Chapter 4 part 2

Individual life policies typically pay out a death benefit if death is a result of suicide after they have been in force for _____ years. A 2 B 4 C 5 D 6

A 2 Two years is typically the standard suicide limitation period for individual life policies. In some states it may be different.

hich of the following beneficiary designations is a class designation? A Any children of this marriage B Mary Smith - spouse C Bank of Springfield - creditor D Frank Jones - son

A Any children of this marriage

An insured with a participating life insurance policy receives an annual dividend check in the mail. He must have selected which Dividend Option: A Cash B Premium reduction C Dividend reinvestment D Accumulate at interest

A Cash

If an applicant for life insurance misstates his age on the application, what would be the consequence if/when it is discovered? A Death benefit will be what the premium paid would have purchased at issuance at the correct age B Premiums refunded with interest, no death benefit paid C The policy will be voided D Real age divided by actual age, multiplied by death benefit

A Death benefit will be what the premium paid would have purchased at issuance at the correct age

What provision describes the parts of the life insurance contract? A Entire Contract B Insuring C Consideration D Incontestability

A Entire Contract

Concerning the Paid-Up Additions Dividend Option, all of the following are true, except: A Eventually, no more premiums will be due on the policy B These single premium additions do not change the face value of the original policy C Paid-up additions have their own increasing cash values D Paid-up additions increase the amount of future dividends credited

A Eventually, no more premiums will be due on the policy

The _________ is the time period provided after the premium due date before a policy lapses. A Grace period B Premium mode C Automatic premium loan period D Reinstatement period

A Grace period

Which of the following statements about policy dividends is TRUE? A There are several dividend options to choose from B Dividends can only be withdrawn at certain specified intervals C Dividends are guaranteed and taxable as income when received D Nonparticipating policies are eligible for dividends

A There are several dividend options to choose from

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Alice dies, so who receives the policy proceeds? A Alice's estate B Bill C The treasury of the state where Alice lives D Claire

B Bill

An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted? A Cash Surrender B Extended Term C Reduced Paid-Up D Premium Reduction

B Extended Term

Frank has a life insurance policy in which he chooses to have the dividends increase the death benefit. Which Dividend Option did he select? A Acceleration of Endowment B Paid-Up Additions C Fixed Amount D Paid-Up Option

B Paid-Up Additions

All of the following are TRUE of Policy Loan Rate provisions, except: A Policies with adjustable loan interest rates have a maximum interest rate based upon Moody's corporate bond yield average B Policies with fixed interest loan rates have a maximum interest rate of 10% C Interest, if not paid when due, is added to the total debt D The policy loan amount cannot exceed the available cash value

B Policies with fixed interest loan rates have a maximum interest rate of 10%

A life Insurance policyowner receives an annual dividend. One option for this dividend is to use it to offset the annual obligation to the insurer. What is this option called? A Cash B Premium Reduction C Cash Surrender D Paid up additions Sorry! The correct answer was B.

B Premium Reduction

All of the following are Settlement Options, except: A Life Income Joint and Survivor B Reduced Paid-Up C Fixed Amount D Fixed Period

B Reduced Paid-Up

The interest earned on dividends is: A Tax-deductible B Taxable C Tax-deferred D Nontaxable

B Taxable

Assignment is _______________. A What the applicant is asked to do when completing the application B The transfer of all or part of the ownership in a life insurance policy C What the insured is asked to do during the underwriting process D What the producer is asked to do prior to submitting the application for underwriting

B The transfer of all or part of the ownership in a life insurance policy

What is one of the main reasons for a Universal Life policy to have a surrender charge? A It is a way to recoup interest paid, but not earned by the policyholder B This provides a means for the insurer to recapture their upfront expenses involved in issuing the policy C It motivates the producer to properly sell the policy D It encourages large additional premium deposits from policyowners

B This provides a means for the insurer to recapture their upfront expenses involved in issuing the policy

What is the primary purpose of the free look period? A It forces producers to deliver policies in person to resell the policy to reduce returns and early policy lapses B To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for C It is a way to offer a legal rebate, 10-30 days of 'free' insurance D It is a marketing strategy of major insurers to get applicants to sign up for a policy

B To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for

Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy when it has $15,000 of cash value and exercise the Extended Term Option. Ted's term benefit will be: A $65,000 B $35,000 C $50,000 D $15,000

C $50,000 The Extended Term Option uses the present cash value of the policy, upon its lapse, to automatically buy a single premium term policy of the same face amount for a specified number of years and days as listed in the policy's nonforfeiture table.

Typically, how many days can elapse before an overdue premium will cause a policy to lapse? A 7 B 10 C 30 D 28

C 30

A Tertiary Beneficiary is the person who receives a death benefit payment in which of the following scenarios? A If the Primary Beneficiary dies before the insured B If the insured dies before the Primary Beneficiary C If the primary and contingent beneficiary die prior to the insured D If the Contingent Beneficiary dies before the insured

C If the primary and contingent beneficiary die prior to the insured

If the insured outlives all of the beneficiaries named in the policy and then dies, by default who receives the death benefit? A A tertiary trust B The treasury of the state where the insured resided C The insured's estate D The state Guaranty Association

C The insured's estate

Z elects the life refund settlement option for a $250,000 death benefit. Z lives long enough to recover $150,000 of the $250,000 death benefit. How much does his beneficiary receive? A $150,000 B $50,000 C 250,000 D $100,000

D $100,000

Sylvia was the insured and owner of a policy that named her husband as the beneficiary. Upon her husband's death, she decided to change the beneficiary designation to her best friend since she has no close living relatives. The insurance company will: A Decline the change due to lack of insurable interest B Require Sylvia to prove that her best friend is financially dependent on her C Require Sylvia to prove insurability D Accept the beneficiary change

D Accept the beneficiary change

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option? A Automatic premium loan B Cash surrender value C Reduced paid-up D Extended term

D Extended term

Which of the following beneficiary designations prevents a policyowner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent? A Incontestable B Named C Class D Irrevocable

D Irrevocable

An insured, whose policy is in force, intentionally kills herself 7 months after purchasing the policy. How much will the insurer pay? A The face amount of the policy B Refund of premiums paid less the costs of policy issuance C Nothing D Refund of premiums paid only

D Refund of premiums paid only

Which provision requires the application, the contract itself and any riders to be attached to establish a complete contract? A The Insuring Clause B The Incontestability Provision C The Ownership Provision D The Entire Contract Provision

D The Entire Contract Provision

The Mode of Premium provision addresses: A The method of premium payment B When premiums can be skipped C Whether or not the insurer or producer will accept cash D The frequency of premium payment

D The frequency of premium payment