insurance quiz 6

Which of the following statements regarding the assignment of a life insurance policy is NOT correct? Absolute assignment involves a complete transfer, giving the assignee full control over the policy. Under a collateral assignment, a creditor is entitled to be reimbursed out of the policy's proceeds only for the amount of the outstanding credit balance. Under a collateral assignment, policy proceeds in excess of the collateral amount pass to the insured's beneficiary. All beneficiaries must expressively approve any assignments of life insurance policies.

All beneficiaries must expressively approve any assignments of life insurance policies.

Which of the following statements regarding a cost of living (COL) rider on a life insurance policy is CORRECT? A cost of living rider provides for a level premium even if the cost of living increases. An inflation index, usually the Consumer Price Index, determines the amount of inflation adjustment that is made to the policy up to a maximum percentage increase. To require additional amounts of life insurance under a COL rider, evidence of insurability must be provided. Declines in the CPI cause corresponding declines in the amount of insurance coverage.

An inflation index, usually the Consumer Price Index, determines the amount of inflation adjustment that is made to the policy up to a maximum percentage increase.

In which of the following situations does the incontestable clause apply? Impersonation of the applicant by another No insurable interest Intent to murder Concealment of smoking

Concealment of smoking

Which of the following is (are) a common life insurance policy exclusion? Death from war Death from accidental means Death by commercial aviation All of the above

Death from war

Which provision of a life insurance policy states that the application is part of the contract? Consideration clause Insuring clause Entire contract clause Incontestable clause

Entire contract clause

Which life insurance provision allows the policyholder to inspect and, if dissatisfied, to return the policy for a full refund? Waiver of premium Facility of payments Probationary period Free look

Free look

Which of the following allows 30 days during which premiums may be paid to keep policies in force? Grace period Reinstatement clause Incontestable clause Waiting period

Grace period

An error in age is discovered after the death of an insured but before any policy death proceeds are distributed. The insured was older than previously assumed. How would an insurance company handle such a situation? No adjustment would be made because the contestable period has passed. The amount of death proceeds would be reduced to reflect the statistically diminished mortality risk. The amount of death proceeds would be reduced to reflect whatever benefit the premium paid would have purchased at the correct age. The beneficiary would be required to pay all underpaid back premiums before the death benefit received.

The amount of death proceeds would be reduced to reflect whatever benefit the premium paid would have purchased at the correct age.

Ron, the insured under a $100,000 life insurance policy, dies during the grace period. What happens, considering that the premium on the policy had not been paid? The premium is cancelled because the insured died during the grace period. The amount of the premium is deducted from the policy proceeds paid to the beneficiary. The premium due, plus a 10 percent penalty, is charged against the policy. The beneficiary must pay the premium after the death claim is paid.

The amount of the premium is deducted from the policy proceeds paid to the beneficiary.

Which of the following statements about a life insurance policy's cash value is CORRECT? In many states (but not all), policy owners are entitled to the accrued cash values of their whole life policies. When a whole life insurance policy is active, the owner can borrow against the cash value. Owners of both term and whole life insurance are entitled to the cash surrender value when a policy is lapsed or surrendered. If a policy owner lets his or her whole life policy lapse, the beneficiary will be entitled to part of the policy's cash value.

When a whole life insurance policy is active, the owner can borrow against the cash value.

All of the following statements pertaining to reinstatement of a life insurance policy are correct EXCEPT a suicide exclusion period is renewed with a reinstated policy when reinstating a policy, the insurer will charge the policy owner for past-due premiums when reinstating a policy, the insurer will charge the policy owner for interest on past-due premiums a new contestable period becomes effective in a reinstated policy

a suicide exclusion period is renewed with a reinstated policy

The most common guaranteed insurability riders allow additional life insurance to be purchased on the insured within a range of ages. The common age range in which guaranteed insurability is available is from age 16 to age 65 age 21 to age 59 1/2 age 25 to age 40 age 30 to age 70 1/2

age 25 to age 40

If an error is discovered after an insured dies and the insured was younger than the insurance policy stated, the insurance company will reduce the death benefits reduce premiums waive the difference increase the death benefits

increase the death benefits

If an error is discovered while the insured is living and the insured is older than the policy states, the insurance company can increase the premium reduce the premium waive the difference increase the benefits

increase the premium

All of the following statements regarding assignment of a life insurance policy are correct EXCEPT to secure a loan, the policy can be transferred temporarily to the lender as security for the loan the policy owner must obtain approval from the insurance company before a policy can be assigned the life insurance company assumes no responsibility for the validity of an assignment the life insurance company must be notified in writing by the policy owner of any assignment

the policy owner must obtain approval from the insurance company before a policy can be assigned

John stopped paying premiums on his permanent life insurance policy eight years ago though he never surrendered it. He is still insurable and has no outstanding loan against the policy. The company probably will decline to reinstate the policy because the time limit for reinstatement has expired. The limit usually is six months one year two years three years or as long as seven years

three years or as long as seven years

Which of the following statements best describes life insurance policy dividends? Policy dividends represent earnings to share owners who hold stock in insurance companies. Policy dividends affect the cost of virtually all insurance policies issued today. Policy dividends are an intentional return of a portion of the premiums paid. Policy dividends provide policy owners with a level, known as annual cash inflow.

Policy dividends are an intentional return of a portion of the premiums paid.

Which of the following is stated in the consideration clause of a life insurance policy? Insured's risk classification Insured's general health condition Amount and frequency of premium payments Benefits payable upon the insured's death

Amount and frequency of premium payments

To what period would a 14-day free-look apply in Florida? The first 14 days after the application has been signed by the applicant. The first 14 days after the application has been received by the insurer. The first 14 days after the policy has been issued by the insurer. The first 14 days after the issued policy has been received by the insured.

The first 14 days after the issued policy has been received by the insured.

Leland elects to surrender his whole life policy for a reduced paid-up policy. The cash value of his new policy will continue to increase decrease gradually remain the same as in the old policy be forfeited

continue to increase

Each of the following statements about the incontestable clause in a life insurance policy is correct EXCEPT the clause gives people assurance that when their policies become claims, they will be paid without delays or protests the incontestable clause means that after a certain period, an insurer cannot refuse to pay the proceeds of a policy or void the contract incontestable clauses usually become effective two years from the issue date of the policy insurers can void a contract even after the specified period, provided they can prove the policy was purchased fraudulently

insurers can void a contract even after the specified period, provided they can prove the policy was purchased fraudulently

All of the following are standard life insurance policy nonforfeiture options EXCEPT cash surrender option one-year term insurance option extended term insurance option reduced paid-up (permanent) insurance option

one-year term insurance option

The rider that provides for a waiver of premiums on a juvenile policy if the adult payor dies or becomes disabled is a guaranteed insurability rider payor rider waiver of premium rider automatic premium loan rider

payor rider

"If an insurance company determines that the insured is totally disabled, the policy owner is relieved of paying the policy premiums as long as the disability continues." This statement describes the premium suspension clause waiting period exemption disability income rider waiver of premium rider

waiver of premium rider