Chapter 5

The assignment provision in a life insurance policy is a policyowner right. When a policyowner uses the cash value of a whole life policy as security against a debt, he or she has engaged in a: 1. Absolute assignment 2. Contingent assignment 3. Collateral assignment 4. Debtor assignment

1. Absolute assignment

A benefit rider may be added to a life insurance policy for an additional premium. What benefit rider may be attached to a policy which protects an insured's future insurability? 1. Guaranteed insurability rider 2. Waiver of premium rider 3. Payor benefit rider 4. Cost of living rider

1. Guaranteed insurability rider

Which part of the life insurance contract describes the obligation assumed by the insurance company in exchange for a premium paid? 1. Insuring clause 2. Consideration clause 3. Grace period provision 4. Contestable clause

1. Insuring clause

Which of the following parties may change the beneficiary designation in a life insurance policy? 1. The policyowner 2. The contingent beneficiary 3. The insured 4. The insured's estate representative

1. The policyowner

A life insurer's promise to pay the death benefit is found in which of the following provisions? 1. Entire contract 2. Insuring provision 3. Non-forfeiture provision 4. Settlement option provision

2. Insuring provision

What life insurance policy provision permits the policyholder to select the face amount of protection, name a beneficiary, or to borrow from the policy's cash savings value? 1. Entire contract provision 2. Owner's rights provisions 3. Incontestable clause 4. Insuring clause

2. Owner's rights provisions

A life insurance policy was issued to Bob four years ago. The insurer then learns of material misrepresentations when Bob dies. How will the insurer respond when the claim is filed by the beneficiary? 1. Deny the claim 2. Pay the claim 3. Deny the claim and refund the premium 4. Pay the claim less total premiums paid

2. Pay the claim

What provision found in a life insurance policy allows an insurer to assess an extra charge if the policyowner makes payments on a quarterly basis? 1. Owner's rights provision 2. Premium paying provision 3. Consideration provision 4. Automatic premium provision

2. Premium paying provision

A prepaid life insurance policy is issued. When the policy is delivered by the producer, he or she should: 1. Complete a statement of continued good health 2. Remind the policyholder of the ten-day free-look 3. Ask relevant questions of the beneficiary 4. Collect premium for the first month of coverage

2. Remind the policyholder of the ten-day free-look

Pamela is 34 years of age and owns a $20,000 whole life policy with a guaranteed insurability rider. At age 35, Pamela exercised her first option without proving insurability and purchased another $20,000 policy. At age 37 Pamela contacted the insurer and asked if she could exercise her next option a year early. How will the insurer respond? 1. The insurer will allow Pamela to move up to the next option date 2. The insurer informs Pamela that she cannot move up to her next option date but she may buy more insurance by proving insurability 3. The insurer will not allow Pamela to exercise her next option since the rider ends following the first option 4. The insurer will allow Pamela to move up to her next option date if she provides evidence of insurability

2. The insurer informs Pamela that she cannot move up to her next option date but she may buy more insurance by proving insurability

Which of the following best describes the beneficiary designation of "per stirpes"? 1. Proceeds are only paid to a secondary beneficiary 2. Through the root or family line 3. Proceeds are payable to specific designees 4. To an immediate family member not named individually

2. Through the root or family line

John owns a whole life policy. If he uses the equity in it to secure a loan, which of the following is true? 1. The lender is assigned the cash value of the policy 2. The lender becomes the owner of the policy 3. The lender becomes the primary beneficiary for its interest 4. The lender becomes the contingent beneficiary

3. The lender becomes the primary beneficiary for its interest

If a policy loan plus cash values exceed premium payments, which of the following is true? 1. The policy becomes a modified endowment contract 2. The policy must be surrendered 3. The loan amount is tax-deductible 4. The loan may be subject to taxation

4. The loan may be subject to taxation

Non-forfeiture options provide a policyowner with all, EXCEPT: 1. Taking the policy's surrender value 2. Using the cash value to purchase extended term insurance 3. Using the cash value to buy paid-up insurance 4. Using the cash value to fund the automatic premium loan

4. Using the cash value to fund the automatic premium loan

Why is it that a death benefit from a life insurance contract cannot generally be paid to a beneficiary who is a minor? 1. The minor does not understand how to manage money 2. The minor is not competent to control the funds 3. The minor is under age twenty-one 4. The minor has no ownership rights

2. The minor is not competent to control the funds

An insurer will take what type of action if the applicant misstates his or her age on a term life insurance application? 1. Cancel the policy 2. Cancel the policy and return the premium 3. Adjust the death benefit 4. Adjust the cash value

3. Adjust the death benefit

Which of the following policy provisions prevents an insurer from denying a death claim in the future after the purchase of a life insurance policy? 1. Insuring clause 2. Entire contract clause 3. Consideration clause 4. Owner's rights clause

3. Consideration clause

An insured dies and the death benefit is paid to the named beneficiary. The beneficiary dies three months later. There are three surviving children. Any remaining proceeds from the policy covering the insured would be paid to which of the following? 1. To the surviving children 2. To the estate of the deceased insured 3. To the estate of the deceased beneficiary 4. To the oldest surviving beneficiary

3. To the estate of the deceased beneficiary

Leslie purchases a whole life policy covering her husband with a face amount of $500,000. Eighteen months after it goes into effect, Leslie's spouse takes his own life. What will be paid to Leslie? 1. The death benefit less the premiums paid for eighteen months 2. Nothing since suicide is excluded in the first two years 3. The entire death benefit 4. A return of premium

4. A return of premium

If a life insurance policy has been in force for five years, it will generally not be contestable in each of the following situations, EXCEPT: 1. If the proposed insured's age is misstated on the application 2. If the owner uses policy proceeds to secure a loan 3. If the policyholder borrows against the cash value 4. If the owner has engaged in fraud

4. If the owner has engaged in fraud