Insurance Exam: Chapter 4

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

Automatic Premium Loan

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income

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

An insurer that does not pay a death benefit in a timely manner as required by state law, will be required to

Pay to the beneficiary an interest penalty from the date of the insured's death.

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

Payor Benefit Rider

When a life insurance policy was issued, the policy owner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit?

The insured's contingent beneficiary.

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate In the absence of a viable beneficiary, proceeds will be paid to the estate of the insured.

All of the following are true regarding the guaranteed insurability rider EXPECT

The rider is available to all insureds with no additional premium

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

The interest earned on policy dividends is

Taxable

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

The insured's premiums will be waived until she is 21.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy The interest credited under this option is TAXABLE, whether or not the policy owner receives it.

Which rider, when attached to permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider