Life Contract - Section 8 - Quiz

Each of the following is true regarding policy loans except:

All life policies contain a policy loan provision (Hint: The policy loans provisions is only found in policies that contain cash value)

A reinstatement may not be based on the following circumstances, except:

Any time before the grace period ends and the maturity date is reached (Hint: Any time before the maturity date, the policy may be reinstated with normally three years of grace period that ends with subsequent termination of coverage)

Transferring all or a portion of a policyowner's interest to an insurance policy is known as:

Assignment of interest (Hint: Assignment of interest equals transfer of ownership rights)

The following are options for a policyowner when a permanent policy with cash value is terminated, except:

Cash value (Hint: Cash Value is only available with an active policy. A surrender value must be made available in cash. It also permits the insurance company to delay or postpone payment for up to 6 months after the surrender of the policy)

All of the following are rights of policy ownership except:

Changing a policy provision with agent's approval

Suppose that you name someone as your irrevocable beneficiary. Without the permission of the irrevocable beneficiary, you give up the right to do all of the following except:

Continue to pay premiums (Hint: Once an irrevocable beneficiary is named the policyowner is required to obtain the irrevocable beneficiaries permission to exercise most of their policy rights. However, the policyowner does not need the irrevocable beneficiaries permission to name a contingent beneficiary)

Which creditors would have the right to claim a portion of a death benefit?

Creditors of the beneficiary (Hint: Creditors of the insurer do not have the right to claim any portion of the death benefit, but creditors of the beneficiary may have rights to all or part of the death benefit)

Which of the following policy provisions states that the application is part of the policy?

Entire contract (Hint: The entire contract provision states that the policy consists of the policy, the application when attached, and any riders or modifications)

Which one of the following is not a settlement option?

Fixed Interest Only (Hint: There is no such option as fixed interest only. Interest only would have been a correct option)

If the beneficiary wants the death proceeds to be paid monthly for the next 20 years, this is called:

Fixed Period Installments

Which of the following statements about the suicide clause is incorrect?

If a suicide is committed in the first 2 years, then the beneficiary receives nothing (Hint: If an insured commits suicide within 2 years of the policy's effective date, the insurer is only obligated to refund the insured's premium)

Which of the following statements is not true about the grace period in individual life insurance policies?

If the insured dies during the grace period, no death benefit is payable but all premiums will be returned (Hint: If the insured dies during the grace period the insurer will pay the death benefit minus the overdue premium)

All statements made by the insured will be considered representations and not warranties except:

In the case of fraud

The common provision that says the insurer will not contest the policy after 2 years of being in force is:

Incontestability clause

Which of the following could not be named as a beneficiary?

Insured

Mr. and Mrs. Smith are receiving a monthly annuity distribution of $2,000. If Mr. Smith dies and Mrs. Smith continues to receive the same amount, which payout option was selected?

Joint with last survivor (Hint: The option is referred to as Joint and Survivor. This option will continue to pay an income until the last person dies)

All of the following incontestability clause statements are true except:

No statement made in the application may be used to deny a claim if in force for one year (Hint: Policy becomes incontestable after two years. This means that a claim cannot be denied or policy voided for material misrepresentation, concealment, or even fraud after the first two years)

All the following are common premium modes except:

Pay bi-monthly (Hint: Paying 2 times a month is not common or normal)

Which of the following premium modes is the least expensive?

Pay in full

If an insurer fails to pay the death claim within 30 days, then it must:

Pay interest from the insured's date of death

If an insured commits suicide after the suicide clause in the insured's life insurance policy has expired, the insurance company will:

Pay the death benefit (Hint: After 2 years the suicide exclusion ends and the insurer will pay the full death benefit should the insured commit suicide. Should the insured commit suicide before the end of the 2 year period the insurer will refund premiums paid)

A change of beneficiary in an individual life policy can be made by the

Policyowner, unless there is an irrevocable beneficiary

If the insured dies on Monday and the primary beneficiary dies on Tuesday, who receives the proceeds?

Primary beneficiary's estate

All of the following are true about the grace period except:

Proceeds will be reduced to zero if the insured dies during the grace period (Hint: If the insured dies during the grace period, the proceeds will be reduced by any overdue monthly deductions)

An insurance producer is prohibited from the following except:

Producer may be named as the owner or beneficiary in a life policy for a client who is a relative (Hint: These prohibited acts do not apply to policies of a producer's family members)

What is the clause that most life insurance policies contain which prevents the creditors of a beneficiary from claiming any of the benefits the beneficiary hopes to receive before the beneficiary actually receives the money?

Spendthrift clause

All of the following are common provisions of life insurance policies except the:

Spendthrift clause (Hint: The spendthrift clause protects the proceeds from a death settlement from creditors of the beneficiary. This is not considered a common provision, but is an additional clause)

The promise that the insured has a specified amount of life coverage while the insurer is completing the underwriting is known as:

TIA - Temporary Insurance Agreement

Jason has a $500K life policy that is a per stirpes. What happens when Jason dies after one of his 3 children?

The 2 remaining children receive their third and the heirs of the child who died would split the final third equally (Hint: Per Stirpes means "by the bloodline")

Who has the right to take legal action if the insurer does not pay the death benefit as stated in the policy?

The beneficiary

With regard to beneficiaries, what does per capita mean?

The death benefit will be split equally between each living child (Hint: Per Capita means "by the head")

All of the following statements pertaining to reinstatement of a life insurance policy are correct except:

The insurer cannot require that previous loans be paid (Hint: The insurer can require that outstanding loans be repaid as a condition of reinstatement)

Dividends are normally paid to which of the following?

The policyowners of a mutual company

The main benefit for reinstating a lapse policy rather than purchasing a new policy is:

The premium remains at the same level, based on the insured's original age

If the insured and beneficiary die in a car accident and the accident report determines the insured died first, which of the following is true?

The primary beneficiary estates receives the proceeds (Hint: This is important because if it is ruled that the insured died first, then the policy proceeds are paid to the estate of the primary beneficiary)

Under the provisions of the uniform simultaneous death act, how would the proceeds of an insurance policy settle if the insured and the only primary beneficiary were killed in the same accident, with no evidence as to which died first?

The proceeds would be distributed as through the insured survived the beneficiary (Hint: Under the simultaneous death act it is assumed that the insured survived the beneficiary to protect the proceeds from being paid to the primary beneficiary estate. This protects the right of the contingent beneficiary)

What happens under the automatic premium loan option?

This prevents the unintentional lapse of a policy due to nonpayment of the premium (Hint: This provision is set up to prevent the unintentional lapse of a policy due to nonpayment of the premium. A loan against the policy cash value for amount of premium due is automatically created by the insurance company when the policyowner has failed to pay the premium on time and by the grace period)

The policyowner has the right to do all of the following except:

Transfer the responsibility to pay the premiums to someone else.

If Mr. X selects the reduced paid up nonforfeiture option, his coverage will continue

Until death or age 100, whichever occurs first, in an amount stated in the policy's Table of Guaranteed values within his policy

When can an irrevocable beneficiary designation be changed?

With the primary beneficiary's consent (Hint: The term irrevocable means the policyowner cannot change the beneficiary without the beneficiary's consent)

A viatical settlement is an:

agreement that provides a life insurance policyowner immediate cash in exchange for death benefit (Hint: A viatical settlement is a contractual agreement that provides a life insurance policyowner immediate cash in exchange for the sale and transfer of life insurance policyownership rights)

All of the following statements regarding the free-look provision of a deferred annuity contract sold in California are correct EXCEPT:

the amount returned to the buyer requesting to return an annuity contract during the free-look period is the premium minus the contract surrender charge (Hint: When a contract is returned during the free-look period they receive a full refund. If the annuity is returned after the free-look period it is considered a surrender and a surrender charge will apply)