Chapter 3 Life Insurance

Under an extended term non forfeiture option, the policy cash value is converted to:

The same face amount as in the whole life policy

What is the purpose of a fixed-period settlement option?

To provide a guaranteed income for a certain amount of time.

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount:

Equal to the original policy for as long a period of time that the cash values will purchase

What required provision protects against unintentional lapse of the policy?

Grace Period usually 30-31 days

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

What is the term for how frequently a policyowner is required to pay the policy premium?

Mode

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's Rights

All of the following are true regarding insurance policy loans EXCEPT:

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

Which type of beneficiary is changeable at any time?

Revocable

The interest earned on policy dividends is:

Taxable

If a life insurance policy has an irrevocable beneficiary designation:

The beneficiary can only be changed with written permission of the beneficiary

Which is true about a spouse term rider?

The rider is usually level term insurance expires at age 65

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 prevents unintentional lapse not required, but commonly added

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor benefit

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

All of the following statements concerning dividends are true EXCEPT:

Dividend amounts are guaranteed in the policy dividends cannot be guaranteed

What are paid-up additions?

Dividends are used to buy additional policies that increase the face amount of the original policy

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid-up option accumulate dividends at interest and then use them

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

Payor Benefit Rider payors DO NOT increase death benefits only pays if payor is disabled or dies

The Ownership provision entitles the policyowner to do all of the following EXCEPT:

Set premium rates They can: -assign a policy -receive a policy loan -designate a beneficiary

An insured purchases a policy in 2008 and dies in 2013. The insurance company discovers that at the time the insured concealed information during the application process. What can they do?

pay the death benefit can't do anything after 2 years

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called:

Guaranteed insurability

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

What type of insurance would be used for a Return of Premium Rider?

Increasing term

Which of the following applies to the 10-day-free-look privilege?

It permits the insured to return the policy for a full refund of premiums paid.

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay double or triple the face amount.

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 named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death?

A minor son of the insured minors do not have legal capacity