a nonforfeiture option? Extended term Reduced paid up Cash surrender Life income

Life Income

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):

Living Benefit

And insured and ability to perform two or more activities of daily living may trigger which type of life policy rider?

Long-term care

Which of these is not considered to be a right given to a policy owner? Surrendering the policies cash value Modify a provision in the insurance contract Assignment of ownership Change the beneficiary, if revocable

Modify a provision in the insurance contract

The ________ Is authorized to assign a life insurance policy as collateral for a loan?

Policyowner

The __________ Has the right to change the life insurance policies beneficiary.

Policyowner

What benefit does the Payor clause on a Juvenile Life policy provide?

Premiums are waived if payor becomes disabled

Which of these nonforfeiture options continue a buildup of cash value?

Reduced Paid-Up

Whole life insurance policy owner does not have the right to

change the grace period

Advantage of reinstating an original life policy is

The premiums are based on a younger age

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

Waiver of Premium

When is the face amount of a whole life policy paid?

When the insured dies or at the policy's maturity date, whichever happens first

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will

adjust the death benefit to a reduced amount

What action will an insurer take if an interest payment on a policy loan is not made on time?

automatically add the amount of interest due to the loan balance

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

Policy Loan provision

What action can a policy owner take an application for a bank loan requires collateral?

Assign policy ownership to the bank

Which of these provisions require proof of insurability after policy has lapsed?

Reinstatement

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Reinstatement

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Reinstatement provision

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? Straight life accumulates faster than limited pay life 20 pay life accumulate cash value faster than straight life Cash value accumulation about 20 pay life and straight life depends on the insurance financial rating 20 pay life and straight life accumulate cash value at the same rate

20-Pay Life accumulates cash value faster than Straight Life

An insurer may normally delay the payment of cash value loan Or surrender value for up to

6 months

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accidental Death and Dismemberment clause

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)

Accidental Death and Dismemberment rider (AD&D)

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Beneficiary will be paid the Death Benefit

A policy loan is made possible by which of these life insurance policy features?

Cash value provision

Who's life is covered on a life insurance policy that contains a payer benefit clause?

Child

Which writer provides coverage for a child under a parents life insurance policy?

Child term rider

What provision in a life insurance policy states an application is considered part of the contract?

Entire contract provision

Which provision prevent an insurer from changing the terms of the contract with policy owner by referring to documents not found within the policy itself?

Entire contract provision

Which of these statements about guaranteed insurability option rider is not true? Coverage can be added at specific events such as marriage or having a child Evidence of insurability is not required when the option is exercised Evidence of insurability is required when the option is exercised Coverage can be added on specific ages

Evidence of insurability is required when the option is exercised

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

Ex-wife D's ex wife is still the beneficiary of this policy, even though policy ownership has changed to his current spouse.

When insurer issues a policy that refuses to cover certain risk, this is referred to as a(an):

Exclusion

In a Life Insurance contract, and insurance companies promise to pay stated benefits as called the:

Insuring clause

How are policyowner dividends treated in regards to income tax?

Interest on accumulations is taxed

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT Fixed period Interest only Fixed amount Life income

Interest only

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?

Interest only

All of these statements concerning Settlement Options are true, except: Increased proceeds can be provided through accumulation of interest Rapid depletion of proceeds can be avoided Proceeds can be administered by the insurance company Only the beneficiary may select

Only the beneficiary may select

In a life insurance policy, which Provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?

Owner's Rights

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability? P cannot borrow against the policies cash value while disabled P Will have to pay income taxes on the amount of premiums waived P Will still receive declared dividends P cannot assign ownership of the policy while premiums are being waived

P will still receive declared dividends

K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?

Paid-Up Additional Insurance

All of the following statements are true regarding a policy's grace period, except: Past due premiums are waived Policy loans may still be made Full coverage continues Grace period terms are stated in the policy

Past due premiums are waived

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

Return of premium rider

Typically a life insurance death benefit is paid by a lump sum payment. A(n) ________________ Option as a method of distributing a life insurance policy death benefit other than buy a lump sum payment.

Settlement option

A(n) ________ Writer may be used to include coverage for children under their parents life insurance policy

Term rider

What does the ownership clause in a life insurance policy state?

Who the policyowner is and what rights the policyowner is entitled to

A return of premium life insurance policy is:

Whole life and Increasing term A return of premium life insurance policy as a whole life insurance with the death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within a period of term, the beneficiary will receive face amount plus the value of all paid premiums.

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

additional Whole Life coverage at specified times A guaranteed insurability option and whole life policy permits the policyowner To purchase, without evidence of insurability, stated amount of whole life insurance as specified times.

A cost of living rider gives the insured

additional death benefits

The incontestable clause allows an insurer to

contest a claim during the contestable period

Additional coverage can be added to a Whole Life policy by adding a(n)

decreasing term rider

And a life insurance policy, which feature states that the policy will not cover certain risk?

exclusion

The purpose of the ________ Period clause is to avoid an unintentional lapse of a life insurance policy.

grace

A nonforfeiture clause gives the policy owner

guaranteed values even if the policy has lapsed

The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured: Dies of natural causes Becomes critically ill Becomes chronically ill Is blinded In an accident

is blinded in an accident

Dividends paid from a life insurance policy are

issued by the insurer

B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will

pay the amount that the premium would have purchased at the correct age

M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the

policy proceeds

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

The consideration clause in a life insurance policy indicates that a policy owners consideration consist of a completed application and

the initial premium

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

A Term Life rider offers the insured

additional life coverage

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

In this situation, the insurance company will deny the claim, as the policy would have lapsed due to nonpayment by September 15.

A long-term care rider And a life insurance policy pays a daily benefit in the event of which of the following?

Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount

How do you life insurance companies handle cases where the insured commits suicide within the contracts stated contestable period?

Claims are denied under the suicide clause of the policy

Which of these actions is taken when a policy owner used as a life insurance policy as collateral for a bank loan? Revocable assignment Beneficiary change Irrevocable assignment Collateral assignment

Collateral assignment

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion. Exclusions are specified hazards listed in a policy for which benefits will not be paid.

All of these statements about the waiver of premium provisions are correct except: A waiting period must pass before becoming eligible for benefits Waiver of premium is available on both permanent and term insurance policies Insured must be eligible for Social Security disability for claim to be excepted Insured must be totally disable to qualify

Insured must be eligible for Social Security disability for claim to be accepted

The agreement and a life insurance contract that states a specific sum of money will be paid to a designated person upon insurance death as called a(n):

Insuring agreement

Which of the following statements about accumulated interest earned on dividends from an insurance policy is true

It is taxed as ordinary income

Which of the following statements is CORRECT About accelerated death benefits?

Must have a terminal illness to qualify

Which statement is true in regards to a policy loan? Past due interest payments not paid after three months will void the policy Past due and trust on a policy loan is added to the total debt Insurance companies consent delinquent and trust accounts to collection agency Insurance companies can charge an interest rate based on the policyowners credit report

Past-due interest on a policy loan is added to the total debt

Which of these life insurance riders allows the applicant to have excess coverage?

Term rider Term riders allow an applicant to have excess life insurance coverage.

The free-look provision begins

Upon receipt of the policy by the policyowner

A Life insurance policy owner would like to take out a policy loan against the cash value and his whole life policy. The interest rate applied to this loan may vary overtime. This is referred to as a(n) __________ rate loan.

Variable

Which of these types of life insurance allows the policy owner to have a level premiums and also choose from the selection of investment options?

Variable Life

Which type of life policy contains a monthly mortality charge as well as a self-directed investment choices?

Variable Universal Life

The automatic premium loan provision is designed to:

avoid a policy lapse

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT Type of life insurance S's is attained age Dividend amount used towards purchase Beneficiaries age

beneficiary's age

Variable whole life insurance can be described as

both an insurance and securities product

Which of the following is an example of a nonforfeiture option?

reduced paid-up option

K's whole Life insurance policy lapse two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policies reinstatement except K must reinstate within a stated period K must pay back interest and premiums K Will forfeit the right to use the automatic loan provision upon reinstatement Kay must provide evidence of insurability

K will forfeit the rights to use the automatic loan provision upon reinstatement

Which life insurance rider typically appears on a juvenile life insurance policy?

Payor Benefit rider payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.

Which of the following provisions guarantees that premiums will be waived if a juvenile life policy owner becomes disabled?

Payor clause