Chapter 3 Quiz

A spouse receives $,5,000 a month until the principal and interest on her husband's life insurance policy have been paid out. Which settlement option did this beneficiary choose?

Fixed amount.

When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What action will the insurer take?

Pay a reduced death benefit based on the insured's actual age.

The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend option has the insured chosen?

Reduction of premium.

Under what circumstances will the contingent beneficiary receive the death benefit?

If the primary beneficiary dies before the insured.

A 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.

If a life insurance policy has an irrevocable beneficiary designation:

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

Which of the following statements is true of both the fixed-period and fixed-amount settlement options?

Both guarantee that the principal and interest will be fully paid out.

Which of the following is NOT a standard exclusion in life insurance policies?

Disability

Which provision of a life insurance policy states that the application is part of the contract?

Entire contract.

Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?

Assignment.

All of the following are nonforfeiture options in life insurance policies EXCEPT:

Automatic premium loans.

Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?

Grace period provision.

Which of the following terms refers to the transfer of some or all of the owenership rights of a life insurance policy from one individual to another?

It starts when the policy is delivered.

The rider in a whole life policy allows the company to forgo collecting the premium if the insured is disabled is called:

Waiver of premium.

All of the following are true regarding the guaranteed insurability:

It is available automatically, for no extra premium.